Inland Steel counters slump and White House takes note
East Chicago, Ind.
Inland Steel Company is expanding aggressively at a time when the steel industry as a whole is cutting back. So when President Carter was forced to cancel a planned visit to Inland's Harbor Works here, the largest steel mill in the United States, he sent his Secretary of Commerce in his place to applaud the firm for its bold growth moves.
Overall, the industry in US has cut employment from 531,000 to 406,000 over the past decade. But Inland has added 2,600 steelmaking jobs over the same period, even while joining other American steelmakers in blaming the industry's poor productivity and profitability on government taxation, regulation, and pricing policies that hold domestic prices down while permitting imports to rise.
While competitors have shelved expansion plans since the first 1975-76 recession shocks hit, Inland has gone ahead with a $1 billion investment in building the Western hemisphere's largest blast furnace facilities.
This heavy investment in furnaces, backed-up by the opening of new iron-ore and coal mines and the launching of a new Great Lakes ore carrier, comes at a time when steel sales have plummeted, due largely to cutbacks in automobile and transportation industry purchases. This resulted in te first reduction ever in dividends to Inland shareholders.
But when Secretary of Commerce Philip Klutznick attended the Sept. 19 dedication of No. 7 blast furnace here, he praised "those who are not afraid to make long-term commitments and risks, such as Inland has done."
Mr Klutznick reported that the 24-member Steel Tripartite Committee, chaired jointly by Klutznick and Labor Secretary Ray Marshall, has achieved basic agreement between government, industry, and labor representatives concerning the steel industry's needs. He said that in the battle "to revitalize American industry," the Carter administration is committed to "the relief of inequities and tax burdens against business, industry, and the individual."
Inland executives explain that their firm has gone ahead with its investment program because it counts on roughly similar improvements in taxation, regulation, and pricing policies regardless of whether Carter or Reagan wins in November.
Some of Inland's confidence is based on the 87-year-old firm's track record. Today Inland is the sixth-largest US steel producer, with more than 6 percent of the industry's $50 billion annual sales. One key to past success was a risky investment of $30 million during the 1929-32 depression years -- which left Inland well equipped to capture new business when recovery came.
Inland's $1 billion investment in its new 7,00- to 10,000-tons-per-day blast furnace facilities raises its annual raw steelmaking capacity from 8.2 million tons to 9.3 million tons.
The new furnace stands at the center of the world's major steel production area, which supplies 27 percent of US output (compared with 17.5 percent for the Pittsburgh area). Because the East Chicago and Gary steel plants are in the heart of the main US market and at the crossroads of rail-carried coal and Great Lakes ship-carried ore supplies, steelmakers here expect their key transportation and energy costs to remain relatively low, helping their competitiveness and profit prospects.
Inland Steel's chairman, Frederick G. Jaicks, says he believes that with the new blast furnace starting production later this week, "a larger share of a market with continuing growth prospects clearly is within our grasp during the years ahead, even while some of our competitors are reducing their steelmaking capabilities."
Inland executives add that the company's success depends on far more than just riding the waves of an expected US economic recovery. They are keenly aware of how Japanese steelmakers overtook the US by building eight new steel plants in the past 20 years.
Inland's response has been to steadily upgrade its older facilities -- such as its 1907 No. 1 furnace. It is still producing, has an increased capacity (from 400 tons to 1,800 tons of molten iron a day), and complies with today's strict pollution control standards.
Now Inland has taken the next step -- building a furnace that turns the tables by borrowing many technological developments from the Japanese in a blast furnace nearly as large as Japan's largest. Inland has added many of its own touches.
Whether the US steel indusry as a whole can match Inland's catch-up-with-the-Japanese performance is undecided.
According to the American Iron and Steel Institute, the industry's average annual capital spending of $2.9 billion during the past decade must increase to business to foreign suppliers. The institute reported earlier this year that without major government policy shifts to support domestic production and investment, steel imports which supplied 18 percent of the US market in 1978 could hit the 40 percent mark by 1988.