Molten metal still flows into gigantic ladles and red-hot steel still is shaped into structural I-beams here.
It is a symphony of might--"the kind of thing that made America great," a Bethlehem Steel Corp. foreman observes. And in the sparkles and flash of the huge basic oxygen furnace, the glow of the steel-filled ingots, and the slaash-kaaboom noises of the forging presses, it is easy to accept his view.
But production at Bethlehem Steel isn't what it used to be. Nor will it ever be again.
Both the company and its industry have been pounded by a brutal economy and tough foreign competition; and both are being reshaped into smaller, different versions of their former selves.
What is emerging is a domestic industry with reduced export ability--one that, nonetheless, will have to compete against imports for U.S. customers.
Domestic steelmakers have sought and won some protections against foreign competition. But they concede that the imports--often competitive in quality as well as cheaper--will be a factor in the domestic market for the foreseeable future.
Competition will increase as the world's appetite for steel decreases--and it is decreasing. U.S. passenger cars, for example, are more than a thousand pounds lighter than in 1978 because they are smaller and tend to rely more on strong, yet lighter-weight metals, such as aluminum. Weight-saving, fuel-thrifty materials also have been substituted for steel in other kinds of transportation, including passenger jets and subway cars.
Cost-cutting and "rationalizing"--consolidating product lines--have become buzzwords in domestic steel. Diversification--putting steel revenues into nonsteel businesses in pursuit of profit--has gained respect. But there is pain in all of this:
Domestic steel employment fell 36 percent from an average annual total of 454,000 workers in 1976 to 289,000 in 1982. At Bethlehem, the nation's second largest steelmaker, the drop also was 36 percent, from 105,000 employes in 1976 to 67,000 last year.
Total domestic steel-making capacity fell from 158.3 million net tons annually in 1976 to 154 million in 1982. But analysts say the industry remains too big, and must lose more weight, quickly, in order to avoid collapse.
"There is too much capacity at a time when demand for steel is falling," said Joseph C. Wyman, an analyst for Shearson/American Express. "The industry should shrink. But what do you see? It isn't shrinking fast enough to do itself any good."
Breaking even in domestic steel long has required operating at about 70 percent of available capacity. By that standard, last year was a disaster. U.S. steelmakers used an average 48.4 percent of their available capacity in 1982, the lowest level in nearly 44 years, according to the Washington-based American Iron and Steel Institute.
Domestic steel shipments, the amount delivered to customers, dropped from 88.5 million net tons in 1981 to 61.6 million in 1982, the least in 20 years.
Recovery, then, will come on cats' feet, if it comes at all for domestic steel in 1983. Analysts predict a 15 percent increase in raw steel shipments, 71 million tons, enough to break even. But 71 million tons is 21 percent less than the 89.4 million tons shipped in 1976, when the industry was operating at 80.9 percent of capacity.
Overall, domestic steel producers last year lost $3.5 billion, of which the largest single amount, $1.5 billion, was lost by Bethlehem Steel.
"We just never anticipated that the economy would fall that hard," says Walter F. Williams, Bethlehem Steel's president and chief operating officer. "If anybody had told me that this was going to happen, I would have told him that he must be kidding. The depth of the fall of the economy was a tremendous blow."
Bethlehem is a major producer of steel for the construction and automotive industries, both of which were hammered by the recession. Companies in trouble try to save cash, and "one of the best ways of saving cash is reducing inventories," Williams points out.
Reduce they did. Domestic steel customers, as a group, liquidated a record 12 million tons of steel inventory last year, according to Williams and industry analysts.
Largely as a result, Bethlehem last year shipped only 8.2 million net tons of steel, marking a 35-year low.
"We got hit with a double whammy," Williams says. "Inventories were dropping and the economy just went to hell."
Bethlehem moved with urgency, trimming its salaried staff by 15 percent last year, following a 5 percent staff cut in 1981. The company has about 17,500 salaried employes today, down from 26,000 in 1980.
Benefits were cut, as were the salaries of top executives. Williams and Bethlehem Chairman Donald H. Trautlein each forfeited annual bonuses and took 10 percent pay reductions. Trautlein earned $427,676 last year in salary and fees, compared with $555,986 in salary, fees and bonuses in 1981. Williams' 1982 earnings were $318,382, compared with $416,931.
Total reductions in salaried compensation are expected to yield a yearly employment cost saving of $275 million by the end of 1983, Bethlehem officials said.
The company also has cut capacity. Last year it closed its Los Angeles plant and put its Seattle plant up for sale. It is planning to scrap most steelmaking operations at its facility in Lackawanna, N.Y., and is consolidating rod and wire production at plants in Sparrows Point, Md., and Johnstown, Pa.
Bethlehem's annual steelmaking capacity is expected to be cut to 17.6 million tons by the end of 1983, down from 22.1 million tons last year and 25 million tons in 1977.
Trautlein expressed "deep regret" over the job losses and other disruptions caused by the changes, but said in the company's annual report: "We were left with no other alternatives."
Industry analysts agree.
"Bethlehem has done what a lot of other companies should be doing," says Charles A. Bradford, an analyst with Merrill Lynch, Pierce, Fenner & Smith, Inc. "The root cause of the steel industry's problems today is excess capacity."
Overcapacity has led to a price war that none of the nation's major steel producers is prepared to fight, Bradford said. "They're taking an average 8 percent discount per ton of steel, and some discounts are as high as 20 percent per ton. Nobody can make any money at those prices," he says.
Bethlehem and other major steelmakers won a concessionary contract this year from the United Steelworkers of America, a 41-month agreement that knocks $1.25 off hourly wages. But the average employment cost in the industry still sits at about $22 an hour, and steelmakers say that is too high.
"Labor isn't very happy with that contract and we are not as happy as we'd like to be, either," Trautlein said. "But the agreement does provide for significant decreases in our employment costs over the next 41 months."
Williams said Bethlehem will seek other savings through changes in work rules, particularly at plants such as Sparrows Point, where the company is considering investing millions of dollars in new machines.
"We're telling our people down there: 'Look, we're willing to keep this plant going. We think there's a future for this plant. We'd like to modernize it, but it's going to take some big capital," Williams says.
"We're also saying: 'You know, it's not only the capital. It's our operating costs. So, let's work together to try to make this plant more efficient.' "
Asked if he was implying that Bethlehem would close Sparrows Point, its largest producer of raw steel, if the company failed to win work-rule concessions there, Williams replies: "We are saying that we have a master plan. Part of our master plan is the modernization of this plant. We're going to find ways to do it."
One possible road to new capital is diversification, the route taken by United States Steel Corp., the nation's largest steel producer. U.S. Steel, for example, acquired Marathon Oil Co. last year. And Marathon Oil, in turn, accounted for 51 percent of U.S. Steel's 1982 revenues of $18.9 billion. Chemicals, utilities and other nonsteel businesses contributed 21 percent, and steel accounted for 28 percent of U.S. Steel's sales last year.
By comparison, 75 percent of Bethlehem Steel's 1982 sales of $5.3 billion came from steel operations, and 25 percent was generated by nonsteel businesses.
But Williams says the nonsteel portion could increase.
"We recognize that, as the steel industry shrinks and as we shrink our steel sector, we're going to have to grow elsewhere. If we don't grow elsewhere in the future, the whole company could continue to shrink," he remarks.
But any diversification will depend on strengthening the company's steel base, Williams said. "If we don't do that, our competitive situation will continue to deteriorate. Then, all of the diversification in the world wouldn't help us," he said.
The domestic steel industry might be in better shape today had it paid closer attention to the rapid development of international competition in steel production, Williams said. "We didn't recognize soon enough the drastic changes occurring in the world import situation. We could see it coming 10 years ago. But, for whatever reason, we weren't ready; the country wasn't ready," he said.
Imported steel now takes 21.8 percent of the domestic market, according to the iron and steel institute. By comparison, U.S. steelmakers, who exported 1.8 million tons last year, are barely visible in foreign markets. The export situation is likely to stay that way, industry analysts say.
"Other countries, including developing countries, are producing and using their own steel. What they can't sell at home, they're trying to sell abroad," explains Wyman, of Shearson/American Express. Even loan policies of international banks encourage the trend, he says.
"Developing countries have heavy debts, and they're trying to reduce that burden through exports," he says.
Domestic steel producers won some trade protections--the latest of these, in October 1982, being an arrangement with the European Economic Community limiting the volume of European steel exports to the United States. U.S. Steel fought for and is now a beneficiary of that agreement. But it also is trying to shore up its flanks by entering a joint-venture agreement with British Steel Corp.
Under terms of the proposed venture, semifinished steel produced in Britain would be processed into finished products at U.S. Steel's aging plant in Fairless Hills, Pa., 30 miles north of Philadelphia.
The controversial arrangement would give British Steel solid entry into the U.S. market and would give U.S. Steel much needed cash for plant modernization..
U.S. Steel officials say it would cost $1.9 billion to rebuild steel production operations at the Fairless plant, which was built 30 years ago. But $1.9 billion "is a staggering investment that we do not believe we could recover," says David M. Roderick, U.S. Steel chairman and chief executive officer.
British Steel, on the other hand, already has a modern steel production facility operating in Ravenscraig, Scotland. "British Steel can supply semifinished product from Ravenscraig at a cost less than we can make it at Fairless," Roderick said in a statement last week to the Congressional Steel Caucus, a coalition of congressmen from steelmaking states.
U.S. Steel's plan "is to plow back the first $300 million to $400 million of profits from the joint venture operation" into modernizing dock and finishing facilities at Fairless, Roderick said. The improved finishing operations would be used to process the semifinished products shipped from Ravenscraig.
Bethlehem Steel officials have no comment on the plan. "I only know what I read in the papers," says Williams. But some steel officials and analysts said the U.S. Steel-British Steel pact, if approved and implemented, could provide a good escape route for domestic steel companies fleeing recession.
U.S. Steel's "is a practical approach" to dealing with the import problem confronting domestic steelmakers, said Thomas Graham, president of Jones & Laughlin Steel Co. Graham, alluding to joint-venture agreements between auto companies, such as that between General Motors Corp. and Toyota Motor Co. Ltd., also said the U.S. Steel-British Steel proposal is not precedent setting.
Merrill Lynch's Bradford put it this way: "It's a matter of looking at the steel industry as a collection of facilities, instead of as a collection of companies. If you could merge facilities without worrying about antitrust laws, it is possible to save some plants that otherwise might close.
"Many companies have facilities that should be merged. The question is whether or not the mergers would generate efficiencies that would make a stronger domestic industry.
"It's not just a question of Bethlehem versus U.S. Steel anymore. It's a question of the domestic industry versus the Germans and the Japanese. The world has changed."