Youngstown, Ohio

In 1979 labor lawyer and civil rights activist Staughton Lynd chronicled the demise of the steel mills in Youngstown, Ohio, for the New York Review of Books. He wrote that although “the first response of many steelworkers and others in Youngstown . . . was to blame the Japanese,” what actually happened was that “most of the American steel industry has become technically obsolete.” He admitted that “Japanese steel companies may at times dump steel on American markets” but concluded that “fundamentally their lower prices are based on actual savings in cost.”

While many factors led Youngstown’s mills to shut down, including growth in global steelmaking capacity coupled with a slowdown in demand, all this took place amid a technological transformation. Steelmaking was moving away from open-hearth furnaces toward the more efficient basic-oxygen furnace. Foreign steelmakers, many of whose mills had been rebuilt after World War II using basic-oxygen technology, could produce steel more quickly and cheaply. Basic-oxygen furnace designs were also more energy-efficient, something that became important during the energy crises of the 1970s.

U.S. mills, at least the older ones in the North, couldn’t compete. Their owners lacked either the necessary capital or the motivation to invest in the emerging technology. This reduced employee productivity, making the wage gains earned by the steelworker union unsustainable. It wasn’t only foreign mills that replaced the steel made in Youngstown. Newer basic-oxygen furnace mills in the U.S. took on some of the lost capacity.

It’s helpful to recall this now, as senators from Ohio and Pennsylvania are joining the Biden administration to raise red flags about the attempted acquisition of U.S. Steel by Japan’s Nippon Steel. These politicians are following the lead of the United Steel Workers, which fears that Nippon Steel will close unionized integrated steel mills in the North and move production to nonunionized electric-arc furnace mills in the South. Just as in the late 1970s and early ’80s, however, the only thing that will save union steel jobs in the long run is technology and innovation. The union and its political champions should focus on making the current U.S. Steel facilities economically competitive.

Innovation in steelmaking today is geared toward reducing carbon emissions. Electric-arc furnaces are one way to do this. The use of recycled steel scrap and other materials in so-called minimills makes blast furnaces more environmentally friendly by replacing some of the coking coal used in the older blast furnaces with hydrogen. While more than 70% of U.S. domestic steel is produced using electric-arc furnaces, U.S. Steel itself was slow to make the transition. The company has attempted to catch up by purchasing and then expanding Big River Steel, which operates electric-arc furnaces in Arkansas.

Whoever ultimately buys U.S. Steel will need to invest significant capital. The older blast furnace mills require expensive relining roughly every 17 years. Cleveland-Cliffs, an American steelmaker whose much lower offer for U.S. Steel is preferred by the union, is scheduled to reline its Burns Harbor, Ind., facility in 2026, and its Middletown, Ohio, one in 2027.

Over the next decade, 70% of traditional blast furnaces will reach the end of their useful lives. This, alongside the global shift to cleaner steel production, means that only mills with access to sufficient investment capital will survive. Nippon Steel, as the fourth-largest steelmaker in the world, has the resources to expand U.S. Steel. It is offering a premium price to gain better access to the U.S. market. It would make little economic sense for the company to fail to provide the type of investment necessary for success.

It might be useful for the United Steel Workers to recall that the mills that closed in Youngstown were all union shops. History teaches that while unions can improve wages and working conditions for those working in the mills, they can’t make the mills economically sustainable. Cleveland-Cliffs announced it would close its unionized tinplate mill in Weirton, W.Va., this month. While the company blamed foreign competitors, the bipartisan International Trade Commission unanimously rejected the claim that imports were damaging Cleveland-Cliffs.

Even if the U.S. adopts tariffs and other countermeasures to raise the price of foreign steel, the older plants that formed the core of the old U.S. Steel will face increased competition from greener domestic rivals. A lack of investment and innovation destroyed steel jobs in the 1970s and ’80s. Politicians and others who oppose Nippon Steel’s purchase of U.S. Steel risk taking us down this road once again. Ironically, they are doing so in the name of the very working-class voters who will feel the brunt of the economic pain should these mills close.

(This is an article written by Paul SRACIC, Adjunct Fellow, Hudson Institute / Professor, Youngstown State University / Senior Advisor, Logos Group International. The article was first published in the Opinion Column of the Wall Street Journal on April 29, 2024.)