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US steel town blames China for bad times (Steel from Youngstown)

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US steel town blames China for bad times
BBC News - US steel town blames China for bad times

By Justin Rowlatt
BBC News

Workers reinforce the metal girders of a skyscraper in the 1920s
Steel from Youngstown built the skyscrapers of New York and Chicago

As heavy industry declines across the US, many American workers lay the blame at China's door.

It is a mixed blessing when Bruce Springsteen decides to immortalise your town in a song.

Of course you would be chuffed that someone had taken notice but, let's be honest, optimism and hope are not really the strong suit of America's poet of blue-collar life.

We sent our sons to Korea and Vietnam, now we're wondering what they were dying for, here in Youngstown, here in Youngstown
Bruce Springsteen

So I was surprised when everyone I spoke to in Youngstown loved his song about the city.

Youngstown was the crucible of the American industrial revolution. The great Mahoning river valley that runs through the city used to be lined with steel mills.

Youngstown steel made the railways that opened up the West and built the skyscrapers of New York and Chicago, and the fortunes of America's first great tycoons.

"Now the yards are just scrap and rubble," sings Springsteen, telling of the terrible decline the city has suffered.

"These mills that built the tanks and bombs that won this country's wars," he continues, "We sent our sons to Korea and Vietnam, now we're wondering what they were dying for, here in Youngstown, here in Youngstown."

Bulldozed

The steel industry in the Youngstown area used to employ 50,000 men. Just a few thousand jobs are left.

George Calko is lucky enough to have one of them. He is the fourth generation of his family to work in the industry.
Disused mill in Youngstown
The steel industry was the lifeblood of the local community

George and his wife Sheila took me on a tour of their community.

We drove along roads where entire blocks have been bulldozed - just grass and telephone poles remain.

Youngstown, Sheila told me ruefully, is now famous not for steel but as one of the drug and murder capitals of America.

We stopped at a mill that closed a couple of years ago. The vast works buildings are shuttered now and weeds grow in the yard.

George explained how Chinese businessmen buy up the machines in factories like this and ship them back to China.

"Now they are making what we used to make and selling it right back to us," he told me bitterly.

Lots of people in America blame China for the decline of great American industries like steel but George discerns a deeper malaise abroad.

"This is going on all over America's industrial heartland," he said as we sat in his car outside the silent factory.

"Places like this are going out of business left and right.

What's most unsettling about China to Americans is not their communism, it's the capitalism
Thomas L Friedman

"What we're losing is much more than just a product that can be found in a store. We're losing a culture and a way of life, a culture of hard work. We're losing a culture of people that knew how to get things done."

I looked over at Sheila who was sitting beside George. Tears were streaming down her face.

I asked her why she was so moved.

"I teach in schools and I think about all the problems that come from losing a job," she told me, choking back a sob.

"I just think about all the people that can't provide for their families any more."

'Dead' town

Three hundred miles (480km) away in Bethesda, a rich suburb of Washington DC, there is no unemployment problem. This is where the powerbrokers live in this, the most powerful city on earth.

I had come here to interview one of the most respected journalists in America.

Thomas L Friedman is a three times Pulitzer Prize winner who writes for the New York Times.
Boarded-up house in Youngstown
Youngstown now has little to offer the young

He is worried - just like George and Bruce Springsteen - about the decline of something Americans used to champion, the nation's working class.

"What's most unsettling about China to Americans is not their communism, it's the capitalism," he said as we chatted in his kitchen.

"We see in China things we used to see in ourselves: can-do, get it done, hard work, sacrifice, 'own the future'.

"That used to be us, and now we see it in them."

It would be hard for America to cope with the remarkable rise of China at any time but, at a time when America is stagnating, it is particularly difficult.

On my last evening in town, I went for a drink in a bar in the centre of town that has become a focus for local activists like George and Sheila. I got talking to two lads outside.

THE CHINESE ARE COMING
Justin Rowlatt has been on a global journey to explore the effects of China's policy of "going out" into the world to secure the energy and raw materials its rapidly growing economy needs
A two-part documentary series goes out on BBC Two in early 2011
He is reporting regularly for the BBC News website

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"This town is dead," they told me. "We're getting out of here."

One of America's great strengths is its optimism but it is hard to believe that your best days are still ahead in a town like Youngstown.

"So where do you want to go?" I asked the young men outside the Youngstown bar.

"Stick a pin in a map, man," one of them said with a shake of his head. "I'd go anywhere rather than here - anywhere."

He took a long hard drag on his cigarette and exhaled with a deep sigh. The raw winter wind whipped the smoke away and up into the Ohio night.

The problem for men like these is that there is no great hope of a shining future over the hill.

These are difficult times for blue-collar America.
 
I can't find figures for US steel production, but I have heard from suppliers that we produce just as much steel or more than we ever did right here in the US. Those old plants are shuttered now, but new ones are built. I also believe that one reason the US steel industry is still kicking is due to high steel demand from China. Meaning that we are exporting a lot of steel TO China.

These new plants are much more energy efficient and environmentally friendly. But, the major change is in the manpower needed to produce the steel. I attached a graph showing the man-hours needed to produce a ton of steel. It shows that with automation and more efficient processes, the same ton of steel takes 1/8 the man-hours to produce today versus in 1950.

This is true in many industries. Automobile production is another example. More car are produced now than ever, but fewer total employees are required.

Here is the paper where I found the graph.

I don't know what that means for the future of blue collar jobs in the US. Stopping Chinese imports is not going to bring back jobs that are just not needed due to newer and more efficient processes. China can afford to use older and less efficient processes because their labor rates are so low. However, when Chinese labor rates rise (they will), Chinese industry will be stuck with old and inefficient factories. At that point the US will have a real advantage.
 

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I can't find figures for US steel production, but I have heard from suppliers that we produce just as much steel or more than we ever did right here in the US. Those old plants are shuttered now, but new ones are built. I also believe that one reason the US steel industry is still kicking is due to high steel demand from China. Meaning that we are exporting a lot of steel TO China.

These new plants are much more energy efficient and environmentally friendly. But, the major change is in the manpower needed to produce the steel. I attached a graph showing the man-hours needed to produce a ton of steel. It shows that with automation and more efficient processes, the same ton of steel takes 1/8 the man-hours to produce today versus in 1950.

<...>

China can afford to use older and less efficient processes because their labor rates are so low. However, when Chinese labor rates rise (they will), Chinese industry will be stuck with old and inefficient factories. At that point the US will have a real advantage.

Thanks for this. It is very enlightening and encouraging. I am sure I read about the new US steel industry here on PM sometime back.
Nucor is one of those forward-thinking and planning steel manufacturers as far as I know:
Nucor Corporation
 
this article is alarmist, and not very accurate.

The latest figures I can find online are a couple of years old, but as of 2008 or so, the USA was producing around 80% of the steel used domestically, and, of the imports, china was down there- 3% to 5%.
As far as I know, we import as much steel from Japan and Germany as we do from China.

Nucor, alone, produces between 1/4 and 1/3 or all the steel made in america- and it does it with a tiny fraction of the number of employees that US Steel plants in places like Youngstown used to.

So-
Number 1 cause of lack of steelworker jobs is efficiency.
Nucor can make MORE steel with 500 guys than USS used to make with 15,000.

Now, there is a valid argument to be made that Wall Street has sold most of our steel making capacity to foreign investors- aside from Nucor, most other major steel mills in the USA are owned by Russian, Indian, and German companies.
However, regardless of ownership, we still make somewhere between 80 and 100 million tons of steel per year in the USA, and we have lots of excess capacity here- as oil prices go up, and shipping stuff from China gets more expensive, which it inevitably will, the US steel mills can make all the steel we need.

They just dont need 200,000 guys to do it.

Thyssen Krupp is building a $5 Billion steel mill in Alabama. It will be one of the most technologically advanced plants on earth.
The Indian company Essar is building what I think will be the largest DR (Direct Reduction) steel mill in the world in Northern Minnesota. Couple billion dollars for that.

Neither of these companies would be investing their money in the USA if the Chinese really had cornered the market...
 
Tbe price of scrap steel is up to .15 / lb for chips in the east so someone is reprossing it. I just got rid of about 10 tons of chips I had been storing up for the last year.

John
 
LFL,

Actually, Nucor ran into a problem a while back when scrap went up to something like 700 per ton. Tghey made all their steel with arc furnaces and scrap.

It became so bad that they decided to, don't know if they ever did, build a Basic Steel Operation, make their own from scratch, supplemented with scrap, as all steel mills do.

US Steel, and other integrated mills, make steel from the raw materials. Nucor decided they needed to do that, too.

Labor in the US steel industry is, according to the Chair of US Steel, 10 USD per ton. In the last 15 years, raw steel has probably been as low as 450 US per ton

Labor is the cheapest part of almost every commercial operation in the US. You guys should know this. You pay a machinist as much as 20 bucks an hour, charge the client 60 to 100 per hour, plus material, plus everything else, and you ALL want to take your extra penny out of the laborer's wage.

Cut a minute out of the process, at 60 per hour, another buck is yours. Cut enough, you can get rid of all them parasites who are holding you down.

Go all CNC, and you can get rid of all them bums, YOU can feed the machines, ALL yours. AND, there ARE people here who have "machining cells" 6 or more machines with one feeder tending them all, and you brag about it.

In some instance I can actually see that as efficiency.

We are going to hell because we don't pay people enough to buy OUR production, so we have to go to Wal-Mart for the basic necessities. Wal-Mart buys Chinese, we put ourselves out of the manufacturing industry.

Cheers,

George
 
Ries,

USS also makes more steel now, with less people than ever. My Mill, Irvin Works, was at less than 1100 when I retired, down from over 4500, and about half of them were clipboard carriers and Salary.

Edgar Thompson, one of the first and oldest of Carnegies mills, is down to well under 1500 from 15 thou.

US Steel can, also, make more steel with 500 than US Steel made with 15 thou. Nucor is not a model of efficiency. They have had "breakouts" of their continuous caster, just as we have. Hundred tons of molten steel escapes the caster and burns everything under it. Lance the cooled metal out, rewire, try to get back on line as quickly as possible.

"aside from Nucor, most other major steel mills in the USA are owned by Russian, Indian, and German companies. "

US Steel is still an American owned Company. Did that slip by you? That we may have investors with other allegiances does not mean that US Steel is foreign owned. I own a very small portion.

Most machine shop owners here also have either reduced head count due to automation and computerization as the US steel companies have, or any other industry.

The only companies who are growing head count are the "tech support" and direct sales industries, and they can all be offshored with the click of a mouse.

Medical industry thought they were immune, and people in Bangalore read your MRI.

You want your house cleaned or painted, you will use an American BASED company, tho', it may be foreign owned. ServiceMaster comes to mind. I don't know who owns them, now.. Although, they will hire US workers to clean up the mess you made.

Cheers,

George
 
George, Nucor is building DRI plant in Louisiana- Not a BOF, like the old fashioned mills you worked in.

DRI is direct reduction- its what the Indians are building in Minnesota.
Its a process the Swedish invented in the 60's, and there are something like 50 mills around the world that have run this process, so its not exactly new.

It doesnt use oxygen, or coal, or limestone flux, or even a ladle.

It uses natural gas to melt iron ore into iron pellets. These pellets then go to their regular mills, get mixed with scrap, and made into steel.

The Bessemer process was invented in 1858. It makes sense we have had a little bit of progress since then.

But this mill in Louisiana is just getting started, I dont know if construction has even begun yet, and will only make 2.5 million tons a year- all the rest of Nucor's production is still from scrap.

Interestingly enough, this plant is expected to employ 150 people.
150 people, to make 2.5 million tons a year of steel.

My dad worked at a mill in Gary Indiana, in about 1948. I believe there were between 15,000 and 20,000 employees at that mill at that time. Today, Gary works makes 7.5 million tons a year- but back then, I think it was less.
 
Labor is the cheapest part of almost every commercial operation in the US. You guys should know this. You pay a machinist as much as 20 bucks an hour, charge the client 60 to 100 per hour, plus material, plus everything else, and you ALL want to take your extra penny out of the laborer's wage.

Cut a minute out of the process, at 60 per hour, another buck is yours. Cut enough, you can get rid of all them parasites who are holding you down.

Go all CNC, and you can get rid of all them bums, YOU can feed the machines, ALL yours. AND, there ARE people here who have "machining cells" 6 or more machines with one feeder tending them all, and you brag about it.

In some instance I can actually see that as efficiency.

We are going to hell because we don't pay people enough to buy OUR production, so we have to go to Wal-Mart for the basic necessities. Wal-Mart buys Chinese, we put ourselves out of the manufacturing industry.

Cheers,

George

LOL! I've got a cold six pack that says you voted for Obama?
 
LOL! I've got a cold six pack that says you voted for Obama?

I've got a cold six pack that says this thread is going to be as epic as One mans take.:drool5:

Seriously though, what do you find objectionable about Georges reply. Automation or a decent wage to encourage domestic consumption of domestically produced goods.

Garry
 
"we don't pay people enough to buy OUR production, so we have to go to Wal-Mart for the basic necessities. Wal-Mart buys Chinese, we put ourselves out of the manufacturing industry."

This sounds like the old "Triangle Trade."

Run it forwards and you clean up. Run it backwards and you lose yer shirt!

Think we're running it backwards.
 
I was thinking while reading this thread of the old Solvay Process plant that was here in "Solvay NY'. Built in 1886 by the Solvay company from Belgium, it was a hugh basic chemical plant that employed 10,000 people in 1990. It eventually become Allied Chemical. They closed in 86 or so, I think they had 1200 employees. It was my understanding that they colosed because the plant was 100 years old, the original chemical they made, Sodium Carbonate became cheaper to mine [Trona?] than to make, in fact the steel mill next door bought it from a mine in the west. and the old plant was otherwise obsolete and a huge polluter. Not some fussy problem with technicallities but was big old fashioned Hg dumper, coal tar, really stinky, bellowing black smoke, all the good stuff. Anyways I bet that former production that 100 years ago required 10,000 people, is probably replaced by a few hundred workers. The chemicals are used more than ever, but far more effeciently.
 
yeh but

Going back to the first threads what I'm reading is, "Buh hoo, there are countries competing against us".

Competition is comparable to Darwin's Theory - only the fittest survive. For years the rich countries have been giving the poor countries enormous sums to help them develope. I'm guessing now the intention was only to just help them get by, not for them to really do well.

In the sporting world records are made to get broken. Why should it be different in the business world? "When the going gets tough, the tough get going".

I'll give an example I have first hand knowledge of. Back in the late 70ties 3 NATO countries in Europe (Norway, Denmark and Holland) bought a large number of F-16 fighter planes. As part of the agreement American companies involved in plane manufacturing had companies in these 3 countries manufacure some of the parts.

I worked as Quality Manager for a Danish company that had the chance to make parts for the F-16 as did several other companies. To cut a long story short after less than 5 years the Danish comany could make the parts better and cheaper than in the USA. Danish wages are higher than American ones for machinists so it wasn't because we had "cheap labour".

Those Danish companies probably didn't have to support a CEO, CFO, Pres, V Pres and others drawing a multi million dollar wage.

George's reply was interesting because it was something I was wondering myself the other day...did US steel manufacturing simply offshore when it became uncompetitive or did it upgrade?

Sure it's hard on the workers but upgrading and automating are the only ways that business can survive. And, it's only going to continue.

Garry
 
What happened with the steel companys in the US was the unions would not let the companys upgrade their equipment in that if they did upgrade the companys still had to have the same number of personel on the job with the new equipment so they just continued to work with the old methods until it was no longer profitable. The foreign companys all had their plants destroyed in WW2 and were operating with modern equipment and producing cheaper steel.

John
 
US Steel etc

What happened with the steel companys in the US was the unions would not let the companys upgrade their equipment in that if they did upgrade the companys still had to have the same number of personel on the job with the new equipment so they just continued to work with the old methods until it was no longer profitable. The foreign companys all had their plants destroyed in WW2 and were operating with modern equipment and producing cheaper steel.

John

Would you like to expand 'your' information on the UK iron and steel plants.
Now I was around in 1939-1946 and lived within the Industrial North of the UK.
In fact, I can go on to say that I was about when several companies 'lost' their coal production part to nationalisation.
 
What happened with the steel companys in the US was the unions would not let the companys upgrade their equipment in that if they did upgrade the companys still had to have the same number of personel on the job with the new equipment so they just continued to work with the old methods until it was no longer profitable. The foreign companys all had their plants destroyed in WW2 and were operating with modern equipment and producing cheaper steel.

John

This might have happened with a few companies-
But we still have, right now, the capacity to make ALL the steel we need.

And we have some of the most modern steel mills in the world in the USA, with more being built. The two big DRI mills currently being built are a good example of that. Thyssen Krupp, as I keep saying, is building a $5Billion dollar plant down south, in a non-union state- the unions are NOT preventing that from happening, and that plant will probably even export some of its output, although most of will go to the BMW and Mercedes plants who are currently not happy with the quality of US sheet available.

If its really true that the "evil unions" made the companies have the same number of personnel, as you say, then how come the plant George worked at now only has 1500 workers, when it used to have 15,000- and thats a US Steel plant that is one of the oldest in the country? Every mill that is still running has fewer employees. Union or not.


What has really changed is that we are not exporting much steel anymore.
Ever since the 1880's or so, we made more than enough steel to satisfy US needs, and then, on top of that, we EXPORTED.
Mainly because we had the most, and the most modern, mills of anyone, worldwide.
But nowadays, there are plenty of steel mills everywhere, so exporting requires either cheaper steel, or BETTER steel.

We obviously cant make cheaper steel than Indonesia, or Mexico, or China- but we mainly only import either really good steel, or really crappy steel.

The majority of US steel imports fall into the good category- German and Japanese die making and tool steels, for example- or, into the crappy category- cheap rebar, really cheap black iron pipe for plumbing.

The vast middle ground of US steel needs, the round bar and flat bar and angle and square tube, I beams and big pipe- is still made in the USA.
As I mentioned before, Current numbers are sometimes hard to find online, without paying, but most figures I can find say we make 80% or so of our steel needs here at home.
And we certainly have the capacity, in terms of tonnage, to make all 100% if we wanted to, and the main reason we dont is price.

Its all about the Benjamins, as usual.
Several of the big old school US Steel companies bled their pension funds dry, then went bankrupt, sloughing off the obligation to the Federal Government. Many of those mills are now owned by foreign steel makers, who are not hesitating to invest in the USA. They all seem to think US made steel will be profitable in the future- if you added up all the mills, I am sure you could break $20 Billion to $30 Billion that is being spent right now by foreign steel companies in the USA on new steel mills, or upgrading existing ones.
Some of that steel, from new, state of the art mills, will be exported.

Much of the steel production, however, has shifted from the Western Pa/Illinois axis to the south, and west. When I buy steel, most of it is made in Seattle, Colorado, and Utah. Those are the closest mills to me, and, with diesel prices what they are, its much more profitable to serve the West and Southwest from those mills, than pay to ship from the Mon Valley.
 
LFL,

Labor is the cheapest part of almost every commercial operation in the US. You guys should know this. You pay a machinist as much as 20 bucks an hour, charge the client 60 to 100 per hour, plus material, plus everything else, and you ALL want to take your extra penny out of the laborer's wage.

Cut a minute out of the process, at 60 per hour, another buck is yours. Cut enough, you can get rid of all them parasites who are holding you down.

George

Uhmm, I don't know about anyone else, but in my shop labor is the single BIGGEST cost. Pay a good machinist 25 bucks an hour, tack on 5 bucks for pension, and other deductions, and your at 30 bucks an hour. The guy has to put 10 bucks an hour in my pocket or it's not worth the bother. so we are at $40. Right now it can be a challenge to get $60, so that leaves $20 an hour to cover the building, heat, electricity, phone, machine payments, cost of the building,etc.:nutter::nutter::nutter: Anyone who thinks labor is cheap- for the small businesses that actually drive the enconomy, must be using the really good drugs.:rolleyes5:
 
My point, Gordon, ( and I'm shocked this went over your head, I consider you to be a sharp guy) is that the regulations we (in the USA) face now, and will soon face more of, are a disadvantage to us. Especially if the EPA is allowed to "make Law" as they are leaning toward.

I used the ship breaking example as simply the most egregious abuse of people I could come up with. I'm sure if you look at the laws of India & Bangladesh, you would find regulations forbidding just what you saw on the video.
 
"...the regulations we (in the USA) face now, and will soon face more of, are a disadvantage to us. Especially if the EPA is allowed to "make Law" as they are leaning toward."

What regulations would you eliminate?
 








 
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