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Born in Battle

Mar 31, 2017 | 08:00 PM | Bill Beck

April, 2017 marks the 100th anniversary of America’s entry into World War I and with it, the transformation of the country’s ferrous scrap sector from a relative bit player to a key component of the nation’s critical steelmaking force.

U.S. entry into the first of two great world wars in the twentieth century 100 years ago this month transformed the nation’s ferrous scrap sector from a small part of the steelmaking process to a key component of how North American industry made and recycled steel. The sharp increase in steel demand during World War I made recycling an integral part of steelmaking and set the stage for a government-led recycling effort during World War II. Scrap dealers and brokers banded together in the newly formed National Association of Waste Material Dealers (NAWMD) to discuss problems specific to the industry, and steelmakers began resorting to
primitive electric arc furnaces to meet the surging wartime demand.

The outbreak of war in Europe in the summer of 1914 ushered in an era of prosperity for the scrap industry nationwide, but it would be
well over a year before improved business found its way to the American scrap iron and steel sectors. Exports increased as the belligerents on the continent ranged far and wide to find steel for their armaments needs. Although the Administration of President Woodrow Wilson attempted to enforce a policy of neutrality in regards to the belligerents -- shipments were embargoed to Imperial Germany and Austro-Hungary after 1915. But scrap metals--principally copper--found their way to Germany, primarily through neutral Sweden.

By December 1916, members of the NAWMD were reporting some of the highest prices for scrap materials on record. But there were also concerns about the issue of supply. Louis Birkenstein, president of the Association, noted to a New York Times reporter that “prices for all products have been way up, but recent peace talk has had the tendency to depress scrap metal prices, as people
are buying only for immediate requirements.”

For scrap dealers, brokers and buyers, the onset of war ushered in a period of roller-coaster pricing that would not stabilize until the establishment of price controls in early 1918. The steel industry in the United States had emerged from a rough economic period in 1913 and 1914. A short-run bank panic in the fall of 1913 had tightened credit, and even big steelmakers like U.S. Steel Corp. has felt the pinch. Iron Age reported that the majority of pig iron and scrap iron had been “sold at a loss” in 1914. Pig iron production dropped more than seven million tons from 1913.

The financial upheaval following the outbreak of war in Europe in late July sent shockwaves rippling across the Atlantic. Then, as today, the global economy was interrelated. When stock exchanges in Vienna, Brussels, Paris, Berlin and London closed during the last week of July, the New York Stock Exchange soon followed. Markets in the U.S. quickly recovered from the financial shock besetting European markets, butt he anticipated orders for steel and manufactured goods from the belligerents did not materialize
through the latter half of 1914.

Steel capacity utilization in early 1915 was less than 50 percent, but orders from the belligerents for everything from shrapnel to barbed wire to trucks began picking up at the beginning of the second quarter. It took the industry much of the year to transition to the production of armor plate and shells, most of which flowed to England and France. That shift in 1915 and 1916 from a peacetime steel sector to a wartime footing would pay huge dividends when the U.S. entered the war in the spring of 1917.

By late 1915, pig iron production had rebounded to 1913 levels--nearly 30 million tons--and scrap iron became an increasingly
sought-after commodity. “Refreshing and inspiring was the change from depression to activity wrought in 1915,” Iron Age observed in early 1916. The increase in steel production that had begun in 1915 accelerated in 1916 as demand from the European allies for products made of American steel continued to grow during the year. Rail mills rolled shell steel, and Chicago mills made plate for shipbuilders on the Clyde. Prices for finished steel and pig and scrap iron went up, and up again. Mills and foundries ran at full capacity, and strains inevitably began to develop. Rail embargoes, for example, became commonplace in the latter half of 1916.

One complaint first voiced by scrap metal dealers that would be heard repeatedly for the next century and that sounds quite contemporary in 2017 concerned the lack of availability of railroad cars. F.W. Reidenbach, vice president of Coates, Bennett and Reidenbach, Inc. of Rochester, New York, told reporters that he was “inclined to blame the shippers in the East for tying up cars and using them for storage purposes. Many of us cannot get the railroads to give us enough cars to make shipments, and we in turn have cars on sidings we cannot unload owing to lack of capacity at plants.” In May 1917, iron and steel scrap dealers and brokers gathered
in Pittsburgh to urge the National Scrap Iron and Steel Association to strongly protest a recent order of the railroad committee of the Council of National Defense discriminating against rail freight shipments of all kinds in favor of shipments of iron and coal.

An Ironclad Embargo

After Germany reinstituted unlimited submarine warfare in the spring of 1917 and diplomatically wooed Mexico into a proposed invasion of the United States, President Wilson asked Congress to declare war against Imperial Germany; on April 7, 1917, Congress declared war. U.S. entry into World War I quickly closed off all avenues of export for scrap iron, steel and non-ferrous
metals to Germany and the Austro-Hungarian Empire. An ironclad embargo, enforced by the Espionage Act, went into effect early that summer, and exports to Sweden tightened overnight. The export ban forbade export of any iron and steel plate, iron and steel scrap, pig iron and steel billets except for those products America’s allies needed for “actual war purposes.”

Entry into the war created a surge in demand that spring that resulted in skyrocketing prices for scrap metal. In 1914, the average price for scrap iron was $10 a gross ton. Three years later, as the U.S. geared up to field whole armies in northern France, the average price quadrupled to more than $40 a ton. The Wall Street Journal reported in June that Pittsburgh mills were competing as far west as St. Louis for heavy melting scrap, and as far east as Philadelphia, running the price of the bellwether grade to an unheard of $42.50 a ton. The Journal called the run-up “epoch-making prices.”

In Cincinnati that spring, foundry scrap soared to nearly $45 a ton. “There is no let-up in demand,” The Cincinnati Enquirer reported,
“with the pressure for steelmaking iron from other lands increasing.” The Enquirer noted sales of 40,000 tons of heavy melting iron to a local concern at $40 a ton, “the best price ever recorded for this material.”

That ramp-up in armaments manufacture and war-related construction soon created spot shortages in regional industrial sectors. “Steel scrap is scarce,” the San Francisco Chronicle reported in late July. “This fact has developed in connection with the plans for the construction of steel and wooden ships which are to be built on this coast. Ninety percent of the foundries depend upon iron and steel scrap for the operation of the plants here.” The Chronicle urged the government to investigate the export of iron
and steel scrap from San Francisco and nearby Oakland, which had jumped to a total of 9,300 tons in the preceding 12 months.

In a relatively short period of time, America had transitioned from a civilian to a war economy; by the late summer of 1917, the U.S.
Government and its allies were accounting for as much as 40 percent of the nation’s steel output. That number would steadily increase throughout the war. Prices for scrap iron and steel actually backed off slightly that summer and widened the premium enjoyed by producers of pig iron. Mills and foundrys were flooded by a glut of prime grades, turnings and borings flowing from vendors making manufactured products and munitions from steel.

The glut of iron and steel scrap, however, was rapidly absorbed, as both public and private armaments manufacturers geared up production. In late June 1917, the War Department’s Frankford Arsenal took bids for 1,300 tons of iron and steel scrap. The War Department also purchased three six-ton electric furnaces for installation at the Charleston Navy Yard in South Carolina for the production of refined steel plate for shipbuilding.

In 1917, the War Industries Board had encouraged the nation’s steel industry to dramatically increase capacity. The quickest way to get more capacity online was to build open hearth furnaces, which utilized large proportions of iron and steel scrap to produce steel. The War Industries Board also encouraged the industry to add electric furnaces for the production of alloy steel and steel castings.
The use of scrap was limited in the open hearth and beehive furnaces of the day, but inventors were already working with the carbon
arc technology that supported much of the streetlighting of the period. The Imperial Munitions Board in Canada had pioneered the
use of electric furnaces the previous year to melt scrap iron and steel for the war effort.

Price Controls

The rapid run-up in commodities prices at the outbreak of war had convinced the Wilson Administration to establish price controls on a broad range of raw materials and finished products. By the end of 1917, the federal government had fixed the price for no. 1 heavy
melting scrap at $30 a gross ton. That was a dramatic drop from the $50 a ton the grade had commanded in October, but corresponding controls on sheets, pipe, cold rolled steel and tinplate took some of the sting out of the scrap price controls. The price for cast iron borings and machine shop turnings was set at $20 a ton, and no. 1 railroad steel prices were fixed at $35 a ton. The War Industries Board, which had determined and published the controls, reported that the restrictions on prices were “bound to work out for the good of the trade and bring the market back to a sane and safe position.”

The ability of the nation’s scrap iron and steel community to meet rapidly surging demand at the outbreak of war in 1917, and the
industry’s relatively seamless transition to a planned economy late that year was a sign of the scrap sector’s emergence as a growing factor in American steelmaking. That ability to meet U.S. and Allied defense needs would be put to the test during the critical months of 1918.

Obstacles to Production

For the nation’s scrap iron and steel industry, 1918 was a year beset by obstacles to production, some weather-related and some caused by the unprecedented strains on U.S. industrial capacity. The nation’s midsection was pummeled by snowstorms in December 1917, and by the New Year, freight movements across the eastern half of the country were causing backups and rail freight embargos.

Things got worse in the second half of January when one of the worst polar outbreaks of the 20th century created a coal shortage that threatened to deplete home heating coal stocks across much of Eastern North America. On January 17, the U.S. Fuel Administration issued an order closing down all industrial plants with the exception of steel mills, arms factories, and shipyards the week of
January 18 and for nine consecutive Mondays starting January 28. The aim of the shutdown was to reduce freight shipments and allow the industry to get a handle on general railroad congestion. Then as now, snow and frigid weather dramatically reduced the ability of scrap dealers to prepare and ship ferrous scrap.

In the era before truck transportation became a common method of delivering iron and steel scrap to the mill, most of the industry’s
production was dependent upon barge or rail delivery. The extremely cold weather of early 1918 shut down a great deal of barge traffic in the eastern half of the country, and the U.S. Fuel Administration’s January industrial shutdown order took 13 days out of U.S. industrial production. The rail car shortage and deep freeze in early 1918 was particularly difficult for scrap iron producers, who were often at the end of the list for rail shipments.

‘No Shortage of Steel at the Mill’

The domestic steel industry’s rapidly increasing demand for iron and steel scrap to feed open hearth and electric furnaces created the
first public awareness of the need to increase scrap flow. “It is said that if all the available iron and steel scrap in the country were marketed, observed the Greenville, North Carolina, News, “there would be no shortage of steel at the mill.”

The Central News, a weekly newspaper in Perkasie, Pennsylvania, suggested to its rural readers they might want to take a long hard
look at the farmyard to find material for the war effort. “Old waste stuff is found in no small quantities on the farms,” the Central News observed, “old plows, old implements and wornout machinery. Now is the time to gather them and realize on them. Iron and steel are
in special demand, and the prices appear to be right. Junk prices now ought to stimulate farmers to gather up all such stuff and get it on the market.”

Although it never reached the level of organized government collection of scrap that occurred during World War II, 1918 did see the
first warnings about hoarding scrap iron and steel, and the initial attempts to create public awareness of the value of scrap drives. In
August, the Subcommittee on Iron and Steel Scrap submitted a press release about hoarding to the Associated Press, which distributed the release widely in the western half of the United States. “All persons, firms or companies in the Pacific coast district having in their possession scrap cast iron or steel are requested to make it immediately available for war purposes by selling
it through the usual commercial channels so that it can reach the foundries and mills,” the release pointed out.

By late in the year, some communities had actually organized scrap drives. On November 5, less than a year before the Armistice, residents of Port Huron, Michigan were asked to fill more than 100 barrels at polling places with scrap iron and scrap rubber. The beneficiary of the municipal scrap drive was the local American Red Cross, which was then in the process of building new facilities in the Michigan City. “Many local war industries can use every pound of iron or steel scrap they can get, and the sale of the material collected will be made to local industries,” the organizers of the scrap drive pledged.

Scrap dealers got in the patriotic swing of things. One Oregon dealer offered to pay at a rate of $8 per ton for every pound of scrap
delivered to his yard. “Throw that old stove in the wagon next time you come to town and in a little while it will find its way to the front in
some form for killing the Huns,” the merchant advertised in the local newspaper.

Scrap iron and steel was such a necessary commodity to steelmaking during the war that some communities actually put the welcome mat out for scrap yards. Scrap dealers were often thwarted before the war by where they could site a scrap yard; residents frequently objected when a dealer announced plans to add a new yard. That wasn’t the case in March 1918 when Sterling Iron and Steel Co. of Philadelphia announced its plans to add a new yard in Lebanon, Pennsylvania. The local Lebanon Daily News wore its civic pride on its sleeves, calling its hometown the “little old town of the iron nerve.” The new yard, the newspaper said, would be a fine addition to the local economy and pointed out that the president of the Sterling Company was none other than Harry Davis, first baseman and captain for Connie Mack’s Philadelphia Athletics from 1901 to 1911.

The signing of the Armistice on November 11, 1918 brought an end to “the war to end all war.” The nation’s scrap iron and steel sector
could take pride in having done its part in what had been a coordinated effort between industry and government to win the war and bring Imperial Germany to its knees. Scrap iron consumption had increased dramatically, with nearly 27 million tons consumed in 1917 and more than 25 million tons consumed in 1918. Despite fears that the United States would experience a shortage of scrap material before the war ended, scrap consumption continued strong in 1919 with nearly 21 million tons melted in 1919 and 26 million tons consumed in 1920. Scrap iron and steel had become a major new player in America’s steelmaking industry.