How Steel Built the Modern Economy

He’d hinted as much when the deal was first announced late last year, issuing a paean to steel’s role in winning World War II and building the America he grew up in. The president from Scranton, Pennsylvania, was not going to abandon steelworkers—or, more to the point, be seen as abandoning them—in an election year.

“I told our steelworkers I have their backs, and I meant it,” Biden said, assuaging the concerns of U.S. Steel employees who have been consistently against the acquisition. The Biden administration is scrutinizing the proposed takeover under the standard but utterly opaque procedures of the Committee on Foreign Investment in the United States, and a final ruling could come after the election. Biden’s rival fusses less with procedural niceties. “I would block it instantaneously. Absolutely, ” former President Donald Trump said in January.

Oddly, a few days after Biden’s March statement, his administration unveiled a $6 billion plan to help decarbonize energy-intensive industries, including steel. Further decarbonizing steel, a major contributor to global greenhouse gas emissions, is one of the first things that Nippon Steel highlighted in presenting its takeover bid last year, and U.S. Steel through recent acquisitions is already on the same path, investing billions of dollars in advanced minimills that use new technology (and fewer workers) to make cleaner steel.

But unions, which like the labor-intensive, old-fashioned, coal-fueled blast furnaces, see things differently. The older steel mills require more workers to make the same amount of steel, and those workers pay union dues; the newer minimills require fewer people and are generally nonunion shops. David McCall, the president of United Steelworkers, North America’s largest industrial union, told Bloomberg News in April that, in the authors’ words, “securing specific investments that will ensure another generation of life at the blast furnaces” is what matters to the union, not who owns U.S. Steel.

That battle between the past and the future is playing out in places such as Gary, Indiana. Gary Works, the largest steel plant in the United States and the rusting jewel in the U.S. Steel portfolio, has been churning out huge volumes of steel from its gigantic furnaces for more than a century. The factory makes more steel than the entirety of the United Kingdom and all but 20 countries. But it makes it dirtier than most.

The competing imperatives to keep old plants functioning—to keep the unions at bay—and to make cosmetic environmental fixes—to pacify the administration and investors—explains why U.S. Steel announced in April a limited trial program to capture carbon emissions at Gary Works. The problem is that the system would scrub at best 0.5 percent of the plant’s annual emissions, and it wouldn’t touch the rest of what comes out of the smokestacks. There are several pathways to green steel; this, for now, is not one of them.

“This is the largest single emitter in Indiana, and that is saying something,” said Ben Inskeep, a program director at Citizens Action Coalition, Indiana’s biggest environmental advocacy group. Coke, a coal byproduct used in traditional steelmaking, pollutes the local air in Gary to a degree that alarms even Britons. “We have concerns that they are keeping the blast oven furnace open by locking in this carbon capture route,” Inskeep said. He’d prefer a wholesale shift to newer technologies that use electricity, not coal, to make steel.

“Our vision of sustainable steel is going to first and foremost benefit the workers who are breathing this day in and day out,” he said.

Steel doesn’t invade headlines like fashionable metals such as lithium or cobalt do, and it doesn’t monopolize attention or even policy the way semiconductors do. But there is nothing more central to the modern world—not to the material world, not to the green transition, and certainly not to trade and economic nationalism.

Steel holds up skyscrapers and trade agreements between the United States and Europe. It makes wind turbines tall, new cars sleek, and old politicians nostalgic. It is at once a relic of the 19th century and the building block of the next. And it is where trade, industrial policy, national power, and the climate revolution come to do battle.

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Today, the world makes more steel every year, nearly 2 billion metric tons, than it did during the entire 19th century; the growth curve for steel output this century is nearly vertical, with global production more than doubling just since 2000. And despite a brief slowdown in world production growth in recent years after the COVID-19 pandemic and thanks to stubborn overcapacity, steel output will only keep growing, as the appetite for new cars, new power plants, and new buildings continues apace.

Even as historic European steelmakers such as ThyssenKrupp scale back their production to fight off cheap Asian imports, India plans to double its production of steel to 300 million metric tons a year by the end of the decade. That is the equivalent of adding the entire steel output of Japan and the United States—the world’s third- and fourth-largest producers, respectively—in just the next five years. China, which already makes about half the world’s steel, is spending tens of billions of dollars to build new coal-fired steel mills, despite its own overcapacity issues.

Steel, which is basically iron mixed with a little bit of carbon to make it stronger and more malleable, has been around in artisanal quantities for centuries: The famous samurai swords and the blades using Damascus steel were made by hand with high-quality steel. But production at an industrial scale began in the middle of the 19th century with Henry Bessemer’s breakthrough process to cheaply turn pig iron into molten steel. The flood of affordable steel allowed the rise of railroads and, after a little more technical tinkering, structural steel that spanned rivers and soared skyward.

Most of the world’s steel plants today operate a blast furnace that uses pulverized coke to turn pig iron into steel—essentially more advanced descendants of Bessemer’s first plants in Victorian England. More innovative plants today use electricity to zap scrap metal into steel, a less carbon-intensive way to produce the metal but one that requires ready supplies of affordable electricity and scrap metal.

Either way, the uses are endless—literally so, since steel is infinitely recyclable. A typical car uses nearly a metric ton of steel. A double-track kilometer of high-speed rail needs 240 metric tons of steel. A wind turbine uses about 900 metric tons.

“At its most basic, pretty much all your major infrastructure, buildings, bridges, energy systems, water supply, all of this is built with steel,” said Kevin Dempsey, the president and chief executive of the American Iron and Steel Institute, a trade association. “So what we need to live and move around in and do our digital jobs still requires a lot of steel and even more going forward.”

But steel is also central to the problem of climate change, accounting for about 8 percent of global carbon dioxide emissions. That’s mostly because the vast majority of the world’s steel mills are the old blast furnace and basic oxygen furnace kind, like the one getting a new lease on life in Gary or the dozens under construction in China and India. Those emit about 2.2 metric tons of carbon dioxide for every metric ton of steel produced. (The world makes about 1.9 billion metric tons of steel a year.)

Much like the nasty environmental impacts of cement, the other unsexy but utterly ubiquitous material of the modern world, steel’s climate footprint was long considered virtually insoluble; the entire process involves huge amounts of coal and heat. But unlike cement, the bulk of steel’s carbon emissions aren’t actually baked in. Secondary types of steelmaking, especially melting scrap metal with heavy-duty electric arcs, can reduce carbon emissions per metric ton of steel by about 60 percent or more. Even more advanced techniques just being developed to clean up the iron reduction part of steelmaking by using hydrogen promise even greener steel in the future.

“There has been a lot of progress because there is a lot of demand for green steel from construction, from the automotive industry,” said Julia Attwood, an industrial decarbonization specialist at BloombergNEF, a research and analysis firm. “They all need to make things greener, and that is what kick-started steel.”

There is plenty of talk these days about government and corporate plans to decarbonize heavy industry, especially steel, given how central it is to the real economy and the one that politicians from Scranton to Shanghai imagine they must protect. The Biden administration is throwing billions of dollars at the problem. The European Union has a REPowerEU plan that aims to clean up steel, at least a bit. Nippon Steel, when not busy with its stalled takeover bid, aims to decarbonize operations on several continents. Even steelmakers in retreat, such as ThyssenKrupp, are spending money on next-generation technologies to ensure what steel they do still produce will be greener than what came before.

The push for green steel isn’t just because the sector accounts for nearly one-tenth of global emissions. It is also because steel will underpin nearly everything that will enable the full transition to cleaner, greener technologies—lightweight electric car bodies and power trains, massive new wind turbines, solar power arrays, and advanced nuclear power plants. Companies that are betting their future on making products for the carbon-free future can’t build it with gear from a carbon-coated past.

“We’re going to require a lot more steel if we succeed in moving toward a green energy revolution, in terms of wind, solar, nuclear, natural gas, whatever—that’s a lot of steel,” Dempsey said.

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“We had to reinvest in Oxelosund, a huge source of carbon emissions, so instead of doing that, we said, ‘Let’s look at the U.S. and minimills and look at doing something similar here,’” said Martin Lindqvist, SSAB’s outgoing president and CEO. SSAB’s U.S. operations had experience with electric arc furnaces, which are much more common in the United States than in Europe.

Around the same time, SSAB had teamed up with ore miner LKAB and energy firm Vattenfall to use fossil-free electricity and hydrogen to make virgin iron with no carbon emissions to feed a steel mill. By 2020, the three companies had a pilot plant starting to churn out small amounts of fossil-free sponge iron.

With that in hand, SSAB decided to overhaul more than a single plant—the idea was to remake the entire Nordic steel industry by turning old blast furnaces into more modern electric arc furnaces. One after another, the company is turning its old, smoky steel mills into sleeker, electric-fired, much greener plants. Just this April, SSAB announced that it was moving faster than anticipated to transform the big plant at Lulea, in northern Sweden, to all electric-arc operations. When the steel mill conversions are complete, it will lower Sweden’s national emissions of carbon dioxide by 10 percent.

The goal is to produce entirely fossil-free steel at Oxelosund by 2026 and throughout the company by 2030. Just keeping the existing plants operational for another decade would have cost more than $2 billion. For about $4.8 billion, SSAB is creating a plant that will make more steel, with a better product mix, and almost no emissions.

“It’s a no-brainer,” Lindqvist said. “It makes business sense. The customers are extremely interested.”

When it comes to green steel, the demand pull is indeed very strong. SSAB started working with automaker Volvo, and later Mercedes-Benz; both want to start introducing clean steel in their cars. Other industries that are under pressure to clean up their products are also increasingly clamoring for cleaner steel, such as the construction industry, Lindqvist said. SSAB gets some state assistance for its innovative fossil-free iron project from Sweden and perhaps soon the United States, but the company insists that the steel transformation is answering a market need.

“What we see now is very strong demand, even though Chinese steel is available at low prices,” Lindqvist said. “Politics and policy are very helpful, but in the end, this will be demand-driven.”

One of the industries demanding cleaner steel is one whose whole raison d’être is to make cleaner electricity: wind power. After all, it won’t do very well to keep building new wind turbines with hundreds of metric tons of steel made from coke and smoke.

Last year, Siemens Gamesa Renewable Energy, a leading wind power company, launched the GreenerTower, a wind turbine that uses steel with one-third the carbon footprint of traditional towers, and quickly landed its first customer, a Danish offshore wind farm of German utility RWE. Siemens Gamesa gets the steel from German steelmaker Salzgitter AG, using electric arc furnaces powered by offshore wind power.

“If you had asked me a year ago, 18 months ago, I would have said that before 2030, there will not be much green steel available,” said Maximilian Schnippering, the head of sustainability at Siemens Gamesa. “But in the course of the last year, things have really accelerated.”

Other turbine-makers, such as Denmark’s Vestas, are offering their own towers made with green steel. Orsted, a Danish clean energy company that partners with Vestas on sustainability projects, just landed the first consignment of heavier low-carbon steel to be used for the foundations of offshore wind turbines. GE Vernova is just going straight to the source, providing new power management technologies for steelmakers to handle the fluctuating loads of electricity that come with the conversion to electric arc furnaces. Siemens Gamesa is now looking at how to recycle its own wind turbine towers for much-needed scrap metal to feed cleaner mills and how to source the rest of a turbine’s steel needs with cleaner and greener steel.

“I think, over the course of the next two, three years, we will see quite green supply chains available,” Schnippering said. “I’m much more optimistic that things will go faster.”

It’s not just Swedes, Danes, and other leafy Europeans. SSAB got the idea for greening its entire operations from the experiences of its U.S. division. That’s because the United States is one of the greener steel-producing countries in the world, especially in its newest electric-fired minimills. Just over two-thirds of America’s steelmaking capacity uses electric arc furnaces, with roughly the remaining one-third using the old-fashioned kind. Globally, the proportions are reversed, with China and India in particular betting on traditional forms of steelmaking to underpin their ambitious expansions.

A metric ton of U.S. steel made using electric arc furnaces produces about 600 kilograms of carbon dioxide; even China’s most advanced plants produce more than double that. But the vast majority of China’s (and India’s) steel plants are old blast furnaces, which emit about four times as much carbon as the cleanest U.S. steel (and more than legacy U.S. steel plants, too).

“The United States has some of the lowest carbon intensities because of the electric arc furnaces,” said Attwood of BloombergNEF. Even without waiting for new breakthroughs in hydrogen and other near-zero alternatives, she said, the most environmentally conscious option for most steel production is using recycled steel and electric arc furnaces—especially as countries everywhere scramble to meet ambitious climate targets.

“To get to net zero, everybody has to decarbonize, so steel’s time is coming,” she said.

U.S. Steel, for all the flak it may take from environmental advocates for its continued operation of old-fashioned blast furnaces, is moving firmly in that direction. Between 2019 and 2021, before it became a takeover target in its own right, it spent about $1.5 billion to acquire Big River Steel, a minimill operator that runs one of the most advanced steel plants in the United States. U.S. Steel is investing $3 billion to build another state-of-the-art electric minimill nearby. Two cornerstones of U.S. Steel’s new pitch are cleaner, advanced grades of steel that cater to environmentally conscious customers and specialty steel for the electricity and electric vehicle sectors. The shift to greenery, which Nippon Steel wants to take even further, is one of the companies’ selling points for the stalled cross-border takeover.

If the United States, which is still the fourth-largest steelmaker in the world, can be so heavily tilted toward advanced, electric arc mills, why can’t everybody? Why is the bulk of tomorrow’s global steel capacity still turning to a playbook essentially written in the 19th century?

First, the electric-fired minimills, which are largely fed using scrap metal, still can’t make all the grades of steel that industry requires. “Scrap has residuals that can have a detrimental impact,” said Dempsey of the American Iron and Steel Institute. “For more advanced grades, for automobiles, the sheet metal, that is where you need higher virgin iron content” from the traditional, integrated steel mills, he added.

Not all countries have access to abundant scrap metal like that found in the U.S. market; Schnippering of Siemens Gamesa predicts that there will be an industrywide scramble for enough scrap to feed the electric arc furnaces that produce cleaner steel. India’s plans to build advanced steel furnaces may be limited by the EU’s desire to keep more of its scrap at home to power its own decarbonization.

Not every country has access to reliable, affordable electricity to power the new-generation mills, either. Big River’s plant in Arkansas uses the equivalent of 176 megawatts of electricity (1 percent of the entire state’s installed generation capacity) to run its furnace, and a local utility is building a massive solar farm next door just to provide clean power to the mill.

But the United States has all those technical advantages—and a friendly playing field when it comes to international trade. The Biden administration has maintained most of the tariffs that Trump levied on steel imports, ostensibly on national security grounds, invoking the Section 232 provision of U.S. trade law to levy tariffs on threatening imports. Trade experts then and now, as well as defense industry veterans, largely agree that the move was about everything but national security. The steel industry can reimagine those tariffs as an environmental measure now that decarbonizing steel is all the rage.

“You want to incentivize the production of clean steel in the United States, and the biggest threat is the threat of cheap but dirty steel that [other countries] are making in the same old steel mills they built 30 years ago,” Dempsey said. He even suggested the idea of a border adjustment tax to penalize carbon-intensive imports, which would make cleaner (but pricier) U.S. steel more competitive.

It’s not just a steel industry fantasy. Biden in May tripled the tariffs on imports of Chinese steel—though China exports little steel to the United States anyway—couching the measure as a way to protect U.S. workers from emissions-intensive Chinese imports. “China’s policies and subsidies for their domestic steel and aluminum industries mean high-quality, low-emissions U.S. products are undercut by artificially low-priced Chinese alternatives produced with higher emissions,” the White House said in a statement.

And the administration is now talking about using tariffs even more in the future—not on questionable national security grounds but as a climate change measure. That very notion has been at the heart of more than two years of stalled negotiations with Europe over a new, rich-country club of clean steel producers.

In April, the Biden administration’s new climate envoy, John Podesta, suggested that the United States might be open to some sort of carbon border adjustment, a fancy way to say new tariffs on old, dirty products. Treasury Secretary Janet Yellen, who has been vocal about a flood of cheap Chinese goods that threaten U.S. manufacturing, has floated similar ideas. All the while, Biden has been promoting a “Buy America” plan to make sure that his administration’s massive investments in new infrastructure are built with U.S. steel and iron.

Between new tariffs and old economic nationalism, steel has become as central to the Biden reelection campaign in the Rust Belt as it is to the modern world and the green transition. But just how has a domestic industry that now employs a mere 80,000 or so people come to utterly dominate U.S. trade policy?

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That argument, as old as U.S. political economy, was laughingly demolished in later congressional testimony. “We, the steel men, don’t need protection anymore. Protection now can only work a serious injustice to the consumer,” the witness told lawmakers.

There is nothing unusual about that debate; it’s the same one raging now among the White House, Congress, trade negotiators, and white-shoe law firms. The only odd thing about it was that both arguments came from the same man: Andrew Carnegie—first in 1890 as the head of the empire that would become U.S. Steel and several years later as a retired, and less self-interested, philanthropist.

The question of special trade protection for steel is not, of course, something unique to Biden or Trump, though both have made it a central part of their economic nationalism message. Former U.S. President George W. Bush, too, raised tariffs on steel to woo votes, as did most of the presidents who came immediately before him. It goes back further: The decades after the Civil War were a protectionist’s dream, and steel reaped the biggest rewards. U.S. protectionism for steel, in a very real way, goes back even further than the invention of modern steelmaking itself: Treasury Secretary Alexander Hamilton’s 1791 Report on Manufactures immediately laid the groundwork for more than two centuries of tariffs to promote U.S. industry.

“The steel industry has not been shy about using its historical heft and its geography, being located in a lot of electorally important places, to push for protection,” said Scott Lincicome, a trade expert at the Cato Institute. Trump’s once and perhaps future trade negotiator, Robert Lighthizer, is the dean of steel industry protectionists, chasing those goals as a lawyer for the industry for decades, pushing tariffs as trade representative during Trump’s tenure, and proposing even more for next time.

“In terms of using trade laws to its advantage, steel is probably the No. 1 example,” said Lincicome, who spent two decades practicing international trade law.

The U.S. steelmaking industry employs about 0.05 percent of the country’s nonfarm workforce, yet, Lincicome argued, “steel has hijacked American trade policy. It is not just the Section 232 tariffs. It is not just the ‘Buy America’ regulations. It is the entire World Trade Organization as well.”

One of the industry’s favorite methodological tricks for securing favorable trade remedies—known as “zeroing” in technical parlance—involves ignoring fairly priced imports and focusing only on cheaper imports to justify across-the-board tariffs. It is also anathema to the World Trade Organization (WTO). So, over successive administrations from both parties dating back years, the United States essentially shut down the WTO’s ability to adjudicate trade disputes. “It’s insanity,” Lincicome said.

A smokestack industry is so central to so many trade fights not because of what steel actually represents in employment or even economic terms but because of what it symbolizes. Even today, political scientists tend to measure national power by counting a country’s steel and iron production, among other crude metrics. Steel’s historical echo—especially for politicians who came of age during America’s postwar industrial boom—is deafening, even more so when steel production is concentrated in politically fickle swing states.

“U.S. Steel has been an iconic American steel company for more than a century,” Biden said when he came out in open opposition to the planned Japanese takeover in March, “and it is vital for it to remain an American steel company that is domestically owned and operated.”

But even the purely national security arguments for the sanctity of U.S.-made steel—the formal justification, then and now, for the Trump-era tariffs on steel imports that Biden has maintained—ring hollow. Nearly the entirety of U.S.-made steel has other uses than tanks, guns, and ships; protecting an entire industry for the roughly 1 percent used for defense purposes is what makes trade experts howl. And even in cases where the military has relied exclusively on U.S.-made steel, the results haven’t always been stainless.

Take nuclear submarines. For decades, below-standard U.S.-made steel was fraudulently sold to the U.S. Navy and used on Virginia-class subs; there were no reported accidents, but the Navy did have to spend more on maintenance. Now, as part of a nuclear submarine deal with Britain and Australia, the Navy will trial small batches of Australian-made specialty steel for the submarines it has to build in years to come. (Britain, the inventor of the modern steel industry, is no better off: The Royal Navy has to get all its specialized steel for submarines and surface ships from abroad.)

The magnified place of steel, whether in politicians’ imaginations, campaign aides’ calculations, or trade lawyers’ hourly earnings, has real impacts that make it harder for the United States to achieve many of the things it keeps saying it wants to accomplish.

Take the transition to a cleaner, lower-carbon future and revitalized infrastructure. The United States and Europe have spent years at loggerheads over Trump’s steel tariffs and years more squabbling over what was meant to be their reconciliation, a partnership to promote green steel and punish dirtier producers, which just happen to be their main trade bogeymen anyway.

But negotiations on this proposed partnership, known as the Global Arrangement on Sustainable Steel and Aluminum, have stalled because Washington wants to use blanket tariffs on steel to protect all its production, even from dirty old blast furnaces in competitive battleground states, while Europeans keep trying to simply apply their existing domestic carbon price to imports that don’t pass muster.

“A blanket 25 percent tariff on imports from almost every other country in the world has nothing to do with steel’s carbon intensity or domestic regulations,” Lincicome said. “It’s just a tax.”

Or take the Biden administration’s Buy America push, requiring U.S.-made iron and steel for infrastructure projects. U.S. steel is a lot more expensive than steel made in Europe, China, or other countries (one of the reasons import tariffs have been so attractive for decades).

“The United States and some other countries are hobbling the infrastructure transition by requiring that it be made at home,” said Gary Clyde Hufbauer of the Peterson Institute for International Economics. “So that dilutes the effectiveness of the transition.”

Or take the lingering uncertainty over the Nippon Steel takeover of U.S. Steel, which would create a global behemoth with deep pockets and big ambitions to ramp up the decarbonization of steel in its overseas operations. Nippon Steel’s new president, in fact, comes from the electric arc furnace world, not the one dominated by old blast furnaces, and has vowed to make decarbonization one of the company’s main objectives going forward.

Or forget everything green, and just look at the Biden administration’s plans to revitalize U.S. manufacturing of all stripes. As important as steel production may be, steel use throughout the economy is much more so, directly supporting many more jobs and a lot more economic activity. That’s one reason the Trump-Biden tariffs were and are, on balance, such a bad deal. They increased the cost of inputs for nearly everything for everybody just to benefit a few.

“Essentially, U.S. manufacturers are paying double the world market price,” Lincicome said. “For downstream manufacturers, it is simply the cost of doing business in the United States.”

Anusha Rathi contributed graphic research for this story.