How profitable is the manufacture of coke by-products is indicated by the fact that for years before the World War, and possibly even to-day, the patentees of one by-product process were usually willing to erect a plant in connection with a steel plant, at a cost of several millions, and to take their pay for it from the profits of the by-products alone, handing the plant over to the steel company at the end of a stated period. They said in effect: “You give us the coal and we will hand you over the coke produced from it; and in twenty years we will give you the plant.” The Corporation, however, has always erected its by-product coke plants at its own expense.
Another important economy in its saving of both labor and material is found in the generation, from what were formerly the waste gases of blast furnace operations, of electric power for running the entire steel mill.
Still another by-product of the steel industry, and one that means material profits from waste, is Portland cement. In this is utilized blast furnace slag, formerly not merely a waste but a source of expense as it had to be freighted away from the mills and “dumped.” The manufacture of cement from slag had been carried on before the Steel Corporation was formed by the Illinois Steel Co. but only in a small way. The big company extended the cement industry as a side line to steel and erected several new plants, the largest being at Buffington, Indiana. It now has a capacity of about 45,000 barrels a day.
Greater earnings for the Corporation, larger profits for its stockholders, are represented by the extension of the manufacture of these by-products. But, beyond this, the cultivation of this part of the industry means an appreciable reduction in the cost of manufacturing steel, and consequently lower prices to the consumer and the possibility of higher wages to the worker, as well as the elimination of waste and the conservation of the natural resources of a continent.
Besides integration and the achievement of economies the early history of the United States Steel Corporation is largely a narrative of expansion, the building of new plants, and the acquisition of other companies. First of these acquisitions was the purchase, consummated about a month after the Corporation was organized, of the Bessemer Steamship Co., a Rockefeller concern engaged in traffic on the Great Lakes and which had been closely affiliated with the Lake Superior Iron Mines. This company had a fleet of 56 vessels (included in the number of vessels given as taken over by the Corporation in a previous chapter). The new organization paid $8,500,000 for the stock of the company, or about $150,000 for each vessel of the fleet.
In the same year control of the Shelby Steel Tube Co., a New Jersey company owning the principal basic patents for the manufacture of seamless tubes, and having an outstanding capital of $5,000,000 of preferred and $8,150,000 of common stock, was secured, the exchange of securities being made on the basis of one share of U. S. Steel preferred for 2⅔ shares of Shelby preferred, and one share of Steel common for four shares of Shelby common stock. Practically all the stock of the Shelby company—$4,776,100 preferred and $8,018,000 common—was acquired, giving the Corporation a substantial controlling interest.
In 1901 also the Corporation purchased by exchange of stock one-sixth interest in the Oliver Iron Mining Co. and the Pittsburgh Steamship Co. The Carnegie Steel Co. already owned the other five sixths of the securities of both these concerns and this gave the Corporation complete ownership.
In December, 1902, an important deal for the absorption of the Union Steel Co. was consummated. This company was a merger, effected only a month or so previous to its absorption by the Steel Corporation, of the Union Steel Co., a $1,000,000 concern owning a large plant for the manufacture of wire rods, wire, and nails at Donora, Pa., and the Sharon Steel Co., a $6,000,000 company making a similar line of products and located at Sharon, Pa. The merged company had an authorized capitalization of $50,000,000 and a capacity of 750,000 tons of pig iron and 850,000 tons of ingots yearly. The purchase was carried out on the following basis: The Steel Corporation guaranteed an issue of bonds on the Union-Sharon properties amounting to $45,000,000, of which $29,113,500 were issued to pay for the properties, $8,512,500 were purchased by the interests controlling the properties, $3,500,000 were reserved to retire bonds outstanding on the property of the Sharon company, and the balance was reserved to provide for future construction and improvements. The actual cost to the Corporation was fixed at $30,860,501, as follows: bonds guaranteed and issued, $29,113,500; underlying bonds assumed, $3,591,000; cash $497,990; total $33,202,490; less liquid assets taken over with the properties, $2,341,989; net cost, $30,860,501.
Down in a Coal Mine