The Economic Impact of the
Steel Industry in
Pennsylvania
Prepared for
Pennsylvania Steel Alliance
by the
Pennsylvania Economy League of Southwestern Pennsylvania, LLC
11 Stanwix Street, 17th Floor
Pittsburgh, Pennsylvania 15222
October 2011
Disclaimer
The Pennsylvania Economy League of Southwestern Pennsylvania, LLC. (Economy League) makes no
representation, warranty or guarantee regarding the conclusions of this economic impact study. The
Economy League acknowledges Pennsylvania Steel Alliance shall retain ownership of all materials
provided to the Economy League during the data collection phase of this project.
Pennsylvania Steel Alliance acknowledges the Economy League‘s ownership in the final product. The
results may be used by the both parties for advocacy, training, statistical, educational and media purposes
supporting the importance of and/or impact of the Steel Industry and may not, without the express
approval of all parties be sold to any third party or used for any other purpose.
Pennsylvania Steel Alliance shall not take any action that might negatively affect the distinctive quality
of, or goodwill associated with, the materials, or adversely affects the reputation of the PELSW and its
affiliates.
Economic Impact of the Steel Industry in Pennsylvania, October 2011
Pennsylvania Economy League of Southwestern Pennsylvania, LLC
The Economic Impact of the Steel Industry in Pennsylvania
Contents
Executive Summary………………………………………………………………………………i
1
2
Introduction ............................................................................................................................. 1
1.1
Origins of this report ....................................................................................................... 1
1.2
The Steel Industry‘s long history in Pennsylvania ......................................................... 1
Overview of the Pennsylvania Steel Industry ......................................................................... 3
2.1
Background ..................................................................................................................... 3
2.1.1
2.2
2.1.1.1
Integrated mills .................................................................................................. 3
2.1.1.2
Electric arc furnaces .......................................................................................... 3
Inputs to the Steel Industry ............................................................................................. 4
2.2.1
Raw Materials ........................................................................................................... 4
2.2.2
Electricity .................................................................................................................. 5
a.
Reducing Environmental Impact: Steel Industry Progress ................................... 5
b.
Profile of a Modern Steelworker ........................................................................... 6
2.2.3
2.3
Supply Chain ............................................................................................................. 7
Uses of Steel ................................................................................................................... 7
2.3.1
Roads and Bridges .................................................................................................... 8
2.3.2
Marcellus Shale ......................................................................................................... 9
2.3.3
Renewable Energy .................................................................................................. 10
2.4
Trends in the modern Steel Industry ............................................................................. 12
2.5
Current Footprint of the Steel Industry ......................................................................... 15
2.5.1
Geographic spread .................................................................................................. 15
2.5.2
Size.......................................................................................................................... 16
2.5.3
Production ............................................................................................................... 17
2.6
3
Processes for Manufacturing Steel............................................................................ 3
Exports .......................................................................................................................... 18
The Steel Industry in Pennsylvania – Company Profiles...................................................... 19
Economic Impact of the Steel Industry in Pennsylvania, October 2011
Pennsylvania Economy League of Southwestern Pennsylvania, LLC
4
5
3.1
AK Steel Corporation ................................................................................................... 19
3.2
Allegheny Technologies Incorporated .......................................................................... 20
3.3
ArcelorMittal................................................................................................................. 21
3.4
Frog, Switch & Manufacturing Company .................................................................... 22
3.5
Standard Steel ............................................................................................................... 22
3.6
The Techs, a Division of Steel Dynamics, Inc. ............................................................. 23
3.7
Tube City IMS (TMS International) ............................................................................. 24
3.8
United States Steel ........................................................................................................ 24
3.9
Wheatland Tube, a division of JMC Steel Group ......................................................... 25
3.10
WHEMCO Group ......................................................................................................... 25
3.11
Wirerope Works, Inc. .................................................................................................... 26
Analyzing the economic impact of the Steel Industry .......................................................... 27
4.1
Modeling the economic impact of an industry ............................................................. 27
4.2
The concept of indirect and induced economic impacts ............................................... 27
4.3
Modeling the impact of the Steel Industry.................................................................... 28
The Economic Impact of the Steel Industry in Pennsylvania ............................................... 30
5.1
Summary of the Steel Industry‘s Economic Impact ..................................................... 30
5.2
Employment .................................................................................................................. 31
5.3
Total Value Added ........................................................................................................ 33
a.
5.3.2
Steel Industry Research and Development.......................................................... 35
Labor Income .......................................................................................................... 38
5.3.2.1
Employee Compensation ................................................................................. 40
a.
The Economic Impact of Pensions ...................................................................... 41
b.
Average Wages paid in the Pennsylvania Steel Industry .................................... 42
5.3.2.2
5.3.3
a.
5.3.4
Proprietor Income ............................................................................................ 43
Investor and Property Owner Income ..................................................................... 45
Recent Investments by the Steel Industry ........................................................... 47
Indirect Business Taxes .......................................................................................... 49
Economic Impact of the Steel Industry in Pennsylvania, October 2011
Pennsylvania Economy League of Southwestern Pennsylvania, LLC
The Economic Impact of the
Steel Industry in
Pennsylvania
Executive Summary
The Pennsylvania Steel Alliance was formed in 2011 by United States Steel Corporation and the United
Steelworkers, working with a coalition of Steel Industry businesses and labor organizations to assist in
educating the general public and elected officials on the state of the modern Steel Industry and policy issues
related to the Steel Industry. The Pennsylvania Steel Alliance asked the Pennsylvania Economy League of
Southwestern Pennsylvania, LLC (PELSW) to perform an economic impact study of the Steel Industry in
Pennsylvania. This study looks at the industry‘s annual impact on the Commonwealth‘s economy, using 2010
as a baseline year, unless otherwise stated.
The Steel Industry generates more than $9.35 billion a year for Pennsylvania
The Pennsylvania Steel Industry employs a significant number of people and generates wealth and economic
activity, both directly through the manufacturing and processing of steel, and through the ripple effects in the
broader economy – the indirect and induced economic activity attributable to Steel Industry employment and
purchasing.
In 2010, through direct, indirect and induced effects, the Steel Industry was found to support:
Close to 80,000 full- and part-time jobs in Pennsylvania;
More than $9.35 billion in total value added to the economy;
o More than half of the value added arose from the $4.94 billion paid in labor income overall
(approximately $1.16 billion paid directly by the Steel Industry);
o Investor and property income contributed $3.62 billion to the total; and
o Indirect business taxes created a further $0.79 billion in value added by the industry.
Table 1 - Summary of the Economic Impact of the Steel Industry in Pennsylvania
Direct Impact
Employment
Total Value Added
-Labor Income
-Investor & Property Income
-Indirect Business Taxes
Indirect Impact
12,160 jobs
38,896 jobs
$2,860,390,891
$4,296,601,649
$1,156,088,412
$1,554,411,715
$149,890,765
$2,533,570,759
$1,339,014,978
$424,015,912
Induced Impact
28,605 jobs
Sum
79,662 jobs
$2,194,946,934 $9,351,939,474
$1,247,816,205
$728,189,346
$218,941,383
$4,937,475,376
$3,621,616,038
$792,848,060
Analysis by the Pennsylvania Economy League of Southwestern Pennsylvania, 2011
Each job in the Steel Industry supports more than five jobs in the Pennsylvania economy
The number of indirect and induced jobs attributable to each direct job in the Steel Industry is 5.55 – a
significantly higher jobs multiplier than is observed for most other industries in the model used.
Economic Impact of the Steel Industry in Pennsylvania, October 2011
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The average wage in the Steel Industry is significantly higher than the private sector average
In 2010, the average wage in the iron and steel mills industry was $70,686. This is $25,000 higher than the
average wage for the private sector as a whole. These higher average wages benefit the economy of the
Commonwealth through the induced impact, i.e. the ‗consumption effect‘, as employees of the Steel Industry
spend their larger disposable income on goods and services in their communities.
$90,000
$80,000
$70,000
$60,000
$50,000
$40,000
$30,000
$20,000
$10,000
$0
2001
2002
2003
2004
Iron and Steel Mills
2005
2006
2007
2008
2009
2010
Total, all private industries
Figure 1 - Pennsylvania average wages in the Steel Industry compared to Pennsylvania private sector
The Steel Industry employs people across the Commonwealth
Legend
Employment in the Steel Industry1 is located across the Commonwealth with concentrations in western
PACountyEmplt_Estblishments2001_2009_census
Pennsylvania and southeastern Pennsylvania (see Figure 2). Seven counties had more than 1,500 people
PrimaryM_1
employed in the industry in 2009 (Allegheny, Beaver, Berks,
Lancaster, Mercer, and Westmoreland
0 - Butler,
50121
Counties).
Data not reported
Employment in Primary Metals Manufacturing by County
(2009 Quarterly Census of Employment and Wages)
0 - 50 Employees
Legend
51 - 500 Employees
PACountyEmplt_Estblishments2001_2009_census
501 - 1000 Employees
PrimaryM_1
1,001 - 1,500 Employees
0
- 50121
More
than 1,500 Employees
Data not reported
Employment in Primary Metals Manufacturing by County
(2009 Quarterly Census of Employment and Wages)
0 - 50 Employees
51 - 500 Employees
Figure 2 - Pennsylvania Employment in the Steel Industry by
County (2009)
501 - 1000 Employees
1,001 - 1,500 Employees
More than 1,500 Employees
Economic Impact of the Steel Industry in Pennsylvania, October 2011
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1 Introduction
1.1 Origins of this report
The Pennsylvania Steel Alliance was formed in 2011 by United States Steel Corporation and the
United Steelworkers, working with a coalition of Steel Industry businesses and labor
organizations to assist in educating the general public and elected officials on the state of the
modern Steel Industry and policy issues related to the Steel Industry. The organization asked the
Pennsylvania Economy League of Southwestern Pennsylvania, LLC (PELSW) to perform an
economic impact study of the Steel Industry in Pennsylvania. This study looks at the industry‘s
annual impact on the Commonwealth‘s economy, using 2010 as a baseline year, unless otherwise
stated.
PELSW has been a force for positive change since its founding in 1936. It is widely recognized
and well-regarded as a nonpartisan research organization committed to sound public policy
which enhances the competitiveness of the Commonwealth. PELSW is the research affiliate of
the Allegheny Conference on Community Development and provides research and analysis on
specific public policy priorities for the greater Pittsburgh region.
1.2 The Steel Industry’s long history in Pennsylvania
Steel is a metal alloy used to construct buildings, manufacture machinery and is used to make
motor vehicles, wire, surgical instruments, food packaging, and hundreds of other consumer
products. The Steel Industry has been a core component of the Pennsylvania economy since the
nineteenth century, when it contributed to the rapid growth and wealth of the Commonwealth.
Figure 3 shows a historical timeline of the Industry.
The Pennsylvania Steel Industry continues to employ a significant number of people and
generate wealth and economic activity, both directly through the manufacturing of steel and
through the ripple effects in the broader economy. These economic impacts are explored in this
report.
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1856, Bessemer Process –
Henry Bessemer creates
method to produce steel,
which begins to replace iron
for use in railroads,
construction, and other
industrial purposes
1901 – Andrew Carnegie
sells his steel empire to
create the U.S. Steel
Corporation, the largest
industrial enterprise in the
world at the time
1870
1856
1870 – Pennsylvania
becomes the center for mass
production of steel, due to
the presence of coal in the
state, and the strategic river
system. This production is
the driving force for the
U.S. Industrial Revolution
1969, Peak of Steel
Production – U.S.
produces more than 141
million tons of steel
1914
1975
1941
1901
World I and II – American
steel production increases
during war years, and
continues to rise steadily
after Second World War
1988 – Steel production
rebounds slightly, but the
overall workforce had been
depleted by 50% since 1975
1969
1988
1975, Sudden Decline –
Domestic steel production
decreased by 37 percent to
89 million tons in only six
years.
Figure 3 - Timeline of US Steel Industry activity
Economic Impact of the Steel Industry in Pennsylvania, October 2011
Pennsylvania Economy League of Southwestern Pennsylvania, LLC
2010
Page 2
Today – Steel production
was consistently at 90-100
million tons per year during
the 1990’s-2000’s, but has
recently decreased due to
lower demand during the
recession. The long term
trend in demand for steel in
the U.S. suggests future
growth. The U.S. trade
surplus has increased
dramatically since 1990
driven by goods imports
increasing significantly
faster than goods exports
2 Overview of the Pennsylvania Steel Industry
2.1 Background
2.1.1 Processes for Manufacturing Steel
Two methods for manufacturing steel are used in Pennsylvania – integrated mills and electric arc
furnaces. Integrated mills use the traditional method of manufacturing steel directly from the
raw materials, while electric arc furnaces use scrap steel as their primary input. Figure 4 shows
the locations of manufacturing operations in Pennsylvania.
Figure 4 - Location of Steel Industry manufacturing locations (2010)
2.1.1.1 Integrated mills
Integrated mills use a three step process that requires iron ore, coke and limestone to make steel.
The three raw materials are heated in a blast furnace to produce pig iron, which is melted down
with scrap metal to create finished molten steel.2 The steel produced from the integrated mill
process is purer and better quality than from electric arc furnaces (EAFs). However, the raw
minerals are costly to obtain and transport. The cost and energy imbalance has resulted in a
declining use of this type of furnace in the United States, though integrated mills are still
responsible for approximately 40 percent of the steel produced in the United States.3 There are
currently about 20 integrated steel mills in the country, one of which is located in Braddock,
Pennsylvania and operated by United States Steel.4 Further details on Pennsylvania steel
manufacturing operations can be found in Section 3.
2.1.1.2 Electric arc furnaces
Electric Arc Furnaces (EAF), or minimills, produce steel through a simple process of melting
down scrap steel obtained from old automobiles, bridges, etc. The scrap steel is heated and
refined by passing an electric current through it.5 Since scrap metal is readily available
throughout the country, EAFs can be built anywhere, and require less of a physical workforce to
maintain. EAFs have a smaller environmental impact because they use recycled steel and the
electric process produces lower emissions on site than an integrated mill. Some EAFs have
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begun to include pig iron to create higher quality steel to better compete with the integrated
mills. EAFs are responsible for slightly more than 50 percent of the total steel output in the
United States and the number of mills is expected to continue to grow.6 Currently there are about
200 EAF mills in the United States.7 Pennsylvania has more EAF mills than any other state.8
Most of the mills are located in the Western part of the state and are operated by companies such
as Allegheny Technologies, AK Steel, and AreclorMittal.9 10 11 Further details on Pennsylvania
steel manufacturing operations can be found in Section 3.
2.2 Inputs to the Steel Industry
The availability of material inputs is important for the Steel Industry, as it is for all
manufacturing industries. The presence of rich coal seams is one of the reasons Pennsylvania
became the center of the Steel Industry. Although modern steel is not always manufactured
directly from raw materials, the presence of coal remains a source of competitive advantage for
the Pennsylvania Steel Industry to the extent that it could contribute to lowering off-peak
electricity costs in the state. Where material inputs are not available locally, Pennsylvania‘s
good rail, river and road freight networks provide access to these materials, as evidenced by
United States Steel‘s Mon Valley Works.
2.2.1 Raw Materials
Producing steel in a traditional integrated mill requires three minerals – coal, iron ore, and
limestone. Coal is heated to high temperatures in the absence of oxygen to create a purer form of
carbon known as coke, which is used as the fuel source for the furnace process.12 Coal is
Pennsylvania‘s most abundant energy resource, and is most prevalent in the Southwestern part of
the state – which is also a hub for steel production. Pennsylvania ranks fourth in the nation in
coal mined, with about half of total Pennsylvania coal obtained from underground mines located
in Greene County.13 Of the approximately 70-80 million tons of coal mined in Pennsylvania
each year, about 7 percent is used to create coke for steel production (metallurgical coal
blends).14
Iron ore is obtained through mining; about 99 percent of the iron ore used in the United States
comes from mines in Minnesota and Michigan. The ore is crushed and concentrated in small
pellets before it is shipped. Large shipments of the pellets are transported by ship on the Great
Lakes, train, truck or, most cheaply, on river barges to iron and steel furnaces across the
country.15
The final mineral input, limestone, is most commonly used as crushed stone or cement for
construction purposes. A small amount of the total limestone mined in the United States is used
during the steel making process to remove impurities from the molten steel. As with coal and
iron ore, limestone produced in the United States is transported domestically, and rarely
exported.
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The Pennsylvania Steel Industry obtains most raw materials from other states, via railways,
trucking, and waterway systems (including locks and dams).16 As a result, these modes of
freight transportation are crucial to the Steel Industry and access to good transportation links is
essential.
Once the materials have been transported to a furnace, the iron ore pellets are heated and reduced
to metallic iron. Along with coke and limestone, all are combined with the iron in a blast furnace
to produce pig iron. Scrap iron is added to the pig iron in a basic oxygen furnace, in which highpurity oxygen is injected to oxidize the elements, which generates heat to produce molten steel.
The steel is further refined, and then it is cast to create solid steel, usually in the form of slabs or
blooms that can be manipulated to manufacture various steel products.
The only material input required to create steel in an electric arc furnace is scrap metal. Because
steel is 100 percent recyclable, scrap is sold throughout the country. The scrap metal is melted
down by applying an electric current to the furnace to provide heat.17 The result is molten steel
that is refined and casted.
2.2.2 Electricity
Both types of steel production require massive quantities of energy for the processes. Electricity
costs have become a concern both for plants that utilize electric arc furnaces and for integrated
producers. The cost of natural resources is volatile, making it difficult for steel companies to
predict long-term costs. Although some steel mills have been forced to reduce operations
because of unforeseen costs, mills are using strategies to control costs such as producing at night,
when electric costs may be more competitive. Integrated mills, and plants with electric arc
furnaces rank among the largest electricity users in the Commonwealth, and electricity costs
represent the largest single input cost after steel scrap.18 Accordingly, electricity rates are a key
factor for the Pennsylvania Steel Industry to remain competitive.
a.
Reducing Environmental Impact: Steel Industry Progress
According to the American Iron and Steel Institute, the amount of energy used in the production
of one ton of steel by the American Steel Industry has been reduced by 30 percent between 1990
and 2009.19 Carbon-dioxide (CO2) emissions were reduced by 35 percent over this period
(largely as a direct result of the lower energy consumption). Steel Industry companies have
formed research partnerships with universities to develop methods to further reduce CO2
emissions, including programs examining several proposed changes to the manufacturing
processes and carbon capture and sequestration projects. In addition to the continuing research
into practices that reduce energy consumption and costs, the Steel Industry has also shared best
practices to spread improvements and found more uses for by-products of the steel
manufacturing process.
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The World Steel Association estimates that the Steel Industry has reduced the consumption of
raw materials per ton of steel produced by 21 percent since the 1980s.20 The increased recycling
of steel makes this reduction in raw material inputs possible and has also contributed to
reductions in CO2 emissions. These gains have not been uniformly realized – the Steel Industry
in the U.S. has lower air emissions than the Chinese Steel Industry for example, with estimates
by the Alliance for American Manufacturing estimating that sulfur dioxide and nitrogen oxide
emissions per ton of steel are three to five times higher in China. Estimates of particulate matter
emissions per ton of steel are more than 19 times higher.21
b.
Profile of a Modern Steelworker
Modern steelworkers have a different set of skills than their predecessors because of changes in
the industry. Advances in the technology used to manufacture steel require that workers use
modern equipment and computer-controlled machinery to control the process, rather than being
dependent on their physical labor and skill. Many positions in modern steel mills involve
overseeing and maintaining equipment, and acting to correct any problems that occur.
The three basic categories of steel workers are production operators, transportation occupations,
and specialty positions. Production operators are needed to run all phases of the production line,
and they represent more than half of all steel worker employees. Examples of production
operator positions include furnace operators, metal pourers, rolling machine operators, and
inspectors. Workers involved with moving and transporting steel by crane, truck and hand
account for about 13 percent of the industry. Transportation and production process positions
can be entry-level, and workers receive on the job training. Specialty positions, which require
advanced education, include engineers, chemists, and computer specialists that represent a small
but growing percentage of the total workforce.22
The Steel Industry is working through college and university partnerships to encourage students
to consider a career in the Industry in an attempt to fill the workforce gap that will be created by
impending retirements. ArcelorMittal‘s ‗Steelworker for the future‘ program is one example,
where students can earn an associate degree in a program that builds the technical skills they will
need to get a job in a steel mill. Another example is the Center for Iron and Steelmaking
Research (CISR) - a University/Industry Cooperative Center within the department for Materials
Science and Engineering at Carnegie Mellon University. CISR is devoted to education and
research related to the production of iron and steel, and similar partnerships can be found with
the industrial engineering and material science departments at other Pennsylvania universities.
Although the nature of the work has changed, many employees still work in shifts, because steel
operations run continuously in order to be efficient. The federal Bureau of Labor Statistics
reports that in 2008, nonsupervisory iron and steel mill production workers worked 44 hours per
week on average.23
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2.2.3 Supply Chain
The steel manufacturing supply chain consists of a wide range of products and services.
Equipment, engineering services, and parts and supplies are all necessary segments of the
upstream steel supply chain. There are several Pennsylvania companies involved in the Steel
Industry supply chain, and some companies are involved at several different levels.
Equipment manufacturing companies produce furnaces, casters, rolling mills, and other steel
finishing equipment. In recent decades, most equipment manufacturers have consolidated into
firms that are large and diverse enough to build a new steel mill from scratch.24 An excellent
example of such a company is SMS Siemag, based in Pittsburgh, which focuses on technologies
and processes for metals manufacturing. 25
There is also some crossover from equipment manufacturing into engineering services.
Engineering in the metals industries is usually focused on mechanical engineering and
metallurgical engineering. R.T. Patterson is an example of an engineering company that focuses
on industry solutions, especially for the Steel Industry. One such engineering project is a United
States Steel plant in Indiana with a total cost of over $230 million.26
Parts and supplies for the Steel Industry are a key part of the supply chain. There are a wide
range of components that require continuous repair and upgrading.27 One such maintenance
company, Marubeni America Corporation, is located in Pittsburgh and Philadelphia. The
company is a major supplier of maintenance services for steel mills across the country.28
Industrial services firms provide crucial support for steel mills, performing tasks that the mills
wish to outsource. Tube City IMS, for example, provides a range of services including
managing scrap metal inputs, slag handling and logistics management.29
2.3 Uses of Steel
Steel has been an integral part of the economic development of the United States since the
nineteenth century when it replaced iron as the primary material for industrial production
because of its high strength and durability. Steel spurred the production of railroads, bridges,
and skyscrapers during the twentieth century, and the quality and diversity of the metal has
increased ever since.
Finishing operations produce steel wire, pipe, bars, rods and sheets. These products may be
prepared for use in particular industries with chemical or paint coatings, or by having a layer of
another metal applied. These steel products are then shipped to other industries as inputs.
There are two main uses for steel in the United States. About 50 percent of steel is used to create
machinery and for construction purposes in the form of bars, sheets, rods, and wires for
infrastructure projects and buildings. The other major application is in the auto industry, which
consumes about 20 percent of steel production to manufacture cars. Half of the material in a
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completed automobile is steel – both recycled steel and advanced high strength steel for specialty
parts to improve safety and efficiency. The national defense industry utilizes steel in the
production of ships and planes, and in the energy industry, wind turbines, reactor components,
mining machinery and oil & gas rigs and pipe-lines are all made with steel. A small amount of
total steel production is used to create appliances, including refrigerators, stoves, washing
machines, and dryers, and for container items like steel cans, much of which is produced in
Pennsylvania at the United States Steel Mon Valley Works.30 Figure 5 below identifies the
percentages of end-uses of steel in the United States. Steel is used to manufacture more than
3,500 different products, 75 percent of which have been developed in the last 25 years.31
Figure 5 - Uses of Steel in the United States (2010 data)
2.3.1 Roads and Bridges
Steel is an integral component in buildings, bridges, and highways. Infrastructure projects often
incorporate steel because it is extremely durable, more light-weight than other metals, and
requires low maintenance. The Federal Highway Administration estimates that a 20-year
investment of about $130 billion is needed for the upkeep of bridges and highways in the United
States.32 In 2010, President Obama announced a plan to expand America‘s infrastructure that
included $50 billion in up-front investment. The six-year plan includes rebuilding 150,000 miles
of highway.33 Aging highways and bridges are constantly being updated and replaced using
government funding for the majority of projects. Both highways and bridges utilize steel as a
main component for their construction.
Bridges are constructed with steel beams, plates, and reinforced bars (rebars). Steel is extremely
durable and lighter weight than other metals, making it ideal for use in bridges. New forms of
high performance steel have superior toughness and can be welded with little preheat.34 Steel is
used for highway construction in the form of reinforced bars (rebars) that are used to support the
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concrete pavement. The steel and concrete roadways can support heavy traffic and are built to
last 30-50 years, cutting costs for maintenance.35
In 2010, the Pennsylvania Department of Transportation (PennDOT) gave a total of about $2.1
billion in bids for 885 different projects.36 Pennsylvania has a significant number of bridges in
need of repair compared to other states. There are about 25,000 bridges (third most in the
nation), and over 5,000 of these are currently structurally deficient. In order to resolve the
problem, PennDOT has set a goal of 400 bridges to be replaced each year in Pennsylvania.37
These projects have traditionally used steel as a main input, and will continue to do so. The
demand for more, better quality infrastructure should have a positive effect on the steel industry
in Pennsylvania.
2.3.2 Marcellus Shale
In addition to conventional uses for steel, the natural gas drilling industry requires steel for its
pipelines and wells. The Marcellus Shale gas play in New York, Pennsylvania, West Virginia
and Ohio is of special interest to the Steel Industry due to the rapid increase in drilling
operations. To extract natural gas from the Marcellus Shale, wells are typically drilled 5,0007,000 feet deep and then 5,000 feet horizontally. As a result, natural gas companies utilize up to
250 tons of tubular steel product for each well drilled.38 There were 1,386 new Marcellus Shale
wells drilled in Pennsylvania in 2010, and approximately the same amount of drilling activity is
expected in 2011.39
Making tubular steel is a sophisticated process that involves engineering expertise to create
stronger steel needed to sustain the deep drilling and hydraulic fracturing process. In response to
the demand, several steel mills have upgraded or opened facilities to produce the smaller
diameter pipeline needed for the advanced drilling techniques used to extract natural gas from
the Marcellus shale.40
One example is Pittsburgh-based United States Steel, the largest producers of steel pipe in North
America and a leading supplier to the Marcellus Shale. As one example, United States Steel
signed a contract to produce at least 50 miles of electric-resistance welded tubes for Chief
Gathering LLC, a Texas company that is drilling in Pennsylvania. United States Steel is also
expanding a steel plant in Lorain, Ohio to increase production and enable the company to ship
tubing directly to drilling companies. The company also manufactures steel pipe products in
McKeesport, Pennsylvania. Another Pennsylvania company, Dura-Bond Industries, purchased
55 acres of land in Duquesne, Pennsylvania in 2010 to build a plant to manufacture and coat 30
inch tube for Dominion Transmission. In Ohio, France's Vallourec & Mannesmann Holdings
Inc., one of the world's largest makers of steel tube for the energy market, has decided to
construct a new $650 million steel plant in Youngstown, Ohio citing the Marcellus Shale
opportunity as the impetus. Also in Ohio, Russia‘s TMK IPSCO added a second thread line to
their pipe threading facility in Brookfield because of increased demand from the oil and gas
industry.41
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2.3.3 Renewable Energy
The American Steel Industry will have energy opportunities beyond those related to natural gas
in the Marcellus Shale. In 2008, the United States Department of Energy (DOE) announced an
initiative to have 20 percent of the country‘s electricity supply generated through wind power by
the year 2030.42 The DOE suggests that this is a feasible goal as there is no lack of raw materials
to build wind turbines. Wind turbines are structures that convert the energy in the wind into
mechanical movement. The turbines are composed of a tall tower structure with a rotor and
three rotary blades. Steel represents a significant part of the material used for this machinery.43
There may be multiple turbines in an area – constituting a wind farm – or just one turbine.
About eleven billion dollars were invested nationwide in wind power projects in 2010 alone, and
the DOE would like to increase the number of turbines installed in the country annually from
about 3,000 to 7,000 by the year 2020. This growth is relevant to the steel industry because 90
percent of the weight of a turbine is metal components, and the tower structure is made of steel
plate and rebar. An average turbine contains about 250 tons of steel.44 Due to the expected
increase in turbine construction, steel demand could rise to higher than $13 billion annually if
wind power produces six percent of the country‘s total energy. Renewable energy infrastructure
would also be developed, so steel companies would be involved with creating transmission
towers and wiring to transfer electricity.45 In June of 2010, the American Wind Association and
the United Steelworkers created a framework agreement to try to accelerate the development and
deployment of wind energy in the United States.46 The partnership will ensure that the United
States is able to compete in the energy sector abroad and that manufacturing jobs will stay
domestic.
Currently, Pennsylvania has several major manufacturing facilities that are creating components
for the wind industry. Pennsylvania has an advantage in this industry because of existing
infrastructure and workforce with experience as machinists, welders and other skilled
manufacturing professions. A Spanish company, Gamesa Corporacion, has invested almost $200
million on the sites of old mills near Pittsburgh and Philadelphia to create manufacturing hubs
for wind turbine generators. Due to the recession, the company was forced to implement
temporary layoffs at one of their Pennsylvania locations, but began hiring again as of summer
2010. Gamesa also subcontracted various aspects of their production to over 100 companies
exclusively in Pennsylvania.47 In addition, construction by the New York company EverPower
Wind Holdings began in the spring of 2011 on a 140 megawatt wind farm in Cambria County
that is expected to be completed in 2012, and the same company is developing plans to build
Pennsylvania‘s largest wind farm in Somerset County.48
Another emerging renewable energy industry is the harnessing of solar energy through devices
like solar water heaters and photovoltaic (PV) panels. The United States was an early world
leader in solar technology and production, but their market share has steadily declined since the
1990‘s and have lost their global advantage. In an attempt to boost the domestic market, the
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United States Department of Energy announced in the summer of 2011 a total of about $8.5
billion in loan guarantees to support nine solar projects. Examples of the projects include
funding for PV panel generation facilities, installation of solar panels on industrial buildings, and
production of concentrated solar power systems.49
Stainless steel is an important component of several solar energy devices. Thermal water heaters
use stainless steel tanks because the material protects the quality of the water and will not
corrode or rust. Solar thermal panels for rooftops are often framed with stainless steel, and a
steel layer is used to support PV panels.50 Current development of solar appliances is
concentrated in areas with a lot of sunshine like the Southwest and Pacific, which have
established solar technology hubs. However, there will be future demand for components, and
steel companies in Pennsylvania and other traditional metal manufacturing states are expected to
reap those benefits.
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2.4 Trends in the modern Steel Industry
As shown in Figure 3 in the introduction to this report, the Steel Industry has a long history in
Pennsylvania, and its economic dominance shaped many areas of the state, contributing to trends
in immigration, the development of railroad and waterway infrastructure and driving investment.
Changes in the Steel Industry and the diversification of the Pennsylvania economy that occurred
in the twentieth century represented a significant adjustment for the state and its workforce.
Much has been made of the decline of the Steel Industry in Pennsylvania, and as Figure 651
shows, employment in the Primary Metals Manufacturing sector – which in Pennsylvania is
dominated by the Iron and Steel Industry – has declined dramatically since the 1970s. This
employment trend holds true both for the United States and for Pennsylvania.
Recession
Figure 6 - Employment in Primary Metal Manufacturing in the United States and Pennsylvania (1990 - 2010)
However, Figure 752 reveals that the trend in gross domestic product (GDP) and gross state
product is not as clear. Examining data on productivity (defined as GDP per worker) indicates
that while employment has declined, productivity has increased dramatically since the 1970s.
This is represented in Figure 853, which shows a strong upward trend in Pennsylvania until 2008.
Since 2001, productivity in the Pennsylvania Steel Industry has been higher than the national
average. The fluctuations in productivity between 2008 and 2009 resulted from firms reducing
employment when the recession began, before the full impact on production was felt (increasing
productivity per worker), and then maintaining employment despite the significant drop in
production that followed in 2009 (reducing productivity per worker). Anecdotal evidence
suggests firms chose to scale back employee hours rather than eliminate positions so that they
would be prepared to rapidly increase production once demand rebounded, keeping the number
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of workers relatively constant while production dropped. This would suggest that productivity
will rebound along with the economy. 2010 GDP data are not yet available, but the crude steel
production data in Figure 954 show a sharp increase in production between 2009 and 2010 as the
economy began its recovery, indicating that the drop in Steel Industry production and
productivity was a result of the global economic downturn.
Figure 7 - Gross Domestic Product of the Primary Metals Manufacturing sector in Pennsylvania and the
United States (1990 - 2010)55
Between 1998 and 2003, the American Steel Industry went through significant restructuring,
with more than 30 companies filing for bankruptcy protection56. Production capacity was
consolidated, and companies restructured – changing work rules, combining jobs, retraining
workers, and eliminating layers of management. In some firms, worker-run trusts were
introduced to take on retiree health care obligations.57 These changes strengthened the position
of firms in the American Steel Industry, and allowed for significant increases in worker
productivity after 2003, which can be seen in Figure 8 – both at the state and national level.
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Recession
Figure 8 - GDP per worker in the Primary Metals Manufacturing industry shows increases in productivity
over time
Figure 9 - Crude Steel Production in the United States (1990 - 2010) shows a rebound in production in 2010
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2.5 Current Footprint of the Steel Industry
2.5.1 Geographic spread
Employment in the Steel Industry58 is located across the Commonwealth with concentrations in
Legend
western Pennsylvania and southeastern Pennsylvania
(see Figure 1059). Seven counties had more
than 1,500 people employed in the industry in 2009
(Allegheny, Beaver, Berks, Butler,
PACountyEmplt_Estblishments2001_2009_census
PrimaryM_1
Lancaster, Mercer, and Westmoreland Counties).
0 - 50121
Data not reported
Employment in Primary Metals Manufacturing by County
(2009 Quarterly Census of Employment and Wages)
0 - 50 Employees
Legend
51 - 500 Employees
PACountyEmplt_Estblishments2001_2009_census
501 - 1000 Employees
PrimaryM_1
1,001 - 1,500 Employees
0
- 50121
More
than 1,500 Employees
Data not reported
Employment in Primary Metals Manufacturing by County
(2009 Quarterly Census of Employment and Wages)
0 - 50 Employees
Employees
Figure 10 - Pennsylvania Employment in the Steel Industry51
by- 500
County
(2009)
501 - 1000 Employees
1,001 - 1,500 Employees but are more concentrated
Steel Industry employers are also located across the Commonwealth,
More than 1,500 Employees
in Allegheny County in the southwest (38 establishments
in 2009) and Berks County in the
southeast (40 establishments in 2009).
Legend
Primary Metals Manufacturing Establishments by County
(2009 Quarterly Census of Employment and Wages)
No business locations
1 - 10 Establishments
11 - 20 Establishments
21 - 30 Establishments
31 - 40 Establishments
Figure 11 - Pennsylvania Steel Industry Establishments by
County (2009)
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2.5.2 Size
Although the majority of the Steel Industry business locations identified in Pennsylvania had
fewer than 50 employees (see Figure 12), most of employees in this industry sector work in
larger companies. As shown in Figure 13, more than five times as many employees worked at
sites with 50 employees or more than worked at smaller locations.
Size of Primary Metals Manufacturing Locations in Pennsylvania Categorized
Based on the Number of Employees at each site
400
365
Number of Businesses
350
324
300
250
200
150
103
96
100
73
35
50
4
17
0
Number of Employees at site
Figure 12 - More than half of the Steel Industry locations in Pennsylvania have fewer than 50 employees
(2011 data)
Primary Metals Manufacturing Employees in Pennsylvania Categorized by
the Number of Employees at the site at which they work
16,000
14,396
Number of Employees
14,000
11,587
12,000
11,401
10,000
7,792
8,000
6,695
5,000
6,000
4,000
2,000
1,289
1-9
10-49
50-99
100-249
250-499
500-999
1,000-2,499
Number of Employees at site
Figure 13 - Eighty percent of employees in the Steel Industry work at locations with more than 50 employees
(2011 data)
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2.5.3 Production
Pennsylvania ranks among the top five states for gross domestic product generated by the
primary metals manufacturing industry. Over the last decade, Indiana, Ohio and Pennsylvania
have consistently ranked in the top three, trading places year to year (see Figure 14). In 2009, an
unrepresentative year because of the recession but the most recent year for which data was
available, Pennsylvania ranked highest among the fifty states on this measure.
Top Five Primary Metal Manufacturing States (1997-2009)
9,000
8,000
7,000
USD Millions
6,000
Indiana
Ohio
5,000
Alabama
4,000
Texas
Pennsylvania
3,000
2,000
1,000
0
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Figure 14 - Gross domestic product generated by the primary metal manufacturing industry in the top five
states (1997 - 2009)
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2.6 Exports
In 2010, Pennsylvania exported directly $3.7 billion in primary metal manufacturing products to
the rest of the world. The Industry‘s products are one of Pennsylvania‘s biggest international
exports, as seen in Table 2. It has ranked as the Commonwealth‘s fourth (or higher) largest
export industry in the last ten years, and has seen faster growth than Pennsylvania exports in
general, more than doubling in value from $1.4 billion to $3.7 billion between 2001 and 2010.
Indirect exports of finished products made from Pennsylvania steel are more difficult to quantify,
but also contribute significantly to the Nation‘s trade balance.
Table 2 - Pennsylvania Primary Metals are a Key Export
2001
Total Pennsylvania
Exports (millions)
Primary Metals
Exports (millions)
2002
2003
2004
2005
2006
2007
2008
2009
2010
20012010
Change
$17,433 $15,746 $16,216 $18,539 $22,333 $26,359 $29,195 $34,649 $29,381 $34,928
$1,419
Primary Metals Rank
Primary Metals Share
of Total Exports
$1,305
$1,439
$1,844
4
4
4
3
8.1%
8.3%
8.9%
9.9%
$2,507
2
11.2%
$3,345
4
12.7%
$3,481
4
$4,150
4
11.9%
12.0%
$2,592
4
$3,697
100%
161%
4
8.8%
10.6%
Canada is the largest importer of Pennsylvania‘s primary metal manufacturing industry products,
and bought thirty percent ($1.1 billion) of the industry‘s international exports in 2010. The
second largest importer was Mexico, with thirteen percent ($0.5 billion). The top ten export
markets for Pennsylvania‘s primary metal manufacturing industry in 2010 are listed in Table 3.60
Pennsylvania has seen significant growth in the export of primary metal manufacturing industry
products to growing economies over the 2005 -2010 period, including to China ($135 million
increase, 125 percent) and India ($101 million increase, 387 percent).
Table 3 - Pennsylvania Primary Metal Manufacturing Export Value by Destination (2005 - 2010)
Export
Destination
% change
2005 - 2010
2005
2006
2007
2008
2009
2010
World
$2,506,562,462
$3,344,896,976
$3,480,924,661
$4,149,698,067
$2,591,578,418
$3,697,012,507
47%
Canada
$967,633,465
$1,175,947,203
$1,049,955,126
$1,174,861,944
$724,637,126
$1,108,550,608
15%
Mexico
$331,701,579
$438,991,135
$343,148,001
$438,782,596
$315,551,975
$466,667,755
41%
Belgium
$178,574,173
$271,134,202
$382,076,830
$429,773,433
$242,813,631
$246,767,757
38%
China
$108,423,086
$159,443,209
$201,167,351
$328,285,987
$190,470,156
$243,925,246
125%
Germany
$92,013,237
$164,196,095
$176,163,575
$193,866,397
$104,895,901
$218,110,961
137%
Italy
$43,654,523
$37,462,092
$63,886,557
$72,501,357
$58,026,045
$161,614,172
270%
United Kingdom
$99,673,412
$145,465,849
$186,200,294
$167,903,933
$117,361,882
$137,308,352
38%
India
$26,104,569
$39,251,652
$56,196,892
$94,696,921
$118,972,013
$127,125,019
387%
Japan
$124,035,756
$199,845,673
$169,826,157
$171,392,989
$118,550,329
$118,073,614
-5%
$62,599,082
$92,751,968
$113,431,971
$108,293,246
$66,490,833
$86,576,168
38%
South Korea
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3 The Steel Industry in Pennsylvania – Company Profiles
The steel industry touches most parts of the commonwealth with a wide variety of companies
that vary in size, location and market position. Several of these companies are profiled in the
following section using data collected from Securities and Exchange Commission Filings,
company Web sites and communications with company representatives. It is not intended to be
comprehensive, but rather is meant to provide a snapshot of this variety.
3.1 AK Steel Corporation
Corporate Website: www.aksteel.com
Headquarters: West Chester, OH
Total Revenue: $6 billion (2010)
PA Operations: Steel plant (Butler Works);
metallurgical coal reserves (Somerset
County)
PA Employment: Approximately 1,500
Figure 155 - Location of AK Steel Pennsylvania
Operations
AK Steel is a world leader in the production of flat-rolled carbon, stainless and electrical steel
products, primarily for automotive, infrastructure and manufacturing, construction and electrical
power generation and distribution markets.
The company was named ―Steel Producer of the Year‖ by American Metal Market (AMM) in
2010, and it received the ―Best Operational Improvements‖ award from AMM in 2011. AK
Steel has also been recognized by Toyota for ―supplier diversity performance achievement.‖
Butler Works‘ production facilities include electrical and stainless steel melting, casting, hot and
cold rolling, and finishing, as well as carbon steel melting and casting. AK Steel recently
completed a $180 million modernization program, most of which was invested in Butler Works.
The project included installation at Butler of a new 175-ton capacity electric arc furnace and a
new ladle metallurgy furnace.
Butler Works previously received the Pennsylvania Governor's Award for Safety Excellence, as
well as awards from the National Safety Council. The plant was also honored with a "Top
Operations and Plant Award" by a metals industry magazine.
AK Coal Resources, Inc., a wholly-owned subsidiary of AK Steel, owns or leases metallurgical
coal reserves in Somerset County, PA.
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3.2 Allegheny Technologies
Incorporated
Corporate Website:
www.alleghenytechnologies.com
Headquarters: Pittsburgh, PA
PA Operations: Corporate headquarters,
eleven steel production/finishing plants, and
one research and development facility
PA Employment: 3,000
Total Revenue: $4,800,000,00061
Figure 16 - Location of Allegheny Technologies
Inc. Pennsylvania Operations
Allegheny Technologies Incorporated (ATI) is one of the largest specialty metals producers in
the world, with annual revenues of almost $5 billion and approximately 11,000 full-time
employees worldwide. ATI Allegheny Ludlum, a subsidiary of ATI, is a world leader in the
technology, production, and marketing of stainless steels, silicon electrical steels, titanium,
nickel alloys, and other advanced alloys. The company has five divisions in Pennsylvania:
ATI Allegheny Ludlum produces grain-oriented electrical steels (Bagdad, Armstrong
County); stainless steel sheet (Brackenridge, Allegheny County, and Latrobe,
Westmoreland County); hot rolled stainless steel, titanium, and other specialty steel coil
and plate (Houston, Washington County); high-temperature alloys, corrosion-resistant
alloys, nickel-based alloys, duplex alloys, and armor materials (Latrobe, Westmoreland
County); stainless steel slab (Midland, Beaver County); cold rolled stainless steel sheet
and strip (Vandergrift, Westmoreland County); and stainless and high technology alloy
plate (Washington, Washington County). Allegheny Ludlum serves customers in various
markets in more than 30 nations.
ATI Titanium Wire produces exotic alloys in Frackville, Schuylkill County.
ATI Powder Metals develops and produces alloy compositions and ultra-clean
microstructures that offer increased performance and longer life in high-temperature and
high-corrosion environments. The business performs its research at a facility in
Pittsburgh (Allegheny County), and produces its products at plants in Robinson and
Oakdale (Allegheny County).
ATI Landis operates in Waynesboro (Franklin County) producing thread and form
rolling products.
ATI Precision Finishing operates three specialty finishing plants in Rochester (Beaver
County), Monaca (Beaver County), and Zelienople (Butler County).62
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3.3 ArcelorMittal
Corporate Website:
www.arcelormittal.com
Headquarters: Chicago, IL (U.S. HQ);
Luxembourg (Global HQ)
PA Operations: Three steel plants and
several additional offices in the state
PA Employment: 2,53663
Total Revenue: $12,920,000,000 (U.S.)64
Figure 17 - Location of ArcelorMittal
Pennsylvania Operations
ArcelorMittal is a leading steel manufacturer with operations in more than 60 countries and
crude steel production of 90.6 million tons, representing approximately 8 percent of the world‘s
steel output. The company has three main steel sites in the state:
ArcelorMittal Coatesville, located in Chester County about 40 miles west of Philadelphia,
has produced iron and steel since 1810. Today, the Coatesville plant operates an electric
arc furnace and has a capacity of approximately 900,000 tons of raw steel annually.
ArcelorMittal Conshohocken, located in Montgomery County in the suburbs of
Philadelphia, is the largest United States supplier of armored plate to the United States
military. It operates a 100-inch Steckel mill and heat-treating facilities and is capable of
producing 500,000 tons of armored plate annually.
ArcelorMittal Steelton, the former Alan Wood Steel Company which stands outside of
Harrisburg in Dauphin County, produces railroad rails, specialty blooms, forging-quality
ingots and special quality bars for use in the railroad industry, forging and industrial
markets. It is one of only two rail producers in the United States. The Steelton plant
covers nearly 380 acres of land and employs approximately 700.
ArcelorMittal purchased the Monessen Coke Plant in Westmoreland County from
Koppers, Inc. in 2008. The plant produces metallurgical coke.
ArcelorMittal also has additional offices in the Pittsburgh region in Allegheny County
focused on tubular products, engineering, and distribution.65
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3.4 Frog, Switch & Manufacturing
Company
Corporate Website:
http://www.frogswitch.com/
Headquarters: Carlisle, PA
PA Operations: Castings plant in Carlisle
PA Employment: 180 (est.)
Total Revenue: $50,000,00066 (est.)
Figure 18 - Location of Frog, Switch &
Manufacturing Company Pennsylvania Operations
The Frog, Switch & Manufacturing Company is a world leading manufacturer of manganese
steel castings for the aggregate and mining industries. The company manufactured frogs and
switches (sections of rail that allow a train to cross over or switch tracks) until the late sixties
when railroad parts were phased out in exchange for more profitable crushing and grinding parts.
Recent upgrades to the Frog & Switch plant in Carlisle elevated its manufacturing capacities,
making it a world leader in the industry.67 The company employs an estimated 180 workers, all
of them in Carlisle, Pennsylvania.
3.5 Standard Steel
Corporate Website:
http://www.standardsteel.com/
Headquarters: Burnham, PA (U.S. HQ)
PA Operations: Plant in Burnham, PA
PA Employment: 600
Total Revenue: $250,000,000 (est.)68
Figure 19 - Location of Standard Steel
Pennsylvania Operations
Standard Steel is one of only two U.S. companies that manufacture forged steel wheels and axles
for freight railcars, locomotives and passenger railcars.69 Standard Steel has been manufacturing
at its current plant since 1795, making it one of the oldest continually-operating manufacturing
facilities in the U.S. The company owned another plant in Latrobe, PA, but sold it to Lehigh
Specialty Melting in 2004. In late 2006, Standard Steel was acquired by Trimaran Capital
Partners, a New York private equity firm. In mid-2011, Trimaran sold Standard Steel to Tokyobased Sumitomo Metal Industries for $340 million.70 The company employs 600, all in
Pennsylvania.71
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3.6 The Techs, a Division of Steel
Dynamics, Inc.
Corporate Website: www.thetechs.com
Headquarters: Pittsburgh, PA (Steel
Dynamics, Inc. is headquartered in Ft.
Wayne, IN)
PA Operations: GalvTech, MetalTech, and
NexTech
PA Employment: N/A
Total Revenue: $6,300,887,000 (Steel
Dynamics, Inc.)72
Figure 20 - Location of The Techs Pennsylvania
Operations
The Techs were born in the mid-1980s when a group of entrepreneurs purchased an idle
galvanizing facility once operated by J&L Steel. The Techs is a group of three divisions:
MetalTech began production in 1984 and specializes in the hot-dip galvanizing of both
hot-rolled and cold-rolled heavier-gauge steel sheet (Annual capacity: 375,000 tons).
MetalTech also offers mechanical leveling and chemical surface treatments.
In 1990, the same investors opened NexTech in a facility where Westinghouse once
made transformers. NexTech produces galvanizing steel in light gauges and holds a
significant share of the marketplace (Annual capacity: 170,000 tons). NexTech has even
landed a share of the previously untapped and growing Chinese market. NexTech also
offers in-line temper rolling and tension leveling and chemical surface treatments.
Again, the company expanded in 1996, when it purchased the former Hays Army
Ammunition Plant to create GalvTech. GalvTech is a state-of-the-art hot-dip galvanizing
facility that produces cold-rolled steel sheet in medium gauges (Annual capacity: 475,000
tons). GalvTech also offers in-line temper rolling and tension leveling and chemical
surface treatments.
In 2000, all three facilities—MetalTech, NexTech, and GalvTech—united under one brand as
The Techs. In 2007, The Techs became a division of Steel Dynamics, Inc. With a total annual
capacity of 1 million tons, The Techs‘ production covers the spectrum of hot-dipped galvanized
steel sheet, from heavy to medium to light gauges.73
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3.7 Tube City IMS (TMS
International)
Corporate Website:
www.tmsinternationalcorp.com
Headquarters: Glassport, PA
PA Operations: Corporate headquarters,
administrative office, and ten other
operations
PA Employment: 35474
Total Revenue: $2,030,600,00075
Figure 21 - Location of Tube City IMS
Pennsylvania Operations
Tube City IMS is the leading provider of on-site, industrial mill services including raw material
brokerage, scrap management, and inventory management for steelmakers around the world.
Tube City IMS‘s network includes more than 70 on-site locations in nine countries and trading
offices in 15 countries. Pennsylvania alone is home to more plants than any other state or foreign
country. Twelve of the top fifteen global steel producers rely on Tube City IMS for on-site mill
support services. Tube City IMS announced its initial public offering in April 2011 listed as
TMS International. The company employs 3,800 worldwide.76
3.8 United States Steel
Corporate Website: www.ussteel.com
Headquarters: Pittsburgh, PA
PA Operations: Corporate headquarters,
four steel production/finishing plants, one
coke production plant, and one research and
technology center
PA Employment: 4,70077
Total Revenue: $17,374,000,00078
Figure 22 - Location of United States Steel
Pennsylvania Operations
United States Steel Corporation is a major steel producer with production operations in the
United States, Canada, and Central Europe and an annual raw steelmaking capability of 31.7
million net tons. The company manufactures both raw steel and a wide range of value-added
steel sheet and tubular products for the various industries.
Mon Valley Works is the Pennsylvania production division of United States Steel and is
composed of a coke production plant in Clairton; a basic steel production plant in Braddock, and
sheet products finishing plants in West Mifflin and Fairless Hills. United States Steel also
converts coiled steel into tubular steel products at a plant in McKeesport, PA. In addition, United
States Steel operates a research and technology center in Munhall, PA where research is
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Page 24
conducted in the fields of steel product and process technology. United States Steel has its
headquarters in Pittsburgh, and operates the Keystone Industrial Port Complex Industrial Park in
Fairless, PA. Overall, United States Steel‘s steel production ranks fifth highest in the world.79
3.9 Wheatland Tube, a division of
JMC Steel Group
Corporate Website: www.wheatland.com
Headquarters: Beachwood, OH (JMC Steel
Group)
PA Operations: Manufacturing facility
Total Revenue: N/A
Figure 23 - Location of Wheatland Tube
Pennsylvania Operations
Wheatland Tube, a division of JMC Steel Group, is a manufacturer of tubular steel
solutions for commercial and industrial fire sprinkler systems, electrical raceways, fence
framework, energy construction, and solar-related applications. Wheatland is the only domestic
producer of continuous welded pipe and one of the only producers of rigid conduit. It is also the
largest steel pipe manufacturer in North America, producing 2 million tons per year. The JMC
Steel Group employs 1,800 employees in nine manufacturing locations in the United States and
Canada. JMC Steel Group was named one of American Metal Market's (AMM's) 2011 Awards
for Steel Excellence finalists, in the category of Best Mergers & Acquisitions.80
3.10 WHEMCO Group
Corporate Website: www.whemco.com
Headquarters: Pittsburgh, PA
PA Operations: Six steel plants81
PA Employment: N/A
Total Revenue: N/A
Figure 24 - Location of WHEMCO Group
Pennsylvania Operations
WHEMCO is a supplier of heavy industrial components for the metals, power generation, and
shipbuilding industries of the world. WHEMCO Steel Casings has two plants (Midland in
Beaver County and Homestead in Allegheny County) that produce cast steel backup rolls for
various rolling mill applications. Johnstown Specialty Castings produces static cast rolls and
sleeves in both iron and steel grades for hot rolling mills in Cambria County. Erie Forge and
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Steel in Erie County supplies United States national defense programs. Lehigh Heavy Forge in
Bethlehem, Northampton County, has been in operation for more than 125 years and provides
forged components to the power generation and metals industries. Lehigh Specialty Melting in
Latrobe, Westmoreland County, specializes in the melting of stream degassed, argon-shrouded
carbon and low alloy steel ingots for a variety of applications. These six Pennsylvania locations
and two Ohio locations combine to form a world leader in the manufacture of heavy cast and
forged steel components.82
3.11 Wirerope Works, Inc.
Corporate Website: www.wwwrope.com
Headquarters: Williamsport, PA
PA Operations: Plants in Sunbury and
Williamsport
PA Employment: 405
Total Revenue: $70,000,000 (est.)83
Figure 25 - Location of Wirerope Works, Inc.
Pennsylvania Operations
Wirerope Works manufactures wire rope for use in construction, elevators, logging, mining, oil
production, and ski lifts. Wirerope Works was founded as Morrison Patent Wire Rope Company
in 1886 and has been at its current location since 1895. The products are sold under the brand
name Bethlehem Wire Rope, which is a carryover from when the company was a subsidiary of
Bethlehem Steel from 1937 to 1989. Through various mergers and acquisitions the company
eventually merged together two Pennsylvania wire manufacturers, Williamsport Wirerope Works
and Paulsen Wire Rope, to form Wirerope Works, Inc. in 2004.
Today the company operates on a 46-acre manufacturing complex in Williamsport with over
620,000 square feet under roof. It is the largest wire rope manufacturing facility in North
America, employing over 405 in the state of Pennsylvania.84 Wirerope Works has contributed its
product line to a wide range of construction projects including Madison Square Garden and
Brooklyn Bridge in New York, Miller Park Stadium in Milwaukee, the Alamo Dome in San
Antonio, and the Missouri River Bridge. It was awarded a Governor‘s Award for Environmental
Excellence in 2006 for removing toxic materials (primarily lead) from its production processes.85
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4 Analyzing the economic impact of the Steel Industry
4.1 Modeling the economic impact of an industry
To estimate the overall economic impact of Steel Industry activity in Pennsylvania, PELSW used
an input-output model. There are several input-output models commonly used by economists to
estimate multiplier effects. Because of the complexity of measuring multiplier effects, all of the
models have limitations. Still, economists generally agree that the models can provide an
approximate measure of the indirect and induced spending, total jobs and personal income
generated by a given amount of direct spending in a particular geographic area. PELSW
employed the IMPLAN input-output model in developing the estimates of the Steel Industry‘s
impact on the economy in Pennsylvania.
The IMPLAN model organizes the economy into 440 separate industries and has comprehensive
data on every geographic area of the United States, sourced from federal agencies such as the
Bureau of Economic Analysis.86 It was initially developed and used in 1984 by the United States
Department of Agriculture, in conjunction with the University of Minnesota. In 1993, the
technology was transferred to a new company, the Minnesota IMPLAN Group, Inc. (MIG, Inc.).
Today, their tools are in use by more than 1,000 public and private institutions.
4.2 The concept of indirect and induced economic impacts
The economic impact of the Steel Industry‘s activity is not limited to the employment,
compensation, and other economic activity directly related the Industry‘s business operation.
Through its supply chain, the Steel Industry creates jobs in related industries, and some of these
jobs would not exist without the activity of the Steel Industry. Similarly, the wages paid to
employees working at the Steel Industry and in its supply chain have an effect on the broader
economy as employees use their compensation to buy goods and services.
The Direct Spending of the Steel Industry in the Pennsylvania economy is made up of the total
of the direct spending on payroll, goods and services, and construction. The money spent by the
Steel Industry in the operation of their businesses is spent again by the recipient employees and
local businesses. These businesses in the Steel Industry‘s supply chain make their own purchases
and hire employees, who then spend their salaries and wages throughout the local, regional and
state economies – termed Indirect Spending. Employees of the Steel Industry and the
companies in the Steel Industry‘s supply chain use their salaries and wages to purchase goods
and services from other businesses for personal consumption – termed Induced Spending. A
chain reaction of indirect and induced spending continues, with subsequent rounds of additional
spending gradually diminished through savings, taxes and expenditures made outside the state.
This economic ripple effect is measured by IMPLAN and other input-output economic models,
using a series of multipliers to provide estimates of the number of times each dollar of input, or
direct spending, cycles through the economy in terms of indirect and induced output, or
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additional spending, personal income and employment. Figure 26 presents an illustration of
direct, indirect and induced impacts of the Steel Industry‘s activity.
Induced Impact
(Consumption Effect)
Food and drink
Indirect Impact
(Supply Chain Effect)
Electric Power
Generation
Banking
Utilities
Wholesale
Trade
Steel Product
Manufacturing
Mining
Coal
Entertainment
Transport
by Rail
Direct Impact
(Direct Effect)
Iron and Steel Mills
and Ferroalloy
Manufacturing
Legal Services
Insurance
Carriers
Natural Gas
Distribution
Housing
Management
Real Estate
of Companies
and Enterprises
Higher Education
Travel
Figure 26 - The direct, indirect and induced impact of the Steel Industry activity (PELSW 2011)
4.3 Modeling the impact of the Steel Industry
PELSW modeled the impact of the Pennsylvania Steel Industry within Pennsylvania. The
Pennsylvania Steel Industry will have economic impacts outside the Commonwealth, and Steel
Industry companies located outside Pennsylvania will have an impact on the Pennsylvania
economy, but for purposes of this analysis, these impacts were not considered. Studies done at
the national level of the impact of the Steel Industry on Pennsylvania may not align with these
results because of this difference in geographic scope.
To determine the impact of the Steel Industry in Pennsylvania, PEL defined the core industry as
consisting of the ‗iron and steel mills and ferroalloy manufacturing’ IMPLAN industry sector.
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Other closely related sectors, including ‗steel product manufacturing from purchased steel’ were
also considered for inclusion, but it was decided that a more focused approach best captured the
Steel Industry supply chain.
The IMPLAN model determines the impact that each industry has on the economy, including
employment, total value added, employee compensation, proprietor income and property income.
These are defined as follows:
Employment – Includes both full- and part-time workers.
Total Value Added – The contribution of a project to the economy. It is calculated by
taking the sum of the following components:
o Employee Compensation – Payroll costs for the industry, including salaries and
benefits
o Proprietor Income – Payments received by self-employed individuals as income,
including income received by private business owners
o Other Investor and Property Owner Income – Payments for rents received on
properties, royalties from contracts, dividends paid by corporations and corporate
profits earned by corporations
o Indirect Business Taxes – Includes taxes on sales, property and production but
not payroll taxes or end of year income or corporate taxes.
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5 The Economic Impact of the Steel Industry in Pennsylvania
5.1 Summary of the Steel Industry’s Economic Impact
The Steel Industry is a significant contributor to the Pennsylvania economy. The economic
impact of the industry is shown in Table 4, and includes the direct effect of the industry, along
with its economic ripple effect – the indirect and induced economic activity attributable to Steel
Industry employment and purchasing.
In 2010 in Pennsylvania, through direct, indirect and induced effects, the Steel Industry was
found to support:
Close to 80,000 full- and part-time jobs; every direct job in the Steel Industry supported
another 5.55 full- and part-time jobs in the wider Pennsylvania economy;
More than $9.35 billion in total value added to the economy;
o More than half of the value added arose from the $4.94 billion paid in labor
income overall (approximately $1.16 billion paid directly by the Steel Industry);
o Investor and property income contributed $3.62 billion to the total; and
o Indirect business taxes created a further $0.79 billion in value added by the
industry.
Table 4 - Summary of the Economic Impact of the Steel Industry in Pennsylvania
Employment
Total Value Added
- Labor Income
Direct Impact
Indirect Impact
Induced Impact
Sum
12,160 jobs
$2,860,390,891
38,896 jobs
$4,296,601,649
28,605 jobs
79,662 jobs
$2,194,946,934 $9,351,939,474
$1,156,088,412
$1,095,615,281
$60,473,130
$2,533,570,759
$2,188,461,097
$345,109,663
$1,247,816,205
$1,101,646,470
$146,169,735
$4,937,475,376
$4,385,722,848
$551,752,528
-Investor &Property
Income
$1,554,411,715
$1,339,014,978
$728,189,346
-Indirect Business Taxes
$149,890,765
$424,015,912
$218,941,383
Analysis by the Pennsylvania Economy League of Southwestern Pennsylvania, 2011
$3,621,616,038
$792,848,060
--Employee Compensation
--Proprietor Income
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5.2 Employment
Among the more than 79,600 full- and part-time jobs supported by the Steel Industry,
approximately 12,100 jobs are directly in the iron and steel mills and ferroalloy manufacturing
industry. The number of indirect and induced jobs attributable to each direct job in the Steel
Industry is 5.55 – a significantly higher multiplier than is observed for most other industries in
the model used (a more typical manufacturing industry multiplier in this model would be lower
than 2.5, with service industry multipliers typically lower than 1.8). An overview of the
breakdown of the direct, indirect and induced impact of the Steel Industry on employment can be
found in Figure 27.
Direct
Impact:
12,150 jobs
Induced
Impact:
28,600 jobs
Indirect
Impact:
38,900 jobs
Figure 27 - Employment Impact of the Steel Industry by Type of Impact
The industries that are identified in the model as seeing the largest number of jobs supported as a
result of the activity of the Steel Industry can be found in Table 5. Employees in the Steel
Industry and its supply chain support more than 28,600 induced jobs through their spending on
goods and services, with the largest number of full- and part-time jobs created in the food
services and drinking places industry sector. Close to 38,900 jobs are created in the Steel
Industry supply chain, with the largest number created in the wholesale trade businesses industry
sector, which also saw the largest overall job impact outside of the Steel Industry.
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Table 5 - Employment Impact of the Steel Industry in Pennsylvania: Top Twenty Industries
Industry
Iron and steel mills and ferroalloy
manufacturing
Wholesale trade businesses
Food services and drinking places
Transport by truck
Services to buildings and dwellings
Real estate establishments
Employment services
Private hospitals
Direct
Impact:
Indirect
Impact:
Induced
Impact:
Total
12,160
1,079
1
13,240
-
7,044
945
3,024
2,155
845
1,502
-
817
2,959
201
404
1,486
366
1,685
7,861
3,904
3,225
2,559
2,330
1,868
1,685
Offices of physicians, dentists, and other
health practitioners
Management of companies and enterprises
-
-
1,557
1,557
-
1,389
163
1,552
Maintenance and repair construction of
nonresidential structures
-
1,271
106
1,377
Automotive repair and maintenance, except
car washes
Business support services
Transport by rail
Architectural, engineering, and related
services
Retail Stores - Food and beverage
Nursing and residential care facilities
-
969
286
1,255
-
1,038
1,100
134
16
1,173
1,116
-
1,000
111
1,111
-
46
1,064
1,027
1,110
1,027
Securities, commodity contracts,
investments, and related activities
-
449
462
911
Civic, social, professional, and similar
organizations
Retail Stores - General merchandise
-
273
615
888
-
51
834
884
Total
12,160
38,896
28,605
79,662
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5.3 Total Value Added
Through direct, indirect and induced effects, the Steel Industry added $9.35 billion to the
Pennsylvania economy in 2009. This includes more than $2.86 billion in direct effects, $4.30
billion through its supply chain and $2.19 billion through the employee spending made possible
by the economic activity of the industry. It is important to note that in 2009, the economy was in
recession and Steel Industry activity was unrepresentatively low. An overview of the breakdown
of the direct, indirect and induced impact of the Steel Industry on total value added can be found
in Figure 28.
Induced
Impact:
$2.19 billion
Direct
Impact:
$2.86 billion
Indirect
Impact:
$4.30 billion
Figure 28 - Total Value Added by the Steel Industry by Type of Impact
The Total Value Added measure captures the contribution of the industry to the economic
product of the Commonwealth of Pennsylvania through Labor Income, Investor Income and
Indirect Business Taxes. These components are broken down in more detail in sections 5.3.2.,
5.3.3, and 5.3.4 below.
The twenty industry sectors that are impacted most by the Steel Industry are identified in Table
6. As with employment, the wholesale trade businesses industry sector represents the largest
portion of the indirect economic impact from the activity of the Steel Industry when considering
the Total Value Added to the economy ($965 million indirect impact, $1,077 million in total
impact). The second largest impact is found in the electric power generation, transmission, and
distribution industry sector.
While the industries that saw the largest employment impact reported in Table 5 included many
service industries based on employee spending, the industries in Table 6 are more closely tied to
the supply chain of the Steel Industry.
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Table 6 - Total Value Added Impact of the Steel Industry in Pennsylvania: Top Twenty Industries
Industry
Iron and steel mills and ferroalloy
manufacturing
Wholesale trade businesses
Electric power generation, transmission, and
distribution
Imputed rental activity for owner-occupied
dwellings
Transport by truck
Management of companies and enterprises
Real estate establishments
Transport by rail
Insurance carriers
Offices of physicians, dentists, and other
health practitioners
Legal services
Monetary authorities and depository credit
intermediation activities
Private hospitals
Natural gas distribution
Food services and drinking places
Telecommunications
Services to buildings and dwellings
Architectural, engineering, and related
services
Maintenance and repair construction of
nonresidential structures
Steel product manufacturing from
purchased steel
Total
Indirect
Impact:
Direct Impact:
Induced
Impact:
Total
$2,860,390,891
$253,799,349
$249,319
$3,114,439,559
-
$964,747,319
$111,904,201
$1,076,651,519
-
$396,961,567
$39,081,563
$436,043,130
$298,970,241
$298,970,241
-
-
-
$233,786,326
$209,929,804
$79,292,748
$158,131,236
$36,647,465
$15,539,325
$24,571,016
$139,489,648
$2,247,591
$99,081,782
$249,325,651
$234,500,820
$218,782,396
$160,378,828
$135,729,247
-
$653
$131,069,038
$131,069,691
-
$81,927,894
$44,462,435
$126,390,328
-
$58,290,851
$66,155,682
$124,446,534
-
$915
$106,472,568
$27,306,259
$64,336,954
$76,144,138
$119,497,949
$6,663,187
$85,473,654
$44,301,491
$14,257,829
$119,498,864
$113,135,755
$112,779,913
$108,638,445
$90,401,967
-
$78,316,120
$8,721,854
$87,037,973
-
$78,456,543
$6,517,691
$84,974,234
-
$71,984,665
$72,582
$72,057,247
$4,296,601,649
$2,194,946,934
$9,351,939,474
$2,860,390,891
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a.
Steel Industry Research and Development
Allegheny Technologies, Inc.
Allegheny Technologies, Inc. (ATI) operates a research and development center in Natrona
Heights, Pennsylvania. Over the past decade, the company has spent an average of $13.7 million
annually on research and development. After peaking at nearly $20 million in 2009, research
and development spending dropped slightly to $17.3 million in 2010.87
Figure 29 - Allegheny Technologies – Research and Development Spending – 2001 to 2010 ($mil)
While the vast majority of ATI‘s research funding comes from the company, in 2010, nearly five
percent was provided by customers. The focus of company research and development efforts is
the High Performance Metals segment, which has captured three-fourths of research and
development expenditures in recent years.88
16%
High Performance Metals
11%
Flat-Rolled Products
Engineered Products
73%
Figure 30 -Allegheny Technologies – Research and Development Spending by Segment – 2010
Economic Impact of the Steel Industry in Pennsylvania, October 2011
Pennsylvania Economy League of Southwestern Pennsylvania, LLC
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Carpenter Technology Corp.
Carpenter Technology Corp. has been growing its research and development investments in
recent years. From its headquarters in Wyomissing, Pennsylvania, the company conducts
research and development activities on four continents on their own or in conjunction with
partners. Ongoing R&D programs include areas such as physical metallurgy, analytical
chemistry, applied physics, or process and systems development. Carpenter‘s titanium
subsidiary, Dynamet, based in Washington, PA, also operates a Technology Development group.
In addition to developing new processes and products for customers, the group also performs
contract research, processing of small lots of developmental materials, and vacuum heat treating
of small titanium components.
Over the past decade, Carpenter Technology has spent an average of $12.9 million annually on
research and development activities, but expenditures have been steadily increasing since 2005
and were almost $18 million in 2010.89
Figure 31 -Carpenter Technology – Research and Development Spending – 2001 to 2010 ($mil)
In January 2011, Carpenter announced that it expanded its contract research and development
manufacturing capabilities to provide new and existing customers with the ability to order
custom-melted specialty alloys to their exact chemistry specifications and size requirements at
heat lot quantities up to 400 pounds.
United States Steel
United States Steel operates a global network of research and development centers including an
automotive technical center in Troy, Michigan; a recently opened innovation and technology
center for tubular products in Houston, Texas, and a research center in Košice, Slovakia. In
Pennsylvania, the company operates a Research and Technology Center in Munhall on the
former site of its Homestead Works where it carries out a wide range of applied research,
development and technical support functions.
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The 120,000 square foot Munhall center opened in 2006, replacing an older research and
development center in Monroeville the company operated for 40 years. It employs 110
researchers and technicians, 25 of whom hold Ph.D.s. In addition to traditional laboratory and
office space, other facilities and services include: a multidisciplinary technical library, full
microscopy facilities, materials testing laboratories and several development facilities that
simulate all aspects of steel production. The research efforts focus on three primary efforts:
process technology, product technology and emerging technology.
Recent examples of innovations at the United States Steel‘s research and development centers
include development of advanced high strength steels, including Dual-Ten® and TRIP steels that
provide high strength while significantly reducing the weight of the structure using the steels,
and PATRIOT TC® tubular connections, developed to meet customers‘ needs in deep well
applications such as Marcellus shale.
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5.3.2 Labor Income
Labor Income makes up approximately 53 percent of the Steel Industry‘s economic impact as
measured by the total value it adds to the Pennsylvania economy. Of the $4.84 billion in labor
income that can be attributed to the activity of the Steel Industry and its ripple effects in the
economy, only a quarter is paid in the iron and steel mills and ferroalloy manufacturing industry
sector that is considered the ‗core industry‘ in this analysis. The rest of the labor income arises
in the supply chain through Steel Industry purchasing and in the broader economy through
employee spending, indicating the high multiplier effect of this manufacturing industry. An
overview of the breakdown of the direct, indirect and induced impact of the Steel Industry on
labor income can be found in Figure 32.
Induced
Impact:
$1.25 billion
Direct
Impact:
$1.16 billion
Indirect
Impact:
$2.53 billion
Figure 32 - Labor Income supported by the Steel Industry by Type of Impact
The wholesale trade businesses industry sector sees the largest indirect labor income impact
($562 million). It also sees the largest total labor income impact outside of the core industry,
which rises to $627 million when the induced impact is included. The offices of physicians,
dentists, and other health practitioners industry category sees the largest single induced impact.
Labor income is made up of two components – employee compensation, and proprietor income.
These components are examined in more detail in sections 5.3.2.1 and 5.3.2.2 below.
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Table 7 - Labor Income Impact of the Steel Industry in Pennsylvania: Top Twenty Industries
Description
Iron and steel mills and ferroalloy
manufacturing
Wholesale trade businesses
Transport by truck
Management of companies and enterprises
Electric power generation, transmission, and
distribution
Offices of physicians, dentists, and other
health practitioners
Private hospitals
Transport by rail
Architectural, engineering, and related
services
Food services and drinking places
Maintenance and repair construction of
nonresidential structures
Legal services
Services to buildings and dwellings
Monetary authorities and depository credit
intermediation activities
Employment services
Automotive repair and maintenance, except
car washes
Management, scientific, and technical
consulting services
Insurance carriers
Business support services
Securities, commodity contracts,
investments, and related activities
Total
Indirect
Impact:
Direct Impact:
Induced
Impact:
Total
$1,156,088,412
$102,578,459
$100,768
$1,258,767,638
$0
$0
$0
$561,953,126
$181,937,517
$172,292,095
$65,182,783
$12,093,035
$20,165,749
$627,135,909
$194,030,551
$192,457,845
$0
$114,916,958
$11,313,776
$126,230,735
$0
$612
$122,885,401
$122,886,013
$0
$0
$857
$97,383,385
$111,921,750
$1,384,154
$111,922,607
$98,767,540
$0
$74,137,677
$8,256,512
$82,394,188
$0
$19,419,614
$60,786,991
$80,206,605
$0
$66,344,651
$5,511,509
$71,856,160
$0
$0
$45,955,337
$55,480,891
$24,940,055
$10,388,680
$70,895,391
$65,869,571
$0
$27,952,809
$31,724,312
$59,677,121
$0
$47,058,604
$11,472,963
$58,531,567
$0
$43,256,597
$12,746,707
$56,003,304
$0
$42,511,822
$12,142,308
$54,654,130
$0
$0
$13,733,193
$40,413,792
$37,129,696
$5,221,472
$50,862,889
$45,635,264
$0
$21,123,845
$21,766,734
$42,890,579
$1,156,088,412
$2,533,570,759
$1,247,816,205
$4,937,475,376
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5.3.2.1 Employee Compensation
Employee compensation is the major component of labor income from the Steel Industry – 88
percent of labor income is received in the form of employee compensation, as would be expected
given the large scale of steel manufacturing operations. Proprietor income, discussed in the
following section, often has a larger share of labor income in industries where the scale of
operations is smaller and more people are self-employed. An overview of the breakdown of the
direct, indirect and induced impact of the Steel Industry on employee compensation can be found
in Figure 33.
Induced
Impact:
$1.10 billion
Direct
Impact:
$1.10 billion
Indirect
Impact:
$2.19 billion
Figure 33 - Employee Compensation Supported by the Steel Industry by Type of Impact
Employee compensation makes up 47 percent of the total value added to the Pennsylvania
economy by the Steel Industry. Workers in the core iron and steel mills and ferroalloy
manufacturing industry sector earn $1.19 billion in employee compensation. The wholesale
trade businesses industry sector sees the largest Employee Compensation indirect impact ($513
million), and private hospitals saw the largest induced impact with $107 million in employee
compensation.
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Table 8 - Employee Compensation Impact of the Steel Industry in Pennsylvania: Top Twenty Industries
Description
Iron and steel mills and ferroalloy
manufacturing
Wholesale trade businesses
Management of companies and enterprises
Transport by truck
Electric power generation, transmission,
and distribution
Private hospitals
Offices of physicians, dentists, and other
health practitioners
Transport by rail
Food services and drinking places
Architectural, engineering, and related
services
Maintenance and repair construction of
nonresidential structures
Services to buildings and dwellings
Legal services
Monetary authorities and depository credit
intermediation activities
Employment services
Insurance carriers
Management, scientific, and technical
consulting services
Other state and local government
enterprises
Securities, commodity contracts,
investments, and related activities
Steel product manufacturing from
purchased steel
Total
a.
Direct Impact:
Indirect
Impact:
Induced
Impact:
Total
$1,095,615,281
$0
$0
$0
$97,212,744
$512,783,519
$172,756,180
$125,724,443
$95,497
$59,479,439
$20,220,068
$8,356,661
$1,192,923,522
$572,262,958
$192,976,248
$134,081,104
$0
$0
$102,999,331
$820
$10,140,465
$107,091,831
$113,139,796
$107,092,651
$0
$0
$0
$532
$97,134,320
$18,221,457
$106,785,658
$1,380,614
$57,036,538
$106,786,190
$98,514,935
$75,257,995
$0
$58,270,231
$6,489,397
$64,759,628
$0
$0
$0
$53,278,561
$48,214,737
$36,421,940
$4,426,058
$9,028,108
$19,766,261
$57,704,620
$57,242,845
$56,188,200
$0
$0
$0
$25,429,476
$40,761,782
$12,612,902
$28,860,521
$9,937,787
$34,100,825
$54,289,996
$50,699,569
$46,713,727
$0
$33,211,485
$9,485,928
$42,697,413
$0
$27,808,614
$14,569,317
$42,377,931
$0
$20,532,901
$21,157,806
$41,690,707
$0
$40,335,979
$40,671
$40,376,650
$1,095,615,281
$2,188,461,097
$1,101,646,470
$4,385,722,848
The Economic Impact of Pensions
The Steel Industry generally offers pension and healthcare benefits to its employees. There are
thousands of retired former Steel Industry employees in the Commonwealth, who benefit from
these pensions, and the effect of their spending is not captured in this analysis. Comprehensive
data on retiree benefits and spending were unavailable, but anecdotal evidence suggests that the
economic impact of Steel Industry pensions on the Pennsylvania economy is substantial.
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b.
Average Wages paid in the Pennsylvania Steel Industry
Average wages in the Pennsylvania Steel Industry are higher than in the private sector as a whole
(see Figure 34). Starting from this higher base, between 2001 and 2010 average wages for jobs
covered by the unemployment insurance system in the iron and steel mills industry increased by
40 percent, which was nine percent more than the rate for private sector wages overall. Average
wages in the iron and steel mills industry were also significantly higher than those in both the
goods-producing and the service-providing industries, when these components of the total
private sector were analyzed separately. Wages in the iron and steel mills industry have
fluctuated along with the business cycle, so the trend has not been the slow steady increase
keeping up with inflation seen in the aggregate private sector average. In 2010, the average
wage in the iron and steel mills industry was $70,686, and $45,323 for the private sector as a
whole. These higher average wages benefit the economy of the Commonwealth through the
‗induced impact‘ or ‗consumption effect‘ as employees of the Steel Industry spend their larger
disposable income on goods and services in their communities.
$90,000
$80,000
$70,000
$60,000
$50,000
$40,000
$30,000
$20,000
$10,000
$0
2001
2002
2003
2004
2005
2006
2007
2008
2009
Iron and Steel Mills
Total, all private industries
Goods-producing private industries
Service-providing private industries
2010
Figure 34 - Pennsylvania average wages in the Steel Industry compared to Pennsylvania private sector
Economic Impact of the Steel Industry in Pennsylvania, October 2011
Pennsylvania Economy League of Southwestern Pennsylvania, LLC
Page 42
5.3.2.2 Proprietor Income
Proprietor income makes up eleven percent of labor income supported by the Steel Industry and
its effects. The $552 million in total proprietor income stimulated across the economy represents
six percent of the total value added to the Pennsylvania economy. An overview of the
breakdown of the direct, indirect and induced impact of the Steel Industry on proprietor income
can be found in Figure 35.
Direct Impact:
$60 million
Induced
Impact:
$146 million
Indirect
Impact:
$345 million
Figure 35 - Proprietor Income Supported by the Steel Industry by Type of Impact
The effect within the core Steel Industry was small – approximately $66 million in total, but
there were significant effects in industry sectors with higher prevalence of small businesses and
self-employment. The transport by truck industry sector saw the largest indirect impact of $56
million, and the offices of physicians, dentists, and other health practitioners saw the largest
induced impact.
Economic Impact of the Steel Industry in Pennsylvania, October 2011
Pennsylvania Economy League of Southwestern Pennsylvania, LLC
Page 43
Table 9 - Proprietor Income Impact of the Steel Industry in Pennsylvania: Top Twenty Industries
Description
Iron and steel mills and ferroalloy
manufacturing
Transport by truck
Wholesale trade businesses
Automotive repair and maintenance, except
car washes
Architectural, engineering, and related
services
Offices of physicians, dentists, and other
health practitioners
Commercial and industrial machinery and
equipment repair and maintenance
Radio and television broadcasting
Legal services
Maintenance and repair construction of
nonresidential structures
Electric power generation, transmission,
and distribution
Management, scientific, and technical
consulting services
Scenic and sightseeing transportation and
support activities for transportation
Accounting, tax preparation, bookkeeping,
and payroll services
Real estate establishments
Services to buildings and dwellings
Employment services
Personal care services
Cable and other subscription programming
Business support services
Transport by pipeline
Total
Direct Impact:
Indirect
Impact:
Induced
Impact:
Total
$60,473,130
$5,365,715
$5,271
$65,844,116
$0
$0
$56,213,074
$49,169,607
$3,736,374
$5,703,344
$59,949,448
$54,872,951
$0
$18,862,515
$5,558,342
$24,420,856
$0
$15,867,446
$1,767,114
$17,634,560
$0
$80
$16,099,743
$16,099,823
$0
$14,728,317
$1,083,226
$15,811,543
$0
$0
$10,817,185
$9,533,397
$3,958,444
$5,173,794
$14,775,629
$14,707,191
$0
$13,066,090
$1,085,451
$14,151,541
$0
$11,917,627
$1,173,311
$13,090,938
$0
$9,300,337
$2,656,380
$11,956,718
$0
$9,632,228
$1,340,630
$10,972,858
$0
$6,599,128
$2,160,697
$8,759,826
$0
$0
$0
$0
$0
$0
$0
$3,137,686
$7,266,154
$6,296,822
$2
$4,305,706
$5,374,132
$5,451,197
$5,519,732
$1,360,572
$1,535,175
$6,600,540
$2,261,303
$694,339
$581,389
$8,657,418
$8,626,726
$7,831,997
$6,600,542
$6,567,009
$6,068,471
$6,032,586
$60,473,130
$345,109,663
$146,169,735
$551,752,528
Economic Impact of the Steel Industry in Pennsylvania, October 2011
Pennsylvania Economy League of Southwestern Pennsylvania, LLC
Page 44
5.3.3 Investor and Property Owner Income
The economic activity of the Steel Industry supported $3.62 billion in investor and property
owner income in Pennsylvania. This represents 39 percent of the total value added to the
Pennsylvania economy. The core iron and steel mills and ferroalloy manufacturing industry
sector saw $1.69 billion in total impact on investor and property owner income. An overview of
the breakdown of the direct, indirect and induced impact of the Steel Industry on investor and
property owner income can be found in Figure 36.
The largest indirect impact was seen in the electric power generation, transmission, and
distribution industry sector ($212 million). The largest induced impact of $247 million was seen
in the imputed rental activity for owner-occupied dwellings sector, which is the economic value
assigned to individuals living in the homes that they own. Since people do not buy houses every
year but the model tries to produce a representative snapshot of economic activity, the economic
value is calculated as if they paid rent for their homes.
Induced
Impact:
$0.73 billion
Direct
Impact:
$1.55 billion
Indirect
Impact:
$1.34 billion
Figure 36 - Investor and Property Owner Income Supported by the Steel Industry by Type of Impact
Economic Impact of the Steel Industry in Pennsylvania, October 2011
Pennsylvania Economy League of Southwestern Pennsylvania, LLC
Page 45
Table 10 - Investor and Property Owner Income Impact of the Steel Industry in Pennsylvania: Top Twenty
Industries
Description
Iron and steel mills and ferroalloy
manufacturing
Imputed rental activity for owner-occupied
dwellings
Electric power generation, transmission, and
distribution
Wholesale trade businesses
Real estate establishments
Insurance carriers
Natural gas distribution
Monetary authorities and depository credit
intermediation activities
Telecommunications
Transport by rail
Legal services
Transport by truck
Lessors of nonfinancial intangible assets
Management of companies and enterprises
Nondepository credit intermediation and
related activities
Steel product manufacturing from
purchased steel
All other miscellaneous professional,
scientific, and technical services
Services to buildings and dwellings
Food services and drinking places
Mining coal
Total
Direct Impact:
Indirect
Impact:
Induced
Impact:
Total
$1,554,411,715
$137,921,247
$135,486
$1,692,468,449
$0
$0
$247,009,380
$247,009,380
$0
$0
$0
$0
$0
$212,282,527
$195,995,577
$56,236,219
$19,754,803
$64,657,142
$20,899,587
$22,734,169
$98,929,229
$53,409,999
$4,046,325
$233,182,114
$218,729,746
$155,165,447
$73,164,802
$68,703,468
$0
$0
$0
$0
$0
$0
$0
$28,690,447
$35,781,061
$56,658,972
$32,383,472
$46,578,620
$32,494,554
$34,235,596
$32,561,475
$24,638,318
$805,320
$17,574,576
$3,095,991
$6,610,556
$4,007,070
$61,251,922
$60,419,378
$57,464,292
$49,958,048
$49,674,611
$39,105,110
$38,242,665
$0
$15,296,200
$14,050,775
$29,346,975
$0
$27,198,898
$27,425
$27,226,323
$0
$0
$0
$0
$20,151,600
$17,506,586
$5,024,354
$20,129,648
$2,799,842
$3,278,071
$15,727,160
$165,726
$22,951,443
$20,784,658
$20,751,514
$20,295,374
$1,554,411,715
$1,339,014,978
$728,189,346
$3,621,616,038
Economic Impact of the Steel Industry in Pennsylvania, October 2011
Pennsylvania Economy League of Southwestern Pennsylvania, LLC
Page 46
a.
Recent Investments by the Steel Industry
Significant investments are being made by the Steel Industry in Pennsylvania, demonstrating the
continuing contribution of the industry to the Commonwealth‘s manufacturing base. Table 1190
shows that since 2005, projects worth more than $2.5 billion have been announced in the metals
industry. These investments generally involve large construction projects or purchasing
expensive equipment and services, which in turn will have ripple effects in the Pennsylvania
economy – generating additional jobs and economic activity beyond those captured in our oneyear snapshot of ongoing Steel Industry activity.
Table 11 - Recent investments in Pennsylvania made by the metals industry
Company
2011
Carpenter
Technology
City
County
Nature of Investment
Total
Investment
($mil)
Reading
Berks
Two additional Electroslag
Remelting Furnaces (ESR) and
increase capacity for Forge Finishing
and Annealing operations
2010
ArcelorMittal
Steelton
Dauphin
Renovation of the plant's reheat
furnace.
$54.0
2009
Lehigh Heavy Forge
Universal Stainless
Bethlehem
Bridgeville
Northampton
Allegheny
$3.2
$13.0
Wheatland Tube
Wheatland
Mercer
Production enhancements
Equipment, automation and plant
layout upgrades in the melt shop.
Upgrade equipment and consolidate
operations
2008
AK Steel
Butler
Butler
$21.0
Allegheny
Technologies
Hussey Copper
Brackenridge
Allegheny
Leetsdale
Allegheny
Latrobe Specialty
Steel
United States Steel
2007
AK Steel*
Latrobe
Westmoreland
Expansion of production capacity of
steel used to manufacture power
generation equipment and electrical
distribution transformers
New hot rolling and processing
facility and melt shop
Relocation of production line from
Kentucky
Plant expansion
Clairton
Allegheny
Clairton Coke Works overhaul
$600.0
Butler
Butler
$180.0
Allegheny
Technologies
Canton
Township
Washington
Replaced two of three electric arc
furnaces with a single furnace
carbon steel slab production
expansion
Titanium mill upgrade
Economic Impact of the Steel Industry in Pennsylvania, October 2011
Pennsylvania Economy League of Southwestern Pennsylvania, LLC
N/A
$2.0
$1,160.0
$1.2
$62.0
$60.0
Page 47
Company
City
County
Nature of Investment
Total
Investment
($mil)
N/A
Arcelormittal
Steelton
Dauphin
Carpenter
Technology
Reading
Berks
Carpenter
Technology
Col-Fin Specialty
Steel
Damascus Steel
Reading
Berks
Upgrades to bloom caster and in-line
head hardening unit
Premium melt expansion with four
vacuum arc remelting (VAR)
furnaces and two electro-slag
remelting (ESR) furnaces
Hot rolling facility expansion
Fallston
Beaver
Plant expansion
$1.1
Beaver Falls
Beaver
N/A
Ellwood Quality
Steels
Ellwood City
Lawrence
Pennsylvania Cold
Drawn
2005
Lehigh Specialty
Melting
Perryman Company
TMK IPSCO
West
Mayfield
Beaver
New induction melt furnace system,
cranes, tram-rail transfer system, and
required electrical upgrades
$60 million for a 5,000-ton open-die
forging press that can handle 40 tons
completed in 2008. $75 million
project for a new forge facility to be
completed in 2011 that will have a
7,000-ton press.
New tubular production facility
Latrobe
Westmoreland
Reopening of shuttered Standard
Steel plant
California
Washington
New titanium plant
Koppel and
Beaver
Pipe line expansion in Koppel, plant
Ambridge
improvements in Ambridge
TOTAL
*Investment amount also includes improvements to finishing operation Zanesville, OH
Economic Impact of the Steel Industry in Pennsylvania, October 2011
Pennsylvania Economy League of Southwestern Pennsylvania, LLC
$115.0
$115.0
$135.0
$9.0
$16.7
$55.0
$60.0
$2,591.0
Page 48
5.3.4 Indirect Business Taxes
Indirect business taxes, for example fees, sales and property taxes paid to governments in
transactions arising from the Steel Industry‘s economic activity, represented eight percent of the
total value added to the Pennsylvania economy by the Industry. The core Steel Industry paid
$150 million in Indirect Business Taxes. An overview of the breakdown of the direct, indirect
and induced impact of the Steel Industry on indirect business taxes can be found in Figure 37.
Induced
Impact:
$219 million
Direct
Impact:
$150 million
Indirect
Impact:
$424 million
Figure 37 - Indirect Business Taxes Supported by the Steel Industry by Type of Impact
The wholesale trade businesses industry sector saw the largest indirect impact ($207 million),
and the imputed rental activity for owner-occupied dwellings sector saw the largest induced
impact ($52 million).
Economic Impact of the Steel Industry in Pennsylvania, October 2011
Pennsylvania Economy League of Southwestern Pennsylvania, LLC
Page 49
Table 12 - Indirect Business Tax Impact of the Steel Industry in Pennsylvania: Top Twenty Industries
Description
Iron and steel mills and ferroalloy
manufacturing
Wholesale trade businesses
Electric power generation, transmission, and
distribution
Imputed rental activity for owner-occupied
dwellings
Real estate establishments
Natural gas distribution
Telecommunications
Food services and drinking places
Insurance carriers
Mining coal
Retail Stores - Food and beverage
Automotive repair and maintenance, except
car washes
Retail Stores - General merchandise
Retail Nonstores - Direct and electronic
sales
Retail Stores - Motor vehicle and parts
Commercial and industrial machinery and
equipment repair and maintenance
Transport by truck
Legal services
Retail Stores - Clothing and clothing
accessories
Retail Stores - Building material and garden
supply
Total
Direct Impact:
Indirect
Impact:
Induced
Impact:
Total
$149,890,765
$0
$13,299,643
$206,798,616
$13,065
$23,987,249
$163,203,473
$230,785,865
$0
$69,762,082
$6,868,199
$76,630,281
$0
$0
$0
$0
$0
$0
$0
$0
$0
$12,397,322
$16,796,926
$8,118,331
$2,862,292
$3,159,469
$11,491,077
$438,567
$51,960,861
$21,809,032
$1,051,173
$5,590,165
$8,959,503
$8,542,087
$94,605
$10,190,481
$51,960,861
$34,206,354
$17,848,099
$13,708,496
$11,821,795
$11,701,557
$11,585,682
$10,629,047
$0
$0
$8,154,374
$451,560
$2,402,903
$7,429,666
$10,557,277
$7,881,226
$0
$0
$173,309
$353,083
$7,417,115
$6,583,951
$7,590,423
$6,937,034
$0
$0
$0
$5,933,517
$5,270,189
$3,589,085
$436,394
$350,299
$1,947,804
$6,369,911
$5,620,489
$5,536,889
$0
$201,085
$5,222,260
$5,423,345
$0
$198,057
$4,683,691
$4,881,749
$149,890,765
$424,015,912
$218,941,383
$792,848,060
Economic Impact of the Steel Industry in Pennsylvania, October 2011
Pennsylvania Economy League of Southwestern Pennsylvania, LLC
Page 50
1
The industry code ‗primary metals manufacturing‘ was used in this analysis (NAICS 331). This includes Iron and
Steel Mills and Ferroalloy Manufacturing, Steel Product Manufacturing from Purchased Steel – the focus of this
analysis – along with Alumina and Aluminum Production and Processing, Nonferrous Metal (except Aluminum)
Production and Processing, and Foundries. However, because non-iron and steel metal manufacturing industries do
not have a significant presence in Pennsylvania, the primary metal manufacturing is described as the ‗Steel Industry‘
in this section.
2
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Tube City IMS website www.tubecityims.com accessed 10 October 2011
Economic Impact of the Steel Industry in Pennsylvania, October 2011
Pennsylvania Economy League of Southwestern Pennsylvania, LLC
Page 51
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The industry code ‗primary metals manufacturing‘ was used in this analysis (NAICS 331). This includes Iron and
Steel Mills and Ferroalloy Manufacturing, Steel Product Manufacturing from Purchased Steel – the focus of this
analysis – along with Alumina and Aluminum Production and Processing, Nonferrous Metal (except Aluminum)
Production and Processing, and Foundries. However, because non-iron and steel metal manufacturing industries do
Economic Impact of the Steel Industry in Pennsylvania, October 2011
Pennsylvania Economy League of Southwestern Pennsylvania, LLC
Page 52
not have a significant presence in Pennsylvania, the primary metal manufacturing is described as the ‗Steel Industry‘
in this section.
59
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60
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77
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78
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79
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80
Company history and plant details from Wheatland Tube corporate website
81
Location listings from WHEMCO Group corporate website
82
Company history and plant details from WHEMCO Group corporate website
83
Wirerope Works, Inc. direct communication
84
Wirerope Works corporate website: http://www.wireropeworks.com/summary.htm
85
Corporate Press Release: http://www.wireropeworks.com/2006news/Governors_Award.htm
86
IMPLAN's state and industry specific input-output multipliers are based on numerous data sources, including the
Bureau of Economic Analysis (BEA) Covered Employment and Wages, BEA Regional Economic Information
System Data, BEA Output data, National Income and Product Accounts, BEA current benchmark I-O Study, the
Consumer Expenditure Survey among others. The IMPLAN model assembles all of the data into a consistent
accounting framework following the definitions and conventions of the US input-output benchmark study and the
US National Income and Product Accounts.
87
Allegheny Technologies, Inc. 10-k filing
88
Allegheny Technologies, Inc. 10-k filing
89
Carpenter Technology 10-k filing
90
Pittsburgh Regional Alliance research
Economic Impact of the Steel Industry in Pennsylvania, October 2011
Pennsylvania Economy League of Southwestern Pennsylvania, LLC
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