Military steel on land and at sea
By KEVIN NEVERS
Second of Two Parts
At a United Steelworkers of America rally on Aug. 26, 2001, President Bush,
enjoying for the moment a cozier relationship with the union than his
predecessor in office ever had, raised the stakes of the import crisis which
by that time had bankrupted a score of steelmakers. “If you’re worried about
the security of the country and you become over-reliant upon foreign steel,
it can easily affect the capacity of our military to be well supplied,” he
said. “Steel is an important jobs issue; it is also an important national
Two weeks and two days later, terrorists flew jetliners into the World Trade
Center and the Pentagon.
Two months later, on Oct. 22, 2001, the U.S. International Trade Commission
(ITC) issued its ruling in the Section 201 investigation ordered by the
president earlier in the year. Its conclusion: 12 domestic steel
industries—including slabs, plate, hot-rolled, cold-rolled, and coated—had
been seriously injured by the unfair trade practices of subsidized foreign
By March 5, 2002, when the president acted on the recommendation of the ITC
and imposed a three-year schedule of tariffs on a range of imported steel
products, this nation was at war in Afghanistan and had started to make
contingency plans for war in Iraq.
And war takes steel. A lot of it.
Almost since the first wave of dumped steel hit American shores and prices
began their catastrophic plunge—generally dated to July 1998—U.S. Rep. Pete
Visclosky, D-1st, had been telling anyone who would listen that the U.S.
stood to lose more than tens of thousands of jobs, as one steelmaker after
another was lowballed into chapters 7 and 11. It also stood to lose the
capacity to home-grow its steel, a commodity as vital to national defense as
oil. And only hours after the biggest bankruptcy of them all was announced,
on the morning of Oct. 15, 2001, Visclosky was quick to sound a dire
warning. Bethlehem Steel Corporation, he said, “is the only company in the
United States that makes the steel to build aircraft carriers and tanks. We
cannot depend on China and Brazil to build our ships, tanks, personnel
carriers, and other items necessary to our national defense.”
Long before the import crisis befell the industry, however, Congress had
recognized the strategic significance of steel, and indeed steel has the
honor of being the only industry cited by name in the Military Selective
Service Act (MSSA), originally enacted as the Selective Service Act of 1948.
Although the greatest part of the MSSA establishes the workings of the
selective service system—eligibility, selection and induction, exemptions
and deferments—in an odd provision which reads almost like an afterthought
it also specifically authorizes the president to order the seizure of any
mill whose owner declines to fill or otherwise to prioritize any order for
steel placed by any defense contractor.
Thus: “The President is empowered, through the Secretary of Defense, to
require all producers of steel in the United States to make available, to
individuals, firms, associations, companies, corporations, or organized
manufacturing industries having orders for steel products or steel materials
required by the armed forces, such percentages of the steel production of
such producers, in equal proportion deemed necessary for the expeditious
execution of orders for such products or materials. Compliance with such
requirement shall be obligatory on all such producers of steel and such
requirement shall take precedence over all orders and contracts theretofore
placed with such producers. If any such producer of steel . . . refuses to
comply with such requirement, the President, through the Secretary of
Defense, is authorized to take immediate possession of the plant or plants
of such producer and, through the appropriate branch, bureau, or department
of armed forces, to insure compliance with such requirement.”
And in fact there is precedent—of a sort—for such a seizure. On April 8,
1952—at the height of the Korean War—President Truman instructed his
Secretary of Commerce to seize and operate most of the country’s mills in
anticipation of a nationwide strike called by the USWA. His reasons, as
stipulated in Executive Order 10340: “the weapons and other materials needed
by our armed forces . . . are produced to a great extent in this country,
and steel is an indispensable component of substantially all of such weapons
and materials”; “steel is likewise indispensable to the carrying out of
programs of the Atomic Energy Commission of vital importance to our defense
efforts”; and “a continuing and uninterrupted supply of steel is also
indispensable to the maintenance of the economy of the United States, upon
which our military strength depends.”
The U.S. Supreme Court later vacated that executive order in Youngstown
Sheet & Tube Co. v. Sawyer—on the grounds that the president had exceeded
both his statutory and constitutional authority and that seizure was an
improper means to resolve labor disputes and prevent work stoppages—but a
larger point perhaps was made: the unwillingness of the Executive Branch to
shilly-shally in the face of a perceived threat to the “continuing and
uninterrupted supply of steel.”
On March 19, 2003, one year and two weeks after President Bush imposed his
three-year schedule of tariffs—which he would later repeal prematurely—U.S.
and coalition forces invaded Iraq, and in the succeeding months the Defense
Department’s contractors developed, and are still demonstrating, a voracious
appetite for steel and in particular for military grade plate, used for the
most part to armor a variety of light, medium, and heavy tactical vehicles.
International Steel Group (ISG), which acquired Bethlehem’s extensive plate
operations and later added to them with the acquisition of U.S. Steel
Corporation’s 160-inch mill at Gary Works, has been diligently filling those
orders since early 2004, and last year Coatesville and Conshohocken shipped
more military grade plate than they had in the previous seven years
In a matter of weeks, though, ISG will no longer own those plate operations.
Mittal Steel Company will, and while the U.S. is by no means losing the
actual physical capacity to produce military grade plate, that capacity will
be under the control of a foreign firm headquartered in Rotterdam, The
Some salient facts:
•ISG produces around 85 percent of all of the military grade plate supplied
to the Defense Department’s contractors, the company’s vice-president of
plate operations, Tom Cera, told the Chesterton Tribune. Algoma Steel Inc.
of Ontario, Canada, produces the rest.
•ISG is one of only three steelmakers in North America, Cera said, to have
heat-treating facilities with quench-and-temper capability, the process
which gives military grade plate its fracture resistance and formability.
Algoma is the second; Oregon Steel Mills Inc. of Portland, Ore., the third.
•Orders for military grade plate may be spiking now, but it nevertheless
represents a tiny product line for ISG. Last year the company shipped only
between 50,000 and 60,000 tons of it, Cera said, or 2.4 percent of its total
annual plate capacity of 2.5 million tons and a minuscule 0.27 percent of
its total annual steelmaking capacity of 22 million tons. Prior to the Iraq
War, its annual shipments of military grade plate were even smaller: in the
neighborhood of 25,000 tons.
•The military grade plate produced by ISG must perform to limits established
by generally classified government specifications, Cera said.
•ISG sells its military grade plate exclusively to the Defense Department’s
contractors, Cera said, although at one time Bethlehem did sell a limited
quantity of it to Israel.
•When the merger of ISG and Mittal closes, approximately 88 percent of the
company will be privately owned by Lakshmi Mittal and his family; the rest,
by the public shareholders of ISG and Ispat International.
Congress has not been insensitive to the national security implications
posed by foreign ownership of domestic industrial and technological
capacity. In 1988 it amended the Defense Production Act of 1950 to include
the so-called Exon-Florio provision, which authorizes the president to
suspend or prohibit the foreign acquisition of any U.S. company when two
conditions are met: when evidence credibly indicates that a foreign acquirer
could act to jeopardize national security, and when no other laws—like, say,
the MSSA—provide the applicable authority to protect national security.
On behalf of the president, the inter-agency Committee on Foreign Investment
in the United States (CFIUS), administered by the Treasury Department,
conducts a review of the impending acquisition once it has received
notification from the transacting parties. According to the Treasury
Department’s website, CFIUS considers five factors in that review: “domestic
production needed for projected national defense requirements”; “the
capability and capacity of domestic industries to meet national defense
requirements, including the availability of human resources, products,
technology, materials, and other supplies and services”; “the control of
domestic industries and commercial activity by foreign citizens as it
affects the capability and capacity of the U.S. to meet requirements of
national security”; “the potential effects of the transaction on the sales
of military goods, equipment, or technology to a country that supports
terrorism or proliferates missile technology or chemical and biological
weapons”; and “the potential effects of the transaction on U.S.
technological leadership in areas affecting U.S. national security.”
CFIUS has a statutory 30-day window to complete its review of an impending
acquisition after receiving notification, Treasury spokesman Tony Fratto
told the Tribune. On occasion, it then opens a further 45-day
“investigation,” and “on the rarest of occasions”—when the acquisition could
credibly be considered a threat to national security—CFIUS makes an
appropriate recommendation to the president, who then has 15 days to act.
CFIUS conducts between 60 and 70 Exon-Florio reviews every year, Fratto
said, and only “rarely” recommends the suspension or prohibition of an
Fratto, citing federal law, would not comment on the findings or the status
of the Exon-Florio review of the proposed Mittal-ISG merger, and would not
say when or even whether CFIUS received notification of it. He did say that
both transacting parties are free to comment on the review if they choose to
ISG spokesman Chuck Glazer referred all questions about the proposed merger
Mittal, for its part, has not returned repeated telephone calls or responded
to e-mailed requests for information on the findings or status of the
Exon-Florio review, on its intentions with respect to ISG’s plate
operations, and on the extent of its existing plate operations and their
military grade capability.
For Visclosky—who is hopeful of persuading Mittal to locate the headquarters
of its combined U.S. operations in Northwest Indiana—the only question
raised by the proposed merger is whether the actual physical capacity to
produce military grade plate will remain in the U.S. And it will. “The crux
of the National Security question is if the U.S. still has the capability to
produce enough steel,” Visclosky’s office said in a statement released to
“The proposed acquisition is for a North American Division, and all of the
steel produced from this entity will be produced in the U.S. While
Congressman Visclosky wishes the venture would produce a wholly-owned
American corporation, it will still result in a strong American subsidiary,
and that will benefit Northwest Indiana’s economy.”
Neither does U.S. Sen. Evan Bayh, D-Ind., object to the proposed merger. “As
a member of the Armed Services committee, Sen. Bayh has worked hard to
strengthen our national security and keeps a constant watch for company
changes that could impact our intelligence and security plans,” Bayh’s
office said in a statement released to the Tribune:
“He believes it is important to keep the production of key military
equipment here in the United States. Sen. Bayh has worked tirelessly to help
preserve a strong, vital domestic steel industry, which will help ensure
that the production of steel plates for the military and the knowledge it
takes to make them remains in Indiana. He recently urged Mittal Steel’s
leaders to establish the company’s U.S. headquarters in Northwest Indiana
and will continue supporting the company’s work there.”
Sen. Richard Lugar, R-Ind., is confident that the Exon-Florio provision is
working as intended and that CFIUS has acted—or will act—in the best
interests of national security, a member of his staff told the Tribune.
Military steel on land and at sea
By KEVIN NEVERS
A Strong U.S. Steel Industry: Critical to National Defense and Economic
Security, published in December 2001, divides military grade plate
applications into two general classifications: land-based and sea-based.
International Steel Group produces plate for land-based applications at its
Coatsville and Conshohocken mills; plate for sea-based applications, at its
Burns Harbor mill.
Plate requirements and consumption totals for certain applications in the
years prior to 2001, according to the report:
•The Abrams tank: 22 tons of plate. The manufacture of 8,500 tanks consumed
•A Light Armored Vehicle: eight tons. The manufacture of 3,750 LAVs consumed
•The Bradley Fighting Vehicle: six tons. The manufacture of 2,500 BFVs
consumed 15,000 tons.
•An aircraft carrier: 50,000 tons. The manufacture of 10 carriers consumed
•A Trident class submarine: 10,000 tons. A Seawolf class: 4,000 tons. The
manufacture of subs in three classes consumed 1 million tons.
The report notes that in the peacetime of the post-Cold War Era shipments of
all types and grades of steel to the Defense Department’s contractors—not
just military grade plate—have dropped markedly: “First, we need to
recognize that the current level of direct steel shipments to military
markets is very low by historical standards.
One need only look to the Vietnam Era to see much elevated steel shipment
levels where, on average, in the 1965-69 period, U.S. steel producers
shipped 2.4 million tons annually directly to military markets.
Similar increased levels of direct shipments could return in the advent of
an extended ground conflict with naval support in the Middle East or
On the subject of military grade plate specifically, the report maintains
that a reliable domestic source of this specialized product line is vital to
national security: “A strong domestic steel industry is essential if we are
to assure that the technologically advanced steel plates meeting demanding
military specifications continue to be available. It is also prudent to
maintain domestic steel supply, because other sources may not be able to
provide either consistent quality or quantities in a timely and reliable
manner. Further, allowing the production of these highly sophisticated
steels in other countries could reduce an American advantage by allowing our
adversaries access to the same advanced steels we can now only produce in
A Strong U.S. Steel Industry was a joint publication of the American Iron
and Steel Institute, Specialty Steel Industry of North American, Steel
Manufacturers Association, and the United Steelworkers of America.