Pittsburgh remains prominent in the global steel industry thanks to suppliers who found ways to evolve
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Many steel mills may have fallen silent, but suppliers are still contributing to the region's economy.
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When the M.E. Cunningham Co. was founded in 1889, one of the steel industry supplier's hottest-sellers was a hunk of hardened steel with a raised letter at one end and a spot to pound a hammer at the other. Muscular workers in Pittsburgh factories used the stamp to laboriously imprint an identification mark into steel.
Today, the company, known as Mecco Marking & Traceability, relies on lasers that slap a 3-millimeter square bar code, company logo and nine-digit ID number on metal in 1.5 seconds flat.
"We're a 118-year-old company that's brand new," boasts President and Chief Executive Officer Dean Frenz. "Our customer base right now is loaded with Fortune 100 companies."
The fact that there are no steelmakers in the Fortune 100 explains how Mecco, one of many firms whose fortunes were once tied to the region's steel producers, not only survived but grew. Suppliers whose business plans assumed there always would be Big Steel met their Darwinian demise, either when Mon Valley mills closed in the 1980s or when a tsunami of bankruptcies overwhelmed the industry this decade.
Mecco is by no means the only supplier still standing. A recent study by University of Pittsburgh documents a hardened core of suppliers who evolved and are making a significant contribution to the region's economy two decades after the furnaces fell silent in Duquesne, Homestead, McKeesport and other steel towns.
Nearly 300 regional suppliers employed more than 12,000 in 2003, accounting for an estimated payroll of $687 million, according to Frank Giarratani and Carey Treado of Pitt's Center for Industry Studies. Workers in the group earned an average wage of nearly $56,000 in 2003, vs. the regional average of $36,000.
Mr. Giarratani, who joined Pitt's faculty as a regional economist in 1979, is convinced the region's economy is more resilient than it gets credit for.
"Soon after I got here, the steel industry collapsed. I and a lot of other people at the time thought "This is the end of Pittsburgh.' Now, when I look back over my shoulder, I know I was wrong," he says.
He and Ms. Treado, a research associate, say the survivors adapted by finding new customers in new industries or new countries or by expanding the products and services they provide to steel producers. Some took on maintenance and other jobs U.S. mills outsourced as they downsized their work forces.
"We had to do something different," says George J. Koenig, president of Berry Metal in Harmony. "We made the conscious decision we were going to diversify into other areas."
Berry, a privately owned company that doesn't disclose sales, has just under 100 employees. It makes lances, 60-foot long, water-cooled rods that, when inserted into steelmaking furnaces, do basically the same job a plastic cocktail stirrer does in a highball glass. Instead of ice, bourbon and ginger ale, the lances mix molten iron and steel scrap, shooting high-pressure bursts of oxygen into the furnace to remove impurities.
"You're basically sticking this lance into a volcano to make the steel," Mr. Koenig says.
The better Berry made the lances, the longer they endured the harsh conditions and the fewer the company sold.
The demise of Bethlehem Steel, LTV Steel and others also reduced demand.
Berry's response was to forge alliances with other industry suppliers, allowing both partners to offer a more complete package of products and services.
The company's allies include HIsmelt, an Australian company with a new process for making iron that uses Berry lances.
"The whole goal was to try to bring more technology to our existing customers," Mr. Koenig says. The alliances are "opening doors for us in a lot of other locations," he adds. As for those days when every day was a fight for survival, Mr. Koenig says: "We learned a lot from it and we're that much better for it.
"It's not Yahoo or Google by any stretch. but it's a new and exciting industry," he says.
In the heyday of Big Steel, U.S. steel producers provided the predecessors of Herr-Voss Stamco all the business they could handle. The company employs 300, including about 175 at its plant and headquarters in Callery.
It supplies equipment that levels steel and cuts steel coils. Herr-Voss' response to Big Steel's decline was to look overseas.
It now tries to generate about 40 percent of its business outside North America, doing business in places such as Guatemala, Colombia, China and India.
"We would all prefer to be doing business closer to home, but it's not there. So you go where you have to go," says John H. Gehring, the company's vice president of sales and marketing.
It wasn't that long ago that Mecco made thousands of thumbnail-sized markers Bethlehem Steel used to impress its logo on steel.
Mr. Frenz, who was brought in when private investors purchased the family-owned company five years ago, realized something had to change when he came across hundreds of the markers at Mecco's plant months after Bethlehem had bit the dust.
The Cranberry company has about two dozen employees.
It sold its traditional manual marking business and used the proceeds to pay down debt and invest in laser marking.
That provided an entree to the electronics, medical equipment and other markets "we could never go to before," says Todd Hockenberry, vice president of sales and marketing.
Lasers account for half of Mecco's annual sales of more than $6 million. "Next year, it will probably be 80 percent," he says.
Mr. Giarratani estimates that given the steel industry's revival, the innovations made by suppliers who adapted to the difficult market are having a larger impact today than when he and Ms. Treado measured it four years ago.
"What they're doing is seeking new markets and every success they have ... represents a change in their portfolio and a broadening of their portfolio that makes them safe and viable in terms of what they're doing for Pittsburgh's economy," he says.
What's just as remarkable, he says, is that the suppliers are much more likely to maintain their operations here instead of moving them elsewhere.
Even though the region accounts for about only 4 percent of U.S. steel production and a fraction of world production, suppliers told the Pitt researchers they have compelling reasons to stay put.
The city is conveniently located to U.S. mills, is home to many of the industry's pre-eminent suppliers and has preserved its reputation for steel know-how.
Ms. Treado tells of one supplier who heard this from a customer: "You're from Pittsburgh. You must know what you're talking about."
"That's one of the fascinating things about this," Mr. Giarratani says. "These firms are tied to the traditional heart of the Pittsburgh region. For them, that heart is still central to their own vitality.
"That is an amazing thing. That's something I hope we can take advantage of."
First Published September 23, 2007 12:00 am
