Kaiser Steel

Kaiser Steel was a steel company and integrated steel mill near Fontana, California. Industrialist Henry J. Kaiser founded the company on December 1, 1941, and workers fired up the plant's first blast furnace, named "Bess No. 1" after Kaiser's wife, on December 30, 1942. Then in August 1943, the plant would produce its first steel plate for the Pacific Coast shipbuilding industry amid World War II.

Resources for early production came from various sources, and the Fontana site presented some logistical disadvantages. However, the plant continued to grow in capacity after the war, adding more furnaces and metal rollers while also introducing new processes. The company would also eventually develop its own mines and railroad so that the steel mill formed a node in Kaiser's larger, vertically-integrated business: materials sourced from Kaiser-owned mines would yield steel for other Kaiser facilities (among other customers), and company workers would even receive medical care through Kaiser Permanente, an affiliated health maintenance organization.

The Korean War led to another surge in production, and by the 1950s, Kaiser Steel and competitor Geneva Steel, a U.S. Steel-owned plant near Salt Lake City, Utah, had captured most of the Pacific Coast steel market. In the 1960s and 1970s though, Japanese and Korean steelmakers would begin out-competing the mill; despite attempts to adapt, the company would enter a steady decline until the mill closed in December 1983. Since then, much of the land in Fontana was sold to create the Auto Club Speedway, while a small portion of the plant still performs rolling operations under different ownership as California Steel Industries.

Background
Prior to World War II, Henry J. Kaiser was already an established industrialist in construction, even participating in the Six Companies, the joint venture tasked with building Hoover Dam and other large infrastructure projects during the New Deal. Kaiser had also entered the shipbuilding business by 1940, focusing on merchant ships for the new United States Maritime Commission. As the war expanded, Kaiser would rapidly open seven Kaiser Shipyards on the West Coast of the US, with the four Richmond Shipyards located near San Francisco, California.

From the beginning, however, the time and cost of purchasing and shipping steel from the Eastern United States cut into the efficiency (and profitability) of the shipyards. Wartime demand and shortages only made reliance on the Eastern steel mills more painful. Aware of this and risks to shipping through the Panama Canal, US government planners supported rapidly standing up steel production near the West Coast.

Political and personal reasons may have piqued Kaiser's interest in a Californian steel mill too. Besides ambition and confidence in his own problem-solving abilities, Kaiser had cultivated ties to several influential members of the Franklin D. Roosevelt Administration. Though originally from New York State, Kaiser had also become a strong proponent for industrializing the Western US, with greater independence from established industries to the east.

Planning and funding
In the spring of 1941, industry on the US Pacific Coast, including the Kaiser Shipyards and other shipbuilders, still relied on expensive steel from the Eastern US. Beyond the cost of rail transport across country, high even under normal circumstances, the distant steel companies typically charged a large markup for Western customers (sometimes as high as $20 per ton).

Capacity itself had also become an issue. Although the US had not yet directly entered World War II, US rearmament and support for allies had pushed demand for finished steel beyond what the Eastern mills could produce. Rail infrastructure also limited shipments to the West Coast.

Though skeptical of expanding westward, this had led U.S. Steel to propose operating what would become the Geneva Steel plant in Utah. The company's only condition was that the government covered the plant's construction as a grant, arguing that the mill would likely become an uneconomical, stranded asset once the war ended and demand returned to peacetime levels. Kaiser, more optimistic about a western mill's long-term prospects and sensing an opportunity to outflank U.S. Steel, offered to build his own facility without any grants, just loans from the Reconstruction Finance Corporation (RFC).

Kaiser's initial plans from April 1941 were not necessarily for an integrated mill, but to refine steel ingots along with a finishing mill, forge, and foundry somewhere in the Los Angeles area. The primary input, less refined pig iron, would come from blast furnaces, possibly in a separate facility, which would source raw iron ore in turn from mines in Utah. This plan to produce finished steel in Los Angeles had several advantages: the tidewater location allowed for low-cost maritime transport, and electric power was cheap thanks to the hydroelectric plant at Hoover Dam. The area could also provide existing infrastructure and a large labor force.

Government planners did not respond enthusiastically at first, and Kaiser's proposal was delayed indefinitely, nominally because of doubts about sourcing raw materials. Throughout this time, Kaiser continued working on the proposal and formally incorporated the Kaiser Steel Corporation on December 1, 1941.

Following the attack on Pearl Harbor and direct US entry into World War II though, along with positive appraisals of Kaiser's existing factories, the US government switched its stance. Kaiser's proposal was fast-tracked and the RFC issued a loan of US$110 million (equivalent to $ in ) for construction of the mill, only with conditions.

Finding a site
The government's first condition was that the mill's initial size would be limited to wartime demand. The second, much more oppressive requirement was that the mill be sited at least 50 mi inland, not in a tidewater area. The primary reason given for restricting the location was to limit the facility's vulnerability to a potential Japanese raid, but some such as writer and consultant A.G. Mezerik believed Eastern competitors had quietly lobbied for the requirement in order to handicap the facility's post-war potential.

Common wisdom in the steel industry was that a facility could not be profitable if more than one of the main links in its supply chain (inputs or products) relied on ground transport. An integrated mill at Los Angeles would already be risky, with reliance on rail transport for regional ore and coal only partly mitigated by easy port access. A plant further inland would lose even the advantage of the port. Yet Kaiser typically embraced a business strategy heavy on innovation and superior operations management. Also forecasting rapid growth in the Western market after the war, he believed the plant could still compete despite an unfavorable site.

After surveying the area, the new steel company quickly settled on the town of Fontana in San Bernardino County for the mill. Just 55 mi inland, it was about as close to the sea as the government's conditions allowed. Additionally, it had excellent railroad connections and an especially good water supply network for the region, including its own hydroelectric plant. Kaiser may have been drawn to the smaller, rural community too, both for sentimental reasons and a shrewd recognition that local government would likely be more compliant should any disputes with the company arise.

Construction
The first public notice of the coming mill would appear in the local Fontana newspaper 6 March 1942. Less than a month later, by 3 April, the company would break ground on the new site. The project and construction continued progressing rapidly, fast enough in fact that by 30 December of that year, the plant's coke ovens were already in operation, and Henry J. Kaiser himself was given the honor of starting the blast furnace.

Starting equipment
More sections of the mill would come online through the following year. By 15 December 1943, the facility occupied 1300 acre of land and included the following property, plant, and equipment (PP&E):

Sourcing raw materials
The complete steelmaking process requires significant amounts of energy. Thankfully for the Fontana plant, hydroelectric plants at Hoover Dam and more locally at Lytle Creek could provide a baseline of cheap and reliable electric power.

However, as an integrated mill, the plant would need regular shipments of raw materials to produce pig iron, which would then be refined into (primary) steel. The first requirement would be the iron ore itself. On that count, Fontana's location provided an advantage; plentiful iron deposits existed throughout the nearby Mojave Desert, even in San Bernardino County. For initial production, Kaiser Steel quickly purchased an iron mine near Kelso, California outright. Known as the "Vulcan Mine" (35.0125°N, -115.65361°W), it would serve as the mill's primary source of ore until 1948.

The next requirement would be limestone or dolomite. Either rock can be ground down and added to a blast furnace as a metallurgical flux, maintaining an ideal chemistry in the furnace while also binding the ore's waste minerals into slag. This ingredient posed no problem for the Kaiser plant either, as both rocks available nearby from various quarries in California and Nevada.

The mill would require one more input though: abundant metallurgical coal, which would be converted to coke first, then added to the blast furnace. With no available deposits within Southern California, or even neighboring Arizona and Nevada, sourcing coal would be one of the plant's main challenges throughout its lifetime. At first, Kaiser Steel would be forced to look as far as Sunnyside, Utah, specifically Utah Fuel Company Mine No. 2 (39.55521°N, -110.37909°W), which Kaiser would lease entirely in 1943.

In combination, Kaiser Steel's logistical costs (measured in ton-miles) did not doom the plant to failure. Flux and iron ore were particularly economical, and versus competitors, the cost of transporting finished steel from Fontana to the California coast was insignificant. The mill's coal costs, however, would largely negate these advantages. With costlier coal than any other blast furnace in the US, the plant would have to excel operationally to survive in the market.

World War II
In August 1943, the first plate steel rolled off the Kaiser Steel production line; it would go into the hull of a Liberty ship, Richard Moczkowski, built at Kaiser's Richmond No. 2 yard. and launched on August 22. The majority of Kaiser Steel plate produced for WWII, however, would actually go to the California Shipbuilding yard on Los Angeles' Terminal Island, a mere 50 mi from Fontana and massive enough to soak up most plate production.

Another destination for Fontana steel was a government-owned and Kaiser-operated ordnance forging plant, conveniently just 4 mi southwest of Fontana, with PP&E including:
 * A 48 acre site
 * 207500 sqft under-roof
 * Forging, annealing, and machining equipment

Over the course of WWII, Kaiser Steel's overall output would exceed even the much larger Geneva Steel mill in Utah. This was partly due to Kaiser finishing construction and starting production earlier than its competitor. The mill's steel ingot production would total 1209000 ST, with uses including but not limited to:
 * 547000 ST of steel plate, enough for 230 ships
 * 135000 ST of structural forms
 * 94000 ST of forged shells (in 155mm, 90mm, and 8-in. calibers)
 * 17000 ST of merchant bar
 * 155000 ST of ingots exported to the United Kingdom in 1943 under Lend-Lease

Peacetime adjustments
Kaiser's nearby Vulcan Mine yielded iron ore that, while usable, was lower-quality, and so the company had begun looking for a more sustainable deposit very early on. In 1944, with WWII still ongoing, the company purchased a mining claim from Southern Pacific Railroad in Eagle Mountain, California (33.8575°N, -115.48722°W). It would take another few years to complete the new mine; the first test charge of Eagle Mountain ore was added to the Fontana blast furnace in June 1947.

Though the mine was now operational, it was too far from existing rail facilities to serve as the mill's primary iron source. To solve this problem, Kaiser rapidly planned and built its own rail line. At a cost of $3,800,000, the new 52 mi Eagle Mountain Railroad was completed on July 29, 1948, after just 11 months of work. The company-owned line connected Eagle Mountain to the nearest junction on Southern Pacific's main line, which could carry freight onward for the remaining 101 mi to Fontana.

The company would achieve several tactical successes in the immediate post-war period too. When the 1946 United States steel strike erupted as part of the wider United States strike wave of 1945–1946, Kaiser's more collaborative approach to organized labor kept the mill open and running at full capacity. With European industry largely in ruins and other US mills on strike, Kaiser could sell into a global steel shortage at a large markup, even exporting some to the typically out-of-reach European market. Kaiser mining engineers and metallurgists also oversaw significant efficiency improvements, both at Eagle Mountain and in the Fontana mill.

Yet Kaiser suffered a financial and political setback in 1947, when multiple appeals to the RFC for a loan reduction were denied. This may have been due to the political tide in Washington, D.C. turning against New Deal supporters (and Henry J. Kaiser's allies). In a bitter contrast, the War Assets Administration sold the government-built Geneva mill to competitor U.S. Steel at just 25% of capital costs and despite U.S. Steel actually offering the lowest bid.

First expansion
Undeterred and buoyed by a large contract to provide steel for a major gas pipeline, the company would initiate a major expansion in late 1948. The centerpiece would be a 2nd blast furnace announced in January 1949, to be constructed by Consolidated Western Steel, the same contractor that had built furnace #1 in 1942. The completed furnace, nicknamed "Bess No. 2", would be "blown in" later that year on 13 October 1949.

Altogether, the expansion project would include:

The Korean War
During the Korean War the steel production increased again.

In 1950, Kaiser Steel purchased the entire Utah Fuel Company outright, including the leased Sunnyside mine.

The 8th open hearth furnace was completed in May 1951, adding 180,000 tons annual capacity with a new total of 1,380,000. Construction of a 200,000 tons/year 5-stand tin plate mill began in April 1951, part of the same $24,5 million expansion program. The hot rolled sheet for this facility were supplied by the 86-inch hot strip mill. First tin plate was shipped August 5, 1952, 2 month ahead of schedule. The expansion was announced in October 1950, part of a $125,000,000 financing program under which the remaining $91,082,990 government loans were repaid with capital raised through (institutional investors) first mortgage bonds ($60m, 3.75% due in 1970 ), bank credit ($25m) and stock ($40m). With this, Fontana was then entirely privately financed. The tin plate mill was the second on the Pacific Coast, after Columbia's 1948 opening.

Further expansion announced March 1952: 3rd blast furnace ("438,000 tons/year" (=1200*365) TBC Spring 1953), 9th open hearth (156,000 tons/year, TBC Dec 1952), 90 coke ovens, 2 strip mill stands for the 86-inch strip mill (now 6-stand). Program cost was $65,000,000. Blast furnace #3 was blown in June 2, 1953.

Global competition: 1954–1974
From 1958–1959 at a cost higher than the original plant the existing 9 furnaces were augmented by 3 basic oxygen furnaces while doubling the steel production capacity to nearly 3 million tons.

With the introduction of basic oxygen furnaces and other updated machinery, Kaiser Steel entered the new decade more productive than it had ever been:

In the early 1960s, the Kaiser Steel Corp. began shipping iron ore to Japan. A 10-year, 10 million tons contract with the Mitsubishi Shoji Kaisha trading company representing Japanese steel producers was closed in 1961 for non-pelletized beneficiated ore (fine grinding and magnetic separation) and in November 1963 augmented with an additional 6-year, 6 million tons contract for pelletized ore. Three 58,000 ton bulk carriers were scheduled to start shipment from California in late 1965. In April 1964 another 4.8 million tons over 6 years with Motsubishi International brought the total in pellets to 10.8 million tons over 6 years with an option of 18 million tons over 10 years. The source of the ore was the Eagle Mountain mine (i.e. unrelated to the Australian mining operation). The 5 Japanese steel works involved in the deal were: Yawata Iron & Steel Co. (Sakai), Fuji Iron & Steel Co. (Muroran), Nippon Kokan K. K. (Kawasaki), Sumitomo Metal Industries Ltd. (Wakayama) and Nisshin Steel Works Ltd (Kure). The 1961 10 million ton contract together with a similar agreement with the Standard Slag Company for shipment of 4 million tons over 10 years from their Minnesota mine in Nevada via Stockton had a value of $140,000,000, i.e. a price per ton in the neighborhood of $10.

Final days: 1975 to today
By the early 1970s, Kaiser Steel was losing market share to cheaper imports from Japanese and Korean steelmakers. The company even contemplated getting out of manufacturing basic steel slabs, but reversed course, and instead spent US$287 million (equivalent to $ in ) to modernize the facility. When the new mill went online in 1979, it was capable of producing 2.3 million tons of high-grade carbon steel a year. But the new plant couldn't hold off the international competition, environmental regulations, labor disputes and corporate raiders.

Closure
In November 1981 it was announced that Kaiser would shut down over a period of several years all steelmaking operations at Fontana, including coke oven and blast furnace operations and mining at Eagle Mountain. This shutdown was expected to cost at least $150 million. The company had earned profits in the first 3 quarters of 1981, but this was after 18 straight quarters of pre-tax losses. Fabrication rather than steelmaking was the major profit contributor.

In December 1983, the mill was shuttered as part of the general termination of Kaiser's steel business. Over its lifetime, the mill had produced about 75 million tons of steel.

Salvage and downsizing
The site and plant were briefly owned by an investor group that purchased much of Kaiser's assets before they were sold to a Kaiser creditor, Brazilian firm Companhia Vale do Rio Doce (now Vale). Vale formed a joint venture with Kawasaki Steel (now JFE Holdings) called California Steel Industries (CSI), which paid about US$120 million to purchase the facility and forgave Kaiser's debt as part of the transaction.

California Steel would only operate the portion of the plant that where they could process imported steel slabs into finished products such as rolled steel. The manufacturing equipment for producing raw steel, installed in 1979, would remain idle. In 1994, California Steel struck a deal with China's Shougang (Capital Steel and Iron Corporation) to sell the still relatively modern steel manufacturing equipment for US$15 million (equivalent to $ in ). Shougang would also spend US$400 million (equivalent to $ in ) to dismantle the equipment, ship it to southern China, and reassemble as one of that country's most advanced steel mills.

Land reuse


In 1988, while re-establishing the finishing mill under CSI, Vale reorganized all other assets of the Kaiser Steel Company under a corporate spin-off named Kaiser Ventures. In addition to most of the sprawling 1800 acre site, only 400 acre of it occupied by CSI, the new company retained associated rights and even the closed Eagle Mountain mine.

In 1990, Kaiser Ventures would lease its Fontana water rights to the Cucamonga County Water District, which provides municipal water to the western portion of San Bernardino County. Royalty payments for these water rights allowed the company to stay in business through further land recycling projects. Next, the company demolished any remaining abandoned structures on the site. Since the Kaiser Steel facility had ultimately been built with more steel per square foot than any other structure in the US, the resale of scrap metal provided further income.

In 1995, after finishing environmental remediation, Kaiser Ventures sold off a large portion of the Fontana site to Penske Speedways, in order to create the California Speedway, now a NASCAR-owned motorsport track.

The company also explored reusing the abandoned Eagle Mountain mine as a landfill, but after planning fell through, the Eagle Mountain site was sold to Eagle Crest Energy for construction of a hydroelectric project.

Coal
In July 1955, Kaiser purchased 202,950 acres of land and mining rights on another 326,854 acres near Raton, New Mexico (36.89694°N, -104.44°W) for $3,500,000, at a time when the company mined 1,500,000 tons per year in Utah (feeding 3 operating blast furnaces) and Utah reserves were estimated to last 70 years at that rate. The new source of coal was to augment the Sunnyside mine, not replace it.

In Raton, the existing mine, named the Koehler Mine, was operated and upgraded until the newer and more modern York Canyon Mine was completed nearby. The York Canyon Mine served as the major source of coking coal until the plant closed. The distance of the Fontana mill from these coal sources suitable for blast furnace operation gives an indication for why the steel industry in the Far West has always been of relatively little importance. More than one ton of coal has to be shipped for each ton of steel produced in a mill.

Flux
Until 1955, this material was purchased from various sources in California and Nevada. In that year Kaiser Steel purchased (simultaneously with the coal at Raton) a large deposit located in Cushenbury, California (34.35389°N, -116.85833°W), only 75 mi from Fontana.

Ore
In 1963 Kaiser Steel became 40% co-owner of Hamerslay Iron Pty, Ltd. and thus gained access to Western Australian iron ore deposits. This part of Kaiser Steel business was highly profitable, but in June 1979 the 28.3% ownership share was sold to Conzinc Riotinto for $207.5 million, bringing Riotinto's share to 54%. The reason for the sale was speculated by The Iron Age to be due to debt incurred for the latest $233 million modernization program at Fontana. The contribution to Fontana operations was probably very small, given that Kaiser was shipping iron ore From California to Japan. But it was not zero.

Facilities
In February 1955 Kaiser purchased the Union Steel Company plant, which became the Kaiser Steel Fabrication Division plant in Montebello, 7301 Telegraph Road, at the intersection of Interstate 5 and Greenwood Avenue (33.98229°N, -118.1293°W). Union Steel was founded in 1941 by A. Wyndham Lewis, in 1955 it comprised a site of 16.5 acres with 185,000sqft under roof and was employing 300. Besides usual structural steel fabrication it was also involved in aircraft and missile launcher parts (possibly a Project Nike tier 4 subcontractor, given the proximity to Consolidated Western Steel's Maywood plant).

A new $164,000,000 (estimate adjusted to $214,000,000 in July 1958 ) expansion plan was announced in the summer of 1957, its main objectives was the doubling of the plant's steel production capacity. This was amidst a market in which the nationwide average of steel production had fallen to 80 percent of capacity, but Fontana running at 100 percent was hoping to replace yet more steel from eastern sources with home-made steel.
 * 40 percent increase in iron ore facilities
 * 1 new blast furnace, coke ovens from 225 to 315, pig iron from 1,314,000 to 2,121,000 tons
 * tin plate increased from 200,000 to 370,000 (this was still far behind Columbia Steel, who had increased cold sheet production to 540,000 tons in 1952 already). New equipment included a pickling line, continuous annealer, temper mill and electrolytic tinning line. Production commenced early June 1958. (presumably there was also a new tandem mill between pickling line and annealer, not mentioned)
 * insert before the existing 86-inch strip mill a new 5-stand roughing mill to break down slabs, allowing the strip mill to run independently of the plate mill. the new strip mill was then an 11-stand tandem mill with 3 preheating furnaces, finished in July 1958.
 * plate mill converted from 110-inch 3-high to 148-inch 4-high for plates up to 126 inches wide, began production in October 1958 max pipe diameter from 30 inches to 42 inches
 * new 46x90-inch slabbing mill, finished December 1958
 * Blast furnace #4 was blown in on January 16, 1959 with capacity increased from 1,314,000 (=365*3*1200) to 1,912,000.
 * steel production from 1,536,000 to 2,976,000 tons with the addition of 3 oxygen furnaces, which finished the expansion program when the furnaces started production in early February 1949. Adjacent to the Fontana plant the Linde Co., a division of Union Carbide, more than tripled the capacity of its oxygen production plant to 10,000,000cuft/day. The number of open hearth furnaces at that time was 9 and despite their lower efficiency and approaching obsolescence, they continued at that time to contribute 50% of the steel ingot capacity.

In 1962 Kaiser built ore loading facilities at the Port of Long Beach which could load a batch of 50,000 tons in one day. An additional loading facility for pellets was added in 1964/65 in the Port of Los Angeles to handle one half of the pellet shipments. (Since there is no logistical necessity to load 2 ships on the same day, this must obviously have been driven primarily by storage needs for one load).

In July 1964 design began on enlargement of the Eagle Mountain mine and of beneficiation facilities. The program was expected to be complete in the summer of 1965. The pelletizing plant (with a Dravo-Lurgi traveling grate type machine ) capacity was increased during initial construction from 1.1 million to 2 million tons in light of Mitsubishi's increased commitment to buy. The new plant was part of a $119 million dollar expansion program launched in the summer of 1964, which resulted in a total of $400 million spent since 1956 (119+214+65 would equal 400). Other improvements were increase of coal mining in Raton, first production of galvanized sheets, increased output of thin tinplate, modernization and capacity increase of the hot strip finishing mill to meet demand, a third electrolytic tinning line. The pellet plant started production in November 1965.

In popular culture
Writer Ayn Rand visited Kaiser Steel in October 1947, as part of her research for the novel Atlas Shrugged, a large part of which takes place at the fictional "Rearden Steel". The Journals of Ayn Rand include numerous observations on the plant's daily routine and technical processes like smelting.

The 1952 romance movie Steel Town, set in the fictional Kostane steel works, includes scenes filmed in Fontana and the mill itself as a major plot element. Later movie scenes filmed on-site, after most of the facility ceased operation, include:
 * Abandoned power plant scenes from the 1985 horror film A Nightmare on Elm Street 2: Freddy's Revenge
 * The wilshire detention zone scene in the 1987 sci fi film The Running Man
 * Live-action scenes from the 1988 independent, sci-fi film In the Aftermath
 * The steel mill scene at the end of the 1991 sci-fi, action film Terminator 2: Judgment Day (special effects simulated continuing plant operations)
 * The final standoff scene in the 1994 action film Direct Hit
 * The decriminalized zone in the 1994 sci fi, action film T-Force
 * Outworld scenes from the 1995 fantasy action film Mortal Kombat
 * Scenes representing Los Angeles after an alien attack in the 1996 sci-fi, action film Independence Day

In 1995, thousands attended an underground rave, billed as "Stargate", on the site after being shuttled in from a nearby shopping center. Between 1987 and 1991, former Santa Fe 3751 A 4-8-4 Northern Steam locomotive was restored to operating condition at the mill.