IV. Investing in the Birmingham Ore Fields
It was to be the Magic City, a mecca for investors and industrialists interested in developing the mineral and agricultural region of northern Alabama. Discovered by the early 1850s but undeveloped for lack of rail connections, the seemingly limitless riches of ore and coal deposits around Red Mountain remained untapped by the end of the Civil War. If the region could be connected by rail to both the northern industrial areas along the Ohio Valley and southern Gulf ports at the intersection of two local railroads, the Atlanta and Chattanooga and the South and North, the new city of Birmingham would spring to life as the industrial giant of the postwar south.
In 1871, local investors and railroad interests chartered the Elyton Land Company and purchased large tracts of land at the local rail intersection where the new community was to be developed. The principals of the company had privately negotiated the location in conjunction with the planning of the yet unbuilt southern spur of the Louisville and Nashville Railroad that was to connect Louisville with Montgomery and the Gulf Coast. The L&N was being pressured to begin construction of the southern spur by the Cincinnati Southern Railway, which was planning a southern spur of its own from Cincinnati through Kentucky and Tennessee. When the iron railroad bridge across the Ohio at Cincinnati was completed in March of 1870, the Cincinnati Southern needed only to secure state charters in neighboring states to begin construction.
Its Tennessee charter was secured easily in late 1870, and adroit political maneuvering secured a Kentucky charter by the end of the 1871 legislative session. What the L&N could not know, however, was that the Cincinnati Southern would be hard hit by the credit shortage after the Panic of 1873 and construction of its southern spur would be delayed for many years. In fact, it was not until 1877 that the Cincinnati Southern was able to complete its route to Somerset, Kentucky and 1880 before it reached Chattanooga.
But the situation seemed much more critical to the L&N, not to mention the Elyton Land Company, in 1871. And sensing impending market isolation if Cincinnati was able to corner the southern route, Louisville businessmen began pressing the L&N to action. Time was of the essence. Both of the rival railroads wanted to expand all the way to the Gulf Coast, and both were well aware that local railroads in Gulf port cities were beginning to extend their routes northward. It was especially critical to investors in the Elyton Land Company that the L&N complete their planned southern route through the Red Mountain region of northern Alabama and intersect with the South and North Railroad running north from Montgomery. It was at that intersection where Elyton land holdings were concentrated. Completion of the L&N route in this manner would make their dream of the Magic City become reality, and return a handsome profit on their land investments.
Even though the L&N connection to the South and North was completed by September of 1872, the expectations of investors and local town folk for the emergence of the Magic City remained unfulfilled. The Panic of 1873 had reverberated through investment markets all across the country, depressing credit markets and pressing highly capitalized enterprises for cash. Expansion plans for those types of industries, such the manufacturing of pig iron, were put on hold. Merchant trades representing manufacturing industries in most cities also felt the pinch, with slackening market demand from local businesses. As might be expected, a great many railroads also fell on hard times, pressed for cash and cutting back on investments in their own expansion or in the development of industries along their rights-of-way. A significant number of railroads, unable to meet their credit obligations, simply went into receivership.
As a result, despite the clear manufacturing and transportation advantages offered by the northern Alabama region, the anticipated construction of coal and iron industries in Birmingham did not materialize in the mid-1870s for lack of investment capital. To make matters worse, the city was struck in late 1873 by a serious cholera epidemic which claimed many of the 2,000 inhabitants. By 1875, the Elyton Land Company was over $70,000 in debt and land sales were negligible. By 1878, the city's population had steadily decreased to a low of 1,200.
In a desperate effort to resuscitate their sagging investments, Elyton and the L&N financed a series of experiments beginning in 1876 to demonstrate that pig iron could be made with Alabama coking coal. The competitiveness of iron mills in northern Alabama had always been hampered by their reliance on charcoal for furnace fuel, and the development of local coking coal would create an additional cost advantage for local mills. When the experiments proved successful, James Sloss, President of the South and North Railroad and a prime mover in the L&N southern expansion, and Truman Aldrich, a local mining engineer, began to search the northern Alabama mineral fields for a suitable supply of high quality coking coal.
With the financial backing of Henry Fairchild DeBardeleben, a local industrialist who had inherited the Pratt textile fortune from his father-in-law, the first major seam was found in the Warrior Coal field about six miles northwest of Birmingham in late 1877. In January of the next year, the Pratt Coal and Coke Company was organized, and Pratt City was borne overnight. The first carloads of Pratt coking coal were shipped from the mining town in February 1879. With the availability of abundant local supplies of coking coal, railroad connections, land, and apparently limitless deposits of iron ore, Birmingham now stood at the threshold of industrialization. Still, what the city needed was investment capital.
The local availability of all of these critical factors for the production of iron and steel should have been a significant lure for industrial investment. But before the mid-1890s, only railroad enterprises had been able to secure risk capital from markets in the east or abroad. No national market for risk capital existed for industrial purposes, and entrepreneurs were forced to rely on private capital or on borrowing short-term against expected earnings from local banking interests. The option of borrowing was less available in both southern and western regions of the country because banking growth outside of major established financial markets was restricted and southern market potentials were virtually unknown to northern investors.
DeBardeleben therefore embarked on an extremely aggressive program to attract private northern investment in the Birmingham region. Cooperating with the Elyton Land Company and the L&N Railroad, DeBardeleben approached entrepreneurs in Kentucky and Tennessee with an attractive package. Investors were offered free or cheap and abundant land for the location of iron mills on spurs of the L & N connected to the Pratt mines. DeBardeleben himself guaranteed coking coal from the Pratt mines on a long-term basis at just above cost. With most iron producers in the Ohio Valley still languishing in the slow and very competitive pig iron market following the Panic of 1873, the DeBardebelen deal was hard to resist. The only question that might linger in the minds of potential investors would be the quality of Red Mountain ore.
In 1879, DeBardeleben brought a number of prominent Louisville industrialists to Birmingham to visit the Pratt mines and outline the advantages of the city as an industrial site. Among them were T.T. Hillman, a successful ironmaster from Kentucky whose grandfather had joined with the elder Belknap, the ironmaster from Pittsburg, in ironmaking ventures along the Cumberland in Nashville; Benjamin F. Guthrie, a successful Louisville merchant and a director of the L&N Railroad; Bidermann du Pont of the Louisville Rolling Mill Company; and William B. Caldwell, Jr., son of a prominent physician W. B. Caldwell and married to the daughter of Louisville banker George W. Norton.
Caldwell's role in the party was particularly crucial. Aside from representing important financial interests, he was by training and experience a geological scientist and had conducted studies of coal and iron deposits in Kentucky as a mineralogist with the Kentucky State Geological Survey in the mid-1870s. After that, he worked for the Roane Iron Works in Chattanooga until he was brought to Louisville to establish a new iron works in 1879 under the charter of the Louisville Iron and Steel Company. His expertise on the Birmingham expedition would have been invaluable in assessing the quality of Pratt coal deposits and the region's iron ore.
DeBardeleben immediately agreed to ship 10-15 carloads of northern Alabama ore to Louisville for testing in du Pont's mill. When the tests proved successful, investment of Louisville capital in the Birmingham area was enthusiastic and immediate. Two mill sites were planned along the L&N right-of-way below First Avenue just inside the city limits. West of the L&N was constructed the first coke blast furnace of the Alice Furnace Company, co-founded by DeBardeleben and Hillman. Because of DeBardeleben's direct involvement, the 20-acre site was donated by the Elyton Land Company at no cost. Alice Furnace No. 1 went into blast in November 1880, whereupon Hillman merged the operation with his Hillman Coal and Iron Company and the Birmingham Coal and Iron Company. The new Alice Furnace Company was capitalized at $250,000, and a second larger furnace, Alice No. 2, went into blast in 1883.
Immediately across the L&N right-of-way near the crossing with the Great Alabama Southern Railroad (which was called the Pratt "Y" because a local spur running out to Pratt City six miles away joins the two at that point) was the Birmingham Rolling Mill, incorporated in January 1880. Capitalized at $200,000, the mill was entirely a Louisville operation from the outset. The enterprise was the creation of Bidermann du Pont, who had drawn into the deal other Louisville investors, including Thomas Cooper Coleman, James Guthrie Caldwell, the younger son of W. B. Caldwell, Sr. and grandson of prominent Louisville lawyer, financier, and politician James Guthrie, and J. Lawrence Smith, M.D., an internationally known chemist and professor, and son-in-law of James Guthrie.
James Guthrie was the founder of the Bank of Kentucky in 1834, and builder of both the Louisville and Frankfort Railroad and its successor the Louisville and Nashville Railroad. He was President of the L&N when its major initial routes were completed in 1860. Guthrie had died in 1869, a full decade before the construction of the rolling mill in northern Alabama, but his family and his fortune was clearly evident in both the broader L&N southern route project and the construction of the Birmingham Rolling Mill. In fact, Guthrie's son-in-law James Guthrie Caldwell, who had during the 1870s served as President of his father's cement business and a local banking house in Louisville, succeeded his older brother as President of the Birmingham Rolling Mill Company in 1880.
The mill site, just over nineteen acres located in the shadow of the Alice Furnace, was sold to the Birmingham Rolling Mill Company for $2,500. Also included were sites for several homes and a company store. The initial plan was to construct a merchant mill to manufacture bar, sheet and guide mill iron, converted later to a steelworks when the Alice Furnace became capable of making steel. The plant, completed by July 1880 under the supervision of John H. Adams from Chattanooga, included a forge, twelve puddling furnaces, two scrap furnaces, a squeezer, an 18-inch train of muck or puddle mill rolls, a 16-inch bar mill and an 8-inch guide mill. It was designed to include blast furnaces and accommodate its own railroad sidings. In the early days, pig iron from the Alice Furnace was hauled to the rolling mill by ox-drawn carts, a primitive process shortly to be replaced by switch engines that ran between the two plants.
All of the management and most of the skilled personnel (the puddlers and rollers) for the mill came from Louisville, or more precisely, from the Clay Street mill of the Louisville Rolling Mill Company. The offices of the Birmingham Rolling Mill Company were located on West Main Street in Louisville rather than in Birmingham. The company's first officers (in 1879) included the 28-year old W.B. Caldwell, Jr. as President, and Bidermann du Pont as Secretary. Thomas C. Ward, who had married Coleman's daughter Dora, was named the mill's general manager in Birmingham, and Arthur J. Moxham, another of Coleman's sons-in-law and a young ironmaster from the Clay Street mill, became the mill's superintendent. That same year, the Clay Street mill was leased to the newly-formed Louisville Iron and Steel, another du Pont enterprise in which Caldwell served as President, Bid du Pont as Vice President, and Moxham as superintendent.
The pattern for Birmingham's entry into the modern iron age was set. James Sloss, with backing from the L&N, Pratt Coal, and several other Louisville investors, including Benjamin F. Guthrie (no relation to James Guthrie), formed the second major iron producer in Birmingham, the Sloss-Sheffield Steel and Iron Company. Located along the L&N right-of-way across town at 34th Street, the two large Sloss furnaces went into blast in 1881 and 1882. The Williamson Furnace Company was founded in 1885 by C. P. Williamson, another Louisville ironmaster. It was financed entirely by the Elyton Land Company and was located several blocks northeast of the rolling mill on First Avenue and 18th Street. Across from the Williamson Furnace was the Linn Iron Works, built from the machinery of the old Irondale Furnace and familiar to locals after 1877 by its previous name, the Birmingham Foundry and Car Manufacturing Company.