The
Development of the Dominion Iron and Steel Company
This file of information on sources and interpretations
regarding the formation and development of the Dominion Iron and Steel
Company in Cape Breton, Nova Scotia 1893-1905 is a supplement to the Epilogue
of Jaybird; A.J. Moxham and the Manufacture of the Johnson Rail
(1991), in part quoted below:
"After the
sale of the Johnson Company to Federal Steel, Arthur Moxham was financially
quite comfortable and retired at the age of forty-four to embark from London
on a cruise around the world on his yacht the S. Y. Erl King. Included
in the party were his wife and four children, and his wife's parents Thomas
Cooper and Dulcenia Coleman. As might have been expected of the Welsh ironmaster,
his retirement lasted only a few months. When he docked in New York in
the early autumn of 1899, Moxham was approached by a close business associate
H. M. Whitney of the West End Street Railway in Boston. Whitney had arranged
for the construction of a major steel facility with the aid of the Canadian
government on the eastern coast of Nova Scotia and offered Moxham the Vice
Presidency and General Managership of the new mill. Before accepting, Moxham
arranged for his brother Edgar, a mining engineer of some considerable
skill and experience, to investigate the quality of coal, iron ore and
limestone deposits of the Sydney region and to report on any construction
or production difficulties that might be anticipated. Edgar's extensive
report was completed by November 1899 and Moxham accepted the challenge
of building the steelworks of Dominion Iron and Steel Company.
The large
integrated $15 million steel works was the first modern blast-furnace and
open hearth plant in Canada. Located at Cape Breton, the mill took advantage
of the Sydney coal and limestone fields and the ore deposits in nearby Wabana in Newfoundland. The transshipment of these raw materials and the
pig iron and finished steel products ultimately produced by the mill was
facilitated by its location right on the harbor at Sydney. Construction
of the blast furnaces and blooming mills began in late November of 1899
and Moxham built a majestic home for himself across the harbor. He commuted
to the mill each day by steam launch.
It was to
be a bitter three years for Moxham and his family in Sydney. Impurities
in local iron ore made production of pig iron difficult from the outset.
High sulphur and ash content of local coal caused the blast and open hearth
furnaces to burn with excessive temperatures and required frequent and
costly relining. His cautious Board of Directors constantly questioned
his high production costs and resisted his efforts to overcome technical
problems in the manner of his previous success with the Johnson Company
-- through increased capitalization. Because of these technical problems,
Moxham was not able to make quality steel at the Dominion mill until January
1902. Lack of capital prevented the roll mill from being completed until
1904.
The absence
of skilled workers in isolated Nova Scotia also meant that Moxham had to
fill most of the skilled positions by recruiting men from mills in the
States. Several men joined him from the Johnstown and Birmingham operations,
but turnover at all levels was extremely high. Both of his sons, Tom and
Egbert, apprenticed at the mill, in the same manner that Moxham himself
had apprenticed at the Louisville Rolling Mill thirty years before. Tragically,
his eldest son Tom, a plant foreman and only twenty-five years of age,
was killed on June 5, 1901 while supervising the loading of rail cars at
the mill. Tom's young wife Ellen, expecting their first child, decided
to remain in Sydney until after the birth. But two months later, Ellen
died after her child was stillborn. All three were taken by train to Louisville
for burial in Cave Hill Cemetery.
By family
accounts, the deaths of their son Tom, daughter-in-law Ellen and first
grandchild drained the spirit from Arthur and Helen Moxham. The Nova Scotia
experience had involved Moxham less in the metallurgical experimentation
he truly loved and more in the kinds of board room haggling over finances
that he had come to loathe in Lorain. Moreover, it had taken his son Tom
who he had seen as the natural heir to his interests in steel making. In
the summer of 1902, financial control of both the Sydney Coal Company and
Dominion Iron and Steel passed from Whitney to James Ross, the founder
of the Canadian Northern Railroad. Moxham resigned from Dominion and returned
to Great Neck, Long Island, where he had maintained a second residence
since his days at Lorain."
Chronology
1893
The Dominion Iron and Steel Company (DOMCO) is incorporated
in February 1893, consolidating holdings of eleven local operators as encouraged
by provincial government as method of breaking into the American (especially
east coast/Boston) market.
1896
The Smoke Nuisance Law is adopted in Boston and, because
Cape Breton coal dirty, DOMCO forced to shift its focus to the domestic
(Canadian) market. SCOTIA successfully experiments with Cape Breton coal
in its blast furnaces, leases Sydney Mines (SM), and builds coke ovens.
1897
U.S. increases its tariff on Canadian coal, diminishing
American market penetration by DOMCO. Federal bounties law enacted, effective
through 1902. Finished steel products are allowed to enter Canada duty-free.
Whitney begins building plants in Massachusetts to make gas from coal (New
England Gas and Coke), which become operational by 1899.
1898
It is reported that 'by 1898,' half to two-thirds of
the Bell Island Wabana ore fields had been acquired by Whitney from SCOTIA
for $1 million (this date is from Donald, 139; Macgillivray claims the
actual date was after January 1899)
1899
Whitney attempts to merge DOMCO with SCOTIA, fails and
forms DISCO based largely on Canadian financing (from Nova Scotia and Montreal);
secures discount on provincial royalties, federal bounties, 30-year municipal
tax exemption, and a grant of 480 acres directly on the Sydney harbor to
built steel mill. Mill construction commenced in 1899 (from Vernon). In
June, DOMCO issues favorable contracts to DISCO. In August, federal bounties
under 1897 acts are extended to 1907, and Whitney's Everett coking plant
in Massachusetts becomes operational, absorbs significant product volume
from DOMCO. In September, Moxham (in retirement) docks in New York, contacted
by Whitney (his business associate from the West End Railway days in Boston)
to accept the Vice Presidency and General Managership of DISCO. In October,
Edgar Moxham, A.J. Moxham's brother and a mining engineer and contractor
in New York, conducts a mineral survey of Nova Scotia and issues report
in/around December 1899 (report in archives of the Hagley Library).
1900
SCOTIA acquires SM and GMA. Growing recession in U.S.
steel market precipitates a slowdown in world-wide demand. By December,
DISCO's $15 million integrated plant is constructed and becomes operational,
including 4 blast furnaces for pig iron (250-400 ton capacity per day),
10 basic open hearth furnaces for steel, with 50-ton Campbell tilting furnaces,
a 35-inch blooming mill, 400 Semet Solvay coke ovens (Donald and Vernon
identify these as Hoffman ovens) and coal washing plant, and a foundry
and machine shop. That same month, 200 skilled workers at DISCO strike
over wage reductions and a resolution is compromised.
1901
Moxham brings John Means from Birmingham (Ala.) to superintend
the blast furnaces; Hugo Carlson and his brother (Swedish chemists) to
superintend the open hearth furnaces. In February, the first blast furnaces
blown at DISCO (Heron and Vernon cite this as occurring two months earlier
in December 1900) and the rail mill link to international rail market is
planned as the Canadian federal government initiates protective tariffs
on steel rails. DISCO plans rail production for international market at
3,000 tons/day (which by 1903 was changed to 1,000 tons/day targeted at
the domestic Canadian market only). In May, DISCO indebtedness up to $
600,000. In June, Tom Moxham (A.J. Moxham's eldest son) is killed in plant
accident. In August, DISCO laborers strike for higher wages. In September,
Ellen Moxham (Tom's wife) dies in childbirth. By November, Whitney
sells controlling interest to Ross and the Montreal crowd. In December,
the basic plant complex at DISCO is completed, other blast furnaces blown;
and first steel made in the open hearth on December 1, 1901 (from Donald).
1902
In spring, due to combination of fiscal disagreements
with the Board, labor problems, and the death of his son and daughter-in-law,
Moxham resigns and returns to Great Neck. In April, DISCO adopts significant
coal lease obligations from DOMCO and as a consequence lacks the capital
to finish the planned rail mill. By May, DISCO indebtedness has risen to
$3.5 million (from $600,000 the previous year), prompting Ross to resign
from DISCO by mid-year. DOMCO coal lease agreements are revoked as financial
obligations. In October, 80 DISCO tradesmen strike over innovation changes
by management. SCOTIA decides to build steel mill at SM, but its completion
is delayed until 1904.
1903
DISCO decides to complete the finishing mills, as the
market for unfinished steel collapses during the recession of 1900-1901.
Canadian tariff protection for finished steel products allows DISCO to
compete for first time (the market having been controlled by American Steel
& Wire and other U.S. steelmakers since 1897), begins to build a rod-wire
mill anda rail mill, the latter of which was targeted only at the domestic
market. In March, DISCO beset by a strike of 275 DISCO laborers over higher
wages, and by September, DISCO's indebtedness had reached $4.8 million.
1904
First blast at the SCOTIA plant at SM; DISCO rod-wire
mill becomes operational and DISCO abandons ideas of international rail
market penetration and focuses instead on rail production on domestic (Canadian)
market. In August, an all-plant strike begins at DISCO over wage cuts.
1905
DISCO rail mill and SCOTIA rolling mill become operational.
Note on Sources and Interpretations:
It is rather
difficult to sort out the industrial, technical, financial, economic, and
political dynamics surrounding the founding and development of DISCO from
the various primary and secondary sources. Financial records at the turn
of the century were exceedingly private and in large measure no longer
exist. Observations about these dynamics are clouded by conflicting technical
reports over ore and coal quality, fluid political relations within the
U.S. and Canadian (both national and provincial) governments, changing
tariff levels (both U.S. and Canadian), changes in the development of the
Canadian rail market itself, and debates over why the DISCO mill did not
become operational and competitive earlier (some would argue it never really
did become competitive). Those debates, especially over ore and coal quality,
are particularly clouded by the emerging desire of Canadian industries
in that period to shed their dependence on American financing and technologies.
Moreover, there is a great deal of overlapping of earlier sources, with
major sources citing data or interpretations contained in earlier (and
unsubstantiated or biased) sources. Finally, there is some interpretive
question as to whether Moxham himself, an industrialist who had been successfully
innovative in an earlier expansionist (pre-1893) period of private financing,
could have brought the DISCO mill into operation under a Board of Directors
that was increasingly conservative in financial decisions. The notations
below will give a flavor of the interpretations of this period.
Canadian Mining Review XXII (1903), various
issues:
The collapse of their securities was due to the selfish ends of the Directors
and their associates to artificially drive up the value of DISCO common
stock (75). "A somewhat fierce light has latterly been thrown upon the
... mismanagement of the Steel Company.(75) ... The Company's history has
been one of kaleidoscopic changes, of extravagance, vacillations, and
blundering.(75) ... When the control of the coal and steel companies passed
into distinctly Canadian hands, there was great jubilation, and great results
were prophesied. But the re-action against the alleged weakness and extravagance
of Messrs. Whitney, Moxham et al has, for some unaccountable reason, failed
to re-act, and Messrs. Ross, Cox and Forget stand arraigned by a bitterly
disappointed public for having lamentably broken down on the promises and
predictions that were made by them, either personally, or by proxy, in
the fall of 1901.(75) ... The frequent changes [1901-1903] in the official
staff of the Company, and the feeling of unrest and uncertainty that has
prevailed among its employees ..." (76)
"Whilst the Steel plant is modern and in many respects efficient, there
has been a reckless squandering of capital, and according to the highest
authority the whole works could have been reproduced for two-thirds of
what they have cost ... a waste of $ 7,000,000 to $ 8,000,000. (185) ...
After five years work and expenditures of $ 25 to 30 million, the plant
is still deficient in several important respects; has still to construct
mills for wire rods, structural steel, a large battery of coking ovens,
and an extensive coal washing plant. (185) ... Mr. Moxham's visionary and
crude ideas of cost, when he estimated the production of pig iron at $5
a ton instead of $ 11 a ton ... This is not because the Company has not
employed competent experts ... those experts have worked under the control
of a Board which did not include one director having a practical acquaintance
with the business which he undertook to direct ..." (185)
Specifically, the Board failed to submit Moxham's estimates to other tests,
even though the estimates were questioned by "practical men all over the
continent." Further the Board failed to ascertain what kind of steel could
be made from their ore (not a Bessemer ore). The coal contracts with DISCO
and Everett Gas were disadvantageous to DOMCO. Finally, DISCO needs to
find a supply of non-phosphoric ore and to restructure their indebtedness.
W. J. A. Donald, The Canadian Iron and Steel Industry
(1915).
"In the first
place, there was much reckless outlay of funds. Whitney, the president,
and Moxham, the general manager, were as extravagant in building the plant
as in talking of it. Frequent changes in the official staff and lack of
coordination of the different departments had an unfavorable effect [citing
CMR XX, 76 (sic)]. It is said that the whole works could have been built
for two thirds of what they cost and that $ 7,000,000 or $ 8,000,000 was
wasted. Moxham had no idea of costs, nor did he know how to organize and
adjust the various departments. He failed to ascertain at an early date
just what class of steel could be made from the ore, which was discovered
to be non-Bessemer after considerable expenditure had been made. [citing
CMR XXII, 186] He seemed to think that cheap ore and coal would place the
finished product in the world market at any time, but the company found
that it could afford to sell pig iron and steel billets only in times of
exceptionally high prices. [citing CMR XXIII, 103] The directorate itself
was largely ignorant of the business. The ore mines did not turn out as
expected at first; and, as we shall see, the coal supply was a constant
source of trouble [citing Jeans, 123-125]."
C.W. Vernon, Cape Breton Canada at the Beginning of
the Twentieth Century; A Treatise of Natural Resources and Development
(1903)
"Mr. A.J.
Moxham occupied the important position of general manager during the construction
period ... After bringing the work of construction to a successful conclusion,
Mr. Moxham resigned from the general managership early 1902. Shortly after
Mr. Whitney retired from the presidency of the company, and was succeeded
by Mr. James Ross, who for some time previously had been acting as managing
director." [219, 213]
Craig Heron, Working in Steel: The Early Years in
Canada, 1883-1935 (1988).
Problems identified to the DISCO mill include production cost estimates
ridiculously low; chaotic cost accounting; high turnover in managerial
staff; adoption of Bessemer converters that could not use local ore (too
phosphoric), forcing conversion to open hearth in 1900; to be competitive
in world market, DISCO had to achieve high-value, mass production output,
requiring heavy investment in highly mechanized standardized, continuous
steel-making process, which in turn created pressure to produce continuously
to achieve mill efficiency regardless of market demand; designed originally
as a specialized mill for production of steel rails for world market rather
than meeting wider steel market needs; half-built rail mill was at one
point dismantled and replaced, not finished until 1904; Canadian financiers
engaging in market manipulation purely as speculative investment.
J. Stephen Jeans, Canada's Resources and Possibilities
(1904).
Moxham's original estimates presented to the Toronto Board of Trade 1899-1900
were favorable because of below-market coal costs and cost advantage in
the international market because other producers had to transship to reach
tidewater. Problems identified: (a) the first plant manager quit soon after
construction begun, and a new manager had to reconstruct all of the original
arrangements (later Jeans identifies Moxham as the first general manager
and plant design the product of Julian Kennedy of Pittsburgh); (b) the
Wabana ore mines appreciated in value dramatically shortly before they
were acquired by DISCO from NSS; (c) coal supplies were compromised by
the heavy demand by Whitney's Boston gas and coke companies, making greater
discounts for higher volume impossible for DISCO; (d) DISCO's first coal
washer burned down and was not rebuilt; (e) extravagant capital outlays
in various parts of the plant, its piers, and its "palatial" company offices;
(f) Belle Island ore mined out at 5% less iron than expected, with lower
grade Wabana ore (13% silica and .8355% phosphorus) had to be mixed with
higher grade ores to make steel until open hearth furnaces adopted; (g)
DISCO's decision to concentrate on the domestic market was well-considered
viz demand, but their location (geared originally to the international
market) because a cost disadvantage; (h) Cape Breton coal more bituminous
and has less ash content, less free-burning and perhaps less adaptable
to coke or gas production; (i) furnace capacity potential was over-estimated
at 300 tons per day, in practice only averaged 120 tons per day due to
under-powered engines in the blast furnaces or mill; and (j) DISCO stock
was subject to much sport and speculation on the Stock Exchange.
Don Macgillivray, "Henry Melville Whitney Comes to Cape
Breton: The Saga of a Guilded Age Entrepreneur," Acadiensis 9 (1979):
44-70.
Criticisms taken directly (and often verbatim) from the Canadian Mining
Review cited above.
Kris Inwood, The Canadian Charcoal Iron Industry 1870-1914
(New York 1986).
Both DOMCO and DISCO were dominated by Canadian commercial capital (particularly
Montreal and Toronto financial and mercantile interests) from the outset,
required in part because of the difficulty in marketing such risky securities
on the international market (263-268). The capacity of DISCO, as originally
designed, required large volume, much larger than could be absorbed by
the domestic market, and its range of production had to include fabricated
and finished products in order to utilize its capacity effectively. (239)
Kris Inwood, "Discovery and Technological Change: The
Origins of Steelmaking at Sydney, Nova Scotia," Early Ironmaking
(Montreal 1983): 59-65; and "Steel Manufacturers at the Margin in Nova
Scotia," Business and Economic History 2d series, 13 (1984): 61-74.
Metallurgical difficulties recounted in detail, relying on Jeans (1904),
Campbell (1952), and other sources, and discussion of how advances in technology
(furnace construction and lining, coal washing, economic duplexing) brought
Nova Scotia steelmaking up to the point of a marginally profitable enterprise.
This is placed in a context of an attempt to explain why the DISCO experiment
was precipitated in the first place (1984: 68-70). The issue of why the
failure of DISCO to achieve profitability in the early years was not more
attributed to inferior resource (ore and coal) base is projected as a matter
of either regional (vested interest) bias or methodological bias (70).
Egbert Moxham, Rosemary (privately printed family
memoir, 1956).
" ...the coal contained a high percentage of sulphur, which was to cause
a long and costly period before processes were worked out to permit its
use ... Semet Solvay coke ovens ... To Sydney, Father brought many of his
old organization from Lorain ... the ablest from a technical standpoint
of them was John Means, who came from Birmingham, Alabama to assume the
superintending of the Blast Furnace, and who brought some hundred colored
furnace men. Also, there was Hugo Carlson and his brother, Swedish chemists,
who took charge of the Open Hearth ... Father found the breaking in of
the plant a difficult one, and as always in the case of a new enterprise,
financial and other troubles became apparent. (58)
"Technical
difficulties in the initial operation of the steel plant mitigated against
its early success. Both the ore supply and the coal were high in impurities,
particularly the coal which contained a high sulphur content and a high
ash. This caused excessive temperatures and the length of treatment in
the blast and open hearth furnaces with greatly increased destruction of
furnace lineage and consequently greatly increased the cost of operation.
These difficulties were reflected in increased tension between Father and
his directors." (73)
Other Sources:
* Arthur J. Moxham, Canada as a
Steel Producer (1902).
* David Frank, "The Cape Breton Coal
Industry and the Rise and Fall of the British Empire Steel Corp.," Acadiensis
7 (1977): 3-34.
Images:
.jpg)
Arthur J. Moxham and family at Kinsaak,
Edgar Moxham, mining engineer
Cape Breton, Nova Scotia, after the death
of son Thomas Coleman Moxham in 1901.