Lackawanna Steel Company - Founding and Early Years

Founding and Early Years

At the beginning of the 1800s, the Lackawanna Valley in Pennsylvania was rich in anthracite coal and iron deposits. Brothers George W. Scranton and Seldon T. Scranton moved to the valley in 1840 and settled in the five-house town of Slocum's Hollow (now Scranton) to establish an iron forge. Although Europeans had been making steel for nearly three centuries, the processes for creating blister steel and crucible steel were slow and extremely expensive. The Scrantons focused instead on manufacturing pig iron using a blast furnace. The Scrantons wished to take advantage of a recent technological innovation in iron smelting, the "hot blast." Developed in Scotland in 1828, the hot blast preheats air before it is pumped through molten iron, substantially lowering fuel needs. The Scrantons also wished to experiment with using anthracite coal to make steel, rather than existing methods which used charcoal or bituminous coal.

The most likely successful first use of the hot blast technique in the U.S. was carried out in 1835 at Oxford Furnace in Warren County, New Jersey, by William Henry, Seldon Scranton's father-in-law. By 1838, Henry had moved to the Lackawanna Valley, where he was experimenting with using anthracite coal in steelmaking.

The Scrantons and Henry formed a partnership in 1840 to develop a hot blast furnace that used anthracite coal in the "charge" (the mixture of iron ore and coal which, when melted, created pig iron). Two other Pennsylvanians, Sanford Grant (a Belvidere, New Jersey, businessman) and Philipp Mattes (a bank manager from Easton, Pennsylvania), also invested in the new company, named Scranton, Grant, and Co. Henry bought 503 acres (2.04 km2) near Slocum's Hollow, and began building the furnace. The blast furnace was completed in the early autumn of 1841.

The company's first effort at smelting iron was not successful. Many problems plagued the iron mill, including a furnace that was not hot enough, water that ran too low in the nearby creek to turn the waterwheel-powered bellows (and thus did not provide enough air to the furnace), unsuccessful experiments with charge mixtures, clogged tuyeres, and more. George Scranton estimated the company lost between $6,000 and $7,000 in the year ending June 1843, but the total may have been as high as $10,000. George Scranton took control of the works from William Henry, and twice rebuilt the furnace. Near bankruptcy, the partners sought new sources of capital. In May 1843, a $20,000 loan permitted the company to continue operating.

After many failures and two years of low-level and low-quality production of pig iron, the firm began producing significant amounts of pig iron in 1843. The company installed a rolling mill, five reverberatory furnaces, 20 nail manufacturing machines, and one spike manufacturing machine. Needing still more cash, the company was reorganized in September 1846, taking new name of Scrantons and Grant. New partners were brought in, including Joseph H. Scranton (a cousin from Georgia), Erastus C. Scranton (a cousin from Connecticut), and John Howland (a banker and businessman from New York). The Scranton family retained a 51.6 percent of the company's stock.

Quality control problems plagued the company and nearly drove it to bankruptcy again. By summer 1844, the furnace averaged five to seven tons of pig iron a day. Scrantons and Grant initially used the pig iron to produce nails and iron plates, but the quality of the ore — "red-short" rather than the required close-grained "cold-short" — prevented the smelting of high-quality pig iron. The company's finances spiraled downward. Luckily, railroad networks in the U.S. were tripling in size during the 1840s, and the railroads required large quantities of rails. But until 1844, the United States had no factories capable of manufacturing rails, and all rails had to be imported from Great Britain. Realizing that the "cold-short" ore they used was ideal for manufacturing rail tracks, the Scrantons sought new investors whose money would permit it to build a rail track rolling mill. Benjamin Loder, president of the New York and Erie Railroad; industrialist William E. Dodge; and eight others invested $90,000 in the firm.

Scrantons and Grant reorganized yet again on November 7, 1846, and began calling itself Scrantons and Platt. Grant was bought out, and Howland asked to have his investment returned. The company quickly began turning out rails for the Erie Railroad, becoming the first company in the United States to mass-produce T rails. The firm's decision to manufacture rail tracks changed the fundamental nature of transportation in the United States, accelerated rail use, and eliminated American dependence on England for railroad track. Rail production began in August 1847, and the company soon employed more than 800 mostly Welsh, Irish, and German workers. Shipments of rail track were hauled overland through the snow to the New York and Erie Railroad, arriving just in time to save the line from bankruptcy.

In 1851, the town of Slocum's Hollow changed its name to Scranton in honor of the owners of the iron works. The Scrantons had won approval from the townspeople some years before to rename Slocum's Hollow as the town of Harrison (in honor of President William Henry Harrison). The town was renamed Scrantonia in 1850, and the name shortened in 1851 to Scranton. The swiftly growing iron mill led to similar growth in the town of Scranton, whose population soared from a few hundred in 1850 to 9,000 in 1860 to 35,000 in 1870.