The history of Swedish iron and steel industry
The Swedish iron and steel industry has a long history beginning in the Middle Ages.
The Period of Osmund
It was merchants from Lübeck who, in the Middle Ages, began to interest the kings of Sweden in the export of iron on a large scale. It was also at that time that German mine owners and merchants acquired the rights to run their own operations in Sweden's mining areas and trading communities.
Mining and foreign trade thereby paved the way for the integration of Sweden into the mainstream of European civilisation. The consequence was a new economic structure and the emergence of a broader society in the formerly agrarian Sweden.
The Swedish iron exports during the Middle Ages comprised so-called osmunds – a standardised format of high-grade forged iron with a weight of just 3 hectograms.The osmund was an accepted object of barter both in Sweden and abroad and was also used as a form of payment with its value being determined by the Crown.
In the 14th century, a large amount of Sweden's iron production was exported, mainly to Lübeck and Danzig. The entire annual production at this time has been estimated at 2,000 tonnes, less than a third of the production from the German forges.
Since the cogs (trading vessels) from Lübeck were not able to enter Lake Mälar, Stockholm was established as a transhipment centre, customs station and port of shipment for iron and copper exports from Närke, Västmanland and Dalarna.
In the 1420's the Scandinavian king, Erik of Pommern, granted preference to Swedish seamen and merchants over their counterparts from Germany and barred Öresund to the cogs fiom Lübeck. This was devastating for Swedish iron exports and led to peasant miners fiom Dalarna and Västmanland - together with merchants in Stockholm, all under the leadership of the peasant miner Engelbrekt - breaking out of the union with Denmark and Norway.
Lübeck, which helped Gustav Vasa gain power - this in exchange for the sole rights to trade in Sweden - saw itself defeated by the united forces of the Swedish and Danish kings. The trading monopolies enjoyed by other Hanse cities would also later be abolished following the expansion of Dutch and English shipping in the North Sea and the Baltic.
The price of Swedish osmund iron started to decline around the mid-14th century and continued to fall during the 15th century. The reasons were to be found on both the producers' and consumers' side. In Europe, the more blast furnace technology was used the more iron production increased, thereby putting pressure on Swedish products. Even though the price fell, Swedish exports of osmund iron to Danzig increased during the 16th century. Here, Swedish iron was used as a basis for the manufacture of a more workable forging iron, which was turned into long bars - known at the time as bar iron - by water-powered iron hammers. This was then sold on under the designation, 'bar iron from Danzig', mainly to Holland and England.
Bar iron takes over
During the 16th century, the kings of Sweden realised that Sweden, too, had to modernise its iron production and start producing bar iron. In order to handle the difficult technical changeover, the involvement of expertise and finance from foreign countries was required.
The decisive modernisation of the Swedish iron industry in fact took place at the beginning of the 17th century. Then Spain recognised Holland's its dependence in 1609, the Dutch started to plan for their future defence partly through importing iron cannons from Sweden. A large number of forgers who had emigrated to Holland from Spanish controlled Wallonia were now recruited to work in Sweden at the Royal ironworks and armouries, modernised by engineers such as Willem de Besche and financed by businessmen such as Louis De Geer.
The doctrine that dominated trade policy in Sweden in the 17th century was mercantilism which stated that a country's economy should be strengthened through high protective tariffs. In addition, exports should be favoured and imports restrained in order to establish a trade surplus. The fact that in international trade finished products commanded a better price than raw materials led to a prohibition, introduced in 1604, on exports from Sweden of osmund iron. In the future, only Sweden's processed bar iron could be exported.
In the 1640's, Sweden's exports of bar iron amounted to around 11,000 tonnes a year. Fifty years later, the average was about 27,000 tonnes a year and in the 1740's an average of 40,000 tonnes a year was achieved.
The large increase depended almost wholly on the emergence of new markets, firstly in Holland and then in England. Nevertheless, most of the armaments produced remained in Sweden and the production of nails, plate, tools and utensils was mainly for the home market.
During the 18th century, Sweden's iron production virtually doubled due to the increased demand for bar iron from abroad, particularly England, which had a large need for high-quality, so called Oregrund iron, as an input for its steel industry. Bar iron gradually came to comprise no less than three-quarters of the total Swedish exports, creating for the Crown much needed revenues in the form of taxes and export duties.
In England, the charcoal forests had been stripped to such an extent that the country had become strongly dependent on iron imports from Sweden. England's imports in the 1730's totalled about 25,000 tonnes of which Sweden's contribution was nearly 20,000 tonnes. From Russia came about 5,000 tonnes but Russian iron, some twenty years later, would rise to 15,000 tonnes hich would then equal Sweden's share.
At the end of the 18th century technology in England had been developed enabling the use of fossil coal in metallurgical processes.
In addition, it was increased competition from Russian bar iron that caused the crisis for Sweden's iron industry which in turn was a crucial factor in the establishment of Jernkontoret in 1747. The increasing utilisation of coal and coke would subsequently lead to a radical change in the competitive status of Swedish iron, and during the 19th century Europe's iron production gradually switched to countries with ample resources of fossil coal.
The strong growth of bar iron exports had aroused concern that the competition of the bar mills for charcoal and pig iron would lead to increased production costs. It was for this reason that a limitation on forge production was introduced whereby it would also be possible to influence the prices on the international markets. The owners of the bar mills were successful in implementing a forging regulation in the Riksdag of 1746-47 which effectively obstructed an increase in bar iron exports over the long term. It was not until the 1830's that the regulation was wholly abolished.
However, a significant upturn in the value of the composition of exports took place during the latter part of the 18th century. Exports of iron, which had undergone further processing following forging under the heavy bar iron hammers, increased sharply. With the help of the lighter and faster iron hammers it was possible to produce thinner bars, or strips, which were then bound together and exported in bundles. Forged plate and steel was also exported to a greater extent than before.
Sweden's bar iron exports during the 18th century - as previously mentioned - were very much focused on the British market. This was complemented by a stable and significant export to the Baltic Sea countries and, in the latter part of the century, by increased exports to France, Portugal and the Mediterranean lands. At the same time the former large-scale sales to Holland diminished. Trade policy considerations were to be of major importance for Sweden's foreign policy during the coming revolutionary and Napoleonic periods.
The Napoleonic wars ushered in a serious crisis for the Swedish iron industry. The reasons were – inter alia – that the custom tariffs on Swedish bar iron to Great Britain were raised sharply. From just over 52,000 tonnes of bar iron per year during the 1790's, the total Swedish export fell to less than 30,000 tonnes for the lowest year, 1808. The losses in the British market could, however, largely be compensated by the newly emerging US market. Thus, in the early 19th century, the USA became an important market and was, right up to the First World War, the largest importer of Swedish bar iron.
At this time many people in the Swedish iron industry realised that the solution to the crisis lay in improving the quality of Swedish charcoal forging. The Walloon forge retained its position on the market in Sheffield. Others recommended going over to the use of coalfired puddling furnaces – invented in England – for the production of forgeable iron and complementing this with rolling mills. This was to be delayed, however, until 1845 when the mill owner, Gustaf Ekman, solved the problems of adapting a Lancashire forge to Swedish conditions using charcoal instead of coal as an energy source. In the Ekman furnace the frayed surfaces on the puddle bars could be effectively welded together. Ekman's furnace thereby became the mainspring in the development of the rolling mill of that period. An added advantage was that fuel consumption was sharply reduced.
The improved quality now made it possible to recover a large part of the lost market in Sheffield. When furnaces adapted to Swedish conditions had been developed and rolling mills set up, iron of high quality could be produced in large quantities. Also, with rolling mills the expensive hammer working in the forge could be replaced. The expansion of the Lancashire forge resulted in a sharp increase in the demand for pig iron and overall production increased to about 180,000 tonnes per year by the start of the 1860's.
The technical advances resulted in more concentrated operations, and smaller mills were now being closed down to the advantage of larger and more dynamic units. This process, known as 'the great mill shutdown', meant that the number of smelting furnaces in Sweden declined from 220 in 1840 to less than 160 by 1880 (despite the fact that many new furnaces were opened during this period).
The Bessemer process
The need for steel increased strongly in the mid-1800's. For industries and means of transport steel of high quality was required in large quantities. Both in Europe and the USA assiduous efforts were made to replace the old craft methods of steel production with processes that better responded to the growing demand. One such was the Bessemer method, introduced by Henry Bessemer in 1855, a system whereby air blown into smelted pig iron made it possible to produce steel directly in the furnace.
The desired carbon content was obtained by breaking off the process at appropriate intervals. At the time it was an epochal discovery. Before, in the finery processes the product became a softer, carbon-lacking iron which had to be carburised through special processes and at a high cost in order to become hardenable steel. Using the Bessemer process this was now no longer necessary. Bessemer himself did not succeed in producing any ingots of satisfactory quality.
When, in 1858 at Edsken, the Swede, Göran Fredrik Göransson became the first person in the world to successfully apply the Bessemer process on a practical scale and produce ingot steel of good quality, this was an industrial exploit of historic importance with international ramifications. It marked the start of the modern steel age by enabling the economic production of high-quality steel products such as rails, railway wheels, ship plate and so on. Now, for example, the great railway construction in Europe and the USA could begin.
The successful introduction of the Bessemer method in Sweden led to its implementation in many Swedish steelworks at the start of the 1880's. It would be some time, however, before the production levels exceeded 50,000 tonnes and not until 1895 that production of 100,000 tonnes would be exceeded for the first time. However, in Sweden the Bessemer process never became the major production method for ordinary steel as it did in other countries. This was mainly because of the expensive charcoal pig iron required to charge the Bessemer converter.
Instead, it was the other great ingot steel method, the Siemens-Martin method, which was to lead the Swedish steel industry into its great era of expansion. A characteristic of the method was that the steel smelting took place in a furnace designed by the Siemens brothers in 1861. Pierre Martin was the first person to successfully produce ingot steel in a furnace of this type.
It would take some time – not until the latter part of the 1880's – before the open-hearth production of steel in Sweden would become widely established but by 1895 it had already exceeded that of Bessemer steel. Not until then did the volume of ingot steel production exceed that of the wrought iron production, meaning that the Lancashire method maintained its position as the most important for production of iron and steel during most of the 19th century.
The introduction of ingot steel processes represented a major upturn in the Swedish steel industry. Both production and exports were doubled during the period from the 1870's up to the First World War. At the same time, the export of Lancashire iron increased at the same rate as ingot steel, at least until the turn of the century. Particularly in the most important export markets - Great Britain and the USA – the Lancashire bar iron continued to predominate. After 1900, however ingot steel took an increasingly larger share of the market whilst the so-called wrought iron methods, based on the Lancashire and particularly the Walloon forge, declined in importance.
A precondition for the geographical concentration of the iron and steel industry at the end of the 19th century was the development of communications – particularly the railways. Steelworks demanded a cheap supply of materials – coal, ore, etc. – as well as good transportation facilities to the export harbours for the finished steel.
The start of the 20th century saw a breakthrough for electric steel – a process which, as a consequence of advantageous electricity prices, was to enjoy a rapid expansion in Sweden. Together with the acid open-hearth process the electric-steel process was to have great significance for the development of Sweden's quality steel.
The advance of free trade
The breakthrough to a more liberal trade policy did not take place until J.A. Gripenstedt a supporter of free trade - became the Minister of Finance in the mid-19th century. As late as 1850 there was a ban on exports and imports of pig iron, an export ban on iron ore and an import ban on bar iron. In 1865, however, thanks to Gripenstedt's authority Sweden became a member of the international free trade system which emerged along the lines of the so-called Cobden treaty between France and Great Britain.
Gripenstedt was also behind the national railway policy, the reforms in the banking sector and the introduction of freedom of trade in 1864. He has come to personify the deregulation and liberalisation which took place in Sweden in the mid-19th century.
There was certainly no question of introducing a complete freedom of trade without protective tariffs. A number of important products enjoyed complete tariff exemption whereas others were subject to relatively modest duties. Iron and steel was on the exemption list up until 1888 when tariffs were re-introduced. For its time, the Swedish customs tariff was fairly sensitive to free trade.
In 1934, a change in American trade policy took place. The Americans realised that to increase their exports they must also be prepared to increase imports. It was this perception that lay behind a liberalising tariff agreement America completed with a number of countries including Sweden. From the 1930's and to the period just after the Second World War, security policy considerations came to play an increasingly important role in shaping trade policy. It was essential for individual countries to make themselves self-supporting with regard to the most important commodities.
‘A steel for every purpose’
During the 1930's the steel industry made rapid strides. The rationalisation and modernisation which had taken place during the 1920's led to an increase of steel production by about 60 per cent. This increase was almost wholly due to ingot steel. Pig iron production grew during the same period by about 30 per cent but did not attain the peak figures recorded during the First World War. During the 1920's production of wrought iron had declined to insignificant quantities. Important progress in the production of specialty steels was also achieved, a large part of which were exported. At the same time the production of ordinary steel had also considerably increased.
During the Depression years of the 1930's, the Swedish steel mills managed to recover a significant share of their home market from foreign steel producers. Sweden's steel industry also developed over this period, greatly diversifying its product range. Fagersta Bruk's advertising slogan - 'A Steel for Every Purpose' - is well-known. This led to increased competition between the individual companies but paid off during the blockade of Sweden during the Second World War and greatly facilitated Swedish rearmament.
After the Second World War
During the immediate post-war years, a large number of regulations remained in force - not least in the area of foreign trade. Here there was a jungle of bilateral trading agreements, mostly with different countries, and the price situation with both imports and exports varied sharply. Payment difficulties were a regular occurrence. Gradually, however, these regulations were abolished. Through the Bretton Woods system a stable currency order was created meaning that world trade could start to expand again. A strong contributory factor was the more or less contemporary agreement reached between the world's leading industrial nations on customs tariffs and trade: The General Agreement on Tariffs and Trade (GATT).
After the Second World War, several organs were created in western Europe for economic and political co-operation the main purpose of which was to reduce the future risk of war. The most important of these was the European Coal and Steel Community (1951) – the embryo of the European Union. From this first step, which was primarily intended to strengthen co-operation between France and West Germany, there subsequently grew the EEC (1957) which came to embrace other industries, including agriculture.
Central to this co-operation was the establishment of a customs union entailing common external custom tariff for all member states. The co-operation was developed gradually towards the creation of a single internal market embracing fifteen conntries which we now know as the EU. Sweden's entry as a full member on 1st January 1995 enabled Swedish industry to participate fully in the EU's integration work.
For Sweden's steel industry, membership in itself has not brought major changes. The industry has long been closely tied to the Coal and Steel Community with Swedish steel companies applying the price and market regulations which relate to steel trading in the union. However, an important advantage of membership is participation in the decision-making institutions and the removal of costly frontier controls on trade.