Iron ore deposits in Texas were first exploited commercially in the time when charcoal furnaces were profitable. Ores in Texas were used as early as 1855 at the Nash Furnace, believed to have been located in northwestern Marion County. Perhaps a score of furnaces were in operation at one time or another turning out iron for use in the manufacture of household articles and farm implements. One plant was operated by the Confederate government to make gun barrels (see GUN MANUFACTURING DURING THE CIVIL WAR). In the 1870s and 1880s the East Texas iron industry boomed. The Kelly Furnace operated near Jefferson in Marion County in 1870 and was sold in 1882 to Marshall Wheel and Foundry Company, which changed its name to Loo Ellen. Iron production continued there until 1886, but by 1888 the plant had been dismantled. A furnace known as the Old Alcalde, at New Birmingham, was built by the state and operated as part of the state prison system early in the 1880s. Privately owned furnaces, including the Tassie Bell at New Birmingham and the Star and Crescent at Rusk, operated in the 1880s and 1890s. The Lone Star Furnace at Jefferson operated from 1891 until about 1910, before being closed and abandoned like most other furnaces. In spite of all this activity, by the time iron production virtually ceased in Texas in 1910, less than 700,000 long tons of ore had been used and less than 300,000 short tons of pig iron produced.
The World War II demand for iron and steel stimulated large-scale ore production in East Texas, along with the production of steel. At Longview the Madaras Steel Corporation built a pilot plant in 1941 to reduce iron ore to sponge iron by a process, invented by Julius D. Madaras of Detroit, that eliminated the pig-iron stage and used cracked natural gas instead of coke and limestone. Sponge iron in lump or granular form was converted into steel ingots by the East Texas Electric Steel Company. The success of this experiment led to the announcement in September 1949 that a million-dollar commercial plant, with a capacity of 2,000 tons of sponge iron a month, would be built by the East Texas Electric Steel Company for Southwest Metals at Longview. In 1941 and 1942, Sheffield Steel of Texas, a division of ARMCO (the American Rolling Mill Company), built a steel mill on the Houston Ship Channel that used scrap metal. Two years later Sheffield expanded these facilities into an integrated steel mill with open-hearth furnaces, coke ovens, a blooming mill, a plate mill, and a blast furnace. The plant subsequently used Texas and Mexican ores to make pig iron.
In 1943 the Lone Star Steel Company used government defense-plant money and private capital to build a blast furnace, coke ovens, and a beneficiation plant near Daingerfield. The project was designed to produce pig iron by the orthodox method, using limestone from nearby sources and coke made from Oklahoma coal. While the company sought a federal loan to build a cast-iron plant and steel mill at the site, the Daingerfield plant began shipping beneficiated ore to Houston, St. Louis, and Birmingham. By the war's end the steel mill had not been completed, but the company leased the facility and certain Oklahoma coal mines with an option to buy the properties within two years. Production of pig iron began in the fall of 1947, and in 1948 the firm purchased the $35 million plant from the War Assets Administration. In July 1949 the Reconstruction Finance Corporation granted Lone Star Steel a loan of $34 million to complete a steel mill, contingent on its investment of $22 million of its own. The company's plans called for four open-hearth steel furnaces and a mill for making electric-weld steel line pipe and oil-well casing. Ores were mined in the immediate vicinity of the plant in Morris County in the 1950s. In 1953 the completed plant was finally put into operation producing steel ingots and steel pipe, and in 1954 and 1956 expanded its steel-making capacity. In 1961, after borrowing $40 million from an insurance company, the company repaid the last of the more than $87 million it had borrowed from the government. In 1965 the Philadelphia and Reading Corporation, a New York holding company, bought 73 percent of the Texas firm's stock, and in 1966 acquired the firm's assets. Lone Star was reorganized as a subsidiary of Philadelphia and Reading, and continued in operation using Texas ores and importing coal from Oklahoma.
In 1945, with the help of federal funds, a charcoal blast furnace, sintering plant, and carbonizing and charcoal by-products plant were assembled at Rusk from disused facilities shipped from other states, before a stop order was issued by the Defense Plant Corporation. The cost of these facilities was estimated at $3 million to $5 million. In 1947 the War Assets Administration sold them to the E. F. McCrossin Engineering Company of New York for $300,000. This company completed the construction, and production by the Valencia Iron and Chemical Corporation began at Rusk in September 1948. The furnace, which initially used coke as fuel instead of charcoal, had a capacity of 100 to 150 tons a day.
In 1963 there were forty-four iron and steel foundries in the state, employing 5,963 workers. Value added by manufacture in that year was $32,508,000. Steel industry expansion was underway near Houston by the late 1960s, with the building and subsequent expansion of an Armco Steel Corporation 1,000-ton-a-day direct reduction plant; major steel plants were already in operation at Houston and near Daingerfield. The plant employed 300 workers and used natural gas to refine iron ore into material that could be charged into steel-making furnaces. The company's eight open-hearth furnaces at Houston were replaced by electric furnaces to reduce air pollution. The United States Steel Corporation built a plant at Cedar Point, near Baytown. A 160-inch plate mill began operation, and two 200-ton electric furnaces, vacuum degassing equipment, and a continuous single-strand slab caster were built.
In 1976 value added by manufacture from Texas iron and steel foundries was listed as $114.1 million. In 1980 Texas used roughly 10.4 million tons of steel, more than 10 percent of the nation's total consumption. The Houston area had become a thriving steel center for distributing imported steel products through its port and transportation facilities. Specialty plants, in addition to those of major producers, were also in operation. Lone Star Steel, by then a subsidiary of Northwest Industries, Incorporated, and the largest of four iron-ore producers in the state, initiated plans to reduce its energy needs and enhance productivity. In addition to tubular steel for the oil industry, the company began production of high-strength seamless drilling pipe.
In the 1980s, to recoup losses from the decline of tubular goods required by the oil industry, steel production was diverted to manufacture of non-energy products including precision tubing. Illegal or unfairly subsidized imports of finished products, alleged to include pipe and tubing dumped at below-foreign production costs, continued to account for a substantial portion of the market. In 1990, Texas remained one of the nation's leading steel-producing states, with five minimills in operation and Chaparral Steel in the process of constructing a third rolling mill at its Midlothian plant. Despite increased profits in that year, however, Lone Star Steel filed for chapter 11 bankruptcy, and was subsequently reorganized. See also IRON ORE DEPOSITS.