FreightWaves Classics: US Steel owned an “in-house” shipping company

In 1910, James A. Farrell was an executive at U.S. Steel Corporation, which at that time was the second-largest steel company in the United States. Farrell determined that it would be more cost-effective for U.S. Steel to own its own fleet of freighters to transport steel products rather than chartering cargo space from shipping companies. 

Therefore, U.S. Steel founded the Isthmian Steamship Company for the stated reason to mitigate the costs of shipping U.S. Steel’s freight. The company was named “Isthmian” for the Isthmus of Panama, to honor the United States’ recent construction achievement, the Panama Canal.

Farrell headquartered the new company in London for two reasons. He wanted to take advantage of Great Britain’s respected name in the maritime industry, and also to benefit from its long history of maritime experience. British Federal Steam Navigation Co Ltd was hired to manage Isthmian Steamship. The company traced its own roots to 1782 and the British East India Company. The U.S. dealings of Isthmian Steamship were managed by the Norton Lilly Agency.

The Isthmian Steamship Company’s ships

The company’s first ship was the SS Bantu, a British vessel launched in 1902 and purchased by U.S. Steel. By 1914, the company had purchased six additional ships – Kentra, Buenaventura, Santa Rosalia, Charleton Hall, Craston Hall and the cargo liner Crofton Hall. All were sturdy British steamships. 

However, after World War I began in August 1914, Farrell had the ships flagged as U.S. vessels, because until the U.S. entered the war in 1917, it was a neutral nation. 

On January 30, 1930 Isthmian Steamship Company was organized as a separate company, rather than as a subsidiary of U.S. Steel. However, U.S. Steel still owned the company. While nearly 30 ships were then registered as Isthmian ships, U.S. Steel retained the SS Steel Chemist, SS Steel Electrician, SS Steelmotor and SS Steelvendor. 

Of the ships acquired by Isthmian Steamship Company, three were sunk during service in World War II.

Selling the company 

From the time it was established as a separate company in 1930 until 1956, Isthmian Lines (the company’s name had been updated) continued to expand its operations and generated enviable revenues and profits. However, on March 6, 1956, U.S. Steel sold Isthmian Steamship Company to States Marine Lines. At that time U.S. Steel stated that it sold Isthmian Steamship Company because the company’s overall usefulness had diminished, and that the line was only carrying a small percentage of U.S. Steel’s exports. According to Ralph Blough, who at that time was chairman of the board of directors of U.S. Steel, “U.S. Steel’s need for these ships was over.” 

States Marine Corporation

States Marine Corporation acquired Isthmian Lines, Inc. and its 24 ships from U.S. Steel for $30 million. Observers thought that U.S. Steel’s management had made a sound business decision. Many of the ships in Isthmian Lines’ fleet were obsolete, and if U.S. Steel had not sold them it would have likely had to replace them in the near future. 

The acquisition was major news in the shipping world “because it was the largest single shipping purchase in memory.” Acquiring Isthmian’s ships made States Marine the largest unsubsidized U.S. flag carrier. 

Henry Mercer, who was president of States Marine in 1956, believed there was an increasing demand for U.S.-flagged ships. He sought to acquire a fast fleet to replace States Marine’s use of “time chartered” ships. As defined by Marine Insight, in a time charter a shipowner leases a vessel to a charterer for a fixed period of time, and the charterer is free to sail the ship to any port and transport any cargo, subject to legal regulations. 

Mercer also noted that States Marine acquired Isthmian’s global network of agents and contacts with resources, as well as Isthmian’s reputation for service, which was second-to-none in the international shipping business.

States Marine Lines continued to operate until the early 1970s. Like many shipping lines of the era, States Marine failed to make the transition from break-bulk cargo to bulk container cargo. Its last list of corporate officers is dated 1974.

James A. Farrell

A major businessman of his era, Farrell served as president of U.S. Steel Corporation from 1911 to 1932. Under Farrell, U.S. Steel expanded “by a factor of five during his presidency.” It became the first billion-dollar company in U.S. history. Farrell was also a champion and early pioneer of export markets; he significantly expanded U.S. steel exports (in large part due to the establishment of Isthmian Steamship Company). 

The success of Isthmian Steamship Company led Farrell to invest in several other shipping ventures. Eventually he and his sons operated three influential companies in the industry – Argonaut Lines, Robin Lines and the American South African Lines (ASAL).

Perhaps those companies will be profiled in a future FreightWaves Classics article.

Source: https://www.freightwaves.com/news
Editor: Scott Mall, Managing Editor of FreightWaves Classics