The year 1873 turned out to be an auspicious one because the Bethlehem Iron Company began to make a new product, Bessemer steel, which was fast becoming the preferred material for railroad rails, the single largest use for iron. In 1863 the Bethlehem company began to supply rails for Asa Packer's Lehigh Valley Railroad. Packer who had started business in the coal region building canal boats and operating coal mines, in the early1850s built a railroad from the coal depot of Mauch Chunk on the Lehigh River to Bethlehem forty miles to the south. Although Packer operated the iron works, the largest stockholder was actually the Philadelphia Quaker industrialist Joseph Wharton, who had become involved in zinc production in Bethlehem in the 1850s. Wharton would later play a critical role in saving Bethlehem from the general decline of the Lehigh Valley iron industry. Packer and his right-hand man, Robert Sayre helped to secure the future of their firm at its very beginning when they hired John Fritz, who was widely acknowledged as America's foremost ironmaster. It was Fritz who enabled Bethlehem to move into Bessemer steel production.
The English inventor, Henry Bessemer had discovered that he could make large batches of steel by blowing air into a converter containing molten iron from a blast furnace. The oxygen in air removed the carbon from iron through combustion, which generated enough heat to keep the nearly pure iron molten. Bessemer's process made quantity production of cheap steel possible. Although Bessemer steel was relatively brittle, it still made rails that lasted longer and could carry heavier loads than iron ones. The American Bessemer steel industry fed the growing need for rails for the railroad network which expanded from 53,000 miles in 1870, to 93,000 miles in 1880, and to an astounding 167,000 miles in 1890.
In the same year that Fritz installed a Bessemer converter in Bethlehem, Andrew Carnegie also built one in Pittsburgh. Thus, began Carnegie's relentless effort to reduce the cost of his rails and drive his competitors out of business. One major advantage that Carnegie had was that Pittsburgh was close to large deposits of bituminous coal. After being heated to drive off impurities, bituminous coal was converted to coke, which was ideal for iron production. Because of its structure, coke could be used in much larger blast furnaces, which dramatically lowered the cost of iron. By 1875 bituminous coal made as much iron as anthracite. By 1890, it made three times as much. As the center of the iron and steel industry moved to Pittsburgh, the older anthracite iron industry of the Lehigh Valley went into a long slow decline. Only the Bethlehem Iron Company truly prospered.