With the Depression, wheat and wool prices plummeted, orders for rails disappeared, building everywhere stopped and No 1 battery of the new coke ovens was left idle.
By 1932, ingot steel production dropped to 195,188 tons - less than half the 1930 output - and only No 3 blast furnace continued production.
Yet, for a number of reasons, not the least of which were the efficiency measures introduced by Baker and Lewis, the Depression didn't hit Newcastle as hard as overseas plants. The works' downturn never went below 20%-25% of total tonnages.
Relief also came sooner and, as a result of the 1920s modernisation program. Further modernisation began in 1932 with new mills and new collieries. By 1933, the Steelworks was at about 40% of total tonnage capacity.
Newcastle survived the Great Depression that had forced many overseas steelworks to shut down completely. By 1935, demand picked up rapidly and the Steelworks produced a record 552,710 tons.
At that time the Steelworks comprised the two new Wilputte coke oven batteries, three blast furnaces (record output for the largest was 5915 tons a week) and 10 open hearth furnaces, four of them of 130 ton capacity with the newest just commissioned. There was a bloom mill, seven finishing mills including a 28-inch rail and structural mill, an 18-inch continuous mill, a plate mill and a 16-stand Morgan rod mill rolling a single strand. In addition there were finishing shops, roll turning shops, foundries, fabricating shops and a brick plant.
Leonard Grant took over as Steelworks' Manager in 1936.
Australian steel was reputedly being sold at the lowest price in the world and prices came down through the '30s while production increased. Newcastle's price advantage was due in no small part to Lewis's striving for increased efficiency in process and operation.
Growth became self-generating. But in all the feverish activity, Lewis had more than the immediate future of the Steelworks on his mind. He was driven by the need to prepare for war and would later become the wartime Director-General of Munitions and Director of Aircraft Production, recognised as one of the driving forces behind Australia's industrial war effort.
Lewis announced in 1936 that machine tools, precision tools and jigs were being obtained to establish a pilot shell manufacturing plant in Newcastle.
In 1938, the heat treatment shop was extended and began producing 10-pounder high explosive shells at a rate of 500 per week. Three-inch anti-aircraft shells were also produced.
When war broke out in 1939, the three blast furnaces and 13 open hearth furnaces had a capacity of one million tons of steel a year. The mean annual output of pig iron and ferro alloys per blast furnace was 221,000 tons in Australia compared to just 160,000 tons in the US and even lower in the UK and Germany.
The outbreak of war saw the production of shells at Newcastle increase fivefold to 2500 a week, rising again shortly afterwards to 3500 a week and a three-shift, seven-day roster was introduced.
The outbreak of war meant shortages of vital metals and tools at a time when they were sorely needed for the war effort. Newcastle Research allowed tungsten carbide - a hard metal used for machine tools - and magnesium metal, which had been sourced previously from Germany, to be produced at the Steelworks.
George Bishop, later General Manager, is credited with another significant advance in armaments manufacture with the development of substitute bulletproof steel using manganese, silicon and chromium with one of the beach sand elements.
During the war years the Newcastle Steelworks was a hive of activity with new plants being built to produce previously imported materials.
Steel produced in Newcastle went into Owen and Bren guns; aircraft engine cylinders and gauges for the production of engines for Beaufort bombers and Beaufighters.
Ingenuity overcame wartime shortages. Equipment designed and made included machine tools (from copies of old ones), high speed milling machines, file-cutting machines, a copy of a British range-finder, precision optical grinders and more than 3000 tons of jigs, gauges and fixtures for the Department of Munitions.
By 1942 there were nearly 9000 workers at the Newcastle plant, but despite continuing demand for steel, production began to fall.
Manpower shortages and delays in the transport of raw materials, caused by the war's toll on ship numbers, saw employment drop to 8217 in 1943.
Newcastle's first sinter plant, a new open hearth furnace and a coal washery were completed by 1944.
The wartime shortage of vessels responsible for the Steelworks difficult position opened a new avenue boat building. More than 50 ocean-going tug boats were constructed at the Steelworks for the US Army and the British Navy.
By 1945, coal was scarce and the need to use low quality ore and limestone from NSW forced costs up and decreased output. Production fell to less than 822,000 tons by May 1945.
Newcastle Industrial Heritage Association