Although Sloss initially focused on the production of pig iron, he aspired to make steel, an iron-carbon alloy in high demand because it was easily shaped and resistant to abrasion, thus ideally suited for rails. Unfortunately, Birmingham's raw materials were poorly suited for steel, and Sloss was unable to secure patent rights to any of the innovative processes that would overcome their limitations. Amid declining markets for pig iron, he sold control of his enterprise in the winter of 1886-87 to a group of investors, largely from Richmond, Virginia, that had greater access to funding. In the process, Sloss Furnace Company reorganized as the Sloss Iron and Steel Company (SISC), indicating the owners' intention to pursue steel manufacture.

Sloss FurnacesJoseph Bryan, a young attorney, led the Virginia syndicate and played a strong role in Birmingham's development for more than two decades. The son of a wealthy tobacco planter, he was rooted in the upper classes of the antebellum plantation-agriculture system and had strong ties with northern bankers active in financing the shipment of southern agricultural commodities to Europe. Bryan and his fellow Virginians, mostly veterans of the Confederacy, were attracted to the postwar South because they believed that labor costs would be low, given the region's large pool of African Americans seeking to escape the exploitation of sharecropping. This outlook permeated the future development of Sloss Furnaces. The Virginia industrialists also took advantage of the convict-lease system, which allowed them to lease prisoners at little cost to work in mines and other dangerous jobs. Sloss employed large numbers of convicts in its mines, including the Coalburg mine, which was known for its deplorable conditions and for its high death rate. In 1890, 90 of 1,000 prisoners died in the mines. Indeed Sloss continued using convict labor after other large companies, including the Tennessee Iron, Coal and Steel Company (TCI), ended the practice. Bryan and his associates developed a satellite community, North Birmingham, where they built two additional blast furnaces and, in addition to Coalburg, established an increasing number of mining camps and company towns, including Blossburg, Brookside, and Cardiff, which was named for the predominantly Welsh immigrant workers who lived at the camp.

During this era, Bryan and his associates acquired brown-ore deposits near Leeds and integrated them into their growing industrial empire; Sloss researchers had discovered that the plentiful red ore in Jones Valley made a better grade of iron if combined with long-used brown ore. In competition with TCI, Birmingham's largest enterprise, Bryan and SISC took control of blast furnaces, coal mines, and ore beds in Alabama's northwest corner whose owners had gone under in the economic depression of the 1890s. The acquisitions resulted in a reorganized entity, the Sloss-Sheffield Steel and Iron Company (SSSIC), indicating a continued interest in steel, a goal ardently desired by most of Birmingham's businessmen. In 1899, TCI scored a coup by adopting complex new methods to produce the first significant output of steel ever in the Birmingham District at commercially competitive prices, leading boosters to dream that it would become the steelmaking capital of the world.