An odd thought: Who is Southern industry producing for?
Depends what kind of industry. Most heavy industry would be for domestic use (railroads, shipbuilding etc), and even then I suspect that the South would still be importing
some manufactures.
A partial exception is steel, and this depends a lot on how the Birmingham site develops, if it all. Historically, the development of Birmingham steel was hampered by a lot of idiotic decisions, which meant that steel which should be
cheaper than anything produced in the North in fact became more expensive. (Forgetting tariffs, for the moment.) If some of these decisions are avoided, the South could be producing some Birmingham steel for export.
However, most of the export production of any Southern industry would be the product of light industry, not heavy. Textiles, cigarettes and related products, processed sugar and candies, rum, whiskey and alcholic beverages,
and potentially other light manufacturing. The main markets for such goods would be Europe and the rest of North America. How well these industries perform would be affected by the broader political situation, whether there would be slave-related boycotts is a good question (I suspect no effective ones), the general state of international tariffs, and so on.
On a related note, I'd expect most southern industry to be light industry, rather than heavy industry. Outside of the Birmingham site and perhaps some parts of the Upper South (especially whatever parts of the Appalachian coal-producing regions which the South holds), I'd expect the large majority of Southern industry to be light industry rather than heavy industry.
Getting back to the ending of slavery question again, let us not forget Guns of the South. Obviously, this is fiction, but Turtledove may not have been too far off the mark when he had a CSA [who had fought a bloody war against abolitionists] willing to begin the process of abolition in 1872.
It is indeed fiction, and in the How Few Remain universe, Turtledove also has the CSA abandoning slavery because their allies ask them to do so. I suspect that reader appeal rather than plausibility was the motivation behind both of those abolitions.
Of course this was with the anti-slavery Marse Robert at the helm in Richmond, but I still believe that even without Lee urging for it, the Confeds would begin to give way after 1888. Many southerners would become too ashamed to be citizens of the only country left in the Am ericas to be a slave nation.
Slavery was far, far more entrenched in the South than it was in Brazil. More capital tied up in it, more entrenched views on racism, different cultural and religious attitude toward freeing slaves, and quite a few other reasons. But the big one was the slavery in the South was self-supporting; the slave population grew through natural increase, and had done since the 1700s. The slave population in Brazil was in net natural decrease (i.e. more slaves died or were freed than were born), and always had been, and relied on new slaves being brought in through the (illegal) slave trade. The death knell for slavery in Brazil was when Britain started sending ships into Brazilian waters to capture illegal slave traders, and thus shut down the illegal slave trade into Brazil. This happened in the early 1850s, and the writing was on the wall for slavery in Brazil ever since. The South had no such problems.
As for being ashamed of slavery, well, the South had entrenched racism for rather a long time after the historical abolition of slavery, and it was only ended due to federal government intervention and the civil rights movement in the 1960s. I can't see them getting ashamed of slavery in a hurry.
I mean, how much can it cost to pay ex-slaves a pittance, and not have to feed and house them any more?
At the minimum, exactly the same. At the maximum, quite a lot more.
The thing to remember is that slaves were in effect paid subsistence wages. It's simply not possible to pay people any less than subsistence wages in the long-term (unless they're getting money from elsewhere), because otherwise they won't subsist. Whether someone is having food and housing provided as a slave is irrelevant, since if they aren't getting it provided then you have to pay them high enough wages so that they can buy food and housing themselves.
Slaves turn out to be even cheaper than free workers for a variety of other reasons, such as being worked for longer hours and not getting pay rises. Not being able to go on strike made a difference too.
And incidentally, the two biggest barriers to emancipation were:
i) the sheer cost of freeing the slaves. Paying the owners would have cost an absolute fortune, even if it could be done legally.
ii) the social fear of what would happen if the slaves were freed. The propaganda about what freed slaves would do was crude but widely-believed.