State of Steel

Steel is proverbially a "feast or famine" industry. Last week National Steel doubled its dividend. U. S. Steel reported a 65,241-ton rise in its backlog of unfilled orders to 1,929,815 tons. Operations for the industry as a whole jumped to 45% of capacity--highest rate in more than two years.* Cheery indeed are steelmen when their backlogs keep swelling while their furnaces grow hotter.

Brightest spot in the steel picture is motor-making Detroit. Thence has come the bulk of the demand that more than tripled steel operations in the last three months./- Makers of automobile steel like National Steel (only major unit to pay dividends throughout the Depression) have come nearest to feasting. In the Detroit district steel operations have surged up to nearly 80% of capacity.

In Cleveland where plants were booming at 77% of capacity, talk of steel mergers was sprouting again last week--sure sign of a jubilant industry. It concerned no Bethlehem-Youngstown merger but it did deal with the scattered relics of Cyrus Eaton's industrial empire--big Republic with small ($34,000,000) Otis Steel and smallish ($54,000,000) Corrigan-McKinney Steel. Interest was added to this report by the fact that a block of 50,000 shares of Cliffs Corp. which controls Corrigan-McKinney was included in the collateral that Cyrus Eaton put up for a big loan from Chase National Bank in 1931. Chase auctioned off that collateral this week.

Operations in the biggest steel districts --Pittsburgh and Chicago--have dragged down the U. S. average. Most companies can break even at 35 to 40% of capacity but for only a few will this mean a second quarter profit. Low April operations will more than offset the recent expansion. Nevertheless, U. S. Steel preferred was last week within a few points of par and the common at 56 had more than doubled its Old Deal low.

In Birmingham, mills were running at about the average for the industry, in Youngstown slightly above at 48%. But what concerned steelmen most last week was prices and wages. Buyers last week found it nearly impossible to place orders for the third quarter. There were persistent reports that a 10% wage raise on July 1 would be the signal for a general upping of all steel prices.

If steelmen have eyed Detroit with pleasure in the past two months, they have also eyed it with alarm. There H. M. Naugle and A. J. Townsend have a plant abuilding. Messrs. Naugle & Townsend once revolutionized a good section of the industry with their continuous sheet steel rolling mill--only new steelmaking process adopted by the industry in the past 41 years. And steelmen knew that what they had done once they might do again. The new Naugle-Townsend plant is to test the commercial possibilities of casting steel by the rotary method. Chief advantages:

1) It eliminates three steps from molten steel to finished product--ingots, soaking pits, blooming mills.

2) It makes non-dendritic (homogeneous) steel. In a cast ingot the interior pressure created by the more rapidly cooling exterior forms segregated crystalline structures which may weaken the steel.

3) It is more efficient--about 20% of an ordinary bloom is cropped off to remove flaws against 2% in rotary casting.

4) Its electric furnaces are charged with scrap steel, the only raw material required. If successful, the process would permit the highly concentrated steel industry to erect small, relatively inexpensive plants near consuming centres, which are almost always large scrap producers. Rated by the industry as first-class steel engineers. Messrs. Naugle & Townsend got their big start when Andrew William Mellon put $7,000,000 into their sheet steel rolling mill. American Rolling Mill (whose experiments along the same line were well advanced) finally bought the plant and patents, and Messrs. Naugle & Townsend promised to stay out of the steel business for five years. With $2,000,000 as their share of the profits, they departed on a leisurely trip around the world. Then, under the beneficent eye of Timken Roller Bearing Co., old friends from rolling mill days, they went to work on rotary casting. Steelmen thought last week that Timken had at least a keen if not substantial interest in the new Naugle-Townsend plant where everything revolves.

*The Annalist, which holds the New Deal to be no unmixed blessing, observed last week: ''Present indications are that the first week of June found the level of general business activity . . . back to the 1921 depression low point, an indication which, however, most people will choose to subordinate to the more startling indication that if the [New York] Times weekly business index continues to increase at its present rate it will be back to normal by August.'' /-Last week General Motors Corp. announced that its car sales (to owners) in May were 20% above April, 35% above May 1932 and equal to July 1931-

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