Steel: Hardening

Despite soft prices and profits, the long-distressed steel industry shows signs of firming. Production has increased steadily since the week of July 4, approached 1,600,000 tons last week. In only three weeks' time, production as a percentage of estimated capacity advanced from 45% to last week's 52%. Looking at their rising orders, steelmen predict still further increases.

With consumption of finished steel also increasing in recent months, the heavy inventories accumulated last winter as a steel-strike hedge are being rapidly whittled away. Detroit automakers, confident of a good year for the 1963 models, are scraping the bottom of their strike-hedge stocks in final production of the 1962s -and new orders are beginning to flow. Steel-using plants that had closed or slowed down during the traditional summer vacation doldrums are reopening and beginning to order for stepped up fall production.

But steelmen are far from convinced that the pickup signals quick and complete recovery. Inland Steel Co. Chairman Joseph L. Block could muster only "mild optimism." Said E. J. Hanley, president of Allegheny Ludlum Steel Corp.: "I don't feel quite so bad as I did a few weeks ago. But anything will be better than July." One steel executive, noting the common prediction that U.S. mills will pour about 100 million tons this year, commented: "That isn't bad -if you don't mind standing still."

Basic to the state of steel is the great spread between the industry's enormous, expensive capacity and its actual production. Steel has spent prodigious amounts of money -an average of $1 billion a year since World War II -for expansion and development. But some economists fault the industry's managers for concentrating so heavily on expansion. Says U.C.L.A. Economist Theodore Andersen: "They have put too much of their investment into increased capacity, instead of modernizing and increasing the efficiency of existing facilities." Some steelmen would now surely agree.

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