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Show Steel Leaders See Pickup in '58 Steel Production Editor's Note: Because of the impact of the steel industry on the economy of the nation and because Utah is one of the centers cen-ters of steel production in the western states, The Salt Lake Times considers the following diagnosis of the industry by Roger M. Blough, chairman of the board, United States Steel Corp., as both timely and especially espe-cially important to Utahns. Preliminary estimates indicate that 1957 was a record breaking year for steel consumption and despite recent cutbacks in steel production U. S. Steel considers the recent decline in orders as a breathing point in a long range increase in steel demand. U. S. Steel, which has extensive exten-sive holdings in Utah, is backing this confidence in the future with nearly $700,000,000 to be spent on authorized projects for additions addi-tions to and replacement of facilities to keep the corporation prepared to meet anticipated steel requirements of its customers custo-mers and ready to meet the demands de-mands of national emergency. Although 1957 was a year in which the actual use of steel may prove to be the greatest in our country's history, it was also a year in which the industry operating op-erating rate declined in each successive quarter. With consumption con-sumption in the beginning and ending quarters approximately the same, the operating rate declined de-clined from 96 per cent to 78 per cent. In the last quarter, for example, ex-ample, ingot production was still (Continued on Page 5) o Steel Leaders See Pickup in '58 Steel Production (Continued from Page 1) five to six million tons higher than the low of 20.1 million tons produced in the third quarter of 1954. It must be considered that steel capacity has been increased sharply since World War II. a development which has distorted year by year comparison on a basis of the operating rate. There fore, any comparison of steel production in these days of in creasing capacity is most informative infor-mative when computed on a tonnage basis. The seeming paradox between lowered production and high consumption lies in the market impact of the recent consumer use of inventory stocks rather than mill or warehouse deliveries. deliv-eries. Early in 1957 steel users were adding between 10 and 15 per cent of steel receipts to their stocks, both in the form of steel products as well as in the form of material in the industrial pipe line. It was late spring before over all inventories ended. The reversal re-versal in customer inventory policy from building to reducing continued through the remainder .01957, resulting in steady reactions re-actions in the steel shipments despite sustained high consumption. consump-tion. In recent months steel shipments ship-ments have fallen approximately 10 per cent below actual consumption, con-sumption, as the equivalent of six million ingots was cut out of stocks during the second half of 1957. With an inventory change of this magnitude, it was inevitable inevit-able that a sharp cut in the operating op-erating rate would result. Steel inventory movements will continue to be a dominant consideration in evaluation of the outlook for steel in 1958. Our estimates of national output and steel consuming industry activity during the first half of 1958 indicate indi-cate that total steel use will show 5 e decline from the record piJLI of 1957. But of greater significance sig-nificance it is probable that inventory in-ventory cutting will be maintained main-tained well into 1958, with a continued con-tinued restraining effect on steel production. Because of these considerations, steel output in the first half of this year may be little changed from the levels of recent weeks. It is important to understand, however, that steel taken out of consumers' stocks is likely to be replaced at some point. Inventory liquidation carries with it the regenerative re-generative seed for a renewed vigor in steel output when inventory in-ventory building inevitably commences com-mences reinforced by the longer term growth potential of our economy. Consequently, there is reason to expect a pickup in steel output engendered by renewed re-newed inventory building, following fol-lowing the current inventory liquidations. In order to keep the steel industry in-dustry outlook in proper perspective, per-spective, the inadvisability of looking only at the operating rate must be emphasized. It is a measure of capacity utilization but it has a constantly changing base as the steel industry adds to its productive capability. We cannot compare today's operating operat-ing rate with that of prior years and automatically conclude that output in terms of tonnage has declined. Since 1947 industry capacity has increased by more than 40 per cent, and with present capacity capa-city an operating rate of 70.6, per cent would equal 100 per; cent operations a decade ago.1 Steel production in recent weeks has declined, but the picture is not as somber in comparison as the operating years would imply. However, production well below be-low rated capacity has led observers ob-servers to question once again whether excess capacity exists in steel. The real question is not whether we may have expanded too far. but whether we will be able to rise to the market opportunities oppor-tunities and responsibilities that lie before us. Beyond the short-range short-range factors now depressing the steel industry operation, the future for steel lies unchanged. Of greater concern than the current decline in operations is the fact that the steel industry still is confronted with the twin problems of mounting costs of production and the inadequacy of depreciation recovery allowed by the tax laws both rooted in inflation. Steel workers wages have risen approximately three times faster than their productivity productiv-ity in the past decade. Replacement Replace-ment costs of facilities today are three to six times that of equipment equip-ment costs in 1940, an indisputable indisput-able fact which the tax laws do not recognize. Our continuing studies of long range steel demand indicate that the basic markets for steel are growing rapidly. Moreover, it is essential that the steel industry have sufficient product flexibility flexibil-ity to satisfy metal requirements in a year of peak activity. To meet the challenge of our expanding ex-panding national economy 30 to 40 million tons of ingot production produc-tion capability will have to be added in the next 10 to 12 years, j |
