Show BUSINESS t t by PORTS INC STEEL BUCKS I ECONOMIC nC DOWNTREND Despite the recent economic downturn which saw real GNP decline at a 63 percent annual rate in the first quarter domestic steel demand has continued high and is expected to remain strong throughout the year At the same time the Improvement in the steel trade picture which devel developed ed in 1973 continued through the 1974 first quarter Steel imports of 25 million tons declined some 34 percent from the year-earlier year period while steel exports rose to 14 million tons from 08 million registered a year ago Because of oC the strong demand total domestic steel shipments are now expected to tobe tobe tobe be only slightly below last years year's record million tons Since last years year's record was met in part through a substantial reduction in inventories it is unlikely that this years year's shipments could set seta a new record in spite spile of oC the strong demand A New Labor Accord This spring the United Steelworkers and the country's ten largest steel producers agreed to a new year three-year contract to replace the one which expires on August 1 While it was in line with earlier settlements within the aluminum and container industries industries industries in in- it stopped short of providing a of living escalator for pension benefits Perhaps almost as important as the settlement itself was the agreement to extend the Experimental Labor Agreement through the 1997 1977 negotiations thus assuring labor peace within steel until 1980 Thus the large up build of oC inventories which occurred prior to past bargaining ng periods and which proved costly to both the industry and the steelworkers should be avoided for Cor the rest of oC the decade Higher Steel Prices With labor costs scheduled to torise torise torise rise significantly and with practically all other costs climbing rapidly the steel industry was in desperate need of oC price relief While the integrated steel producers were able to turn in some good earnings gains for last year the better showing reflected primarily the sharp improvement in capacity utilization rates which tended to mask the profit squeeze resulting from price controls Hence Bence once price controls were lifted wide-ranging wide price boosts were posted by the major producers The increases were far from ul uniform form however resulting in a fragmented pricing structure The most recent price increases were il initiated by Bethlehem Steel comprising base advances ranging from 5 percent to 15 percent depending on the product and covering nearly all of the company's product mix Another Good Year With steel production slated to remain at or near capacity levels and with a much much- improved price structure the major integrated ted steel producers should register further gains this year First First- quarter earnings for most of the major producers were better than anticipated and while costs continue to rise recent price boosts should help in preserving profit margins Availability of raw materials however could be a restricting factor especially if there is a walk-out walk by the United Mine MineWorkers MineWorkers MineWorkers Workers this fall during negotiations with the nations nation's coal producers Investment estment Opinion Although prices of most steel equities have eased in the past few weeks they have for the most part performed relatively well so far this trus year Furthermore despite some term longer uncertainties we feel that these equities can register further gains once the stock market atmosphere improves For those investors who wish to add a steel equity to their portfolios the Staff of Babson's Reports is currently recommending purchase of Bethlehem Steel common Those interested may have a afree afree afree free copy of a report on tl this s company by writing to Babson's Reports Inc Wellesley Hills Mass I |