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Show BUSINESS AND STEEL Babson reviews conditions in billion dollar industry. "Wellesley Hills, Mass. October Octo-ber 26th, 1923. "The steel industry in-dustry gives us both a barometer baro-meter and a thermometer of business," according to Roger W. Babson, whose associates have just completed a survey of this great industry. ''Steel prices," says . Mr. Babson in a statement issued today, "tend to follow general business to act as a thermometer thermom-eter in measuring, roughly, prosperity or depression. During Dur-ing the early months of this year business was active and the price of steel billets advanced ad-vanced 30 percent from January Janu-ary to April. It was evident by them that the improvement had been overdone and business busi-ness took to caution and conservatism con-servatism a condition still prevalent. "Iron and steel prices very naturally followed. For the past six months production has dropued and iri-"s have been ..'.-: "-pitethe readjustment to aate, I do not feel that steel prices or production produc-tion have reached the low point. It should be borne in mind that during the war period per-iod our production capacity was greatly stimulated. The actual output of steel in 1913 was about 31,000,000 tons with a producing capacity of proba bly 35.000000. So far this year the steel industry has operated on a basis of more than '40,000,000 tons annually, a rate materially over the actual act-ual output of recent years. A a matter of fact the abnormal stimulation in steel output started in August, 1921. In 1922 total output jumped 75 percent over the previous year, while production during the first nine months of this year stands over GO percent above the same period of last year. However, the main point is, if this country were called upon, we could produce steel at between be-tween 56,000,000 and 58,000,000 tons annually. . Even today at the current rate of 40,000,000 tons, we are producing more steel than we can consume and export. Nor should we lose sight of the fact that our European Euro-pean neighbors expanded their steel producing capacity to cope with abnormal war needs. "The underlying situation is well defined by unfilled tonnage ton-nage the barometer. which from the low in February, 1922, of 4.141,000 tons climbed with little interruption to 7,403,000 tons in March of this year. Today, six months 1 ater, unfilled tonnage has dropped to approximately 5,000,000. j General business is reflected j in the Babsonchart has drop-i ped to 10 per cent below j normal. My main thought, is that altho no radical depar turo f loin Cm- present price, level is indicated, n survey of j actual conditions shows that! tl't-weight is certainly on the bear side, as it is in most lines! today. J "On the financial side W(,; find further evidence of this; slowing up, in the rinmmt. of; recent refinancing which h;b:j been undertaken by some of tit.-J new. r companies," continue,! j Mr. V.r.bson. 'uryigj"-!.- of record-breaking business, in w f.n'.Tvinir, it is 1nie, may be required by the old onn-r-vative manufacturers for justifiable justi-fiable 'txpanfcioii as well .as th-r:, new ones. It is a characteris - j tic sign of the beginning of a sharp competitive period, however, how-ever, when many new offerings of funded debt with specially attractive promises appear in connection with corporate names that are new to investment invest-ment lists. The absence of any new financing on the part of old?" ' t such periods, always is noticeable. It is the time when the more experienced experi-enced management is conserving conserv-ing resources, limiting new-business new-business to established capacity capaci-ty and reducing indebtedness rather than taking on more overhead. Signs of this stage of business have not been lacking lack-ing in the iron and steel industry indus-try this year. The wisdom of .the restraint shown by the .argest factors at the peak of demand early in the year, now is apparent. Already certain of their more aggressive new-competitors new-competitors are falling by the wayside. "A few of the seasoned concerns con-cerns which have consistently turned surplus back into equip ment without increasing capitalization capi-talization offer sound bonds for investment. This is as far as the conservative investor should go at the present time. "Those who would purchase iron and steel stocks as a speculation specu-lation must weigh the outlook with the understanding of the position which they accept as stockholders that of merchandisers merchan-disers in the commodity. Success Suc-cess lies in buying when busi-Bes.s busi-Bes.s is slack and the commodity commodi-ty low, to sell when business is brisk and commodity prices high. From this test it may be apparent that it is not yet time to look for attractive purchases pur-chases in iron and steel stocks." |