Steel Seeks More Money, Quick

No industry has suffered more from weak domestic markets and buzz-saw foreign competition this year than steel. Nonetheless, steel mills last week announced price increases that clustered around 5.5% to take effect early in 1978. The increases come just when the Carter Administration is putting the finishing touches on a plan to offer financial aid to the ailing industry and sharply reduce the flow of cut-price foreign steel into the U.S. But the Administration reacted to the price boosts mildly, indicating that American mills will not be battered by the presidential jawbone--yet.

The boosts began with an announcement from Wheeling-Pittsburgh Steel Corp., the industry's ninth largest producer, that it would lift the price of sheet steel used in cars and other consumer goods by 7% on Jan. 3. Bethlehem Steel, the second largest producer, followed with an announcement that it would raise prices on most of its products by an average of 5.5% effective Feb. 1 for sheet goods, March 1 for structural steel. By week's end Inland Steel, U.S. Steel and other companies had fallen in line behind Bethlehem, and Wheeling said it would shave down its 7% rise.

The steelmen's case for higher prices is simple: they need more money, and quickly. Steel profits have slumped deeply this year; Bethlehem in the third quarter reported a record loss of $477 million. The announced price rises found a generally sympathetic ear in Washington. Barry Bosworth, director of the Council on Wage and Price Stability, termed Wheeling's 7% increase "awfully big," but a COWPS official later said of the Bethlehem-Inland hikes: "With inflation running around 6%, nobody is terribly concerned about a 5.5% increase--if that's to be the only increase for 1978. If it's not, there's reason for real concern." Should the Administration stick to that line, the steelmen may yet get into a fight with Washington. Industry officials do not say out loud that they probably will raise prices again later in 1978, but their private comments point that way. They claim that the current increases only partly catch up with cost rises already incurred.

There is some question whether even these increases serve the industry's own best interests. The Administration is now engaged in setting "reference" (minimum) prices for imported steel, which has captured 20% of the American market in recent months. Any foreign metal sold below the reference prices would automatically be subject to a heavy tariff. The reference prices probably will be pegged to the cost of producing and transporting Japanese steel. The aim is to stop foreign "dumping" of steel (that is, selling of imported metal below cost) and to bring import prices close to the U.S. price level. But by some estimates the increases announced last week would raise American prices by as much as $40 a ton above the reference prices for imports--which ironically are supposed to be enforced starting Feb. 1, the very day that the first Bethlehem-Inland hikes take effect. That could well enable foreign mills to hold on to a big slice of the U.S. business.

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