The Recovery in the Iron and Steel Trade

IN the " quasi war economy " which has grown up in this country in the past twelve months fate seems for once to have dealt a stronger hand to industry than to finance. On the whole, things have become easier for the men who make things ; those who have skilled labour to sell sell it on a widening and a rising market ; those who control the factories can rely upon a volume of Government orders un- precedented in times of peace. Those, on the other hand, who live by financing the operations of the industrialists have found their burdens and responsibilities increased. They have to reckon with higher taxation, political fears and falling capital values. Thus the authorities are agreed that industrial activity has reached a level which in normal times would coincide with a minor Stock Exchange boom. They are agreed that this level of activity springs largely from the rapidly-increas- ing volume of GovernMent expenditure. It is, as it were, the obverse of the political fears and heavy taxation which have brought stagnation to security markets. There is no general agreement whether the industrial recovery of 1939 is greater or less than might have been expected from the amount of Government spending which has taken place. Some authorities feel that this expenditure has not yet produced all the effects that could have been expected. But it seems clear that the broadening of indus- trial activity started with the iron and steel industries, and that much as they owe to armament and civil defence orders there was at any rate up to the end of May also a broaden- ing in the normal commercial demand. There is some evidence that in the last six or seven weeks the improve- ment in non-armament demand has been less marked.

RECORD OUTPUT LEVEL The iron and steel industries started their recovery at the turn of the year when a cut in prices combined with an increase in Government business and a normal seasonal rally to provide a strong stimulus to recovery. Recovery has been rapid end complete. In the first six months of 1939, indeed in the first five months, the whole of the ground lost in the industrial recession of 1938 was regained. In May steel production reached a record level ; in June it would have passed the May figure had there not been one day less in the month. The recession which lasted from March to December, 1938, was sharp. It reduced the monthly figures of steel production from over r,t oo,000 tons to little more than 650,000. In. May, 1939, with deliveries of air raid shelters proceeding at full pressure, the figures were over 1,200,000 tons.

The following table shows the dimensions of the 1938 recession and of the 1939 rally: IRON AND STEEL PRODUCTION IN 1938 AND 1939

1938. Pig Iron.

Tons. Steel. Tons.

Pig Iron. Tons. 1939. Steel. Tons.

January 761, zoo ...

4082,400

•••

500,500 ... 811,7oo February 693,300 ••• 1,057,600

•••

516,000 ... 971, roo March

714,600

...

1,115,800

•••

603,6o0 1,170,900 April 661,000 ... 938,600

•••

608,900 ... 1,058,20o May

633,900

•••

957,000

•••

692,100 ... 1,218,100 June

541,500

776, roo

715,70o ... 4175,600 July 507,800 ... 683,200

August 443,000 ,.. 658,900

September 429,800 . - •

754,700

October 469,40o ... 854,800

November 461,500 ... 860,000

December 445,800 . -. 655,700

Though the movements in iron and steel activity are not quantitatively typical, their direction is an invaluable guide to the industrial community as a whole because steel occupies a very special position as the basis of our indus- trial structure, supplying the needs of very many other in- dustries both of war and of peace and sharing its fortunes with them. It is concerned largely, but not wholly, with capital goods' industries, whose activities lead to further industrial production, but it also provides commodities only a few stages removed from the ultimate consumer, for example, steel sheets for the Anderson shelters and black plates for the tin-plate manufacturers. PRICE POLICY Over the last five years the steel industry has not only been rapidly growing, but more fully planned and con- trolled than other British industries. The planning em- braces policy on prices. Prices are in general based upon the cost which steel makers themselves have to meet, though they do not invariably claim the full benefit of a rise in their own material costs, and they do from time to time make reductions to stimulate new demand. This control prevented a full exploitation of the boom situation of 1937, just as it prevented the price-cutting which would normally have occurred during the recession last year, and it is now generally admitted that the control has on balance been advantageous to the industry in flattening out last year's recession. The price-reduction introduced at the beginning of this year was not considered to be called for from the strictly accounting basis, but it proved an excellent move. Subsequently the present level of prices has been continued until October.

In each of the years 1935, 1936 and 1937 the production of steel ingots and castings established a new high record. In 1937 it all but reached 13 million tons, and there can be no doubt that, making allowance for necessary repair stop- pages, the industry was then working at full stretch. During the whole of that period the physical reconstruction of the industry has been proceeding rapidly, and important new additions to capacity have been brought into effect. The new Richard Thomas works at Ebbw Vale, the new Stewarts and Lloyds plant at Corby, the important extensions to United Steel Companies Appleby Frodingham unit, the last- named still being added to, together with numerous other improvements and extensions, have greatly increased the potential output. This increase has been partly offset by the agreements granting paid holidays in the industry, since it is anticipated that the rate of production will decline in the holiday period even where arrangements have been made to stagger holidays. It is, however, believed that the present capacity of the industry has been raised to a rate of about 14,500,000 tons per annum. Theoretical capacity

is, of course, much higher. The figure makes allowance for reasonable stoppages for repairs, and is to be considered as a rate which could be achieved in practice, though not main- tained indefinitely.

INCREASED CAPACITY The important difference between the steel boom of 1937 and that of 1939 is therefore that the industry now has a margin of capacity in hand for further expansion. It is not expected that that margin will be required in the imme- diate future. Holidays, the normal seasonal fluctuations and necessary repair work should mean lower production for July and August. Although the major schemes for the growth of the industry have been completed, there still remain a few additions to capacity to be brought into effect and there seems to be no doubt that the industry is being adequately equipped for any demands which are likely to be made upon it Is it also adequately equipped to face any shrinkage in demand that it is likely to experience through a slackening of rearmament or a trade depression? Complete isolation from such things can never be achieved, but the reinforced organisation of the industry through its sectional associations and the British Iron and Steel Federation give the industry the means of working out its own protection and efforts are now being made to devise schemes of tiding over slack