Steel: Price Rise

Because the economy is so finely balanced, the Administration has been keeping an especially sharp eye out for any price hike that might signal—or set off—a trend toward inflation. Last week Bethlehem Steel Corp., the nation’s second biggest steel producer (after U.S. Steel), increased by $5 a ton (to $119) the price of its steel structural shapes and piling. The price hike covered only 5% of all Bethlehem’s production, was for a specialty steel that is used mostly in construction and does not appear in such consumer goods as autos and refrigerators.

Despite the limited nature of the price increase—which Bethlehem clearly expected the other steel companies to follow—the Administration reacted with quick disapproval. Gardner Ackley, chairman of the President’s Council of Economic Advisers, called the move “inflationary and not in the public interest.” The increase, he said “does not appear to be justified under the council’s guideposts, based on the information available to the Government.”

After Lyndon Johnson had had a while to think it over, he issued from his ranch a statement charging that there was “no justification for the action” and asking that Bethlehem representatives meet immediately with the council members. Added the President:

“This is certainly no time for unwarranted price increases which can lead to inflation. It is time to consider the larger national interest, to weigh the impact of unnecessary price actions against the sacrifices of our men in Viet Nam, and to act accordingly.”

That seemed like quite a reaction to a price increase that touches only 7% of total steel production in the U.S., but the Administration obviously feels that even a minor hike might act as a symbol to encourage others to raise prices. Bethlehem may have to back down, but it will not be because of a repeat of the Administration’s successful use of stockpiles to force back price increases in aluminum and copper. The government has no stockpiles of steel. What it does have is a voice that is very hard to ignore when it is insistent.