STATE OF BUSINESS: Boom

In Month I of War II U. S. production jumped from 102% of the 1923-25 average to 110. Beginning of Month II, production was around 115, headed for the 1937 peak of 118. Guarantee of its getting there is the fact that the output of U. S. industry is sold out until the end of the year, that most industries have stopped booking orders, are concentrating on making deliveries.

Steel. Typical of industries no longer making sales last week was Steel, whose customers will be amply stocked against any possible famine if only they can get delivery on orders already placed. Chief worry of the industry right now is how to keep the operating rate (last week: 87.5%, this week 88.6%; buying by consumers took up about 70%) above 85% of nominal capacity without dangerously deferring repairs, cracking up expensive new machinery, running shaky old machinery into the ground. Even small marginal companies like Tycoon J. H. Hillman Jr.’s Pittsburgh Steel Co. were defying the rule of producing with 85% of capacity and rotating 15% under repair, were actually smelting ingots at better than 100% of nominal capacity. Bethlehem’s battery of 30 old and new furnaces at Buffalo is now working at 100% for the first time in Bethlehem’s history. Steel’s (mostly Big Steel’s) last reserve of obsolescent capacity in Chicago and Pittsburgh waited to limp into action. When these furnaces are blown in to work once every five or ten years, steelmen prepare for overproduction and shutdown.

Pig & Scrap. Fourth quarter steel earnings will not be as lush as production because sheets will be going at June’s cut prices until Jan. 1. And there is a menacing squeeze in raw materials. September pig iron production rose only 12% because blast furnaces for making pig iron are in worse shape than furnaces for smelting steel ingots. Quick to profit from the scarcity of pig (price $22.50) have been the railroads and other sellers of its rival raw material, scrap, who have put the price up to $26 a ton (Aug. 31 price: $15.25). At $26, sheet mills are buying bundles of scrapped sheets which they must re-roll to strict specifications to sell for only $7 to $8 more. Rail mills are buying scrap to go into rail selling for only $14 more. Small steel companies, buying nearly all their scrap have already passed $5 of this scrap advance on to their customers, are unable to get enough raw material to fill orders even at this advanced price. Scrap is one material Europe has actually bought heavily.

Coal. Typical of industries doing so well that they were selling on a 24-hour basis, with no prices guaranteed for longer, is sick old King Coal. Exports (mostly to neutrals’ deprived of coal supplies from belligerents) are competing with forward buying by worried U. S. fuel users. Hampton Roads (Va.), which has not been a big coal port for years, took foal from Pocahontas mines at the rate of 433,066 tons a week (current Pocahontas weekly production: 6-to-700,000 tons a week). Hampton Roadsters worked days, nights and Sundays loading ship holds and bunkers. Pennsylvania Railroad’s Norfolk & Western Railway has been setting a new coal loading record daily. Mine owners have forgotten restriction agreements, are trying to get onto a six-day week. Chief obstacle: the labor supply, long unemployed and insecure, of Appalachian coal fields is now insufficient. Last week, for the first time since immigration days, mine owners were broadcasting daily appeals for miners and foremen.

Copper. But on the outskirts of the buying rush stand some industries which have already passed the peak mark of sales, are declining. Typical is copper, which the Allies have passed by in favor of purchases from African, Chilean, and Canadian sources; Germany, in favor of Balkan metal. In September copper sales had set an all time record (183,627 tons). Copper sellers sagely guarded against White House strictures on profiteering by stabilizing the price at 12¢ a pound. They guarded against overproduction by rationing customers. By the beginning of October sales had gone as low as 4,000 tons a day from a September peak of 16,830.

Most copper men, glad that they had had their innings, were content to give their customers a chance to work off the loads bought in July and September. Not so Phelps Dodge’s Louis Gates, whose customers left him high and dry last spring (TIME, May 22) when he refused to follow his competitors’ price cut to 10¢. Last week poker-playing Gates showed that he believes in flexible prices—on the up side. He posted a price of 12½¢, panicked consumers to come back into the market for more inventory. Reluctantly Kennecott and Anaconda, both with lower costs han Phelps Dodge, followed the price up, while frightened consumers bought still more. Small copper fabricators, worried, ike small steelmen, about the rising price and shortened supplies of their raw material, began to exert political pressure on Washington to halve the 4¢ a pound copper tariff, in order to unfix the copper market by bringing 6 to 8¢ Chilean and Canadian Copper in. President Franklin Delano Roosevelt, his eye on scrap and steel as much as on copper, addressed another letter to Wyoming’s Senator Joseph (“Dear Joe”) O’Mahoney, charged his Temporary National Economic Committee to guard against price profiteering. This time the President meant business.

Wool, Burlap, Manganese. Copper sales may have dropped, but typical of industries still selling in a frenzied market to customers fearful of a famine of imported materials is carpet wool, currently being consumed at the fastest rate in history: (September consumption, 16-to-17,000,000 grease pounds). Last two months stocks have been reduced by 10,000,000 grease pounds. Shrewd speculators bored with the stockmarket’s stalling with the headlines, have made wool a medium for some pretty certain cleaning up if Europe stays at war; spot wool is priced at $1.26, cannot be bought anyway, but wool for delivery in July 1940, when the war shortage should be much worse, is priced at only $1.09. A less obvious bet, already paying cushy dividends, is burlap, imported from Calcutta, where a monsoon run on the warehouses is going on. One use for burlap is binding the springs of auto seats—it removes the squeak. Last week one auto parts supplier was “in” more cash as profit on burlap inventory warehoused well before the war, than it hopes to make from its seat division all year. Another company standing to clean up on a raw material shortage is Freeport Sulphur Co., which in addition to handling a thriving chemical business, owns 89.84% of up-and-coming Cuban-American Manganese Corp. Last week insurance companies, at wits end to know what to do with their money in this war market, put $3,000,000 of it in some 3% Freeport Sulphur bonds. This cheaply rented $3,000,000 will have plenty of work to do in Cuba and the U. S.