STEEL: Jap Scrap

When Mussolini was winding up for his dagger thrust at France last month, the pauses and flourishes were not merely for effect. They were partly stalls for time: time for his purchasing agents in the U. S. to move as much as possible of the 250,000 tons of scrap iron and steel they had just bought (TIME, June 10). By the time the stiletto fell, all but 60,000 tons of this order had been shipped.

The Italian purchase, more than twice their normal year’s imports from the U. S., scarcely rippled the usually nervous U. S. scrap market. For that II Duce could thank the timely cooperation of that market’s most persistent nuisance—Japan. The Japs have bought an average of 1,770,000 tons of U. S. scrap a year for the past three years. Last month they knew that U. S. steel industry operations were rising again, and that steel mills were likely to start bidding for scrap. They knew also that throwing big foreign orders into the market when U. S. mills are buying invariably skyrockets the price. So, while taking delivery on old orders at the rate of 70,000 tons a month, they were content to stand aside on new orders and let Italy have the export market to herself. It kept the price down, and helped the Fascist cause.

By last week Japan was able to show Mussolini just how grateful he ought to be. Japan was short of scrap; her steel activity was being choked down; furnaces that run on high-grade U. S. scrap operated at as little as 50% of capacity. Japan the scrap buyer had lost time to make up.

So last week the Japanese returned to the market, ordered 300,000 tons from U. S. scrap brokers for delivery this summer. Again their timing was smart. From last fall’s high of $26, the scrap price had fallen to around $18.50-$19.50. Biggest steady factor in the market has been Britain, which is now paying $18.50 a ton (subject to monthly adjustment when the market moves). But brokers were hungry for big orders. When the Japanese dangled 300,000 tons under their noses, the price went down to $16.50.

With Japan back at her tiresome game of arming with U. S. materials—this time in the very week when President Roosevelt signed a bill to build a two-ocean Navy—U. S. steelmen (especially little steelmen) began to grumble again. How could they be expected to expand production for Defense, they asked, if the “damn-japs” were to be allowed to diddle the scrap price, perhaps clean out the country’s junk yards in the process? They pointed out that the West Coast, where scrap consumption is certain to grow with expansion for Defense, has encountered scrap shortages in previous production peaks. They cited a recent statement of the Institute of Scrap Iron and Steel (which is all for free trade in scrap) to show steel’s increased dependence on scrap: from 1920 to 1938 U. S. steelmaking capacity rose 30%, while capacity for making pig iron (the only alternative to scrap) fell 2%. They wanted to know why Defense Advisory Commission’s Ed Stettinius hadn’t put scrap on his list of embargoed strategic materials issued four weeks ago. Scrap brokers could retort that there is no scrap shortage as yet. But if Defense orders put steel’s autumn production rate as high as patriots hope, steel mills will have to buy in a sellers’ market whose origin can be blamed in good part on Japan.