STATE OF BUSINESS: The Expansion of Steel

Like the hard-pressed copper fabricators (see below), U.S. steelmakers have seldom been so hard put to supply the nation. Americans are using steel at the alltime record annual rate of 1,350 Ibs. per capita, and demand is mounting steadily for consumer goods and a host of new steel products, e.g., stainless steel sheathing for buildings. Last week in Cleveland, Republic Steel Corp. announced plans for a $130 million plant expansion program that will boost its capacity 16% to 11.8 million tons a year within 20 months. Said Republic’s President Charles M. White. 64, who succeeded tough Tom Girdler as Republic’s operating boss last June: Republic’s new expansion, launched only two years after a 17% capacity increase, is “based squarely on careful estimates of better living for more Americans. We are going to take as big a bite of the future as we can.”

Plans Aplenty. Republic’s announcement is the starting gun in a new round of expansion by all steelmakers (present capacity: 125.8 million tons). Virtually every steelmaker has definite plans for new facilities, but most are holding off until the Government decides whether de fense needs justify extension of the industry’s present fast-tax-write-off program beyond 1957. Many steelmen expect to see three brand-new U.S. Steel plants in Detroit. Houston and Birmingham by 1958. Bethlehem is also expected to start expanding again. Jones & Laughlin may build a new 2.5 million-ton plant and boost capacity 30% at its Cleveland plant. Pittsburgh Steel is expected to announce expansion plans next month.

In any case, few steel companies are in better shape to take a bigger bite of the market than Republic. Third biggest U.S. steelmaker (after U.S. Steel and Bethlehem) and top producer of alloy and stainless steel. Republic specializes in the light “growth” steels which go into industry’s mushrooming output of autos. kitchen appliances, air conditioners, etc. Largely as a result of specialization, technical advances, e.g., high-pressure blast furnace blowing and strategic location of its eleven steel mills and 30 fabricating plants, Republic has made money steadily over a 2O-year period. With its new facilities, Republic will have more than twice the capacity it had when the company was organized in 1930.

Money in the Bank. Last week, with long-term debt down to $45,868,758 (of which $33 million is a G.M. loan that Republic is repaying in steel), Republic said it plans to finance expansion largely out of its $240 million working capital, has arranged a five-year revolving credit of $75 million to draw upon if necessary. Furthermore, by adding to existing plants rather than building from the ground up. Republic will pay only $80 a ton for its new facilities, v. $300 a ton for entirely new capacity. The company is equally well fixed for raw materials. It has contracted for one-quarter of the rich ore that is already trickling in (and will pour in via the St. Lawrence Seaway by 1959) from the vast Labrador-Quebec fields, owns ore mines in four U.S. states and Liberia, operates its own coal mines and limestone quarries.

Republic’s Charlie White, who calls himself “not a professional optimist,” doubts that even the new round of ex pansion will meet the nation’s needs. White expects steel consumption to reach 1,450 pounds per capita in 1965 and top 1,500 Ibs. by 1975.