World Trade: The War over Steel

Steel, the world’s basic industry, is locked in a bitter international price war. With steel profits sliding in almost every industrialized nation—the auto boom and buying as a strike hedge made the U.S. an exception in the year’s first half —catcalls and complaints of dumping and cheating are flying back and forth across national borders.

U.S. steelmakers complain of inroads by the Western Europeans; the French snap crossly at the Belgians; the Germans lash out at the British, the French, the Belgians and the Swedes; and no one, of course, has a kind word for Japan’s low-cost producers. Last week, alarmed that undercutting foreigners have grabbed more than 21% of the German steel market, German steelmen vowed to risk a loss to meet the price of any cut-rate competitor.

Need to Keep Up. Saturation is the word the world’s steelmen use to describe the situation. “As civilization advances in any nation,” says President Shigeo Nagano of Japan’s Fugi Iron & Steel, “consumption of steel rises, but at a certain point it reaches the saturation point and levels off. Advanced industrialized nations currently have reached or are fast reaching that saturation point.” International steelmakers figure the saturation point at about 1,100 Ibs. a year per person;* when a nation reaches that level of steel consumption, such substitutes as plastic and aluminum begin to cut severely into steel sales. By this yardstick, the U.S., West Germany and Sweden are already near saturation—and several other countries are on their way.

Last year’s world steel production of 370 million tons represented only an estimated 75% of total capacity. Yet capacity often rises much faster than demand, driven upward by the new nations’ longing for steel mills of their own and the competitive need of industrialized nations to keep up to date. Japan’s steel industry has grown at the remarkable rate of 18% a year for six years; Germany’s has risen at a 7.2% rate, France’s at 5.2%, Italy’s at 6%.

Secret Rebates. With too much steel to sell at home, the world’s steelmen have turned to pushing steel exports, often at slashed prices. The Swedes have undercut the Germans by $9 a ton in Germany; the Japanese have moved heavily into the U.S. West Coast market with cheaper prices than U.S. firms in almost all steel products. At one ridiculous point, the British undersold the Belgians in Belgium—while the Belgians were underselling the British in Britain. Within the gentlemanly European Coal and Steel Community, where competition is supposedly regulated, secret rebates are given, and many steel firms keep two sets of books to hide the fact that they deliver 11,000 tons of steel for the price of 10,000.

As a result of the worldwide steel situation, the French have already chopped back their long-range expansion goals for steel, and Belgium’s giant new Sidmar mill will open in 1965 with one-third less capacity than originally planned. A tenuous “gentleman’s agreement” was reached recently between Common Market, British and Japanese steelmen to stop undercutting, but the agreement does not seem to have made much difference. Most steelmakers see little easing of the competition until steel consumption begins to rise among the 80% of the world’s population living in the developing nations, who now use only 20% of the world’s steel output.

*A family with a medium-sized car, a refrigerator, a stove and a washing machine is apt to own about 2,500 Ibs. of steel. But the 1,100-Ib. saturation figure (which also includes the steel in the building a man works in, the bridge he crosses, the commuter train he rides in) is reached by dividing all the steel purchased in a nation each year by the entire population.