"Steel at Any Price"

In the list of 15 stocks most popular with investment trusts, compiled annually by Frazier, Jelke & Co., Manhattan brokers, appeared a notable new name last week. Tied for 15th place with Westinghouse Electric was U. S. Steel, which was not in the list even in 1929, when the company made $197,000,000 and its stock sold at a high of $261 per share.* As it turned out, U. S. Steel was a good stock to avoid, for it sank to a Depression low of $21 and even at the turn of this year could be bought for $75 per share.

Since then, in the face of continual talk of a steel strike, the stock has climbed steadily, crossing par last month. By the start of last week Big Steel had assumed its pristine place as the stockmarket's undisputed leader. Evident it was by now that some people either knew or suspected that a long and costly showdown between the Steel Corporation and the CIO was not inevitable. Sure enough, the announcement soon came that President Benjamin F. Fairless of U. S. Steel's biggest operating subsidiary, Carnegie-Illinois Steel, was conferring with the Steel Workers Organizing Committee, followed by the historic revelation that Chairman Myron C. Taylor had reversed U. S. Steel's long-fought stand against Organized Labor in a series of heart-to-hearts with John L. Lewis. Big Steel common bounded forward $14 per share for the week, closing at $126.

Under Steel's leadership the whole stockmarket advanced to new Recovery highs, ending the week at levels abreast of 1931. In its unyielding attitude toward Labor, U. S. Steel has always been an inspiration to anti-union executives, not only in the rest of the steel industry but in all industry, and its capitulation would give pause to many another management. Wall Street did not relish unionism any more than it had before but it realized that there might be more profits in industrial peace than in industrial war--at least until the next election.

This realistic viewpoint was discovered and front-paged by the New York World-Telegram in the well-carpeted offices of "two financiers closely identified with Morgan interests." Otherwise unidentified, these two bankers predicted complete unionization of U. S. industry in the near future, conceded that it might be a good thing, provided Labor was willing to assume the responsibilities of its new-found importance. Whether the House of Morgan was now lending its influence to John L. Lewis' cause no one who knew would tell. Certainly Steelman Taylor would not have acted without the advice and consent of the Morgan-Baker group which has dominated U. S. Steel since it was founded in 1901. And, as the World-Telegram pointed out, the "partners of that firm are known to have been very much impressed by the last Presidential election."

How important a new viewpoint at the House of Morgan might be was highlighted last week by publication of that long-awaited, already-quoted study financed largely by the University of Pittsburgh and the Falk Foundation, The Economics of the Iron & Steel Industry, a two-volume, 1,188-page work by the University of Pittsburgh's Carroll R. Daugherty, the University of Virginia's Melvin G. de Chazeau and Harvard's Samuel S. Stratton (McGraw-Hill, $12). Concluded these authorities: "Of all the factors reviewed . . . affecting the future of labor democracy and industrial peace in the industry, the single most important one appears to be the attitude of the large, powerful steel companies and of the persons who control their policies. Until they have undergone substantial alteration and revision, one may doubt that real democracy will replace fundamental autocracy in the industry or that labor peace therein will have a solid basis."

But even peace costs money, and U. S. Steel promptly let the public in on that fact with a laconic statement from President William A. Irvin that prices would be upped to "meet steadily increasing costs of production." Said he: "Although advances to labor in the matter of higher wages and shorter hours are a compelling factor, a price rise was inevitable due to the fact that quotations on scrap iron, constituting 40% of the makeup of steel, have risen from $14.96 per ton to $19.88 since Feb. 1, 1936." The increases in the price of steel ranged from $3 to $8 per ton, leaving the "general level of prices for steel products slightly higher than that prevailing in 1926, when the basic labor rate in Pittsburgh was 44-c- per hour as compared with the new rate of 62-c- per hour."

Like the wage boosts, price boosts last week were general throughout the industry. It was obvious that the traffic would bear them. The steel industry was operating at 87% of theoretical capacity (69,000,000 tons per year), and that rate was close to the efficient maximum. Already it was hard to get enough coke. Movements of Superior iron ore this year were expected to be limited only by the capacity of Great Lakes shipping, and an increase in ore prices for the first time in eight years was on the way. Pig iron prices were hiked $2 per ton last week to the highest level since 1923 ($22 per ton). In scrap, confusion reigned. So much has been sold for export to rearming Europe that there are not enough vessels to carry it.* As for steel itself, a shortage in some lines was no longer a threat but an actuality. In Pittsburgh last week it was freely predicted that buyers would shortly be crying: "Steel at any price."

Though the booming industry was willing to play along with U. S. Steel in the matter of wages, hours and prices, it showed no conspicuous haste in asking John L. Lewis for collective bargaining appointments. Myron C. Taylor has been more circumspect in public statements about Organized Labor than some of his hard-boiled fellow steelmasters. They would probably not receive the shrewd compliment paid last week by Mr. Lewis to Mr. Taylor's "industrial statesman-ship." Rumors flew that Mr. Taylor's feat of industrial statesmanship might be crowned with White House recognition in the field of international statesmanship. Promptly denied, the amazing story was that Myron Charles Taylor was now in line for a New Deal Ambassadorship, perhaps to the Court of St. James.

*New Era favorite was Consolidated Gas, followed by Electric Bond & Share and American Telephone & Telegraph Co. All these have since disappeared from the list, which is now led by General Motors, International Nickel and Chrysler. *So urgent is its rearmament program that Britain last week halved its 20% duty on steel, abolished its duty on iron.

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