Scrap Squeeze

Last week, day before Japan threw a scare at the U. S. by signing a pact with Berlin, President Roosevelt struck a blow at Japan. He prohibited the export after Oct. 15 of all U. S. steel scrap, except to Great Britain (now U. S. scrap customer No. 1) and countries of the Western Hemisphere (which means Canada). But Japan depends on the U. S. for practically all of her scrap, is U. S. scrap customer No. 2 at present. The embargo, as the Japs knew, was aimed at them.

This was one Roosevelt measure which Republican Steelmaster Ernest Tener Weir welcomed. He even thought it overdue. Moving his never-lit cigar from mouth to desk, he glowered: "It is too bad that the Administration did not see fit to heed the repeated warnings of businessmen against the continuous, large-scale exportation of scrap. . . . Even now, since the embargo is not effective until Oct. 16, exportations can continue for more than two weeks. With scrap-steel stocks already so badly depleted, I can see no justification for the delay."

New Dealers like Leon Henderson, fervent Weir-haters all, agreed with his criticism of the Administration for having been so slow. Their common ground: U. S. pig-iron production has lagged behind the steelmaking rate, forced steel men to use more & more scrap in each melt. But steel operations, at capacity for weeks, are already running ahead of the scrap supply. Best evidence of the scrap squeeze: in depressed 1938, the industry melted 18,000,000 tons of scrap, of which 10,000,000 tons were piled up out of waste material at its plants, 8,000,000 tons bought. Last year it used 28,600,000 tons, of which it had to buy 11,000,000 tons. Last week, scrap consumption was at the prodigious rate of 48,000,000 tons a year, of which nearly 20,000,000 tons have to be bought.

Better prepared for this squeeze than U. S. industry was Japan. In 1937, again in 1939, Japan's measly 7,000,000-ton-a-year steel industry fed on some 2,000,000 tons of U. S. scrap. This year, the Japs have braked their steel production; cut scrap purchases to 900,000 ton rate. Even this is more than their recent requirements. From it the Japs have built a scrap stock pile good for about six months.

The U. S. is today the world's only important source of scrap. When Japan's stock pile is gone, she will have either to get scrap from Germany, if Germany can deliver it, or the Japanese steel industry must switch from scrap to pig iron. To do so, the Japs must get the Germans to build them some good blast furnaces; they must also get the Manchukuoan mines into real production, or get ore from Russia.

Projecting future trouble for Japan, the U. S. scrap embargo was a relief to the U. S. Only ambiguous reaction was that of the Scrap Iron & Steel Institute, which has long argued that there was plenty of scrap for everybody, including Japan. Last week the Institute's president, Joseph E. Jacobson, bowed his head, called the move a very good one. Since Mr. Jacobson's industry has long been condemned for selling scrap that the Administration did not have the diplomatic courage to tell it not to sell, the scrap men welcomed the embargo, which relieves them of any moral responsibility.

But the Institute went on to point out that British and Canadian scrap buying is 50% ahead of Japan's, implied that maybe Britain should be embargoed too. It was not a popular hint. A spokesman for the Independents, most scrap-hungry element in the steel industry, is Robert Wolcott of Lukens Steel. He thought scrap exports, even to England, should have been forbidden three years ago, said last week's embargo "has averted a crisis in my business." But he did not ask for more. Said he: "I suppose England is now our ally and first line of defense, so an embargo on scrap to England is now out of the question."

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