End of a Battle?

A bold and able man is William Loren Batt. In public life he is Ed Stettinius' deputy in the Industrial Materials Division of the Defense Advisory Commission; in private life he runs the U. S. end of the international SKF ball-bearing business. One night last week Mr. Batt went to

Manhattan to talk at the annual dinner of the American Society of Mechanical Engineers. There he gave a powerful sermon about the facts of contemporary life. He told off the experts of Information Please for not knowing who does what on the Defense Commission; praised the new kind of "epic" leadership British labor has given democracy; called for the creation of a council to plan post-war prosperity.

He also made a highly significant announcement: the U. S. steel industry, now operating at the highest rate in its history (78,000,000 tons a year), must either build new capacity or begin rationing its customers. "I am convinced," said Deputy Batt, "that the steel industry must enlarge its capacity, and I see indications that the industry realizes it too."

If Mr. Batt's indications were no mirage, they meant the end of one of the stormiest battles yet behind the scenes of the Defense Commission. Opposed for weeks were stand-pat steelmen, represented in the Commission by American Iron & Steel Institute Secretary Walter Tower, and expansion-minded New Deal staff economists, who want enough steel to handle defense and normal steel needs both. Mr. Tower has frequently boasted of the industry's readiness to handle any emergency without expanding. Republic Steel's Tom Girdler echoed him: "If ev erything in this country was in as good shape as steel to supply the national-defense program and England, there would be nothing to worry about." U. S. Steel President Ben Fairless last fortnight made capital of the 12,000,000-ton steel-ingot expansion which his industry has completed since Depression.

To the New Deal economists, such talk sounded pre-boom and pre-emergency. Against present theoretical capacity of 83,000,000 tons of ingots, they figure steel demand for the year ending June 30, 1942, at 95,000,000 tons of ingots (of which 75,000,000 tons will be civilian, about 16,000,000 tons will go into exports, 4,000,000 tons will go into defense).

Last week, just before leaving Washington, Franklin Roosevelt took a hand in the controversy. He called in ex-Steelman Stettinius, told him he wanted less talk about steel and more steel. Weighing on his mind were such facts as this: if the railroads were at last to start buying equipment in a big way. the Government, to give the railroads priority in steel, would have to curtail civilian sales & employment. This week Stettinius' materials division rushed work on its final steel report to be handed to the President when he returns. Meanwhile the National Resources Planning Board fortified the expansionist position with a steel report of its own. (Author: Louis Paradiso, under the direction of Gardiner C. Means.) Taking the long view of how much growing the U. S. has to do, it estimated pig-iron (and ferro-alloy), steel-ingot and rolling-mill capacity needed for full production at various levels of future national income.

For a national income of $83 billions,* Means & Paradiso estimated, the U. S. will need 6,900,000 tons of new pig-iron and ferro-alloy furnace capacity, 15,400,000 tons of new steel-ingot capacity, 2,600,000 tons of new rolling-mill capacity. For a national income of $94 billions, the U. S. will need 26,400,000 tons of new pig-iron and ferro-alloy, 40,200,000 tons of new ingot, 11,600,000 tons of new rolling-mill capacity.

If the New Dealers are right about their figures (and the U. S.'s chances of attaining them), the steel industry cannot expand too soon -- especially since it takes up to a year and a half to install new blast furnaces and rolling mills. Last week, in spite of the Tower, Fairless and Girdler pronouncements, it had begun to do just that. Last month Mr. Fairless' Tennessee Coal, Iron & Railroad announced a 20% increase in pig-iron capacity (TIME, Nov. 25). Fortnight ago Mr. Girdler announced another 60,000-70,000-ton electric furnace. Last week he followed that up by ordering a new 100,000-ton cold strip mill. But the No. i independent, cold, canny Eugene Grace, topped them all.

For several weeks Mr. Grace has negotiated for a Certificate of Necessity from the Navy, to insure Bethlehem (which is also the No. 1 U. S. shipbuilder) the most favorable tax deal possible in amortizing any new plant it might put up.

Last week Mr. Grace announced that Bethlehem will expand $18,000,000 worth by enlarging its ingot capacity 8% (by 850,000 tons). With the Navy deal, he could look forward to having his latest additions all written off in five years, after which he would enjoy lower costs than competing mills already built if steel then goes back to buyers' markets and price wars.

But last week steel was very much a sellers' market. Best evidence: steelmakers, who reaffirmed the present posted prices for the first quarter of 1941, were actually getting the posted price on new business instead of special bargain rates. In effect, steel users are paying at least 10% more than during most of the last few years.

Not only steel, but steel's own raw materials, were tightening up last week. Most important is iron ore: there will be no traffic on the Great Lakes for the next six months or so, yet there is barely enough ore at the mills to sustain the present rate of consumption of over 6,000,000 tons a month. Scrap prices have risen 50-c- to $1.50 a ton since mid-October in spite of the export embargo. Tighter still was coke. The U. S. has plenty of coal underground, but its coke ovens (including many an obsolete beehive oven) are at full blast. Last week newspaper readers were jolted to read that steelmen had let U. S. coke stocks dwindle to less than two weeks' supply. They had either to discontinue monthly U. S. shipments of 55,000 tons to Canada, or to start importing coke. Likeliest U. S. coke supplier: England, which has it to spare.

* Fourth quarter U. S. national income, announced Jesse Jones last fortnight, is running at the rate of 76 billions.

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