Rift in the Ranks

Even before its hefty wage settlement early this month, the steel industry was braced for a slack third quarter. Most big customers are still using up the steel they stockpiled as a hedge against a possible strike. Nonetheless, steelmakers, led by U.S. Steel, announced an 8% across-the-board price increase to take effect on Dec. 1. Behind the scenes, though, hard-pressed companies began seeking sales by offering discounts--urging automakers to sign orders for cold-rolled steel before the increase and take delivery afterward at current prices. Last week an open rift developed within the industry when Bethlehem Steel, the second largest producer, said it was deferring until Feb. 1 its increase on cold-rolled steel used in making auto bodies.

By extending the time allowed customers to buy steel at the cheaper rates, Bethlehem was only making public essentially the same offer that some other steelmakers were granting with their discounts. Other steel firms now are likely to find themselves compelled to follow Bethlehem's lead. "It looks like Bethlehem is playing price policeman again," noted one steel executive.

Though price hikes on all other steel products are so far not affected, there is growing doubt as to whether the industry can make its increases stick in such a soft market. In fact, two weeks ago, Bethlehem and National Steel undercut by as much as 1% the 8% boost posted by U.S. Steel on tin-mill products used in cans. For all the competitive scramble, there are strict limits on the extent to which the industry can cut back or discount its posted prices. The recent settlement with the United Steel Workers will cost more than $1 billion in extra wages and fringe benefits during the first year alone--effectively precluding any all-out price war.

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