Steel Steps Back

In a time of persistently rising prices, last week's announcement by U.S. Steel Corp. had a man-bites-dog quality. The company, which usually sets steel pricing patterns, had announced three weeks ago that on Oct. 1 it would raise the price of sheet steel, which is used in a wide variety of consumer goods from autos to washing machines, by an average of $10 to $15 a ton. U.S. Steel's competitors quickly followed its lead. But then Armco Steel Corp., in an extraordinary move for the clubby steel business, broke the united front and said it was deferring its planned increases until Jan. 2. Last week U.S. Steel reluctantly canceled its boost, and the rest of the industry fell into line.

Armco cited "a lack of support for the Oct. 1 effective date by some competitors." As translated by industry sources, this meant that Chairman William Verity Jr. had become irritated when he learned that some steelmakers were making deals to ship flat-rolled steel to selected customers at the old prices after Oct. 1. Verity's move immediately put pressure on competitors to scrap plans for an increase and thus keep pricing policy out in the open.

Good News. There is some doubt whether the market for steel is strong enough to support a new price increase. The attempted hike would have been the third in the past year. U.S. Steel, for example, lifted prices on sheet products by 14% last October and another 6% in June. At the same time, the industry is faced with weakening demand for flat-rolled products. Though automakers' sales are booming, purchases of appliances and other household goods are lagging.

The rollback was one of two pieces of good news for Ford Administration inflation fighters last week. They also were able to report that wholesale prices, after three months of small rises, declined in July by .1%, due mainly to a drop in farm prices. White House officials attributed the steel price cancellation to market forces and insisted that no pressure from Washington was exerted on the steelmakers.

The cancellation will head off prospective price increases on appliances, air conditioners, mobile homes and other products. The Speed Queen division of McGraw-Edison Co., for example, dropped plans to raise the price of its washers and dryers by $10 to $20, and Magic Chef put off a proposed price hike on ranges. Whatever anti-inflationary benefits result could be short-lived, however. Few analysts are betting that steelmakers will not try for another boost before the year is out. Says one Wall Street expert: "The first half-hour that they feel the demand is there, they'll try again."

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