of course, on scrap supply. Complete data on scrap use for iron and steel making in 1948 were not available. Preliminary data indicated a higher percentage of scrap consumption in 1948 than in 1947. Making due allowance for the presently indicated improvement in the scrap situation, there would still be need of additional pig-iron production and producing capacity to meet requirements indicated by this analysis of the problem of steel supply.

There may, in fact, be a better case for substantial expansion of pigiron-producing capacity than for a similar expansion in steel-ingotproducing capacity. The need indicated above is for about 68,000,000 net tons of pig iron and for nearly 76,000,000 tons of blast-furnace capacity.

The precise relationship between capacity as normally calculated and production depends greatly on technological and operating factors. Recent improvements in furnace design and operation may greatly increase the output from a furnace of given size, while on the other hand poor quality of the ore and the coke greatly reduce the output.

The needs of the country, both economic and security, make it desirable to look at this matter from the standpoint of providing a reasonable margin of safety in planning capacity of pig-iron production. There is a good case here for considering a stock-pile program to smooth out fluctuations in demand and to provide needed insurance for periods of extraordinary demand for iron and steel.

The location of additional capacity in blast furnaces is a real problem. How to bring together the iron ore, the coke and the fluxing materials to produce the lowest assembly costs, when no one knows where the iron ore is to come from during the lifetime of the furnace, is a problem to stump the experts. The problem must be solved, however, and time is running out. The subcommittee feels that this too is a matter of public, as well as of corporate, interest.

IRON AND STEEL SCRAP

There has not been enough scrap in recent years-there isn't enough yet and there may not be enough for a long time to come to restore the proportions of virgin metal and scrap that have best served the steel-making furnaces and the foundry cupolas in the past. Increased use of scrap is ordinarily the best way in which to increase steel supply quickly; it is also of great importance in stretching our disappearing reserves of high-grade iron ore. A ton of scrap in the furnaces or cupolas will save mining, transporting, and reducing nearly 2 tons of ore.

The annual review of the scrap situation by the Scrap Iron and Steel Institute, reproduced as appendix E, high lights the improvement in supply in 1948. At the same time, it indicates that increased production of steel in 1949 will increase the demand for scrap. Obviously, there should be no relaxation in efforts to increase the scrap supply either from abroad or from domestic sources.

COKE SUPPLY AND COKE-PRODUCING CAPACITY

The margin between indicated coke requirements and coke-producing capacity presently available, and planned for 1949, is smaller than is the case with pig-iron and steel-ingot production. The basic

problems in this area appear to be in the supply of clean coking coals and in the transport of coal to the places where the coke is now or will be needed. The Department of the Interior has been directed to make a study of coal supply which should provide realistic data, in the near future, for an appraisal of this important aspect of the steel problem. The subcommittee urges that this investigation be pushed to completion at the earliest possible moment.

STEEL PRODUCTION AND INGOT-PRODUCING CAPACITY

This has been the focal point of the controversy on steel supply. Obviously additional steel-making capacity would be needed to provide a base for additional finished steel output. The ratio of output to capacity depends, however, to a very large extent on raw materials and operating conditions and on the degree of conservatism used in rating output capacity.

Successful use of oxygen, for example, might boost the output of furnaces substantially and provide peak capacity for emergencies, but it might not be used as a factor in rating furnace output. A 10-percent addition to the expected capacity as of January 1, 1950, of 98,303,930 short tons would give a steel producing capacity, if it could be sustained, of around 108,000,000 tons. The bright optimism of several years ago as to early results from this technological improvement has faded somewhat because oxygen production would have to be on a scale never dreamed of before. Equipment to produce it cannot be taken off the shelf.

The possibilities of oxygen and other technological improvements as a means for providing peak capacity to present equipment should have an important place in a complete study of the steel situation.

The problem of substantial addition to ingot producing capacity probably is no longer one of piecemeal addition to existing place. The reluctance of the large operators to take action in view of the uncertainties of ore supply or to announce contemplated action because of competitive relationships is understandable. The public interest however, is involved in this issue in a very large way. A proper recognition by the steel makers of the serious factors involved in this matter should impel them to cooperate fully and frankly with responsible Government authorities in an attempt to state the problem and find answers that are compatible with both the national interest and the maintenance of free competitive enterprise. The fact that such an attitude has not been too apparent in the past probably is largely responsible for the development and extension of the present controversy on steel.

STEEL ROLLING AND FINISHING CAPACITY

No attempt has been made in this analysis to determine even approximately the gap, if any, between needs for finished steel and the capacity to produce it. Statistically it might be quite adequate over-all and yet be out of balance for specific items at any one time according to the product mix required by the demands of industry.

This analysis, for example, shows an indicated demand for 71,500,000 tons of finished steel. The 1948 edition of the Iron and Steel Works Directory (published by the American Iron and Steel Institute) shows total capacity for finished hot-rolled products of over 74,000,000 net

tons. This capacity is supposed to be related, in the words of the directory, "either to the available supply of ingots or to actual performance in production."

The production of finished steel is said by Iron Age (p. 201, Jan. 6, 1949) to be out of balance with ingot capacity by at least 2,500,000 tons, or perhaps 3,000,000 tons, so that ingots produced in one plant through "conversion deals" have been moved to other plants with available finishing-mill capacity. The general inference is that more finishing capacity is needed in the industry and that the large integrated companies are well justified in making their huge expenditures for finishing capacity.

The justification may be there, for the country as well as for the individual company, but it should be noted that while the integrated companies have been adding importantly to their finishing capacity, the semi-integrated and nonintegrated mills have been unable to obtain enough raw steel to keep their finishing plants fully occupied. The subcommittee has made an investigation (reported in Part III) that discloses unused finishing capacity in the semi- and non-integrated plants during the first 6 months of 1948, sufficient to produce about 2,000,000 more tons of finished steel annually. This capacity if fully used during the past year would have taken up much of the unbalance referred to by Iron Age. A large proportion of the unused capacity was in strip, bar, plates, pipe, and wire products so much in demand by small manufacturers. The reason given by the smaller operators for their failure to utilize their finishing mills at capacity rates was their inability to obtain raw steel (billets, sheet bars, skelp, wire rod) that had formerly been supplied by the integrated companies. The situation that the smaller concerns in the steel industry now face was forecast in testimony before the Steel Subcommittee July 10, 1947. (See hearings of the Steel Subcommittee, pt. 15, pp. 1720 to 1762.)

It would seem that the interests of the country, and certainly of small business would best be served by making the fullest possible use of existing finishing capacity. A recent technical development that should be of great value in this connection is the method of direct casting of billets through a process jointly worked out by the Republic Steel Corp. and the Babcock & Wilcox Tube Co.

A very large proportion of the finished steel is rolled from billetsized raw steel. The time-honored process of pouring steel into large ingots and converting them into billets requires the use of very heavy rolls and other expensive equipment and the expenditures of large amounts of power not needed in the direct casting process for making billets.

Other important advantages of the new process are much smaller investment and less expenditure of steel and other critical materials. in plant construction than would be required under conventional methods to produce an equal tonnage of billets. Prompt and careful study should be made to determine the possibilities of early and wide. use of the new process as an important part of the solution of the steel supply problem.

The subcommittee is of the opinion that one of the ways in which to obtain prompt and economically sound relief for the steel supply problem is to utilize effectively all of the resources in iron and steel production that we now have available. It is not at all certain that is being

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done now. Certainly that avenue should be fully and quickly explored so that any possibilities in this direction can be utilized now while we need steel so badly. Whatever may be the merits of the case for radical expansion of iron and steel producing capacity, relief cannot be obtained quickly in that direction. Small business needs relief now. It is in the interest of the steel industry as well as the Government to move in fast to provide that relief.

REPORTED CHANGES IN CAPACITY BY THE STEEL INDUSTRY

Wide publicity has been given to the expenditures by the steel industry since the war to add capacity and improve the existing plant. Undoubtedly these expenditures, for the most part, have been helpful to the individual companies. Where they have resulted either in increased basic capacity in coke, pig iron and ingots or of greater use of existing facilities, they have added to the steel supply of the Nation. Analyses of the results of such expenditures to date as reported by the American Iron and Steel Institute show that the gains in capacity from the high point of the war, 1945, have been disappointingly small, especially considering the demand for steel. The gain in steel-ingot capacity from January 1, 1945, to January 1, 1949, was only 616,000 tons; six-tenths of 1 percent. The 10 largest companies showed an actual loss in capacity of 2.5 percent in that period, which was compensated for to some extent by the gain in ingot capacity in smaller integrated and semi-integrated mills of 15.2 percent; or 2,596,000 ingot tons. There was a net gain in coke- and pig-ironproducing capacity in the 10 largest integrated companies, but here again the gains in capacity, percentagewise, in the smaller companies was much greater than in the large companies. The details of this analysis are shown in the tabulation in appendix N (summary of the capacity of the industry to produce iron and steel, 1938, 1945, 1947, and 1949).

It is realized, of course, that some of these changes in capacity position have been due to sales of property and to various acquisitions of Government-built facilities. For example, the sale by United States Steel of the Farrell works with nearly 1,000,000-ton ingot capacity to Sharon Steel Corp. added materially to the capacity of the group of smaller integrated producers.3

The courage of the smaller steel mills in adding materially to their producing capacity in the face of their present difficulties in obtaining materials and long-term uncertainties, forms a noteworthy contrast to the general performance of most of the large units in the industry in adding to the net iron and steel productive capacity of the Nation.

* See appendix G for details on locations and ownership of coke, iron, and steel capacity.

PART III

ANALYSIS: SURVEY OF CAPACITY AND OUTPUT OF
SEMI- AND NON-INTEGRATED STEEL MILLS

INTRODUCTION

When the questions of steel supply and what to do about it are discussed, the principal, if not the sole, consideration is given to the operations of the large integrated companies or of the steel industry as a whole. This completely neglects the semi-integrated and the non-integrated steel companies, and the contribution they can make toward relieving the supply problem.

Obviously when supply is so short, every avenue for providing additional supplies should be explored. Testimony introduced at hearings of the Steel Subcommittee and many complaints from the smaller producers and users of steel have indicated that the capacity of this segment of the steel industry is not being fully used to produce and roll steel.

The subcommittee therefor sent a questionnaire to all the semiintegrated and nonintegrated producers of steel in an effort to ascertain the facts about unused capacity in these mills and the reasons for such below capacity operation. These questionnaires (sample form in appendix H) were sent on November 22, 1948, to 60 semiintegrated-steel companies and 126 nonintegrated companies listed in the Iron and Steel Works Directory.

Semi-integrated steel companies are those that have steel-making furnaces (open hearth, Bessemer or electric) and equipment to roll or forge steel. They do not have blast furnaces so must buy the metallics required for steel making (pig iron and scrap) in the open market. The integrated mills, and to some extent the merchant blast furnaces, are their source of supply of pig iron. They produce and sell both semifinished and finished steel products.

The nonintegrated steel companies have rolling mill and other equipment for finishing steel. They do not have either iron-making or steel-making furnaces so have to buy their raw material, semifinished steel, in the open market. Both integrated and semiintegrated steel mills have customarily been their sources of supply. Of the 60 semi-integrated concerns listed in the directory, 44 replied to the subcommittee's request for information and 39 of these replies were in sufficient detail to permit analysis. In comparing the steel-making capacities of the reporting companies with the capacities of the nonreporting companies, as shown by the 1948 edition of the Iron and Steel Works Directory, it was found that the data received covered 80 percent of the total steel-making capacity of the semi-integrated companies, 84 percent of the electric-furnace capacity, and 83 percent of the open-hearth capacity. The coverage was thus adequate for purposes of analysis of the semi-integrated steel mills.