Of the 126 nonintegrated companies questioned, only 19 failed to reply; 9 of the concerns had gone out of business; and 14 of the returns had incomplete data. The coverage as to number of companies analyzed was 84, or 67 percent of the number queried.

INFORMATION DISCLOSED BY ANALYSES OF THE QUESTIONNAIRES The 39 semi-integrated mills that were analyzed in the subcommittee's survey could have produced at least 600,000 additional tons of ingots in 1947 and 500,000 tons in 1948 had they operated at the same capacity rates shown by the industry as a whole.

The steel-finishing capacity of the semi-integrated and the nonintegrated companies could have used every ton of this steel and still have had room on their rolling schedules for more than a million tons of finished steel, had they been able to obtain enough semifinished steel to keep busy. As a matter of fact the indicated unused capacity shown by the reports of production for the first 6 months of 1948 is 2,572,000 tons. There is some duplication in this, especially in the semi-integrated steel-mill reports.

It seems probable that around 2,000,000 tons of finished steel is being lost to the country yearly because the semi-integrated and the nonintegrated steel makers of the country are unable to obtain enough raw materials to operate their mills at rates of capacity comparable with the industry as a whole. The over-all capacity of the industry is largely concentrated in the integrated companies who reported as of January 1, 1948, a total capacity in finished hot-rolled products of 64,680,960 tons; 87 percent of the total capacity reported for the entire industry.

The companies reporting to the subcommittee showed a total capacity in comparable steel products of about 7,000,000 tons, or 9.4 percent of the industry total. The companies that did not report to the subcommittee appear to have a capacity in those products of about 3,000,000 tons. It is not known what use they made of this capacity.

The addition of 2,000,000 tons of finished steel produced by semiintegrated and nonintegrated mills would have helped considerably in the steel-supply situation in this country during the past 2 years. It is still as urgent that it be made available and the first step in any investigation of the steel situation should be to determine what road blocks exist to prevent full utilization of presently idle ingot-producing and steel-finishing capacity and what can be done to remove them quickly and inexpensively.

Analyses of the questionnaires, covered in some detail herein indicate that the main obstacles to increased output of finished steel by these mills are insufficient supply of pig iron and of semifinished steel in the form of blooms, billets, skelp, sheet bars, and wire rods. The semi-integrated furnaces are now using all the scrap they can obtain. Were it not for the scrap provided by their customers on conversion deals they probably would be in far worse position than at present. The need is great for much more pig iron; the question is how to make it available quickly. The second is how to provide more capacity in bloom- and billet-sized raw steel quickly and at low cost in materials and money. The continuous casting process developed by Republic Steel Corp. and Babcock & Wilcox Tube Co. might provide this

answer. At least the possibility calls for prompt and full investigation in the public interest.

Small business, whether it be the buyers of steel or the smaller producing companies in the steel industry itself have a tremendous stake in the solution of the problem of full use of the capacity of the semi-integrated and nonintegrated companies to produce steel.

THE CAPACITY AND OUTPUT OF INGOTS IN THE SEMI-INTEGRATED STEEL MILLS

The relationships between the capacity and output for the first 6 months of 1948 of the 39 semi-integrated steel mills that reported data to the Steel Subcommittee and the capacity and output of the entire industry are compared in the following table.

TABLE 1.-Capacity and output of reporting companies compared with total industry [Quantities in 1,000 net tons]

1 Industry data as reported by the American Iron and Steel Institute. For detailed data on production see appendix I. None reported.

The capacity of the semi-integrated mills in 1947 as indicated above was 5,982,000 tons, or 6.5 percent of total industry capacity of 91,241,000. In 1948 it was 6.4 percent.

One reason for the high operating rate of the electric furnaces in the semi-integrated mills is their wide use in recent years for production of low-carbon steel and probably the availability of large quantities of scrap in conversion deals where the buyer has provided the raw material.

It is apparent from the above record, which includes only about 60 percent of the total rated capacity of the steel-making furnaces in the semi-integrated companies, that had their open-hearth furnaces operated at the same average capacity rate as the industry, at least 600,000 tons of ingots would have been added to supply in 1947 and close to 500,000 in 1948. If the situation in the companies that did not report to the subcommittee was comparable with those that did report, it would appear that around 1,000,000 tons of ingots have

been lost yearly since the war through the low use of the steel-making capacity of the semi-integrated companies.

The loss in output of ingots represents a serious deprivation of opportunity to the small steel producers to earn a full return on their investment in steel-making facilities. It is an even more serious loss to the users of raw steel and of finished steel products. Had this steel been available the semi-integrated and the nonintegrated mills could have turned out close to 750,000 tons of finished steel products for they had the idle finishing capacity to use at least 2,000,000 additional tons of ingots in 1948.

Small business is especially hurt by this loss in output from the smaller steel mills. In the farm-equipment industry, for example, the Steel Subcommittee survey of steel requirements showed that an increase of around 40,000 tons of steel yearly would have relieved all the more serious cases of distress reported by the small manufacturers. An added supply of 250,000 tons of finished steel would have placed all of the smaller segments of the industry in a steel supply position comparable with the larger firms. As it is, many of the smaller concerns manufacturing farm equipment may have to shut down or face bankruptcy.

STEEL MAKING CAPACITY INCREASED SUBSTANTIALLY SINCE 1940

The semi-integrated producers, in the face of their uncertainties as to the supply of raw materials, have increased their steel-producing capacity substantially since 1940. The reports show the following changes in capacity of 39 producers in 1940, 1947, and 1948.

These small operators have demonstrated their faith in the future. of the country, in spite of the hazards of their own position, by a 52-percent increase in capacity since 1940. This compares (see Appendix N, summary of capacity of the industry to produce iron and steel) with an increase in ingot capacity of the entire industry from 1938 to 1949 of 17.7 percent.

The performance in the use of their steel-making capacity by the semi-integrated mills has not been as favorable as that of the industry as a whole. In 1940 they operated at an average capacity rate of 72.5 percent compared with an industry rate of 82.1 percent. In 1947 their average rate of 80.3 percent compared with 93 percent; and for the first 6 months of 1948, 85.2 percent against 91.9 percent, and 93.9 percent for the year. (See appendix L for industry production record by months for 1947 and 1948.)

SHORTAGE OF RAW MATERIAL THE BOTTLENECK

According to the statistics and the comments submitted by the semi-integrated steel makers, they not only had an inadequate supply of metallics but the shortage of pig iron forced them to use a disproportionately high percentage of scrap. Much of the scrap came from buyers of steel who exchanged it for ingots and finished steel in fantastic swapping operations known as conversion deals.

The record of supply of metallics as reported by the 39 producers is as follows:

The consumption of scrap in all steel-making furnaces in the United States in 1947 was 0.497 ton per ton of ingots produced. Of this scrap, 0.216 ton (43.5 percent), was "purchased scrap" and the remainder, 0.281 ton was "home scrap" (recirculated in the mills). The semi-integrated mills therefore used more than two times as much scrap to make a ton of steel as was used by the industry as a whole. As the record shows, the small mills have customarily relied principally on scrap. It was available in adequate supply, it was relatively cheap, and it suited their furnace operations, especially the electric furnaces. There is now no early prospect that scrap will be available in adequate supply or quality or at a favorable cost ratio to pig iron. Again it must be recorded that much of the scrap supply during the past 2 years has come from the buyers of steel. There is no assurance that the semi-integrated mills will continue to enjoy this source of supply.

1 Annual statistical report, 1948, American Iron and Steel Association.

At any rate it is not likely to increase in volume, so that pig iron will be required in greatly increased proportion if the semi-integrated furnaces are to operate at rates comparable with the integrated furnaces.

There should be at least 1,000,000 tons of pig iron available to the semi-integrated steel makers to permit them to operate their furnaces at the capacity rates attainable by these furnaces.

It is apparent that lacking an adequate supply of suitable metallics at a fair price, the small members of the steel industry are at a serious competitive disadvantage with the integrated mills that have their own sources of supply of raw materials.2

MORE FINISHED STEEL COULD BE PRODUCED

The reports of the semi-integrated and the nonintegrated producers reveal that in the types of steel most needed by small business, an additional supply of from 1,500,000 to 2,000,000 tons could be made available if the mills could obtain adequate supplies of semifinished steel. In the following table is summarized the combined results of an analysis of the returns from semi-integrated and nonintegrated producers of semifinished steel. A break-down of capacity and output by the two classes of producers is given in appendix J.

TABLE 4.-Summary of capacity and output data on finished steel from 39 semiintegrated and 84 nonintegrated steel companies 1