Higher Prices For U.S. Steel

Press, Volume CII, Issue 30128, 11 May 1963, Page 10

Higher Prices For U.S. Steel

Because it is a vital commodity in innumerable other industries, steel has often been described as the best indicator of United States economic health. For that reason the price in-

creases announced recently by American steel producers are more important than a comparable move in probably any other industry. A year ago the steel producers' attempt to impose a general increase was frustrated by Presidential intervention. The bitterness then engendered will not be revived lightly. The industry has renewed its pressure on a different pattern; and so far the Presidential reaction has also been different. Mr Kennedy is caught between his twin objectives of resisting inflation and of stimulating economic growth. His earlier clash with the steel corporations caused widespread distrust among business leaders; if this antipathy were to be fanned the President’s economic programme would be jeopardised. Therefore, in the meantime at least, the President’s attitude towards the new steel prices must continue to be mildly equivocal. Already, however. Mr Kennedy has reaffirmed his opposition to a general price increase, and he has urged industries using steel to absorb the “selective” increases rather than pass them on to the consumers Until the latest increases steel prices had been stabilised since 1958. Executives of the industry assert that their profits are inadequate. although in every other manufacturing industry profits were higher in 1962 than in 1961. The United States producers have suffered seriously from foreign competition (which

recently has tended to recede), and because cheap substitutes for steel have become popular. Costs, according to the industry’s spokesmen, have been cut as much as possible; modernisation of plant remains the only way of enhancing efficiency, and to finance modernisation higher prices will be necessary. Many observers, however, see a policy of charging more for products most in demand—the policy that has now been introduced—as selfdefeating because of its possible effect on consumer demand. To the Administration the consequences of price increases are frankly disquieting. Endeavours to improve the nation’s balance of payments may be endangered by the tendency to discourage steel exports and encourage imports. Defence expenditure is likely to rise at a time of extreme Congressional sensitiveness about the Federal Budget. Wage demands will become more insistent; under their existing contract the United Steelworkers are entitled to seek the reopening of wage negotiations after April 30, and other unions will not be slow to follow their lead. Because he has let “ selective ” price increases go unchallenged, Mr Kennedy may find himself in the awkward position of having to countenance subsequent wage claims that ordinarily he would regard as repugnant to his antiinflationary policy. Relations between the Administration and big business have improved during the last 12 months; but they could easily be strained again if the President indulged in too much equivocation over the steel industry’s problems.