IRON AND STEEL

Evening Post, Volume CXXII, Issue 96, 20 October 1936, Page 14

IRON AND STEEL

BRITISH INDUSTRY

BETTER CONDITIONS

N.Z. IMPORTS

(Specially written for "The Post" by Sir William Larke, K.8.E., Director of the British Iron and Steel Federation.) The present estimated capacity of the British iron and steel industry is: pig-iron, approximately 11,000,000 tons per annum, with a possibility of ex-1 pansion if existing plant at present inoperative is reconstructed; and steel production, approximately 13,000,000 tons per annum. The change in steel production practice through the increased use of scrap in the steel furnace has reduced the ratio between pig-iron and steel production. Further, steel has largely replaced cast-iron as a structural material^ even in the,case of machinery parts, such as bed plates, bearings, etc., now frequently fabricated from rolled material instead of being cast as previously. The nominal value of the reconstructed share and debenture capital of the industry is in the neighbourhood of 130,000,000 sterling, and the number of insured, workers in all sections of the industry, blast furnaces, steel furnaces, rolling mills, sheet and tinplate industries is not far short of a quarter of a million. The British steelproducing capacity is only exceeded by three countries; the United States, which produce half of the total world production, at present is working at a rate pf well over 40,000,000 tons per annum; Germany producing over 18,000,000 tons per annum; and Soviet Russia, with an estimated capacity of 16,000,000 tons per eu*".um. SHEFFIELD'S POSITION. Most of the British output is in the form of basic open hearth steel, but there is a substanial production of acid open, hearth steel, also acid bessemer and the basic bessemer process has recently been re-established at Corby in Northamptonshire. The chief steel-producing areas in the order of volume of production are the NorthEast Coast; South Wales; Sheffield; Scotland; and Lincolnshire. Of these the Sheffield area is in a special category in that it produces a wider range of steel qualities of higher value than any other productive centre in the world, the steel ranging in value from £8 to £10 per ton, with hundreds of intermediate qualities, types, and values, up to £1800 per ton, which is the value of steel in the form used for the hair springs of watches. The total production in the United Kingdom in 1935 was approximately 6,424,000 tons of pig-iron and 9,859,000 tons of steel ingots and castings, the latter figure being about 10 per cent, of the total world production. In 1929, which saw record production in all countries, Britain produced 7,590,000 tons of pig-iron and 9,636,000' tons of steel. Production during the present year is at the rate of 11,500,000 tons of steel ingots and castings per annum, and 7,500,000 tons of pig-iron. ' The products of the iron and steel industry being largely capital goods, the recovery in the British industrypreceded the general economic recovery of the country, and dates from the imposition of protective duties on imported steel in April, 1932. The extent of the recovery may be realised from the fact that in the first seven months of 1932 the aggregate output of pig-iron in the United Kingdom was 2,225,400 tons and that of steel 3,114,600 tons, whereas in the corresponding period of the present year, the figures were 4,414,300 tons and 6,717,500 tons respectively, an increase of 98 per cent, in the case of pig-iron, and 115 per cent, in the case of steel. Unemployment in the industry declined from 48 per cent, in July, 1932, to 17 per cent, in July, 1936. BASIS OF IMPROVEMENT. This improvement in the industry is not entirely due to the limitation of imports, but to the confidence created by the adoption of protection, the elimination of uneconomic competition, and substitution of co-operation for competition within the industry itself, particularly internationally. Actually, imports of finished steel in 1935—the last completed year—increased as compared with 1932 from 573,600 tons in the latter year to 601,000 tons in 1935, showing that the domestic market recovery - was so strong as to absorb an increased volume of imports in spite of the tariff. While it is impossible to determine accurately what proportion of the home consumption in 1935 would have been supplied by foreign producers had there been neither tariff nor an international agreement, this can be approximately estimated by reference to the year 1929, before tariffs were in operation, when the total consumption of finished steel in the home market was approximately the same as in 1935. Out of a total consumption in the home market for 1929 of 5,700,000 tons, imports accounted for 1,181,500 tons, whereas in 1935 out of a total home consumption of 5,589,800 tons, imports accounted for only 601,000 tons. Thus out of an increase in domestic consumption, of British steel of 2,330,000 tons in 1935 as compared with 1932 only 600,000 tons may fairly "be attributed to the direct effect of the tariff. Prior to the introduction of the tariff it- was impossible for' British industry under any conceivable conditions of efficiency to meet the then existing competition from free imports, particularly with .Continental wage levels as much as 50 to 60 per cent, below those obtaining in Great Britain. Competition was unrestrained, and bore" no relation 'to' costs of ; production in the countries concerned. The result of the sustained falling price level during the early years, of the depression was a complete • destruction .of confidence. Capital enterprise which might have been undertaken, and for which money was'undoubtedly available, was checked until the price level was stabilised and . confidence created, thus releasing capital for the renewal and development programmes which had been suspended during the black decade, of 1921-31. Of the factors which may be considered as being directly responsible for the recovery of the industry may be cited the expansion in the building programme, both domestic, public, and industrial; the improvement, steady; but all too, slow, in shipbuilding, British, yards are now building 46 per cent,: of ..the total new tonnage under construction in the world; the great expansion of the motor-car industry; and railway reconstruction. INFLUENCE OF ARMAMENTS. Contrary to the general view, the demand for armaments has, and is likely to exert only a negligible effect on the total, although naval construction will make a useful contribution to the demand for shipbuilding material. Therefore, the present prosperity of the i-idustry owes little to the defence programme. There is every reason to expect the maintenance of the present output with a steady upward tendency in the immediate future. Taking the long view, it will be obvious that the general condition of the world as a whole must exert an important influence on the British industrial structure, though probably, less at present than at

any other period during the past cen-j tury. The relations of the British industry to the Empire have undergone^ very important changes during the post-war period, due to the development of the iron and steel industries in India, Australia, and South Africa, and the expansion of the pre-war industries in i Canada. This is illustrated by the decrease in exports of iron and steel from the United Kingdom to Empire countries since 1913, when they purchased 2,309,200 tons from the United Kingdom, whereas in 1929 they took only 2,198,900 tons, which had fallen still further in 1935 to 1,329,298 of British steel. The steel production of the Empire iron and steel industries had increased between 1913 and 1935 by about 1,400,000 tons. While it is to be expected that countries possessing natural resources of ore and coal would develop them to supply their own needs, the dependence of Empire countries for iron and steel on overseas producers was emphasised during the war years, and this stimulated the development of these industries within Dominions possessing the requisite resources as a matter of national defence, and inspired a desire for economic self, sufficiency. DEPENDENCE OF NEW ZEALAND. British iron and steel exports to the Empire overseas have in the past formed an important part of the payments made to the Empire for the products of their primary industries, of which the United Kingdom is the greatest consumer. The dependence of New Zealand at present on the British market as an outlet for her surplus production is probably greater than that of any other Dominion. Thus for nearly 70 per cent, of the total New Zealand exports, the United Kingdom is at present the sole market, and of .82 per cent, of the total New Zealand exports the United Kingdom at present takes 92J per cent. In spite of the general policy of preference extended to British goods the exports of British iron and steel products to New Zealand are declining. Whereas in 1929 New Zealand took 83£ per cent, (by value) of her total iron and steel requirements from Britain, in 1935 the percentage fell to 73J- per cent. The fall in the percentage of total iron and steel imports (by weight) was from 84 per cent, in 1929 to 66 per cent, in 1935. The ground lost by the United Kingdom has been gained mainly sby Australia, which in 1929 was a quite unimportant supplier. In 1935 Australia supplied 16J per cent. of the total requirements of New Zealand (by value) and 25J per cent, by weight. • It is obviously in the interests of the iron and steel industries of the Empire to establish a policy of close co-operation on a basis which, while recognising the autonomy of each within the sphere of its own market, also regulates the development of each by agreement, in relation to production and distribution, the objective being to stimulate an increase in the consumption of steel in Dominion markets by promoting development arid securing the lowest price to the consumer compatible with a reasonable profit based on efficient production. The adherence of Dominion industries to an international agreement on terms compatible with their own interests might do much to ensure steady and progressive development in Empire markets in the future, and to eliminate,at least the worst effects of the cycles of boom and depression which have caused such difficulty in the past; , The present world consumption of steel is very substantially lower than the potential demand. It should therefore be the objective of the iron and steel industries of the world, through a policy of complete co-operation in the development of markets, to coordinate production and distribution therein in relation to the conditions obtaining from time to time, and thus to stimulate consumption in those markets. There is reason to believe even in the existing steel-consuming countries, based on the pre-war rate of increased consumption, that the world output during 1929, which was the highest yet attained, of 118,000,000 tons, was 25 to 30 per cent, below what might have been anticipated had the pre-war rate of consumption been maintained without the dislocation of trade resulting frota the aftermath of the war. It is gratifying to record that all the iron and steel industries in the Empire are members of the British Iron and Steel Federation, which hopes to secure the co-operation of the Governments and industries of the Empire in the development of overseas markets to the full extent of thefr great potentialities. Such a policy is only obtainable by substituting intelligent cooperation for wasteful, unrestricted competition in all spheres of industrial and commercial relations.