The Iron and Steel Market

This article first appeared in Eletrochemical and Metallurgical Industry 1907. The information that is contained within this article is therefore valid as of 1907. The article provides an historic look at Metals in the US at the time.

Prices Remain Firm in Iron and Steel

It is clear that the crest has been passed in the iron and steel trade. The market is on so different a basis than formerly that this statement does not infer what it would have been a few years ago, that prices were becoming weaker and production decreasing. Prices of all finished steel products are as firm as they were a month or two months ago, and in some few instances they are higher. If production has decreased at all, the change is of the slightest and has been forced purely by physical conditions. Pig iron prices have eased off a trifle, but considering the prospects for six or nine months to come they are remarkably firm.

Price of Pig Iron Squeezes Margins

The steel producers have an unprecedentedly large volume business on books, and a very large part of this is in the form of absolute orders and specifications. This business is if the soundest description, and will be filled as fast as physical conditions permit, with the sole exception that the large steel mills will not buy merchant pig iron to swell their production of crude steel and finished products, to the extent they probably would were it certain that the present orders would be replaced by equally large ones at full prices. The exception is a slight one as to tonnage, but illustrates an important phase of their attitude. There is some profit in furnishing finished steel products made from purchased pig iron, but very much less than in using the steel producer's own material.

Small Recession in Demand Expected in Late ‘07 and in ‘08

It is accepted that railroad buying in the future will be on a materially reduced scale, on account of the difficulty in financing, but the present commitments of the railroads will keep the iron trade at full speed for many months to come. Commitments from interests other than the railroads are proportionately heavier than usual, and their renewal will depend largely upon crop prospects. The indications thus are, that while the greatest activity should prevail for six or nine months to come, there will be some recession in demand late this year and in 1908. Productive capacity, however, is increasing rapidly.

It taxed the resources of the industry to make 17,821,307 gross tons of pig iron. In the following year, owing to the completion of new furnaces, a much larger tonnage could have been made, but the slump in production in the last quarter of the year brought the total to only 18,009,252 tons. In the following year demand was light and many new furnaces which had been completed were not blown in until about the close of the year, the 1904 production being only 16,497,033 tons. In 1905 the full employment of all capacity resulted in a production of 22,992,380 tons, while 1906 showed 25,307,191 tons. Through the progress of new erection it can be estimated, on quite complete data, that so far as physical considerations control, a production of 28,000,000 tons can be made.

With the present trade outlook it is quite certain that no such tonnage can be absorbed, and a reaction in prices of pig iron is inevitable. It does not follow that a reaction in prices of finished steel products is probable, for the double reason that pig iron had reached a level out of all proportion with finished products, and prices of finished steel products are closely held. They were prevented from unduly advancing, and can within limits, be prevented from declining.

The Production of New Blast Furnaces

Here is a summary of the production of the absolutely new furnaces blown in, or to be blown in, from Jan, 1, 1905, to July 1, 1907. The furnaces included are all absolutely new ones, with the single exception of a southern furnace, which replaces an old one not in blast since 1903. Many furnaces have been rebuilt, but it is not regarded as feasible or desirable to consider them.

The actual increase in production in the second half of 1905 and the first half of 1906 was progressively greater than the contribution of the new furnaces. This was due chiefly to harder driving and the rebuilding and otherwise improving of old furnaces. No such influence was manifest in the second half of 1906. Possibly the limit of hard driving had been reached; certainly weather conditions were especially unfavorable, and an unusually large number of furnaces were out for relining during the third quarter of the year. The presentation should be conclusive that a very large increase in production is possible over 1906, while trade conditions do not warrant the belief that there will be any material increase in consumptive demand.

Bessemer Pig Iron

Bessemer pig iron is greatly disturbed and the outlook is quite uncertain. A large tonnage regularly goes from merchant furnaces to consumers on contracts which call for monthly adjustment of price, according to the average of sales made in the open market. These contracts contain a clause releasing the consumer from taking the iron should the monthly average pass above $20. This it did last October by a few cents, while the November average was but a few cents under $22 and the December and January averages were both $22.07 f. o. b. valley furnace. In December an adjustment was made with one consumer by the sale of a tonnage at a flat price considerably under the average. In January a round tonnage was released, which was sold to other parties. In February, adjustments were not so easily made and the whole future of such contracts is in doubt. The large steel interests which occasionally buy large tonnages in the open market completely withdrew from the market months ago, but for some time the market advanced through the very heavy purchases of malleable iron foundries and steel foundries. These interests depend largely on the railroads and their interest in the market is now slight, so that the merchant furnaces making steel making pig first, lost their regular customers and are now losing their newer customers. Bessemer pig for second half is held nominally at $21.50, valley furnace, but some small lots have sold at lower prices and it is purely a « matter of conjecture what may be done later on large lots. Southern iron showed a reactionary tendency, but the chief producers have been endeavoring to hold strictly to the old quotation of $18.50, Birmingham, for second half. There is too little inquiry to test the market. Foundry iron f. o. b., valley furnace, has been nominally $21.50 for second half, but the market has not been tested. Altogether the demand for pig iron is so stagnant that close quotations cannot be given, and time must fix the new level, if there is to be one, as seems inevitable. Prices cannot for the present precede to former levels as costs to ordinary merchant furnaces are much higher, with the large advances in coke and ore.

Steel

The supply has been much better and steel mills have caught up, to a large extent, on old contracts. No billets or sheet bars are offered as originating in Pittsburg, but other steel works, and particularly new interests, have been offering steel at slight concessions. While two months ago Bessemer billets were nominally $29.50, f. o. b. Pittsburg, and sheet bars $30, f. o. b. Pittsburg, billets can be had f. o. b. Youngstown or Ohio valley mill at about $20, f. o. b. mill, and sheet bars at about $29.50, f. o. b. mill. To most consuming points this means a reduction, although for actual Pittsburg delivery it could hardly be said that there has been a decline.

Finished Steel

There have been no important changes in prices. Steel boiler tubes have been advanced two points, or about $4 a net ton, following an advance of one point Jan. 25, and of two points Dec. 20. Independent tin-plate mills are obtaining an advance of 10 cents a box for third quarter deliveries, but the regular price has not changed. At regular mill prices plate deliveries are three months or more behind, steel bars two to three months and sheets two to three months behind. Occasionally premiums are obtained on these lines for early delivery, but in general buyers are so well covered by contracts that business is conducted at the regular mill prices. These are as follows:

Standard rails, 50 pounds and heavier, $28 at mill; light rails made from new steel, f. o. b. Pittsburg, $34 on carloads and $33 on larger lots, sections 25 to 45 pounds.

Structural shapes, $1.70 for beams and channels, 15 inch and under, angles and zees; $1.75 for tees; $1.80 for beams and channels over 15 inch.

Plates, $1.70 for tank quality, 1/4 inch and heavier, 100 inches wide and less.

Merchant steel bars, $1.60 base.

Sheets, 28 gauge, black, $2.60; galvanized, $3.75.

Tin plates, $3.90 for 100-pound cokes.