Big steel producers plan price increases, but they may not stick

July 05, 1991|By Jonathan P. Hicks | Jonathan P. Hicks,New York Times News Service

LTV Corp., the nation's third-largest steel producer, has told customers that it intends to raise prices on some products by about 5 percent, beginning Sept. 29.

USX Corp., the nation's largest steel producer, and Wheeling-Pittsburgh Corp., the eighth-largest, said they would match the proposed increase.

Other major steelmakers, including Bethlehem Steel Corp., Inland

Steel and Armco Inc., said they were studying the price increases but that they had not yet decided whether to match them.

Analysts, however, said the increases were unlikely to hold, given the current low demand from major customers and the inability of steelmakers over the last year to raise prices after several attempts.

Late last year, Bethlehem Steel said that it had cut an 8 percent price increase planned for the beginning of this year to 4 percent. But analysts said that even the 4 percent

increase was not realized.

Further, the analysts said, the utilization rate in steel mills had dropped to about 70 percent from the average of 84 percent last year. Low utilization rates typically lead steel producers to discount their products to maintain market share.

"Unless the utilization rates of steel companies increase sharply, it will be difficult for them to push these increases through," said Christopher Plummer, an analyst with the WEFA Group in Bala-Cynwyd, Pa.

"Once the utilization rate drops below 80 percent, the leverage shifts to the buyer. Until that changes, the steel companies are going to have problems."

Mr. Plummer and other analysts said the price of hot-rolled sheet steel, the industry staple used in everything from automobile parts to construction, has fallen to $280 a ton from more than $350 a ton two years ago.

Mark R. Tomasch, a spokesman for LTV Steel Co., said the increase was necessary because costs had increased.

"All industrial commodities have increased in price by 26 percent since 1982, but steel prices are at 1982 levels," Mr. Tomasch said. "The industry has invested $18 billion in new technology and new product capability in the last 10 years. And the steel industry is losing money and that's not an acceptable situation."

Steel companies have also been facing higher labor costs as a result of agreements reached in the last two years with members of the United Steelworkers.

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