Steelmakers try to raise prices despite weak demand

November 29, 1991|By Kim Clark

Steelmakers are trying to pull themselves out of red ink by raising their prices, which have fallen below the level they charged in the early 1980s.

But demand for steel continues to be so weak that producers are having difficulty making the increase stick, industry observers said Wednesday.

An increase in steel prices, though inflationary, is widely viewed as a healthy economic sign. If there is enough demand for steel to allow mills to raise their prices, then that means the buyers of steel -- the nation's factories -- are growing.

USX Corp., the nation's biggest steelmaker, announced Tuesday that it would raise its prices for sheet steel -- the stuff that goes into everything from car bodies to refrigerators -- by about 6 percent, or about $30 a ton, in April.

Bethlehem Steel Corp., which has lost $128 million so far this year, immediately announced that it was "studying" its competitor's price boost.

But even if the nation's second-largest steelmaker follows USX's lead, buyers of steel probably won't suffer much, said Michael Via, a stock analyst for Anderson & Strudwick Inc., in Richmond, Va.

The steelmakers often announce price increases and then give customers discounts that erase the increase, he said. That's what happended two months ago, when the major U.S. steelmakers attempted to push their prices up about 4 percent to 5 percent.

"They certainly don't expect to get all of it," Mr. Via said. "If any of it sticks, that will be a victory."

Charles Bradford, who follows the steel industry for UBS Securities in New York, said that USX probably gave such long notice of its intentions to establish a negotiating position with automakers.

General Motors Corp. asks its suppliers for a 5 percent price decrease each spring, Mr. Bradford explained. With the announced price increase, USX can now try to negotiate a smaller increase, he said.

Besides, Mr. Bradford said, USX needs the increase because it has had to offer discounts more than the other steelmakers. "USX had been one of the price-cutters," he said.

Bethlehem has been able to mainSee STEEL, 15C, Col. 1STEEL, from 12Ctain much of the 4 percent price increase it put into effect Sept. 29 because Bethlehem doesn't have as much steel to sell as USX, Mr. Bradford said.

Most of Bethlehem's losses have been due to repairs and outages at its two main steelmaking facilities, at Sparrows Point in Baltimore County and Burns Harbor, Ind. Bethlehem has about 8,000 workers at Sparrows Point.

But all that will change when the repairs are finished next year, Mr. Bradford said.

Bethlehem will not have to take big charges against its earnings, and the mills will probably have more steel to sell, he said.

Though poor auto sales bode ill for steel demand this winter, Mr. Bradford said that he is still hopeful for the steelmaking industry.

Demand for steel has risen somewhat this year.

Early in the year, 70 percent of the nation's mill capacity was being used. Nearly 80 percent is being used now, he said.

Factories and distributors have been keeping their inventories low, and as the economy begins to rebound, they'll have to order more, Mr. Bradford predicted.

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