EXHIBIT S-S4E COPY OF CABLEGRAM DATED 11.2.38 SENT BY MR. DIEUDONNE TO ACIER, LUXEMBURG Americans accept protect provisionally our Far East price bars and let us underquote their price $38.35 CIF for semis Stop Unable at present guarantee higher price semis for Europe but hope shortly establish full control and protection Stop No change shapes and plates pending meeting American works next week Stop South Africa in view loss orders to American outsiders Elliot and myself recommend reduction price to nearer world level. COPY OF CABLEGRAM DATED 13.2.38 SENT BY MR. ELLIOT AND MR. DIEUDONNE TO STEEL EXPORT ASSOCIATION, NEW YORK For Mundle and Bash referring situation excesses and deficits may we insist upon protection European prices shapes and plates by American works as you were good enough to promise that you would strongly recommend Stop Please cable Bremen result Tuesday meeting Stop Referring your general price list your price basis not applicable British West Indies, Trinidad, Jamaica, Straits Settlements, Dutch Indies, and Argentine where we fix price levels. EXHIBIT S-85 REPORT ON NEGOTIATIONS WITH THE AMERICAN SHEET MAKERS The delegation appointed by the Federation to visit America was sent primarily to make it plain to the Americans that the way in which they had carried out their undertakings had resulted in the total loss of confidence of the Cartel and the Federation in their good faith, and that unless steps were taken immediately to effect a change, a price war must result. Moreover, the agreement must be extended at once to those products not yet formally included, if cooperation was to continue. The main features of the agreement referred to were: A. The quota of the American group to be that share which the American exports in 1934 and 1936 represented of the total Cartel-U. S. A. trade, i. e., compensation would be paid if American exports fall below the smaller of these percentages, and penalty become payable if American exports exceeded the higher of these percentages. From the information we had, these figures were: Black sheets, 14% (1934); 20% (1936). Galvanised sheets, 14% (1936); 15.4% (1934). B. Cartel imports into the U. S. A. to be restricted to the tonnage imported in 1935. C. The terms of the Agreement with the Continent to be accepted by the Americans. On the general question, the delegation obtained the most binding assurances possible that the Americans would take the necessary steps to see that the arrangement was carried out to our entire satisfaction. In particular, it was arranged to reorganize the Steel Export Association of America, to embrace all the companies signatory to the arrangement, and to set up a Committee in London with power to ensure the maintenance of quotas. The Americans have made arrangements to send a representative to reside in London, to attend all Comptoir meetings and represent America on the London Committee. On the question of sheets, we found that the policy of the Steel Corporation and Bethlehem had been to limit, as far as possible, the firms to be invited to share in the American quota, and to keep prices down with a view to preventing their participation. Only quite recently had any serious attempt been made to incorporate a sufficient number of firms as would render the competition of outsiders negligible. We were told the total of claims for quota on Black Sheets reached over 200% at first, and when we arrived they still totalled 125%. On February 10th the Americans reported that on galvanised sheets the quota participation was settled. In black sheets, however, the capacity for making cold-reduced sheets was so great that it was found impossible to reconcile the claims for participation, and it would be necessary either to exclude cold-reduced sheets altogether, or put them into a separate category. This I refused to do, and a deadlock appeared imminent. Our discussion on the general position had taken place with the Principals of the different companies, and we therefore told them that it would be necessary for them to take the sheet question out of the hands of the executives who had hitherto carried on the negotiations, if a solution was to be reached. Further more, that a starting date must be agreed with us before sailing, even though their domestic difficulties were not resolved. We suggested February 15th should be that date. The principals of the ten interested firms (Mr. Weir, of the Great Lakes Corporation excepted), endeavoured to reduce the quota demands to 100%, but without success. Finally they referred the matter back to the executives, with instructions that a solution must [one line illegible in file copy] Further meetings were held, as a result of which, on the evening of the last day, a deputation came to see me. The report of that meeting is given in Appendix A.' Whilst returning in the "Bremen", we were informed that the Americans were willing to debit against their quota deliveries against sales made on and after February 11th (compared to February 7th as offered by us), and deliveries against sales made before that, as from March 16th. We cabled to Mr. Grace, of the Bethlehem Company, asking him to look into the matter, as we felt it was not right that orders taken during our visit in America should escape the agreement, and pressing for February 7th to be accepted. On Friday last we received a cable from Mr. Grace, saying he could not secure agreement to any better terms than February 11th. Finally, having consulted Sir Andrew Duncan, we cabled acceptance of these dates. During the discussions it was found that the use of converted figures would give rise to insuperable difficulties, owing to their different methods of manufacture, and to the need to debit against the American quota exports of outsiders (if any), the gauge of which could not be established. I therefore said we would accept straight tons for both the American and the European groups. This, however, would not affect the existing method of accounting between the present members of the Comptoir. Once the quota position was established, it became possible to discuss prices, extras, etc., though in the limited time available it was only possible to do so in very general terms. I impressed upon them the necessity for raising their prices promptly, if stability was to be achieved. On February 26th 1938 I received the following telegram from Mr. Outwater (recently appointed President of the Steel Export Association of America): "Advise Mr. Summers we have established and advanced prices effective today black and galvanised sheets uniformly 30 cents per one hundred pounds below American domestic market price which generally are higher than continental prices. Will send representatives as soon as possible after formation of group to coordinate prices." to which I replied as follows: "Reference your cable twenty-sixth please name FOB price black and galvanised sheets resulting from decision reported. Please also cable your new CIF prices black and galvanised in each market where they are below continental prices as given by me. Essential have above information enable me control situation at meetings on Thursday." On March 2nd, 1938, I received the following telegram, which was reported to, and acted on by the meeting in Brussels: "Advise Mr. Summers referring to his telegram of February 28th. Gauge 24 black $3.05 (£13.13.4). Gauge 24 galvanised $3.70 (£16.11.6) both net cash F. A. S. vessel New York. No galvanised C. I. F. prices below continental black steel sheets basis C. I. F. Puerto Barrios $3.44 (£15.8.3) less 2% C. I. F. Guayaquil $3.55 net (£15.18.1) C. I. F. Cape Town $3.33 net (£14.18.4)—C. I. F. Beira 3.52 net (£15.15.5).” 2 1 See exhibit S-85A (pp. 172-173). The dollar prices per 100 lbs.; the figures in brackets give the corresponding sterling prices per 2,240 lbs. Some discussion on general principles took place, when it was suggested that: 1. American works should sell on C. I. F. terms only, except to firms on an approved list. This list to consist of buyers in America exporting to their own consuming houses abroad. 2. No rebates to be paid to U. S. A. Buyers. 3. Present Comptoir approved mechants to be authorised to buy American sheets on the same terms as from present members. 4. That the American practice of deducting 2% for cash in certain markets be continued, provided account of this be taken when establishing relative prices. 5. That until otherwise determined, each party should continue to charge their existing extras, except that for heavy gauge black sheets the American makers would not deduct more than 50 cents per 100 lbs. from the basis price of 24 gauge. 6. That when C. I. F. prices were established, the F. O. B. price resulting should not exceed the Pittsburgh price, to prevent merchants exporting material bought for the Home Trade, and to deter outsiders. 7. That the American Home Market be regarded as follows: Philippines, Porto Rico, Virgin Islands, Hawaii, Canal Zone, and Alaska. In conclusion, I would say that in my opinion, once the machinery for consultation and control is established, there is no reason why the introduction of the Americans to our Comptoir should not prove of great benefit. In practice, the Americans would have a percentage of the combined trade, and the present members of the Comptoir together would have their percentage. The present arrangements would continue unaltered, and would govern the participation of the non-American portion of the trade. I hope that before long a representative of the American sheet makers may come over to discuss extras, trade practices, and C. I. F. prices, etc., so that a full understanding may be reached on all points. In the meantime, I trust I can count on the cooperation of all groups to bring the understanding so far reached to a full and satisfactory conclusion. MARCH 5TH, 1938. S. S. [Spencer Summers.] EXHIBIT S-85A 1 APPENDIX A BLACK SHEETS SUMMARY OF DISCUSSION HELD 12TH FEBRUARY, 1938, AT THE WALDORF ASTORIA Present: Mr. Spencer Summers. Mr. I. F. L. Elliot (part time). Mr. Masters, Bethlehem Steel Corporation. Mr Morgan, U. S. S. Co. Mr. Sharpe, Republic Steel Corporation. Mr. Benedict, Armco. Mr. Morgan, on behalf of the American group, reported that after prolonged discussion, they had succeeded in reducing the quota demands down to a figure below 103%, and intended to have a further meeting the following week to try and reach finality. They had discussed the starting date for the accounting, and in view of the volume of business taken some months ago, which makers felt should not come within the arrangement, the earliest date to which unanimous agreement could be reached was March 16th. Mr. Summers said the British group could not accept that date, inasmuch as it would allow business taken during and after their stay in America to be shipped before the agreement began. Having regard to the long time that had elapsed since the provisional agreement was signed, whch covered sheets, and to the need to create confidence and stability, he thought March 1st should be the date. Moreover, he felt the Continental countries would not be willing to allow such a long time to elapse before the start, and a further reduction in prices might become unavoidable. After further discussion, Mr. Summers said the British group would accept March 16th as the starting date for all business booked prior to February 7th, provided business booked on or after that date should be debited, even if it were delivered before March 16th. He asked, further, that if the representatives present were unable to obtain common agreement to this suggestion, the matter should be referred to the Principals. Mr. Morgan promised to cable to the "Bremen" the result of the forthcoming meeting on quotas, and on the starting date. The question of what should constitute delivery was discussed, and it was agreed that despatch from Works to customers' order should govern the figures. EXHIBIT S-85B LIST OF FIRMS, PARTIES TO THE AGREEMENT, WHO JOINTLY ACCEPT RESPONSIBILITY FOR EXPORTS FROM ANY U. S. A. OUTSIDERS Great Lakes Steel Corporation and Weirton Steel Company Jones & Laughlin Steel Corporation Newport Rolling Mills Otis Steel Company EXHIBIT S-85C COPY OF CABLE FROM MR. E. G. GRACE TO THE CHAIRMAN, RECEIVED 12TH JAN. 1938 Sir CHARLES WRIGHT, Promptitude, London: Glad to have your message and talk with Elliot. You have probably already heard from Outwater which in substance says we will give your suggestion a sincere trial. I feel sure there will be no question about performance of member companies. Our only difficulty will come, if at all, from outside and uncontrolled interests which I referred to in my recent cable to you. It will be our hope and effort to protect prices and have scheduled bringing all influence possible on uncontrolled interests. You, of course, in like manner will insist upon performance in our pricing zones. Your people and ours should be inconstant contact to prevent misunderstandings striving constantly for observance and making necessary revisions from time to time to accomplish what we all want. Best wishes. GRACE. EXHIBIT S-85D CABLE TELEPHONED TO MR. E. G. GRACE, 11.1.38 At emergency meeting with cartel principals and Outwater today, conclusive evidence was furnished indicating that your group's interpretation of fighting Your outsiders involves price cutting whether outsiders are interested or not Stop Your proposal to reduce prices will not remedy this position, but we are willing to study prices Stop Meantime we have made proposals through Outwater which will regularize the position Stop Trust your group will agree to these proposals as continuance of your present attitude intolerable Stop Cartel and Britain have been losing important regular business to America through our efforts to observe prices according to agreement Stop Production conditions in certain European countries who are most interested in export are now somewhat similar to yours Stop Only alternative to your acceptance of proposals and assurance of strict observance must be organized competition from this side against America. EXHIBIT S-85E REPLY TO THE PROTOCOL TELEPHONED BY MR. OUTWATER 11.1.1938 We are in general accord with minute, however, from our point of view prices Europe and Empire markets very high which we are sure will result in a loss of business to outsiders. Therefore feel we should be exempted on tonnage secured by outsiders until Europe agree to allow us to meet this completion, However, leave it to your judgment. Advise. EXHIBIT S-85F COPY OF PROTOCOL TELEPHONED BY MR. J. O. OUTWATER It is realised that outside competition is detrimental to the operation of our Agreement and with a view to checking it, it is agreed (a) That in the markets of Japan, Manchuria, China, Cuba, Mexico and Central and South America, except the Argentine, all Groups will observe whatever price levels may be agreed with the American Group, and every Group will be entitled to their share in these markets on these price levels. (b) In all other markets the official prices will be observed, and in so far as special prices may on occasion have to be determined to meet outside competition, they shall be so determined by the Cartel and British Groups, and every Group will be entitled to their share in these markets. (This does not apply to Canada.) As soon as possible adequate machinery will be established to determine whether outside competition is genuine or otherwise and to meet it on the most orderly way. It is understood that all Groups must in any event receive their quota tonnage strictly in accordance with the Agreements. 11.1.1938. EXHIBIT S-86 E. I. A. NOTE CONFIDENTIELLE SUR LA REUNION DE LONDRES DU 11 JANVIER 1938 à laquelle ont assisté : Sir Charles Wright, Lord Dudley, Sir Andrew Duncan, MM. Dorman, Henderson, Peech, Sir Wm. Larke, Mr. Elliot, Mr. Wheeler, Capt. Read, MM. Craig, Tubman, Gibson. MM. Meyer, Dieudonné; D'Heur, Hirt; de Wendel, du Castel, Pucheu; Sir Andrew DUNCAN et Monsieur MEYER exposent les raisons qui ont provoqué la convocation d'urgence d'une réunion avant le départ de Mr. Outwater pour les Etats-Unis. La collaboration avec les Usines américaines n'a pas donné les résultats attendus et, si les Groupes européens comprennent les difficultés du Groupe américain et la nécessité devant laquelle on se trouvre de combattre les outsiders, ils doivent néanmoins souligner qu'à la base de toute entente, il y a le respect des prix et des quantums; or, des affaires importantes ont été enlevées par le Groupe Américain en-dessous des prix convenus. Les conditions de production sont peut-êtres trés manvaises en Amérique, mais il existe des Groupes européens sans marché intérieur qui ont à faire face à des difficultés analogues et dont les carnets de commandes sont presque vides. M. MEYER remercie Mr. Outwater de l'invitation qu'll lui a faite de l'accom pagner aux Etats-Unis; d'autres engagements l'empêchent malheureusement de donner suite à cette invitation. Mr. OUTWATER apprécie la façon dont les Groupes du Cartel reconnaissent la situation difficile dans lacquelle ses usines et lui-même se trouvent. I insiste sur les nombreux appels à la patience qu'il leur a adressés au cours de sa tournée auprès des différents Comptoirs. Les circonstances sont malheureusement défavorables et de très grands malentendus séparent les Groupes du Cartel et le Groupe américain. 11 espère néanmoins qu'avec le temps la situation s'améliorera. Les Usines sont démo |