Pittsburgh

...The U., S. Dept. of Labor, Bureau of Labor Statistics in 1943 prepared for the use of OPA and WPB officials a study on "Consumers' Prices of Steel Products." This study was made at the request of the Iron and Steel Branch of the Office of Price Administration and had a fourfold purpose. (1) It describes the changes in the price of steel from January 1939 to April 1942. (2) It was intended to determine the relationship between actual prices or delivered prices to published prices. (3) It was hoped that there would be shown the relative importance of the base price, extras and freight as components of the delivered price. (4) Information was sought on which to set up periodic reporting of actual prices paid by consumers of steel. The report does not appraise the possibility of establishing regular reporting of steel prices of consumers, but it is clear from the survey, according to the Dept. of Labor, that such a reporting system is practicable.

As a result of the study, which was national in scope and very broad from the standpoint of steel consuming industries, some 13 conclusions were reached. The breadth of the conclusions and their effect on the economic structure of the steel industry have been summarized.

(1) Actual delivered prices paid by steel consumers deviate frequently from published delivered prices. By published price is meant the sum of published base price at the basing point nearest the consumer plus published extras applicable to the given specification plus rail freight from the basing point to the consumer's plant.

(2) Actual prices fall below published prices when steel mills are not operating close to capacity and the market is highly competitive, but closely approach and sometimes exceed published prices during periods of capacity operation when little competition exists.

(3) Changes in actual delivered prices are due mainly to changes in either base price or extras. On products for which extras are an important element of the delivered price, changes in price tend to be made by varying the charges for extras. On products for which extras are not an important element in the delivered price, changes in price tend to be made by varying the base price.

(4) The relative importance of the three components of the delivered price is approximately as follows: base price, 79 pct; extras, 14 pct; and freight, 7 pct.

(5) Base prices alone are neither good measures of the level of prices of steel nor adequate indicators

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of the comparative prices of different steel products. Some products such as hot-rolled strip, commodity cold-rolled strip, cold-finished carbon bars, cold-finished alloy bars are not for sale at the base price regardless of specification.

(6) Extras, especially during the early war years, assumed increasing importance as a component of the delivered price.

(7) Freight costs increased for many steel consumers as a result of dislocated tonnage, or change in basing point from that nearest the consumer to that nearest the mill, as well as change from the basing point system to an f.o.b. mill basis.

(8) Invoice prices paid by consumers for certain steel products advanced markedly between the second quarter of 1939 and the second quarter of 1942-in some cases as much as 25 to 50 pct. However, some consumers paid the published prices throughout the period.

(9) Actual prices varied from 50 to 135 pct of April 1942 published delivered prices during the period covered, while published prices remained stable.

(10) By the second quarter of 1941 actual prices paid for most steel products closely approximated published prices and were stable for the remainder of time covered by the survey. The mills were operating at or near capacity and had removed most of the price concessions, introduced new extras, enforced more rigid interpretation and use of published extras, and were changing basing points from those nearest the consumer to those nearest the mill.

(11) In 1939 and 1940, when steel mills operated at an average of 65 and 82 pct of capacity, respectively, consumers received concessions from published prices as shown in table I. These concessions were granted by the waiving of certain extras, reduction in base prices, downgrading; that is, computing the price on a less expensive specification than that of the product actually sold the consumer, by special quantity discounts, and by quoting prices which had no logical basis except to meet competition.

(12) The extent of price concessions shown by this survey is probably understated. First, it is likely that certain big consumers not included in the study receive large concessions; and second, the price series obtained, with few exceptions, do not include those concessions which take the form of rebates based upon the volume of steel purchased during a given period. (13) The price the consumer pays for steel does not depend as much upon the pricing system used as it does upon the degree of competition existing among the mills.

During the course of the survey, 1063 steel consumers were interviewed in practically every major steel consuming industry, located in every important industrial center in the United States. Over 2200

Steel Pricing Conditions Pittsburgh

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Since the basic structure of steel prices did not change materially between April 1942 and February 1946, this report is published to show pricing conditions that are rather generally accepted. This study was used by OPA and probably had considerable bearing on the outcome of negotiations for increases in price ceilings for steel. The report does not take into consideration any factors except steel prices and pricing methods and is intended neither as a criticism nor a justification of the pricing policies of the industry. It is a study that directly shows the U. S. Dept. of Labor's thinking as to steel prices and pricing methods.

The report was written by Willard Fazar and Fay Bean of the Bureau of Labor Statistics under the supervision of Kenneth Hunter and is published in THE IRON AGE by permission of the U. S. Dept. of Labor.

price series were obtained from the 629 firms yielding usable data. Products chosen were those for which consumers' specifications remained unchanged during the pricing period. A breakdown of delivered unit price into the components of base price, extras and freight was obtained from the purchasing agent of each firm.

Price data were not taken from those firms purchasing less than carlot quantities or purchasing from warehouses or jobbers, from firms not regularly purchasing products of a given specification, or from firms that were subsidiaries of steel producing companies.

The 629 firms included in the sample purchased

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THE IRON AGE, April 25, 1946-119

From the second quarter of 1939 through the second quarter of 1941 the range remained about the same from 77 pct to 114 pct-but the proportion of purchases below April 1942 published prices decreased by about half in each succeeding period studied. By the second quarter of 1942 all dispersion below published prices had disappeared, Fig. 13 and table XVII and all purchases of bars were made at the published prices or more. In the case of plates and sheets, even in the latest period, some purchases were made below published prices.

Although the published base price on bars at Eastern basing points remained stationary at $2.15 between the third quarter of 1939 and the second quar ter of 1942, from January through April 1939 the published base price was $2.25. Invoice prices indicated that several companies were still paying this higher base price in the third quarter of 1939. Other reasons for invoice prices higher than April 1942 published prices in the three early periods were the charging of higher extras than published, and in two cases, higher freight costs. One of the extras which