Introduction___ CONTENTS Page 1 RAW MATERIALS AND TRANSPORTATION I. Reserves of iron ore and other raw materials of steel production: A. Lake Superior high-grade ores-. B. Other domestic iron-ore reserves currently in use_- C. Reserves of raw materials other than iron ore necessary for A. Development of domestic sources of low-grade ore.. III. Summary of proposals to meet shortages of raw materials_ IV. Ownership of domestic iron-ore deposits; position of various pro- II. Present corporate structure of the steel industry- III. Expansion of major steel companies into the fabricating business_ IV. The United States Steel Corp.'s role in the steel market. NOTE. Except as otherwise indicated, all footnote references V THE IRON AND STEEL INDUSTRY INTRODUCTION The purpose of the hearings which are reported on herein, as stated by Representative Celler, chairman, in his remarks initiating the hearings on the steel industry, was as follows: At the outset of this hearing on steel, it may be well to state the nature and purpose of this committee's investigations. We are concerned with monopoly power. The problem of monopoly power is one of the great issues facing this country. Many representatives and important citizens have already appeared before this committee and have expressed their concern over the growing concentration of industrial power. Almost every point of view has been expressed in our prior hearings. This committee is now moving from the general to the particular. We are going to look into the problem of monopoly power in specific industries. The purpose of our hearing will be to determine whether specific changes in our laws against monopoly are required so that free and competitive enterprise may be maintained. I am sure that I can say that if this committee has any bias it is a bias in favor of free and competitive enterprise. This is going to be a fair and objective hearing, and I do not prejudge the answer. I do point out that some of the proposals made at recent congressional hearings come close to asserting that the steel industry has passed from the domain of competitive enterprise and must be treated as a public utility. So, the question of whether the steel industry is competitive and, if not, why not-is an urgent and pressing question. I do not think that these questions are satisfactorily answered by showing that there is some competition in the steel industry or that there are some monopolistic factors. The problem is the over-all effect of the various factors that are at work in the industry. We are going to look into the various segments of the industry-the ores, the transportation, financing, and the problems of integration. Because steel is such an important commodity-basic to economic life and national security-this hearing on steel has important ramifications. The American steel industry employs directly about 800,000 employees. Millions of employees are indirectly dependent upon the steel industry. When it comes to national defense few problems may be more important than the question, for example, of whether the iron-ore supply of this country is being adequately protected. The economic and national defense responsibilities of the American steel industry are directly related to the issue of monopoly and competition within the industry. When major policy decisions are made with respect to prices, employment, or national defense are these the decisions of a few people in a few companies—or are these decisions arrived at competitively? The focus of this hearing will be legislation. Our inquiries into steel may throw additional light upon any deficiencies in the Webb-Pomerene Act, the commodities clause, and the Sherman and Clayton Acts. For example, a question of considerable significance is as to the adequacy of section 2 of the Sherman Act in controlling the very problem of monopoly power. I am sure that this and subsequent hearings will help to lighten up the dark corners of our inquiry into the need for legislation. I hope that we will learn as we proceed with these hearings whether one company in the steel industry is of such a size as to interfere significantly with normal competitive behavior. Witnesses from Government and industry, and experts in various phases of the production and distribution of steel, testified before the 1 subcommittee concerning the wide ramifications of the steel industry. In addition, many of the Government agencies and private corporations represented at the hearings submitted extensive data, exhibits, and commentaries to the subcommittee. This report attempts to state explicitly and concisely all conflicting points of view regarding the economic structure of the steel industry. This is a factual report, compiled with the assistance of the Legislative Reference Service, Library of Congress. It contains no subcommittee conclusions or recommendations. It is a reflection of the testimony, in a concise and readable manner; also the various exhibits are correlated with the testimony. PART I RAW MATERIALS OF STEEL MANUFACTURE One of the major aspects of the steel industry to engage inquiry by the subcommittee referred to the raw materials of steel manufacture, since the conditions affecting the supply of and demand for raw materials of industry are necessary considerations in the analysis of monopoly and competition. Although the primary concern of the hearings involved questions of possible monopoly power in rawmaterial supply, these phases of the industry have added significance because of problems of "shortages", both in relation to steel capacity and to national strength. 2 A comprehensive array of testimony and exhibits was submitted relating to the principal raw material of steel production: iron ore. To set forth a composite report of the data presented at the hearings it will be summarized topically, rather than in the order of appearance of the witnesses. The following outline will serve to indicate the principal divisions of the subject of iron ore and raw materials: 1. Reserves of iron ore and other raw materials of steel production, present and future output and demand. 2. Development of complementary domestic sources of low-grade ores, and discovery and development of foreign sources of ore. 3. Recommendations respecting alleviation of raw material short ages. 4. Ownership of deposits. 5. Integration of the iron-ore and steel industries. 6. The iron-ore market. Prices. Sales and purchase policies. It should be noted that there is some overlapping of data under these topics, partly because of the varied perspectives and relationships differently emphasized in the testimony and in questioning by members of the subcommittee, and partly because of the relevance of some of the information to more than one phase of the ore industry. I. RESERVES OF IRON ORE AND OTHER RAW MATERIALS OF STEEL PRODUCTION A. LAKE SUPERIOR HIGH-GRADE ORES The principal iron-ore deposits of the United States are found in the region around the Lake Superior "district," which includes parts of Michigan, Minnesota, and Wisconsin. Other districts, each of which • It should be noted that steel scrap is an important secondary raw material of steel manufacture. includes deposits in more than one State, are the northeastern, southeastern, south-central, and western. For several decades past, the Lake Superior district has been the principal domestic source of high-grade iron ore, and within this district the so-called Mesabi (or Missabe) "range" has yielded the largest quantities of high-grade ore, both in total output and in rate of annual production. On an average, the Lake Superior district accounts for approximately 80 percent of the iron ore produced in the United States. One of the principal questions raised in the hearings was whether there would be sufficient domestic raw material for continuance or expansion of the steel industry at its present rate of production. 4 To indicate the close relationship between ore output and the volume of steel production and national income, Secretary of Interior Oscar Chapman asserted that "they even seem to have the same coefficient of expansion," as suggested by the figures for 1909, 1929, and 1948. In 1909, national output was valued at 80 billion dollars; steel output was 27 million tons, and the iron ore required was 51 million tons. In 1929, the production of 63 million tons of steel required 73 million tons of ore, and national output stood at 160 billion dollars. In 1948, steel output was almost 90 million tons, using 101 million tons of iron ore, while national output was valued at almost 260 billion dollars. Projecting this relationship, the Secretary stated that, if national product attained a level of 300 billion dollars, steel production would be about 105 million tons, and the iron required would be almost 120 million tons. Pointing out that about 80 percent of the iron ore used in 1950 will be obtained from the upper Great Lakes region, the Secretary commented that the combination of fortunate geographical circumstances contributing to the growth of the steel industry has been the location of ore in this region and the linking of ore and steel-making areas by low-cost inland water transportation. While there are important steel centers in the West and in the South, "the hub of the industry is that part of it near the Great Lakes." 5 In the light of these circumstances, said the Secretary: the first and foremost of the problems which face the steel industry is the approaching depletion of the high-grade, easily mineable ore reserves in the upper Great Lakes region. What before World War II looked like enough of such iron ore to last indefinitely has shrunk to the point where ability to produce steel may be restricted within the foreseeable future. Within 15 years, ore production from that area, under present metallurgical techniques, will of necessity be reduced to slightly more than half its present level. The great drafts on these deposits demanded by the war radically changed the outlook and underline the vital need for readily available iron-ore reserves in times of national war emergency." The Director of the Bureau of Mines, Dr. Boyd, pointed out that since development of the Mesabi Range in Minnesota, late in the nineteenth century, the United States has been virtually independent in iron-ore supplies. While more than 1.6 billion tons have been produced to date from the Mesabi, only 3 percent of our total ironore supply has been obtained from foreign sources. Since World War II, however the time is already here when the domestic steel industry would have serious difficulties operating at full capacity from present domestic iron-ore sources; Each district contains one or more iron ranges, and each range generally has one or more mines. 4 Hearings, p. 69. |