Document 82oyw0zwKG74JemvNez1pakpZ

aMSitMUa&jg LIA15695 Mmums&im m *" , ip wm ' 1" ' ' 'j i iu i i ii p p 'i mi i 1 |iwf., mw u mp.'M u 0 BOOKSGC GBOWTH AD MEXALB MAD By B. I. Bate* Tie* Preal&set - Marketing Doited States Steal Corporation Pittsburgh, Pennsylvania It la a pleasure to boa* the opportunity of spooking before tbs nambers of tvo associations mad* up of caapanlta which art aueh Important suppliers to tbs stool Industry of which my own company la a port. You aro lnportont auppllors in toms of tbs volime of load and cine which tbo atool industry buys and uses. You aro also lnportont auppllors fin tarns of tbs qualities your products add to those properties which steel, In its many fores, already baa. Those added qualities help us serve our customers better, and they help steel products compete nore effectively against other aaterlals lo the aarfcot place. It la good to be meeting with you here In Chicago, in the heart of a large and growing narket which your products and ours both serve. U. 8. Steel baa strong roots in this area, going back to tbs Borth Chicago Bolling Kill Company, asrnml oldest of the original plants of Chlted State* Steel. Today, 0. S. Steel produce# nor* steel In the Chicago area than any other producer by a considerable aargln. It baa the widest product line. In the last several years, we have apart mmj *n" of dollars In this area for new facilities. Including a plate adll capable of rolling the world's widest plates (and, we believe, the world's highest quality plates); an additional galvanising line that went Into operation last March; and a bar Bill de signed to aake top quality bars and to produce larger colls. Ve have announced plana to add other facilities here. Including a major sheet expeaalon program featuring a 5-*t*nd cold reduction mill. We believe It makes ten** to place Investments Ilka these In this growing steel market made up of progressive, forward-looking steal coosxmers -- the kind who can make the best use of top quality materials. Veil, that's enough of "blowing my own blaat furnace" and. Incidentally, Chicago's "born of plenty" if I may mix *f metaphor* a bit. But, perhaps, you will pemlt one more brief commercial -- thla one for the entire steel Industry. Last fall, the American Iron and 8teel Institute opened a new steel Industry exhibit st the Chicago Kusetm of Science and Industry, located at $7th sod South E tor* Drive. It la outstanding among a group of fine exhibits, many of them sponsored by companies and Industrie* which ust your products. After all, what Industries don't! Tb* steal exhibit 1* of Interest to men, women, and children alike; and I urge you to visit It If you eao spars a few minute*. You will find It rewarding, and I think you will be impressed et whet our trade association baa done to promote our product* and public understanding of our Industry in n way which would be impractical for any alngle company in the steel industry. (Presented at tb* Joint Session of tha American tine Institute and lead Industries Association Chicago, 111., April JO, 196} LI A 15696 ii . . i i . . i w m .i in i i i 1. 1i i . ............ .. i i ............ nmn i . 8 I. X. CRB Bow, let's get oo to tb* subject of mj toll, "Bcaoomlc Orowth and Metals Demsnd.* Sometimes, It ih u to me that 'ecooomlc growth' 1* getting to b i bit Ilka Motherhood." Xveryon* 1* for it Democrat* and Republicans; big business and small; business and labor. Iran government official* and collage professors arc In favor of It. Unlike Motherhood," however, there ma to be eonaldereble dleagreceaeot on Just vbat "ecooomlc growth* la and, especially, oo bow to bring It about. 1 an not going to deal at length vith either of tbeae aObject* today, except to tb* extent that 1* required by any dlaeuaalon of natal* daaand. for tb* aoat part, moreover, aqr connect* will be directed to tb* area of ateal demand, bow It ha* changed, and why It be* changed. 1 believe you can best make tb* transition to the particular netal* In which you are most directly Interacted. It le customary to measure oor ecoocaale growth by use of Oroas Rational Product flguree compiled by the federal Oovarunant. for this purpoaa, GRP la uanally expresaed In constant dollar#, which naana that they have bean adjusted, as veil as they can be, for changes in the value of the dollar eo that only changes in physical volute of output are amaaured. It la laportant for us to recognise several things about these nuabere which are used so universally for determining the exletene* or lack of growth, and ite extent. In the first place, 00 la an estimate, or nor* properly, the aim total of any estimate*; and the price Indexes used to convert GRP to constant dollars are also estimates. Son* of tb* estimate* are close; acme are rather approxlaate. Sen* of the estimating errors nay be offsetting. Others may not be. The people In Washington who work on these figure* would, X an sure, be the first to recognise this. In fact, their publication* make it very dear. But, aoat people pay no attention to these qualifi es11 oo*. ms doesn't mean necessarily that GRP figure* are wrong or useless. It does mass that changes In s short period, particularly fron quarter to quarter or year to year, may have little meaning, especially If they are mail. It does mean GRP figure* ust be used with care. In the second place, It should be recognised that the basic rate of growth of tb* ecotKny la not always reflected In year-to-year change* In GRP. We are la tb* habit of saying, "Our economy grew over 5 per cent fren 1$>61 to 1962." By this v* mean that GRP (a* reported) vs* over 5 per cent greeter in 1962 than in 1961. TMs nay have been pertly because our economy was In the upward phase of the business cycle. Economic growth cannot be meesured on a year-to-year basis. It Bust be measured la terns of an underlying trend over s period of years, with business cycle movement* carrying GRP above and below this trend line. Furthermore, as GRP Is constituted, short-range Influences, basically unrelated to ecooanlc growth such m a sudden shift In inventories or an Increase in government payments for farm surpluses, may greatly affect year-to-yeer GRP relationships. This brings me to ay third point. An lacrosse in certain Items Included la GRP 1* not ecooomlc growth In the sense of being greeter production of things that people want and are willing to pay for. For example, government activities, such as Increased expenditure* for defense, tb* space program, or natlooal perks, would appear In the figure as an lneraaae In GRP. However, desirable, or necessary, any of these things night be, to you or me they ere not ecooomlc growth as v* normally think of it. In the fourth pises, sven after v* have mad* due allowance for all these things, the same rate of growth In the economy In two different periods could Involve wide differences In growth of various sectors of tb* econoay and night Involve widely varying action# to stimulate growth. These difference* would have a profound affect 00 the relationship of acononlc growth to for ateal and other metals. T**T'->a'TSr* ** 1R I*1L IA 15697 m \ I. I. BOS ^i'^ilnrtfaiifi rr"rra*rWri1if-^ -ifi fiiiitfiiMfntt-MtTifc|-| -3- It 1* Obvious that v* are going to boar a groat deal more about growth X rata* in tba months ahead. The reaaooa for this are clear -- our econc^r la not \ performing aa Ita resources, productivity, and potentlalltlea would permit. Aa a consequence, under-utilisation of men, machines, and materials la coaacaplaea in today'a Induetrial aceaa. Ihla affecta all of ua profoundly -- not only because of the economic and eoclal waste of nen unable to find Joba, but aleo because all of ua repreaest caapanlea that produce netela; and recent yeere here aeen few output recorda In our lnduatrlaa. let'a look nora closely at the area of aetala danand X know best -- the postwar record of steel production. 8ona of the special clrcmstancea and problana faced by steel producers are ccmaon to all of ua hare today, so that this analysis l ay prove helpful la reviewing your own Industry or campmty problana. Steel production reached an all-time high of 117 Blllloo Ingot tons In 1955# and averaged 11$ Billion for the years 1955*57* Since then, output has not touched the 100 Blllloo ton level for any year; although annual totals of 99# 90, and again 90 million tons during the pest three years approached It. (I think we'll break { through that lid In 1963 but the penetration will probably not ha great.) I One fundamental reason for tba relatively low level of recent years lias In the movement of finished steel Inventories in the handa of steel coptimara la tba aenufeeturlag, transportation, and construction industries. Bach year alncn f 1956, these considers have drawn down their steel Inventories. We estimate this Inventory reduction has averaged over 2 ml11100 product tons per year -- compared to i average annual Inventory building of 2.1 ^Ulon tana la the 1955-57 period. I iA f In terms of Ingots, steel requirements la the mld-flftlcs were overstated (compered with conauBptlon) hy 3-1/2 ml11100 tons a year; and In tba years from 1958 i through 1962, they have been understated by more than 3 million tons a year. In f total, steel ingot production baa been reduced by more than six ml111on tons ma Hf nually, not because our economy la using leas steel, but because of a change lm . steal consumers' Inventory practice#. t Tba reason for this cutback In stocks lies In the rapid and comprehensive expansion of steel availability in the postwar period. Efficient and rapid deliv eries by the steel mills make large customer Inventories less necessary, and modern Inventory controls have helped to make low inventories of purchased material econom ically feasible. We believe the recent Inventory liquidation cycle brought industrial stocks of steel down to a minimus at tht end of 1962. While there will be temporary swings up and down In Inventories keyed to labor negotiations and the business cycle, steel production la the future should mors closely parallel the growth la steel consumption. A second Important factor that haa bald down domestic steal output la recent years haa been the shift In the nation's export-import balance of steel mill products. Tbs rise In steal imports and decline In exports between 1955*57 and 1962 has meant a loss to domestic steel product?* of some six million tons annually of shipments of steel mill products, or in terms of Ingot production, a loss of r about sight million tons. It la Important to remember that these two major factors depressing steal output In recent years have not involved any least ting of steal's kty role In this m yrpr WPr-i* *-1*15698 4 ................................._____________ ____ ____ -4-- -------- ---------------- 1.1.09- action *s industrial framework, but rather a shift la source of supply fear part of our seeds to steel from abroad and steel moving out of Inventory. Iowever, these factors aloes are sot enough to explain why production of steel has declined relative to earlier periods. Kven when the tvln effects of nega tive trade balance and inventory swing have been taken Into account, the fact rail ns that there has been so increase in the tons of etoal used by our econtmy over the past decade. We hive been barely bolding evso. Sana of tbs reasons for this lack of forward thrust are Obvious, la the i early postwar period, there verc sharp increases la the steel re^uirunts of the railroads, of agriculture, sod for oil end gaa drilling. During ouch of the recent past these areas of steel were declining, reaching extremely low levels la I960, lowever, we here alreedy aeea acme Improvement la both faro and railroad aarketa, though they remain far from record levels. Similarly, Military requirements for steel reeebed a postwar high during the Korean Mr in the early fifties, falling sharply theraaftar as our dafaesa budget shifted from the eooventlooal weaponry of a email war to tba highly complex research- oriented weapons aysteas that characterise our defense today. The net decline in steal requirements between the Korean-stimulated 1953 peak and present military usage amounts to several million tons, while total defense dollars being spent are actually higher than they were 10 years ago. This flow of national income has shifted to areas using relatively leas metal per dollar spent. The net affect of theee several declines in steal-using markets has been to conceal the basic growth in several major eousmlng industries. It is important to . note that these losses are ell behind us, and will not subtract further from steel demand, these markets may, in fact, add to future requirements now that the post war shakeout has been aecaaqpllebsd. There ere three other important influences on steel use, the first ooa, wall publicised and the secood two perhaps laaa wall known. First, there is increasing competition from other eatarials, including cMnt, elualmm, plastics, glass. lou are all familiar with alusintm orange juice cans, momreturnable beer bottles, aluminum in same perts of same automobiles, prestressed concrete in construction. Although hundreds of other such examples might be listed, the total tonnage of steel involved to date is not trmendous. Tet, this challenge is significant -- particularly when added to all tha others. Secondly, there is "technological unemployment of steel," as somaooa has called it. Steel users are beccmlng more cost minded. They are adopting steel proces sing and fabricating methods which reduce scrap, so they use smaller tonnages of steel to produce ths same quantity of a particular part. Along tba same lint, two seemingly opposite trends era taking place -- miniaturisation and magnification -- both reducing the amount of steel needed to do a specific job. for example, the development of transistors has mads It possible to make radios, television sets, and electronic devices of many kinds, Mailer than in tha peat. This has reduced tha amount of steal mead to enclose than. At tha opposite pole, we have higher capacity machines of many kinds being produced, with ooe doing the work formerly done by two or more. For example, the it l t llll ttlllli f- I~` . . -itn -, .. ...... - WF  mm J -- ........................... ....... f^Mmrnmmy . ^wupm .JwpMipi iiiMtfirtif^ii^ritrfifr LIA156 99 ir - jfrti' niif-lirfByfihifr~ir[ - ...... ... i M i ii ii mm i iMimm ........ m m m -3- (mentor* and transformers now being built *r* capable of producing and handling ora currant than units built tan years ago. They an ion efficient, son econom ical, and use lass steal than the several aarllar aodala required to do tbs aaaa job. Closely allied to these shifts la eoostaer technology an the changes and advance* In steel themselves. Steel producen an asking and selling Improved steels which do son work per ton. Stronger steels an carrying greater loads per too] thinner steels an covering son surface per pound; corrosion- and abnsloo-nslstant steels an lasting longer. These steels an serving custoasn better. Tbsy an helping steel compete In the market. But, they do mean leas tonnage for a given Jdb. Many of these facton affecting steel dsmand may have run their comrse. Others may continue though, perhaps, at a reduced nte. But the competitive chal lenge la then, end steal la responding to this cbellange. Ons of the most Important anavan to be found by any steal company la meet ing these problma lies In cost reduction and product lnprovamect. Recognising these needs, we at V. 8. Steel have pound millions of dollan Into facilities and research. Our developeeats In continuous casting have neelved widespread attention In recent weeks, sad they will bring notable advances la both product quality sod production efficiency. The list of new and Improved steel products la long and still growing. Sane example* an lightweight tin plate; higher strength structural shapes; special steels for low tempentun applications; and steal products with Improved machining properties. 8uch products as these help steel producen and their custamen taka greater advantage of growth and change. It la against this background of technological adwace that we have deflated our marketing program* to take advantage of the many diverse and outstanding quali ties of both new and old steels. Marketing steel, or any product, is a continuous process In which planning for expanded and more profitable sales, and timing an key elements. It includes a variety of functions extending fra marketing research to tba stimulation of market and aalea building activities by distributor* and ntailmn of products made or atael. TO achieve a specific marketing objective may mean starting with the devel opment and the promotion of the processes necessary to fabricate s particular grade of steel economically. . . or the development of applications for a particular grade of steel. . . or encoungement of approval and specification of some grade of steel In a specific application by shoving materials engineer* on the staff* of cod* author ities and government agencies how it la used. . . or the stimulation of steel consussrs to buy a new grads of steel. . . or maybe all of these things must be done at ooe and the same time. To be successful, a marketing program must trigger a complex dedslooaaklng process over a considerable tine period. There are many decisions by maay people to be Influenced against the opposition of many competing factor*. Tbess de cisions eventually will involve some or all of ths steel eonsuaer's actlvitas la styling, engines ring, designing, distribution, advsrtlMng, merchandising, and sailing Bteel companies, as wall as the American Iron and Steel Institute, are becoming more and more active in various types of application developasnt and research They are working to bring about improved design* of end products to take full advea- mmmmaap'gm^mmnpmpii mm - ....... --------------------------- mm mm iAMUtU Mi*i JMUI WPjpMPPBWff wmsmrn^mm^ LIA15700 m BWiiMn rtfrtm try*** -'lift"' tmurfafrir mm* * ------- - . t. m tag* ef tba characteristics of steal. la Boat cases, tba Inroads of another aatarlal Into a ataal market Involve redesign of tba and product. Xqvaal attantloo to redesign, u*lng steels to full advantage, frequently laada to evea graatar acoocmlea, or and product laprn resents Bavaral years ago, tba companies Id tba ataal Industry working through tba Institute l&ltlatad a raajalgn alaad at laeraaalng tba ptfellc's avarauaaa of tba versatility and advantagaa of ataal. Tba Objective we* to aaka aura that the ptfelle placed a proper value oo atael In and product*, that they did not prefer product* aada of other aaterlal* la the belief that beeauae acme of thaaa aatarlala ware never, they vara, therefore alao batter. Surveys Indicate that thla continuing progm la producing algnlflcast raaulta. j Hunsroue afforta have been aada by ataal coa^mnlee to azpand varloua aarfcata for ataal auch aa cans for aoft drlnka, galvanlcad ataal farm atructurea, atalnlaaa ataal tanka for bulk Bilk handling, and ataal curtain valla for office buildings. Tba use of cans for aoft drlnka has grown at a rata of nearly $0 per cant a year for 3 several yaara. 1 have taken a good bit of tine so far to describe eoae of the prdblaBS facing tbe ataal Industry today and to Indicate ease of the ways in which ve are taklj^ action vlthlc tkiltad States Steal to neat these challenges, aa well es sane of the things being done by those In tbe Industry and by tbe AISI. There la, however, one ell-enconpeaalng problw that no coacpeny can overcane Itself, no natter bow wall con ceived ita afforta, and that la tba econonlc environed In which decisions are ante, and actions are taken. All tba factors I have sectioned Inventory shifts, foreign competition, sifestltute aatarlala, changing technology, and certain conaunlng aarket declines ~ are facta of our current, raaaarcb-orlanted, coat-conscious Industrial scans. Tour J industries have alao Talt tba Impact of nost of tba. However, the single Boat laportant change baa bean tba slowing la over-all economic growth. The aetala Industries, as tbe suppliers of Boat of tba basic mate rial* from which tba production and construction of all kinds of equipment end structures proceed, suffer Boat fraa such a leveling off. We Bust have trua growth at aoBethlng better than tbe alow Increases of tbe peat eight year* If our narkrta are to approach their earlier growth tread. let's taka a alnuta bare to look at tbe record. Between 19V7 and 1955i Cro*a Rational Product recorded a real annual rat* of Increase around k per ead; Industrial production Increased by 5 per cent a yeer, and tba output of durable goods -- tba area with which we la tbe aetala bualaess ara Boat concerned -- advanced at aa annual rat* of 6 per ced. Reflecting this postwar boon, tba use of steal roe* at a baalthy k-l/2 par cd a year. X* contrast, between 1955 end 19&2, total national output Increased by only 2.7 par cent a year, lndu*trlal production roa* by 2.6 par cant, and tba output of durablea advanced by only a little over 2-pei cant, and ataal usage declined allgdly. It la this slowdown in growth that must b* reversed if we expect to see unemployment rates fall and operating levels rise. What, than, ara tba proapacta for nor* vlgoroue growth! 9 mi h i ii i l i t l' gamm th*mm mmsm LIA15701 lilli ( iini'inSMjaanms'ienini i *. m T *........... . -- There ere several Indications that va can reasonably hope for snort hi ng battar than tha performance of tba lata fifties and early sixties. Private capital Investment has baas sluggish la racant years, reflecting both tha aquaria la profits and decreased availability of attractive Investment opportunltlas . la a aanaa tha paat $ to 10 yasrs have baas a period In which our economy baa barn growing up to its saepandad capacity and enlarged amply of oooaiaar durable goods Ilka care and home appliaaeaa. low, a major replacement job la before tba American acooaay, stimulated la part by ccBprtltloo from modern ovaraaas plants and. In still larger assure, by In tense domestic competition. Tba Increase la business activity la tba years ahead M va replace and aodernlsa the equipment Installed In tba early postwr period will, la turn, generate renewed dasand for expansion of production facllltlsa. Tba right tax policy, recognising tba need for a continuing dlnata favorable to capital Investment, ratber than abort-range stimulation of coosuaer spending can do such to facilitate this whole process. Tba changing composition of our population nay also have contributed la pert to our s c o o mIc slowdown In recent years; but It will contribute to faster growth la demand for hard goods and steal Is tba years ahead. During tha five years from 1955 to I960, tha sharpest rise la our population vas among teenagers -- a relatively limited market for durable goods. Xqually important was a decline la tha mafeer of people 20-29 -- tba major source of new household formations. Fortunately, this problem carries with It Its own solution, as yesterday's teenager becaaes today's housebolder. Population studies of the Oensus Bureau In dicate that during tba next tan years, tha fastest growing portion of mir population will ha this critical 20-29 age bracket, and household formations will ha on tha Increase again. This should give a definite boost to durable goods production. Thus, tha basic materials for a maw surge la national economic growth are present. We have tba Industrial plant, tha manpower, tha markets -- but do ve haw tha trigger -- the will to grow? Are we as a nation more concerned with securing our present standard of living than In achieving a better one} In tha amm of security many tins have bean rramlttnd In every phase of national life, and they have eoet ue progress. tkrtll our nation recognises that the answer to technological uoamploymast la not obstruction, hut growth In final markets; until every company recognises that tha ansver to competition from whatever source lies In doing a better Job and mot In government aid; until tha force and creative stimulus of individual Americans are cut looaa from the deadening shackles of incentive-destroying taxation; until thaaa things happen, we will not capitalise on our national potential. Personally, I'm hopeful that we will make progress In thaaa vital areas. Aa I doss, let me aspheslse tba special Importance of nil this to us In tha metals industries Certainly, it la important to every American and every business, large or small, whether It produces and sails services; or farm products; or consistar products,durable or noo-durable; or Industrial products. But, it la doubly Important to us; because auch a large pert of our output goes Into oapltal 1w i f iamipiwwjpgm Mjmmm m wm -Mtfc'--hitel iru tiiiW iii i ------------ ii- im t o . B iH . it i mw-nnim. mxm M*mm*.up " ' *'mm m* .w^^piwpiiWWgppiww LIA15 702 . .-*