State of Steel

For most Wall Street pundits, the Depression will be over the day U. S. Steel restores its preferred dividends to $7. That day was nowhere in sight in 1933 when U. S. Steel lost $36,000,000 or last year when it lost $21,000,000. And it still looked a long way off last week when U. S.

Steel directors met in Manhattan to announce half-year earnings and take action on the preferred dividend.

Big Steel's loss for the six months was $2,936,000 against a deficit of $1,639,000 in the same period last year. Taken by the quarters, the results were not so bad as they appeared. Whereas U. S. Steel lost $2,173,000 in the first quarter of 1935, its deficit for the second quarter was only $762,000. Better still was the operating profit per ton of steel. On each of 3,553,999 tons delivered, the company made an operating profit of about $7.50 against $5.36 for the full year 1934. Thus it was clear that U. S. Steel had got a firmer grip on the costs of its Brobdingnagian household. Nonetheless the directors, still unconvinced that Recovery is here, voted last week to continue the preferred dividend at $2.

Much of U. S. Steel's production capacity lies in heavy structural and rail tonnage. As all the world knows, these two classifications have long been at the foot of the class in Recovery. Hence U. S.

Steel's earnings were not up to the performance of some steelmakers who, counting less on heavy industry orders, have benefited from mounting sales of flat-rolled steel for light industry uses. By last week nearly every important steel company had reported six months' earnings. These indicated that on the whole the junior members of heaviest of heavy industries had enjoyed a spanking half-year recovery.

Some half-year earnings:

1935 1934

(Jan.-June) (Jan.-June) Bethlehem $1,193,000 $2,539,000

Republic . . . 2,756,000 805,000 Inland 4,858,000 3,233,000

Jones & Laughlin 750,000(D) 1,038,000(D)

Ludlum .... 345,000 375,000

National . . . 6,558,000 4,235,000

Wheeling . . 1,602,000 1,076,000 (D = deficit)

Last week Inland Steel celebrated its 50% rise in earning with a 25-c- extra dividend in addition to its regular 50-c- dividend. Typical of hustling steelmakers who in the last 15 years have whittled U. S. Steel's share of the nation's ingot capacity down from 45% to less than 40%, Inland Steel has doubled its own ingot capacity since 1925. Last year it completed a four-year program of diversification by building a tin-plate mill. Its sales and profits this year came chiefly from sheet and strip steel.

At the head of Inland are the brothers Block, Philip Dee, president, and Leopold E., chairman, sons of a Cincinnati ironmonger. Visitors seldom find them both at their own desks because each is continually popping into the other's office to argue, suggest, consult. Philip Block is the operating head. As such he supervised the building of Inland's new $20,000,000 finished steel mill at Indiana Harbor, Ind. which, though it looked like a bad investment in 1931 and 1932, is currently responsible for most of Inland's profits. Leopold Block is the financial head and used to be the top salesman. In the company's salad days he was not above going down to the railroad station to greet incoming purchasing agents as they stepped off the train. But Salesman Block never used high-pressure methods. Amiable, gentle, softspoken, he resembles the oldtime drummer only in that he continually smokes a long black cigar.

Hard on the heels of the dividend announcement came another. By approval of the two boards of directors Inland was merged with 93-year-old Joseph T. Ryerson & Son, independent steel and iron company, with Ryerson in the status of a wholly owned subsidiary. With this addition Inland moves up to seventh rank among the nation's steel companies, with a capitalization of $116,000,000. Fifty-nine shares of Inland stock will be issued for each 100 shares of Ryerson turned in.

Bullish as were the half-year earnings of most steel companies, they were not bullish enough to account for last week's spectacular rise in steel shares on the New York Stock Exchange where no less than 14 steel issues broke into new high ground. One was U. S. Steel preferred which soared to 100 3/4, to sink only three-fourths of a point after earnings were announced. Reason was the counter-seasonal boom in steel. While everyone supposed that, as usual, steel operations would wilt in July, late July production turned out to be nearly a record for midsummer. And last week the boom rumbled into August.

Production climbed to 46% of capacity, against 36 1/2% only three weeks before. Orders for tin-plate, farm implements, machinery and machine tools continued to expand. But the most heartening news for steelmen was the steady growth of miscellaneous business from unclassified sources --orders for steel to make washing machines, kitchen ware, office equipment, furniture, refrigerators and a hundred other commonplace products.

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