Competition Moving Inland

A third of the nation's steel and nearly two-thirds of its highly profitable sheet and strip is consumed within 250 miles of Chicago, but only a fourth of U.S. steel is produced in the area. Aware of the opportunities this situation offers in the world's fastest growing steel market, major steel companies are spending nearly $1 billion to expand or build new facilities in the Indiana industrial complex near Chicago.

U.S. Steel is in the midst of a $300 million expansion of its Gary works, and second-ranked Bethlehem has already spent $350 million on its new Burns Harbor installation, where steel-plate production is scheduled to begin this month. Jones & Laughlin is tripling the size of its Hammond mill, and National is turning out flat rolled steel from its new mill at Portage. When all the new facilities are completed, Midwest steel capacity may exceed consumption by as much as 30%. Says a Pittsburgh steel executive: "I don't know who is going to hurt whom, but it is going to be one helluva scramble."

Pricing Advantage. In the midst of the scramble sits the only major steel company with its headquarters and entire production facilities in the Chicago area: Inland Steel. The smallest of the industry's Big Eight, Inland has long benefited from its proximity to Midwest steel consumers. Sixty percent of its output is sold within 100 miles of Chicago, and practically none is shipped more than 400 miles away. This provides Inland with pricing and delivery-time advantages over distant Eastern mills, and has contributed to its enviable earnings record. The company was eighth in steel production during the first nine months of 1964 (setting a new company production record), ranked seventh in sales, and earned sixth place in earnings with a record $49 million. Even more impressive, it was first in net income per ton and second only to National in its percent of return on sales and investment.

Inland has built up a large deposit of good will in its area. Many little consumers, told by other steel companies to "call Inland" for their small orders, have grown larger--and stayed with Inland. By encouraging its executives to participate in civic affairs and all employees to take advantage of a corporate education program--half of its 30,000 employees do, at company expense--Inland has developed an excellent community image that impresses local customers. The company recognizes, of course, that it cannot meet its challenge from the East with good will alone. It is spending $125 million this year for a computerized hot strip mill, a tin-plate cold rolling mill and two 250-ton oxygen furnaces at its huge Indiana Harbor complex in East Chicago, the most concentrated facility in the industry.

The Defense Is Ready. From its 19-story, stainless-steel headquarters in Chicago's Loop, Inland is run by another highly concentrated facility of a sort: Chairman Joseph Block, 62, whose grandfather founded the company in 1893. A pipe-smoking intellectual who surrounds himself and his colleagues with modern art, Block angered competitors in 1962 by holding the price line during the steel crisis. Although he recently came out for steel price rises now, Block is realistic enough to admit that "I don't think there is much likelihood of an across-the-board increase any time soon." He is calm about defending his market--a market he knows the way the old-time grocer knew his customers--and he promises: "We shall give a very good account of ourselves." As usual, everyone in Pittsburgh knows exactly what Joe Block means.

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