Cold Steel

WESTERN EUROPE

Western Europe's steel industry is sick. With a few exceptions, European steel plants are too old, too small and too far from seaports to compete in the world market. All this requires drastic action, which is now being taken in several countries.

Three Kinds of Effort. West Germany has seen three big steel mergers since 1964. Moreover, 31 steel companies have asked the European Coal and Steel Community for permission to form themselves into four competing cartels that would provide joint marketing services, coordinate investment and give specialized roles to different factories. The Community is expected to approve reluctantly in a few months with some firm conditions, one being that the cartels last for a limited time.

In France, Finance and Economics Minister Michel Debre has announced a "milestone" agreement that "avoids both a system of laissez-faire, or indifference, and a system of state control." The government will lend the steel industry $544 million, doled out at a rate of about $120 million annually, at low interest, to modernize and regroup. The four biggest French steelmakers recently formed two new combines.

Britain's steel industry faces nationalization for the second time. The bill now in Parliament, which would buy out the 14 major private steel firms for $1.358 billion, is designed as much to demonstrate that the Labor Party still has some socialist beliefs as to modernize the industry. That nationalization will reform British steel is doubtful, but private industry has done little in the 13 years since steel was denationalized, and few would disagree with the Observer that "British steel is a mess." Now, even in the British domestic market, imported pig iron, at $53.20 a ton, undersells the local stuff, at $72.80 a ton.

Outlook: Poor. The most promising steel industries in Europe are new ones in Holland and Italy, which, being big, modern and set up near seaports, can undersell the old inland German mills, imprisoned atop their own uneconomic mines. With four new coastal plants opened by Italy's government-owned Finsider, Italian production increased 26% from 1964 to 1965, and is up another 8.3% this year. The Dutch firm of Hoogovens, partly situated at Europoort, where 80,000-ton ore ships can come calling, is expanding output from 2,800,000 to 4,000,000 tons annually.

For all the improvements, according to a Coal and Steel Community report leaked last week, the five-year outlook for European steel is poor. European steelmen must modernize to stay in business, but by modernizing they add to overcapacity.

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