[Situation in Steel]
[From the U.S. Government Publishing Office, www.gpo.gov]

THE SITUATION IN STEEL X
TRANSCRIPT OF THE MEETING OF IRON AND STEEL INDUSTRY WITH THE IRON AND STEEL BRANCH OFFICE OF PRODUCTION MANAGEMENT
TUESDAY, NOVEMBER 11, 1941
Chairman, A. D. WHITESIDE, Chief, Iron and Steel Branch
(Issued by the Division of Information, Office for Emergency Management)
MEETING OF IRON AND STEEL INDUSTRY TUESDAY, NOVEMBER 11, 1941 WASHINGTON, D. C.
Chairman: A. D. Whiteside, Chief, Iron and Steel Branch, Office of Production Management MORNING SESSION
W. S. Knudsen, Director General, Office of Production Management:	Page
Message from the President of the United States: Welcome to Industry,	1
E.	G. Grace, President, Bethlehem Steel Company:
Reply for Industry___________________________________________________ 3
Sidney Hillman, Associate Director General, Office of Production Management:
Labor’s Part in the Defense Program__________________________________ 7
D.	M. Nelson, Executive Director, Supply Priorities and Allocations Board and Director, Division of Priorities, O. P. M.:
Allocations and Priorities___________________________________________ 9
W. L. Batt, Director, Materials Division, Office of Production Management:
Materials____________________________________________________________ 10
Jesse H. Jones, Secretary of Commerce and Administrator, Federal Loan
Agency:
Financing and Expansion Program______________________________________ 13
Leon Henderson, Administrator. Office of Price Administration:
Price Administration and Civilian Supply_____________________________ 14
Rear Admiral Emory S. Land, Chairman, U. S. Maritime Commission: Objective and Requirements of Maritime Commission___________________ 17
J. V. Forrestal, Under Secretary of the Navy:
Over-all Program and Requirements of the Navy________________________ 19
John J. McCloy, Assistant Secretary of War:
Over-all Program and Requirements of the Army________________________ 21
Thomas B. McCabe, Administrative Consultant to Lend-Lease Adminis-trator:
Lend-Lease___________________________________________________________ 23
AFTERNOON SESSION
R. C. Allen, Assistant Chief, Iron and Steel Branch:
Raw Materials________________________________________________________ 25
Thomas Akin, President, Laclede Steel Company:
Steel Scrap__________________________________________________________ 27
Charles Halcomb, Assistant Chief, Iron and'Steel Branch:
Priorities and Administration___________________________________J____	28
W. A. Hauck, Iron and Steel Branch:
Plant Expansion______________________________________________________ 30
Stanley B. Adams, Assistant Chief, Iron and Steel Branch:
Allocations__________________________________________________________ 33
George F. Wright, President, Wright Steel & Wire Company, Worcester, Massachusetts:
Allocations__________________________________________________________ 35
Dr. George B. Waterhouse, Iron and Steel Branch O. P. M.:
Ferro Alloys_________________________________________________________ 36
Paul J. Kruesi, President, Southern Ferro-Alloys Company, Chattanooga, Tennessee:
Ferro-Silicon________________________________________________________ 41
H.	LeRoy Whitney, Iron and Steel Branch:
Standardization and Simplification of Specification__________________ 42
M. Brace, Iron and Steel Branch:
Alloy and Tool Steels________________________________________________-	45
L. Gerard Firth, President, Firth-Sterling Steel Company, McKeesport, Pennsylvania:
Tool Steel___________________________________________________________ 47
R. C. Allen:
Scrap________________________________________________________________ 49
A. D. Whiteside:
Allocations and Closing Remarks______________________________________ 50
III
MEETING OF THE IRON AND STEEL INDUSTRY WITH OFFICE OF PRODUCTION MANAGEMENT
A conference of the Iron and Steel Industry with the Office of Production Management, held in the Auditorium of the United States Chamber of Commerce Building, Washington, D. C., on Tuesday morning, November 11, 1941, convened at 10:40 o’clock, Mr. A. D. Whiteside, Chief, Iron and Steel Branch, Office of Production Management, presiding.
Chairman Whiteside. The meeting will please come to order.
This meeting is unique. It is the first complete and over-all industrial meeting we have held. We are doing this because we have held repeated meetings of the main committee and subcommittees of the steel industry, and we think it best, occasionally, throughout the year, to have the entire industry present so that they can hear the Government aspect toward industry, and industry’s reactions toward the Government.
We are going to confine ourselves to the Government position this morning with the exception of Mr. Grace, and this afternoon we are going to have a general business meeting which will be open for questions and answers of any kind whatever.
I am going to introduce Mr. Knudsen now, who will read a message from the President. Mr. Knudsen! [Applause.]
Mr. W. S. Knudsen (Director General, O. P. M.). It is my pleasant duty to bid you gentlemen welcome and to thank you for coming here. It is also an honor and a privilege to read to you a message from the President of the United States. It is dated November 8, 1941, and reads:
My Deae Mr. Knudsen : It seems appropriate that I should, through you, address the representatives of the largest industry, producing the largest tonnage of metal in the world, on the morning of November eleventh, the anniversary of Armistice Day, 1918, and the first day of the week which has been designated as Civilian Defense Week.
The output of the steel mills serves as the backbone of the weapons, the tanks, the airplanes, and the ships on which the fate of free government in this world rests.
The men who will gather with you are the leaders of the iron and steel industry of the United States. They have a great responsibility. They must supply, at the time it is required, the steel in the form and the type essential, not only to carry out the immense armament program necessary for our own protection, but they must supply adequate steel to serve the requirements of Great Britain, Canada, Russia, China, and all other forces determined to defeat the Axis Powers. And, added to this, steel must maintain the industries absolutely essential to the functioning of our civilian life, as well as that of Latin America and every other civilized country in the world, depending upon that commodity.
No greater burden has ever been thrown on a single industry.
No greater call has ever been made on any industrial group than is required of the steel industry. The initiative, the energy, and the resourcefulness of every man in every capacity, from the senior executives through every type of labor must concentrate upon those objectives, primary of which, of course, are the requirements for our Army, our Navy, and our Maritime Commission.
We must set aside any individualistic interest which interferes in the slightest degree with this objective. The executives must, and I know they will, work
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with labor to meet this test of their resources, and I am equally as positive that labor will work with the executives, for that purpose is mutual—the protection of the lives and the homes of the American people and of every free home on earth.
I have watched with personal interest the part which the steel industry has played in the Defense Program, and I expect even greater results and accomplishments from it in the future, for the day on which you will meet with members of the industry is one set aside and dedicated by the people of this country, as a new starting point from which to concentrate every facility to make this country impregnable—and to furnish the materials and products which will enable the free countries of all continents to defeat the despotism which threatens us all.
Very sincerely yours,
Franklin D. Roosevelt. [Applause.]
It is, of course, a privilege for me to tell you what we are up against. The program, as you know, has grown from 11 billion dollars to 65 billion dollars, and we are running now at the rate of about li^-plus billion dollars a month. We hope to raise this production curve next year to 2 billion dollars a month, plus, and eventually to get it to 2^ billion dollars a month, plus.
But, of course, at the bottom of all this is your industry. You are the people who furnish us with the material with which to start practically everything going. If we have to build a new factory, we have to come to you. If we have to have a new machine, we have to come to you. If we have to have material to start a shipyard, we have to come to you. In fact, you are really the keynote of the Defense Program.
I would be remiss if I did not tell you how much we appreciate what you have done to date: the fact that you got up to maximum production in a relatively short time, the fact that you are now at the point where it is most difficult to keep the plants operating at the maximum and meet all the contingencies that come up on every side.
As you know, in our steel picture, the steel of which we have been shortest is certain grades of steel. We have not been short in the over-all steel capacity. The Defense Program has not reached that point, or nearly that, as yet. I question whether it will ever absorb 100 percent of our production.
But there are certain things that we need for tanks, for airplanes, and ship plates which at the present time are on the shortage list, because we have started so many yards and we need to have a great deal of steel.
When I was on the coast last July, I went around and saw every shipyard, and all of them were right in the throes of starting, and were banging away at steel like nobody’s business. There wasn’t a single fellow I saw who did not explain to me that, within two or three weeks, the steel would all be in work. So in these certain grades of steel of which we are short, we shall have to ask you to do an extraordinary thing for us, perhaps, during the next month or two, until we get on top of the job.
After we get to the point where we can begin to check out what is coming out of the yard, against what is coming into the yard, I think we will be comfortable. In fact, our steel people have told me that is a matter of the next 6 or 8 weeks.
Alloy steels, of course, are used mostly in tanks and airplanes. I would say there that while there are specific kinds of steel that we
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need very badly, we are at the same time more or less bottlenecked on forging capacity.
On armor plate the requirements have gone up to such an extent that we have not been able to keep up with them, and I do not think you have, either. But there are other things involved in it. We started out with 400 tanks a month and went to 500, and then to 1,000, and now we are talking about 2,000 tanks a month, which requires about 1,000 little ones. And by “little ones,” I mean little ones that weigh 14 tons, you know.
There will be a tough period while we are building up to 2,000 a month, but I have the assurance of our people that the things have all been talked over with you men, and there is in sight capacity enough to handle the armor plate after we make certain expansions that you probably know about.
That, of course, in a way, covers the Defense Program in steel, roughly as far as I am concerned. I deal only with the over-all things. There will be more plants built, and we will have to have more structural steel, but I do not feel that structural steel is such a difficult item to master. At least, we have the satisfaction that after one building is built, there won’t be another one built right in that place. We will just go along from there.
Coming back to the program, however, I feel that while we have a start, we have some of everything in production. Please understand that: we have some of everything in production. We are not anywhere near our peak rate as yet, and we won’t be, perhaps, until the second quarter ot 1942. We hope to be there at that time if we can get enough speed into this problem. We still lack it, because, as you well know, when you are starting a new plant there are many different things which come up in starting that plant which in a good many ways retard the attainment of the peak capacity. But I tell you, gentlemen, we are making progress.
We have nothing, and industry has nothing, to be ashamed of in this program. We are going along, and I feel that with the help of God and you fellows, ana everybody in the industry, we will get this program set.
Sometimes I get a little sentimental about the thing. It may be a sign that I am getting old. But the other day I talked to a sailor who had just spent 14 days in an open boat. He needed a few guns on the boat that was sunk. He needed a few more vessels to convoy his ship. He needed a few airplanes to help spot the submarines, and I think that is our job, to take the boys in the air and the men at sea and help them to do the job.
Thank you very much. [Applause.]
Chairman Whiteside. It always seems rather ridiculous for a chairman to try to introduce a man who is much better known than the chairman will ever be. In this case I have to mention who comes next, because all of the speakers have riot come yet. Mr. Grace, will you speak now ? [Applause.]
Mr. E. G. Grace (President, Bethlehem Steel Co.). Mr. Chairman, Officials of Washington, Fellow Puddlers: The only excuse I can give for my selection for this job would be my age. I certainly haven’t any other qualifications. Mr. Whiteside tells me that I was to answer the President’s message for the steel industry. I wish every one of you people whom I am supposed to represent would tell me what you
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would like me to say. However, knowing you as I do, I think you will stand for what I will say in respect to the orders which we have from President Roosevelt.
He has told us in unmistakable language and terms what our job is. I am glad he has. It should do us all good. If we had any misgivings as to meeting an all-out effort on the part of the steel industry, as to what it is necessary to do in this emergency, the President certainly should have eradicated any thoughts of that kind which existed in any of our minds.
I would like to emphasize, because I think it is really the meat of the President’s message to us, one paragraph, not attempting to detract from the others in it, but emphasizing what I personally feel is the meat of the message. If I may, I should like to read it:
We must set aside any individualistic interest which interferes in the slightest degree with this objective. You must, and I know you will, work with labor to meet this test of our resources, and I am equally positive that labor will work with you, for the purpose is mutual—the protection of the lives and the homes of the American people and of every free home on earth.
Now, Mr. Chairman and our good friends in Washington, that is just what we will do. [Applause.]
Mr. Knudsen, thank you for what you said you knew we had done up to the present time, and if there is more to be done, if it is in the wood and in the body and in the steel industry, it will be done.
It might be appropriate (and I am not attempting in any way to raise any controversial subjects) to say just a few words in review of the tools that we have to work with. After all, the tools we have to work with and how we man them, how we use them, will determine the results.
I think we are to be congratulated and very happy to find that on our side through this great conflict we have 130 million tons of valuable steel capacity. We have a pretty good start. On the other side our adversaries have 59 million tons of steel capacity. That is giving credit to the opposition for full producing capacity that existed in all acquired countries, or all conquered countries, like France, Belgium, Japan. On our side we are starting with our own 88 million ton capacity, and we add to that, that of our Allies.
Therefore, from that angle, we ought to be able to win this fight, if steel is what is required to win it.
Another interesting statistic (and then I won’t bother you with any more statistics) is that when Germany was making this great mechanical machine of hers through the years of ’34 to ’38, inclusive, Germany produced during those 5 years 99 million tons of steel.
We in this country in the last 18 months have produced 120 million tons of steel.
I speak of those conditions only to show what we have at our command, and what we have in that direction we all know is being increased in different ways and in different forms to meet primarily special and specific conditions.	J
Now, what do we want? We are here, these people have given us a chance to talk to them, and I know they would like us to talk to them; that is the spirit in which we have met in this place.
First of all, we want to know what you want—No, we don’t. We are not particularly interested in what you want, and when you want
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it. Frankly, to do this job, we want to know what you need and when you need it. I think that is part of it.
We are making in this country alone between 7 and 8 million tons of steel a month., and that is an awful lot of steel. And we want, from our own selfish interest, for our own patriotic interest, to have it used for the purpose of saving the world. [Applause.]
If there is any selfish interest in the steel industry we want to know it. It is a bigger stake for us to know than it is for you people down here. We don’t want any friendly slackers in the steel industry. If we find any of them, I will promise you we will deal with them and we will deal to the point where, if the interest or the persons we are dealing with we think are unreasonable, that is the time to come down and see you folks.
But I don’t think we will see any of them come down here.
First of all, we are making this steel. It is just as easy to ship it to Smith as it is to ship it to Jones or to anybody else. This is no mystery, and it must not be gotten into that Category. We are making the steel, and we are shipping it. If we are not making the kinds of steel in every instance to meet the requirements of Mr. Knudsen, it is because there may not be certain types of finishing facilities to do it, or it may be because the requirements are not properly coordinated, and we don’t know where to ship it.
But I will say to you, we can make it and we will ship it wherever you tell us to ship it, and we will cooperate with you to find out where to ship it and who to ship it to.
My own companies are making 1,000,000 tons a month. We are having no trouble to make it, and we have no trouble in shipping it. We don’t care where it goes, with only one proviso, that it goes to serve this emergency ; that is all we care about.
Now, Mr. Whiteside, Mr. Knudsen, the rest of the official organization, I do not want to have you take any of my words to mean for a minute that we do not feel we are getting full cooperation from Washington’s organization to help us to do our job. But it is an enormous job to do, to know what should be done is an enormous job. Then to organize to do it effectively is an enormous job. But with us, honestly, I want to say to you that it is an everyday detail job for us to make this kind of steel and ship it.
Now, at this point, I want to go back to my original thesis: What do you need and when do you need it? You may have been handicapped—and I speak now to Mr. Whiteside, because, Mr. Knudsen, he is heading this division—you may have been handicapped, Mr. Whiteside, in not having experienced help. Mr. Whiteside points to himself. Of course he does not know the steel industry. He cannot be expected to know it. He will never know it. We don’t know it in all of its entirety. But to the extent that these men have intelligent, experienced organization in the central organization in Washington, to first arrange for allocation and second to arrange for production—which are the two fundamental things and the only two required to do this job—the job can be done, and we do it in each one of our institutions daily.
We do it through an organization known as our Order Department. The Sales Department canvasses the country to get the orders, they put them in the hopper known as the Order Department in our industry, and that Order Department schedules the production of
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steel to meet the requirements, the coordinated, consolidated requirements of the trade.
Our trade, in this instance, our controlling, dominating trade in this industry, our customers, are the Navy, the Army, the Maritime Commission, the Lease-Lend. They are our controlling customers. If we get the needs of those controlling customers, I believe that we will all be pleased—not entirely satisfied—and we will do a good job that will satisfy those requirements.
We have the steel available. There may be some special forms for which, I repeat, there may not be the finishing facilities in certain directions, but I believe that is being ably surveyed and, where needed, capacities are now being increased.
But in the overall picture, we have got the goods and it is up to us with our guiding hand, which it must be, in control of the situation, centralized and directed as it must be in Washington. We want it there, we expect it there, because we must know what our task is.
Our industry is a highly integrated industry. It starts in the mines and goes into the various lines of finished products. Any interruption at any point in that integrated operation will be reflected all along the line. Labor troubles in one department, Mr. Hillman, particularly in the early stages of production, in the coke ovens, the glass works, in the steel-making, stop the whole machine.
Labor troubles down the line will stop the production of a specific commodity, but labor troubles are not our only troubles by any means. The lack of materials, the lack of raw materials, the lack of supporting materials in the factory, the raw materials in the category first of our own basic raw materials, all hold us back. We emphasize, as you all, of course, know, the problem of scrap and pig iron to keep our present capacities operating, and those capacities are being aggravated all the time by the increase of new capacities and, for some magic reason, the ability to produce more with our present capacity.
Thought, intelligent thought and effort, are being put into all of those problems to solve them. We are doing it, you are doing it, and frankly, I would not be Grace if I did not say that we are pretty proud of the job we have done up to the present time in this industry. I would not be true to this crowd of men and the interests they represent if I did not say that for them, because I know of their sincerity, I know of their desires, and I believe as we go along and are being more and more understood, our problems more and more understood down here, that we are going to do better.
We have not done all we can do; none of us. That is our fault, it is your fault, it is everybody’s fault, yet “fault” is not really the word.
I want to tell you that the job which confronts this world is one such has never confronted it before, and I wish that this particular meeting, just at this time, were for the purpose of celebrating the armistice in respect to the present conflict instead of a celebration of an armistice of some twenty years ago.
Thank you, Mr. Whiteside. Thank you, Mr. Knudsen. [Applause.]
Chairman Whiteside. The statement by Mr. Grace requires an answer regarding the 130 million tons of ingots on our side, and from the standpoint of the Government it is utterly essential to use mathe
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matics if we understand nothing else. There are 130 million tons on our side now, but if Russia and England go down, it leaves us with Canada with 90 million tons, and reverses, then, the preponderance of steel, and it goes entirely over to Hitler’s side. Those are the figures we are working against, because that is the eventuality which we must face if we are to properly protect this country.
I just want to take that one exception in regard to the statements which were made.
The other is that at times we have required steels which we believe could have been produced and they have not been produced in the quantities which we needed them. I speak particularly regarding ship plates. Before I introduce the next subject, I want to say that just twenty years ago I was in front of Buckingham Palace when the King and Queen, and the Duke, and others stood on the balcony in the rain while the British played the national anthem, and then America’s anthem, Armistice Day, 1918.
The next is Mr. Sidney Hillman.
Mr. Sidney Hillman (Associate Director General, OPM). Mr. Chairman, Officers of the Institute, Ladies and Gentlemen: Of course, we have before us today one great problem, and the sooner we all realize what the problem is, we will have no trouble as to adjusting ourselves with regard to our responsibilities. Because our problem is to lick Hitler, and lick him abroad, not to wait until he has a chance to come here.
In that effort, labor and management have everything at stake. There cannot be any free labor, or free management, or free industry if that menace prevails.
The job, of course, is the job of organization. I have my responsibilities, responsibilities placed upon me in June 1940, wnen I was given the task of organizing the labor supply for National Defense, and the record today is that as far as the labor supply outside of some instances is concerned, we are ahead of what use can be made of the labor supply.
In our training programs, through the schools, through industry, we have met the challenge of supplying labor to the needs and the requirements of the defense program.
Our difficulty today is, frankly, that we cannot make use of it, that we have been reducing hours of work in very important industries because there is not a sufficient flow of material.
We find unemployment because of the lack of the kind of things that would give the men and women of labor the opportunity to work for defense.
I believe that that record of training labor (and I like to speak to you gentlemen representing industry) shows that in this overexpansion of labor I had the cooperation of labor organizations, with difficulties in a few spots. I had the cooperation of organized labor, if you please, to increase the number of people, of skills in different vocations in the highly skilled trades.
Of course, we have the Labor Relations Department. I don’t need to tell you my position on that matter. Just last Sunday in the City of New York I had the opportunity of addressing representatives of 600 labor organizations—AFL, CIO, independent labor organizations. I told them that regardless of how few strikes interfere with our defense program, we ought to get ourselves to accept
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the fact that we cannot lick Hitler with strikes as usual, or with business as usual. [Applause.]
The quicker we appreciate that our own differences, whatever they may be, are minor in comparison with our joint problem facing us, all of us, I think the quicker we will be able to do the real job of organization.
I have listened with great attention to the words spoken by Mr. Grace. We have these tremendous resources. There is no question in my mind but that we have the facilities, and we certainly have the ingenuity. America would not be what it is today if it had not had the ability to make it what it is. Now we have got a great task, and the task is to organize every element in our national life for that specific objective which is to protect and safeguard our way of life.
Of course, there are bound to be dislocations. We must make our national economy fit into a 50 or 60 billion dollar defense program, and if that 50 or 60 billion dollars is to be of any use, it has to be turned into implements of war quickly, not 5 years from now, or it may be of no use and there are bound to be dislocations. But I believe in the program that we have laid out for ourselves—and this is to try to transfer, to convert nondefense to defense production— if all of us will give our cooperation, if we will do the job with the abilities we have, that can be met and met effectively and quickly.
Of course, there are differences of points of view on many things. Sometimes we consider principles which are merely prejudices, but whatever they are, they must be laid aside today. There must be the greatest possible cooperation between labor, management, and industry and Government to do the job.
Of course your industry is the major industry. Lack of steel of course affects practically every industry in America. And I would like to say to you—and it is of course no more than I am saying and acting in my relationship with labor—there is no question at all that great numbers of us are fearful of what will come after the emergency if we overexpand. Now I believe that we ought to meet each problem as it comes, each problem at a time. Our problem right now is to come out victoriously in this emergency so that we in our own way can meet the problems that will arise after the emergency.
I believe we ought to be big enough to say no matter what the cost is, we must have the greatest expansion for defense. We must keep the morale of the people. I have always believed that, given the opportunity, the democratic way, the free way of doing things will always prevail because it is the most efficient way. I don’t believe that any dictatorship for any length of time can compete with free industry, with free men and women, with the ingenuity they have, with the drive for real work instead of being driven by dictators.
Now there is an obligation, a responsibility, and also an opportunity for all of us, and this is to demonstrate that in this great emergency we can do the most by organizing the best kind of teamwork. I know from what I know of labor that labor is deeply concerned with the major problem of defeating the threat of Hitlerism. I know you gentlemen are. What we want to do is to translate our desires, our wishes into practical operation, and I can assure you that, in any way that I am connected with it, you can look for complete cooperation in this major effort.
Thank you. [Applause.]
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Chairman Whiteside. Way back a few years ago I used to have to comment after the speakers had said something, and after I heard Sidney Hillman talk several times, I have stopped it; so I am not going to follow that procedure.
Mr. Nelson will speak next. [Applause.]
Mr. Donald M. Nelson (Executive Director, Supply Priorities and Allocations Board, and Director, Division of Priorities, O. P. M.). Mr. Chairman and Gentlemen; Gentlemen of the Steel Industry: After what has been said, and so well said, it seems rather trite, perhaps, to get down to the points that I have to make with you. My direct responsibility is that of working with you gentlemen in the steel industry, and with Government, to try to see that the product that you make is distributed to the places that it ought to go. That is what priorities really is. Priorities is not necessarily a system of paper certificates, ana I, for one, want to see many of these paper certificates that are floating around, on which we are trying to do our business, eliminated if it can possibly be done, because I don’t believe we should spend our time on paper.
Mr. Grace said some things that impressed me very deeply, when he said it is our job to show what we need rather than what we want, and I think that is the difficulty that we are finding ourselves in on many of these materials and shortages that are occurring today. I sometimes feel that what we are trying to do is to put a telegraph pole through the knothole of a barrel without breaking the barrel. It isn’t possible to support business as usual and carry through the size of program that we have already got before us and, certainly, the size of program which you and I know we have to put through before we can get off of the spot we are on now. That, to me, seems to be the important job before us, to get this job done as quickly as possible so that we can get back to normal pursuits again, and, instead, of trying to show Mr. Hitler that we have got brains enough and ingenuity enough and courage and determination enough, show him that he can’t change bur form of government.
Now in this job of determining what we need, of course I don’t need to tell you how big the job really is, but I can assure you that insofar as it is possible—and it has to be possible—we feel it is our job to tell you what we need. And in that process of determining what we need, I think we have to look at two points of view very definitely. One, of course, is that this defense program must come first. That is the objective. That is what we are after. We are not on a great national joyride. We are building a defense program, and it is a grim business, and those of us that sit here see it getting grimmer and grimmer all the time, and see the job ahead of us as one that is more difficult all the time, and the program has to keep on increasing in size and it has to keep changing in character because it isn’t enough just to produce as much material as your enemy has; it must be better; and that constantly means that you have to learn the lessons that are being shown to you in warfare all the time and constantly improve your product.
So the job of determining what we need for military purposes, for our own defense and for the help of our friends into whose hands we have determined to put the implements of war in order that they may lick Hitler, is not an easy job, but I can assure you it is being actively worked on and we are getting splendid cooperation from every one of the military services in order that we may get that to you just as quickly as we possibly can.
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But we have another responsibility, and a deep one, and that is to keep this civilian economy going on the basis of what it needs and not on the basis of what it wants, and before we get through, I am afraid it is going to be an unpleasant job for all of us to get our belts tightened up to the point where we all get what we need and what we want.
I think that keynote of Mr. Grace is a keynote for you and for us together—because this job can’t be done unless we work together. I have never felt that we are representing Government as some people think of it, because, what is Government? Government is nothing but the people, and we here in our official capacity in Washington, borrowed as we are from industry, many of us, have just one objective, and that is to get this job done, get it done as well as it can be done, as quickly as it can be done, and still preserve a free-enterprise system that when it is all over can normally take up its operations, its occupations again, and go on to even greater heights. I think that is the objective of everybody that I know in this Government, and I am sure it is your objective.
When two groups of people, you in the industry and we here in Government, get together on our responsibilities, help carry them through in that spirit, I know there isn’t any job ever put up to this country that it can’t do if it is determined enough, and we must be determined, and you in this industry must help us get other industries determined enough to do the job. Now, we all say that we don’t want business as usual. I don’t want to be cynical, I don’t want you to misunderstand what I am going to say to you, but I am afraid too often we mean we don’t want the other fellow to do business as usual. Now, when we say “business is not to be as usual,” it means for everyone of us, and it must be for everyone of us. This economy has to be in such shape that it can do the necessary things, but not necessarily the things that it wants to do, and I, for one, take very much to heart what Mr. Grace said when he said, “We can make what you need,” and that is the keynote, I will assure you, of the job that we are trying to do, and I am sure that out of this meeting today can come from you the suggestions, the help, the cooperation that can do this perfectly enormous job, and I want to assure you that sitting where I do, I don’t underestimate the kind of job that has to be done. It isn’t an easy one in a nation unaccustomed to controls, and one that wants just as few controls as possible—and certainly I agree with that in fundamental principle—to remake, in a sense, our whole civilian economy to get it on a basis of what it needs and not necessarily what it wants.
Thank you. [Applause.]
Chairman Whiteside. We are switching the order about a bit because Mr. Jones would like to speak later. Mr. Batt will speak now. [Applause.]
Mr. W. L. Batt (Director, Materials Division, O. P. M.). When we were arranging this meeting, there was only one thought that was in our minds, and that was that Armistice Day was a good day for the keystone of American industry to sit down with us here and jointly rededicate ourselves to the job which is ahead of us. We hadn’t any idea what kind of a program we ought to have, because we didn’t want to be too formal, and I think all of us feel a sense of deep satisfaction that Mr. Grace’s remarks, as informal as they were, but as sincere as they were, struck the keynote out of which we form this day’s meet
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ing and everything that is to come out of this day’s meeting; because, as Mr. Knudsen pointed out, and as the President pointed out in his letter, and certamly you men know, without the steel industry you can’t have a defense program.
I have just come back from a 5 weeks’ trip through Great Britain and Russia, and that, of course, gives one an opportunity to see war at closer hand. Of course, I am fully satisfied that when we talk about sacrifice and tears, as we sometimes do in the speeches we make, we haven’t very much of a comprehension of what that really means, because the war is not very close to us and very few of us have made very much sacrifice and very few of us have shed many tears. I only hope that the years to come don’t bring that problem too close to hand to many of us, because you can’t go to Europe without feeling that it is a baa, bad world we are in, and that the impact of this war today is more vicious than the impact of any other war has been.
To keep it as far away from home as possible is our objective and our job. But they don’t understand over there why we aren’t able to do more than we do. Mr. Stalin said when we were discussing the comparatively small commitment we were prepared to make for one class of steel, 1,000 tons a month was all Mr. Knudsen had authorized me to furnish, and he said, “With an industry making 85,000,000 tons of steel a year, and you want to help us, you mean to say that a thousand tons a month is all you can furnish?”
Well, you and I understand some of the reasons, but people 5,000 miles away and carrying the brunt of a bitter battle don’t always understand them. We have committed ourselves to be the arsenal of democracy. That means to furnish all of those people who are fighting on one side of this fight all of the materials they can use, and that doesn’t mean 3 years from now. Otherwise, we may not be able to use them.
When we talk about potential capacity, we have to make many allowances, all of us in industry, for the fact that industry here has grown up in specialized lines. The United States as distinct from England has been more a country of specialized development, whereas in England they have had a little more all-round technique in their manufacturing processes. It makes it a little difficult for us to swing over from making one thing to making another, but we are going to have to try to do it.
Mr. Grace (taking again the remarks I want from his very, very appealing address) said we have four customers: the Army, the Navy, the Maritime Commission, and Lend-Lease, and he took the words out of our mouths because they are our customers, and I tell you, gentlemen, they are dissatisfied. If you were to get the brunt of criticism on you individually which we in O. P. M. get from those customers, you would understand, as we do, that your customers are not satisfied. They know a good job has been done but they are trying to get ready to fight a war, for somebody to fight a war, and they want more material and more material and more material, and when you don’t always have it there, they are going to be critical, and we get the first brunt of that criticism.
The orders come to you. I think in too many cases you have tried to be the judges of whether what they asked for was what they wanted or what they needed. Now, I know many times they have asked for more than they want, but we are accustomed to that. We who have
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sold the automobile and other large industries know it is habitual, that many times they ask for a good deal more than what they want. It may be bigger than they need. If it is a big customer, we don’t argue with him. We have to deliver what he asks for, and this is a big customer. This is the defense of the world that is our customer, and even if he does ask sometimes for more than what he needs, we are going to have to do our best for him or he is going to complain.
Mr. Grace has committed this industry, and I am perfectly satisfied that you are going to back up that commitment. You are receiving these orders. You are going to receive more and more of them, because the size of defense in proportion to our total economy must constantly increase, and many of the manufacturing techniques— shipbuilding, for example—have progressed so amazingly that steel is needed much faster today than 3 months ago we would have assumed that it could be needed, and these people are soaking up these materials at an amazing rate.
One reason that happens is illustrated, it seems to me, in what happens when you build a pipe line. If this pipe line had been built, or if it should be built, from Texas to New York, it would be 1,560 miles long and it would carry many, many million barrels of oil. If the people in the East were hungry for oil and you had that pipe line finished today, tomorrow they would be wanting oil to run out of there. But you know as well as I do that the boys back in Texas would be pouring oil in that pipe line for weeks before there would ever be a drop come out of the finished end. That suggests what has happened in the consumption of materials in this defense program. It grows so rapidly and the demands for backlog, for pipe line material grow so rapidly, that they appear large, very large when measured against the output at the finished end.
We are all businessmen in O. P. M. We haven’t changed our interest in business or our knowledge of business because we came down here temporarily to be a part of Government. We have had a lot of habits in industry that are very difficult to get out of. For 10 years, 15 years, ever since 1929, it has been hard to get business, and we have sweat blood getting these customers lined up on our books, and it is asking a lot of an order department or a sales department to push out the window a good civilian customer that they have worked for 10 years to get and to take some defense business on, and I have heard that story in the company that pays me my salary, just as you hear it.
Now, you, as the heads of these businesses, assuming your responsibility for Mr. Grace’s pledge, will just have to bear down a little harder than you have ever done before on your own organizations to break them of those bad habits, because defense has got to come first and these four customers have got to be satisfied, and their needs are going to be larger and larger and the job of satisfying them is going to be more and more difficult.
The Materials Division will do everything it can to help, but it is a small unit. As a matter of fact, the Steel Branch probably hasn’t got as many people in it as a good many of you people have in your own individual order departments. They are men gotten with great difficulties. They work all hours of the day and night. I know what they are up against, and I know you know that they need sympathy. Criticize us all you want to; we don’t care about that; but get the steel when
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the Army and the Navy and the Maritime Commission want it, and usually you know when they want it.
Now, let’s see if this new commitment starting from Armistice Day, with this unequivocal pledge which Mr. Grace has made—let’s see if when next we meet, 3 months or 6 months from now, I can’t report to you that these customers are a good deal better satisfied than they were when we met the last time.
Thank you. [Applause.]
Chairman Whiteside. I think it was about 2 years ago that I went to Texas and I sent an orchid to Mrs. Jones. Mrs. Jones was giving a tea that afternoon. When Mr. Jones came in he said, “You are going to make it hard for the men in Texas from now on.” Mr. Jones will speak now. [Applause.]
The Honorable Jesse H. Jones (Secretary of Commerce and Administrator, Federal Loan Agency). Mr. Chairman, Gentlemen of the Steel Industry: I didn’t know there were so many of you. The last time I appeared on this platform I said something about the possibility of a 90 billion dollar debt. I wasn’t thinking about the situation that confronts us today, but I got the headlines.
As much as the American people abhor war and dread war, in their hearts they are now at war; at war with a monster, a terrible, hateful thing creeping over the continent of Europe as a hungry animal devouring all that is unable to resist it. We are not yet face to face with this monster, but millions of human beings are and have been, millions have already succumbed, and unless he can be stopped we will face him as sure as the sun rises in the East.
We have undertaken to help those who are facing and fighting this monster, and there must be no hesitation, no slowing down, no stopping, no haggling over terms and conditions. We must furnish them, from our own bountiful resources, the things that they do not have in sufficient quantity and cannot get except through us.
We are helping Russia, not because we like or embrace her form of government. We are helping England, not because we approve everything that she does. We are helping China because we are against aggression. We are helping all of the peoples of the world that are fighting Hitler. We are doing this because we love liberty. To do all this we must all make sacrifices and concessions.
It is a terrible thing that we face, spending our vast energies and our resources, but there is no choice if we would avoid the fate that has already overtaken many peaceful nations.
We are here this morning—Armistice Day—to talk with you gentlemen of the steel industry. Steel is the leader of all industry in our domestic lives, and certainly it isi the leader of all industry necessary to defend and protect our way of life.
Time was when wars were fought with the saber and the rifle. Now it is with science and machines. Therefore, without your producing every pound of every kind of metal that you can produce with the greatest possible speed our efforts can fail.
I know that there are no more patriotic set of men than you, and while you have responsibility to those you represent, they, too, are as patriotic as any of us, and so I want to add my voice this morning to this appeal to the steel industry, to the executives of the various corporations, and to the men who work with their hands, whether in the mines or in transportation or in the factories.
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427164*—41-----------2
And I want to assure you and them that your Government will willingly provide the necessary capital on terms fair to you and to those you represent. R. F. C. financing of the national-defense program presents no problem, imposes no condition, and contains no terms upon which reasonable men cannot agree. We must, of course, preserve our form and system of government. We must respect the value of money. It must not be wasted, but there must be no haggling. It is as much the responsibility of industrial leaders to meet their Government fairly as it is the Government’s responsibility to meet them fairly.
There must be expansion of capacity. We must make more of the things necessary to defeat Hitler and we must make them better, and in a hurry.
We know that we are building a great many more plants than can operate in peacetime in steel, in aluminum, in magnesium, in munitions, in airplane factories, in shipping, and whatnot.
We will deal with this problem when the emergency is past. We will have to meet again, not just the steel group but those who will be charged with adjusting all of this extraordinary productive capacity so as not to destroy our national economy and our form of government.
We are bound together today in a common cause with a common determination, repeatedly expressed by the President and by Cordell Hull, to keep this nation free. To that objective we dedicate ourselves.
I thank you. [Applause.]
Mr. Leon Henderson (Administrator, Office of Price Administration, and Director, Civilian Supply Division, O. P. M.). In order to take at face value what “Czar” Whiteside just said, you have either got to assume that he is careless, or that he is extremely polite. As a matter of fact, appearing in what ought to be the whip-cracker position, civilian supply is in reality, of course, the tail end of this effort. Whenever Forrestal or Land wants more steel, he takes it away from the civilian, and I had an arrangement worked out one time that they would ask me, and then that didn’t work very well, and I asked them if they would send me a little note when they had taken it, and that hasn’t worked out very well. So I am working out a different arrangement with Don Nelson and we will tell you about it a little later.
The same way with Jesse Jones; when he wants a little better price he sends word over and we send word back as fast as we can as to what they are to get; and it is about the same way when Batt and Knudsen and the rest of these fellows that you have heard want to make some inroad on the civilian part of the economy; they say, “Now, of course, this is not an order of precedence or importance, but you know, Leon * * *”
Well, I know what is coming, and so I find out that the reason why I really have been picked for civilian supply is that I “give” easily. [Laughter.]
One of the things that I am proud about, though, in that job is that we have so much to give in the civilian part of this economy. I have been deeply touched at times when I have heard Averell Harriman and Bill Batt tell us how people can live and fight on reduced rations, and so for such responsibilities as we have on civilian supply we intend no bar to any proper request from the military and from maritime and from the things that are necessary to make this defense effort a real
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one because, in the last essential, I regard civilian supply as having a deep interest in the success of your operations.
What Bill Batt was saying a few minutes ago, however, was that after they had taken it away from me by means of pieces of paper and certificates he hopes you fellows will honor those and. see that somebody doesn’t slip the material out a side door to make gadgets and cuspidors with it. If I had any one thing to echo, as far as the steel supply intended for civilians, I would urge that you begin to take seriously the question of whether or not certain civilian requirements will be served. We are as fast as possible engaged in making civilian programs that will have a preciseness that I know you want, and I know Mr. Grace, Mr. Fairless, Mr. Girdler, Mr. Weir—all the rest of the men that I have talked to—have insisted from the beginning that is an essential part of an orderly flow of steel.
We have that obligation. We expect to meet it. But I haven’t so much to tell you about civilian supply. On the matter of my other function—that of prices—I want to say a word about the price bill which will be coming up for Congressional consideration in the House within the week. No group in the whole economy, to my mind, has acted better about price control than the original steel producers—that is, the basic steel producers. I have been very proud of that. I take great pride in it because it represents such a tremendous increase in the type of relationships that should exist between Government and industry over what was the history of the last war. Any difficulties that we have had in steel have come from those businesses, those trades, those brokerages that take steel after it has left the steel mill, and in relationship to the total value of the product I can tell you there would be no real problem of price administration if the entire economy acted as satisfactorily as the fabricating and brokerage part of the steel industry.
I think it is to your interest to want to support the price bill as it will come before Congress. I am hoping that that bill will be strengthened by the restoration of three or four important provisions that were in the bill when it was presented, but, independent of that, I want to suggest that we have reached the stage in the defense program where such a large diversion of civilian resources are being preempted for defense that we face some extraordinarily difficult and serious problems in maintaining a reasonable stability in the price structure.
We are already engaged on a wide front in the type of price control which is subject to the standards that we could work out in these few months. As far as price administration is concerned, it would be a much easier task to continue operation on the same basis of Executive order. I think most of you who deal with the Office of Price Administration on such matters would agree that, from an administrative point of view, it is much easier, but we are reaching a point in which we are having to make determinations, sometimes of guilt, sometimes of cost, sometimes almost of markets, and I submit that we have reached a period in which a legislative structure is highly necessary, and is one that should be desired by industry itself. We have reached a place in which we ought no longer to rely upon indirect sanctions, and we ought to go to a period—a system—under which standards are written, rights of appeal are spelled out, penalties for violators are spelled out, and the methods of administration and limitations upon the exercise of
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executive judgment, so far as possible, are spelled out under the same terms that we try in normal periods by other laws.
We will probably need to cover two or three times as much territory in connection with prices as we have already tried with the formal price ceilings and the voluntary informal agreements that now exist. For that reason I am not coming to ask of this group either that you be passive or that you do not resist the passage of that bill. I am saying that, in my opinion, based upon experience to date, this bill is a minimum, that the bill does represent more standards than have ever been written into any bill in the current period by other countries, and that it is a part of business wisdom and statesmanship actively to support a selective price-control bill which will be something of a regular order of business rather than to leave the future to a question of a whole set of individual judgments.
I don’t know how many of you here today were in Washington on November 11, the first Armistice Day. I was and I had operating control over an automobile. Late in the evening and clear until the next morning I chose to take people home from the downtown celebration from that delirious, mad, wild exultation of joy. I recall very vividly that day—and I recall it quite vividly coming here to this meeting—how each person in the automobile was looking forward with happiness to the future. Each one of them had had some restraint put upon his individual liberty. Each one of them had had a sacrifice. Sometimes it was in terms of members of the family being in the service organizations. Sometimes it meant sacrifice of a standard of living. Sometimes it was a business restraint that pulled and tugged at them. But everywhere, in addition to that sense of great joy at the conclusion of the Armistice, the national and international joy at the cessation of bloodshed, each person was thinking in terms of a burden that had been lifted from his shoulder, of a burden that had gone, and of a future in which he would be free to make free choices.
What I like to look forward to on this Armistice Day is another Armistice Day, and if it is given to fate that I should be here or somewhere else in connection with this program, nothing would suit me better on that Armistice Day than to be the transport by which many of you will be helped to release the burdens of restraint, the burdens that rest heavily on you which prevent your free exercise of free choice out of which comes the real strength and, of course, is the basis of what we are defending.
I thank you. [Applause.]
Chairman Whiteside. We thought, before we asked the representatives of the Services to speak, that we would take a minimum of 5 minutes’ recess. That is rather short, but we want to continue the program before lunch. So we will take a recess of about 5 minutes.
(Five-minute recess.)
Chairman Whiteside. The next speaker is Admiral Land. I want to say, before he speaks, that yesterday we received from the Maritime Commission a figure showing their requirements for steel, by types, by months, by quarters, and by years. This is the finest exhibition of requirements that we have had. I think it shows what the Maritime Commission needs, and I think the steel mills are going to meet it promptly because we have given Admiral Land that assurance. [Applause.]
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Rear Admiral Emory S. Land (Chairman, U. S. Maritime Commission). Mr. Chairman, Gentlemen of the Steel Industry: You all know the story of the flagman who witnessed a head-on collision, and then telegraphed his manager that that was a hell of a way to run a railroad. This is a hell of a way to spend a holiday.
It seems to me “Armistice” Day is a misnomer. What you have to do is take off the last two syllables. That is what we are here for. Not armistice, but arm. It is not pleasant to come with bared knees to the wailing wall. I tried that last July with a few of you gentlemen, and some of you responded. It is all very well to have to say “No,” and it is all very well to listen to noes, but they are not pleasant. The shortest bedtime story, which is “No,” always has an unpleasant interlude. [Laughter.]
After my stump speech of July, enough happened to give me some encouragement, but not enough to carry on. So, in August, the following letter was sent to Mr. Knudsen, Mr. Stettinius, and Mr. Harrison:
When the President authorized the construction of ships under the emergency program as well as additional ships under the regular program, he directed me to keep him advised of the progress being made. There is attached hereto a copy of report prepared by the Commission’s staff directly concerned with ship construction, both emergency and standard.
The first week in July, the President asked me a specific question: “How are you getting along with steel?” I replied, “We have been having some difficulties but I believe they can be ironed out satisfactorily with the assistance of the OPM.”
The staff of the Maritime Commission and the staff of the OPM have been working together on this steel problem, but the results at the shipyards are not satisfactory.
I know three things about steel and steel manufacturers: (1) They can do this job if they have the will to do it; (2) The customer Is always right; (3) Kissing goes by favor—and the Maritime Commission wants to be kissed. [Laughter.]
Some of you fellows kissed the Maritime Commission on both cheeks, and some of you kissed it on one cheek, and a very few gave it the Judas kiss. The first was swell, and the last was lousy.
This appeal went to the White House after consultation with OPM, and the result was a very material improvement, but when I tell you there were 14 idle ways in October, you know that the results are not satisfactory. I am going to make a personal appeal to you because I think that the steel industry owes something to the Maritime Commission. We have kept our yards to a minimum, and I will give you a nice comparison if you don’t mind a little profanity. In 1914-18 there were 23 shipyards, 3 billion dollars’ worth of ships, and 2,300 ships, and not a blank-blank one of them ever got in the water. Now we have 32 as against 23. That ought to be some help. We are one of your customers, both in peace and in war. We backed your scrambled expansion and were against a lot of your new expansion. We opposed new steel facilities. We believed" in expansion. We backed concrete barges not because we believed in concrete barges, but because there was a steel shortage. We opposed the pipeline. I don’t know anything about pipelines, but the timing is wrong. We backed your ore carriers, and I have a grudge against you there. You gentlemen ought to be building these ore carriers, not the Maritime Commission. We reduced the number from 25 to 16, and we still think that you ought to be carrying the load and not the Maritime Commission. The same thing is true with the tanker industry.
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We are carrying the whole burden there, and there is plenty of brains and plenty of intelligence and ability in the oil industry, and they ought to be carrying a lot more of the load in privately-owned tankers, not the Government.
We have facts and figures, as your Chairman has just told you. In 1942 we want to build 6,000,000 tons of shipping. We want to build, in 1943, 6,000,000,000 tons of shipping. We can do it if you play ball, and if you will produce it. We will require, to complete these ships and continue our program into 1943, approximately 2,200,-000 tons of steel plates and shapes for delivery in 1942. This is a small percentage of the total capacity of the iron and steel industry, yet at the present time we have a steel plate deficit of approximately <80,000 tons and of the total steel delivered much cannot be fabricated because it is not being delivered as scheduled. This deficit alone is equivalent to approximately 30 cargo ships. I wish to impress upon the steel industry that there is a definite fabricating time in the construction of a ship, depending on the type, extending from 4 to 6 months. It is essential, therefore, that steel deliveries be made far in advance of our scheduled ship delivery dates.
At our last meeting, I placed before the Steel Industry Supervisory Committee specific cases where there were difficulties in various shipyards due to a steel shortage. Some of these cases have been relieved, but, unfortunately, others have arisen which have not changed the over-all picture.
For example, at the present time one yard has only a 10-day supply of steel, while another yard has received 20,000 tons of steel which will be retarded in its fabrication while awaiting the delivery of keel plates. A third yard requires 600 tons of steel per week to meet its production schedule, and only 200 tons have been promised. There are, likewise, a large number of ships in repair yards to be repaired or joutfitted for service in the North Atlantic. That is a new problem. We not only have to repair our own ships, but we have to repair both British battleships and British cargo ships.
Since July several plans have been under consideration to correct this steel deficit, and numerous assurances have been given us that the Maritime Commission’s requirements would be met, permitting us to expedite our shipbuilding program. I regret to add that so far the problem has not been solved, but I have just had the assurance of your Chairman that it will be, and I feel sure that you will come across. We have the shipyards, manpower, machinery, and facilities with which to build ships. The component parts, such as boilers, engines, propellers, and pumps, and so forth, are coming along. We do need steel and more steel. We cannot let an inadequate supply of steel interfere with the national policy of aid to the democracies and with the national-defense effort to these United States. The Commission is ready to cooperate with the steel industry in any way to obtain a solution to this problem, but it appears that the failure or success of ship construction, at the present time, at least, rests with the steel industry. Gentlemen, it is up to you to produce the steel, and it is up to OPM to see that our requirements are met.
I am no prophet—I wasn’t raised in the bullrushes—like Moses— but sometimes I wonder if you gentlemen, wise as you are, have as much vision and foresight as you ought to have m facing this
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problem. I am not going to attempt to advise you, but I want you to ask yourselves the question. We have all had the experience. We have two nerves. One is the patriotic nerve, and one is the pocketbook nerve. In my brief tour in this unhappy job in which I am, I have found that the patriotic nerve frequently flies out the window without a parachute wThen the pocketbook nerve is touched. Now let’s amalgamate these two nerves.
If anybody has any doubt about the accuracy of my statements, I shall be most happy to show you in the Maritime Commission and in OPM both facts and figures.
I would like to close by stressing the highlights, to my mind, of what I have heard this morning. Mr. Grace said, “Let’s go after what we need when we need it—not what we want when we w ant it.” That is number one.
If we had as much productivity on the part of this grand audience as you have oratory on the part of Government, I think we would get away with this job right quickly.
Let me close with number three. No business as usual, no strikes as usual (that is for industry and labor), and for Government, no friction as usual. [Applause.]
Chairman Whiteside. It isn’t necesary to say any more about that. [Laughter.]
Mr. Forrestal, the Under Secretary of the Navy, will speak now. [Applause.]
The Honorable J. V. Forrestal (Under Secretary of the Navy). Mr. Whiteside, gentlemen. Mr. Batt remarked as Admiral Land finished his talk that in view of the large quantity of oil available to the country, in spite of the fact that we didn’t have a pipe line, we might pour some of that oil around this town and cut out the friction. I think it is a very sound observation.
You have heard and will hear from people this morning who know more and can speak better than I. So I will confine my efforts mainly to limiting the period of pain on your part to as short a period as possible.
I have been asked to address myself to the subject of the “Over-all Program and Requirements of the Navy.” I want to say right here to Mr. Whiteside and the people of 0PM that I think that the Navy’s projection of its requirements has been deficient and not cast accurately into the future. I think there are some reasons for that, but I think that we have to improve the accuracy and the scope of our forecasts to enable these men who are struggling with a monumental task to do their job easily, quickly, and efficiently.
It is not easy, of course, to make a precise estimate of Navy requirements, because there are frequent and unforeseen and unforeseeable emergencies that arise from time to time. But inasmuch as approximately 90 percent by weight of the material used in the building of a naval vessel is steel in one form or another, and this material is also basic in other forms of naval construction, the importance of steel to us is obvious. During the past 6 months, the lack of steel has slowed down the Navy’s defense effort in many cases. During 1 month the shipbuilding yards reported a shortage of 60,000 tons of plate alone for naval construction, and I could mention other shortages if I wanted to take the time. It must be remembered that for want of a small tonnage of certain steel, a large project
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may come to a complete standstill. In many cases this danger has arisen because of the failure to deliver steel in the sequence that was required for orderly production. That situation has been due, I think, in large part—in some part, at least—to the failure of proper scheduling in the yards themselves, and it has also been due, as you men know as well as I, to the failure of the mills from time to time to deliver.
As Jerry Land said, kissing goes by favor. The Navy is no less ardent a lover than the Maritime Commission. [Laughter.]
Steps have been taken to rectify this situation in the yards, and we hope that the mills will take equal and efficient steps to meet it from their point of view. The Navy is now in process, of revising its estimates of steel requirements. The data that we now have indicate that steel products of all kinds and forms in our requirements are running presently at the rate of about 300,000 tons per month. Without any question, that figure will be increased as the impact of our program grows and becomes more definite.
We have been accused of hoarding. As Admiral Spear said in response to a question one day from Mr. Knudsen, “You are damned right we have been hoarding. We are going to keep on. We need to.” I think that accusation in some part is true. On the other hand, we must keep certain stocks on hand to meet unforeseen and unforeseeable exigent emergencies.
On the first of July, the Navy had on hand only 3% months of steel products in its supply. Those stocks are separate from the stocks used in new construction, but in order to be prepared for the emergencies that I have referred to, it is a military necessity that those stocks should not merely be maintained, but should be larger than they are now.
There is steel in some yards that is not moving, but in most cases that is because it has been delivered prior to the date it was required or is being held up for the lack of certain materials which must precede it in production.
In reference to the question of hoarding and the question of military supplies that we must have on hand, in passing I want to refer to what Admiral Land also has touched upon briefly, and that is the exigent, the unforeseeable situations which arise out of the repair of British ships. When the Illustrious came to Norfolk last winter, it was necessary to scour the yards of the Atlantic coast to provide the steel plate that went into the repair of that vessel. Not only did we exhaust the available supply of steel in Norfolk, but we had to go to every other Navy Yard on the seaboard to supply the deficiencies involved in that job of repair, which was much more extensive, as most of you know, than had been imagined, which took a much greater amount of steel than had been foreseen. Those situations are not foreseeable, and yet the Navy must not have an alibi if it is faced with that kind of critical situation.
We realize very fully the task that is laid upon you men to meet these sudden demands of war. We in this country are under the necessity of arming in a very short space of time, not merely arming ourselves, but providing arms for those countries that are actually fighting the common enemy, which is Germany. We are undertaking, in a period of months, what the Germans took years to accomplish.
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They did not merely have ample time for that preparation, but they had the totalitarian authority of war-intentioned state with which to bend every industry and every individual to its will. We don’t have that amount of time, and we do not have nor do we wish to have that kind of government. We depend, instead, upon the resourcefulness, the adaptability of American industry, and the will of a free people to impose whatever discipline or restraint is necessary upon itself to accomplish a tough job.
Your industryj like the Nation, faces a heavy and a great task. It is a task which involves inconvenience, sacrifice, and disturbance to our normal way of life. None of us likes it, myself included. But I know there is no one in this room who wouldn’t like far less doing business in a world run on the sufferance of a megalomaniac in Berlin. The task is hard, but yours is an industry which, like the Navy, is manned by hard-bitten men who have had to travel the way of experience. You know better than I that there is no place in your industry for men lacking in will, endurance, and courage. The Navy doesn’t talk much about those qualities, but it appreciates them wherever it meets them, and it knows that the men who make steel have those qualities and that is why the Navy is confident that whatever the requirements may be, however heavy a burden we may lay upon you, that task will be fulfilled.
I thank you. [Applause.]
Chairman Whiteside. The Navy has prepared very complete data regarding their requirements for the next 2 years, and we should have them within the following 3 weeks.
Mr. McCloy, Assistant Secretary of War, will speak now. [Applause.]
The Honorable John J. McCloy (Assistant Secretary of War). In the first place, let me make it perfectly clear that I am only here as a substitute. Judge Patterson should be here, really, but he could not get here, and he asked me to take his place.
Judge Patterson,, as you all know, is charged with the responsibilities of production and procurement in the War Department. They are his special responsibilities. But no one in the War Department can be wholly detached from the problems of procurement. Procurement, together with the training of the Army, constitute the two great efforts that are before us.
Every plan of the War Plans Division must consider the problems of supply, and no plan can be made or is being made today without having the imprint upon it of our present lack of certain material. Behind most of our procurement problems lies steel. The fact is that the Army is not getting the steel today in the form and at the time it should have it. This is translated into unfinished weapons and airports, incomplete overseas projects, and other vital needs.
The reasons for this can be piled on top of each other, and in many cases they are not so much reasons as they are recriminations.
The fact remains that we are not being supplied in the way we need to be supplied. Tonnage figures as such mean little to us when we do not get the plates, structural shapes, or high alloy bars at the time that we need them.
I am told that some of our quotations on high alloy bars are for delivery for over a year hence. We thought a little while back that the mandatory OPM order which is known, I think, as M-21, would
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improve our situation. Actually, it seems to become a little worse instead of better, for our requests of the Supply Service seem to be growing more and more demanding.
Now, the Army’s priorities are low compared with those of the Navy. Emory Land just said that “kissing goes by favor.” I know a very indelicate story about that. When the Maritime Commission and the Navy got through with the priorities, then comes the Army.
Actually, the Army’s needs are no more than about 8 percent, I am told, of the steel capacity of the country, so that there must be no more than a matter of method to supply those needs. Great Britain told us the other day that 10 percent of the steel that she will produce and that she will receive from the United States in 1942 will be used for civilian existence and maintenance, and that 90 percent would be used for her war effort. We can safely assume that Germany’s steel is being utilized in about the same ratio.
The United States has far more ingot capacity than the combined output of Germany and the occupied countries, and certainly not more than 50 percent of our steel production, if that much, is going to the Army and the Navy and the Government agencies, yet the Army is not getting certain critical items which it needs when it needs them.
The Army is no doubt partly to blame. We could schedule our needs better than we have in the past, and I hope that we will improve in that respect. I have no doubt that the OPM could do a better job than they are doing, but we are here not to ascribe fault; we are here to solve a problem. ,
I am a lawyer, not a steel man, but as a lawyer I have had contacts with steel men. In my experience I should say they are at least, to put it conservatively, as realistic, as tough-minded, and as capable as any group of men in the country. I have seen some very large problems undertaken by members of your industry, and I have seen those problems solved. I cannot recall having heard any of them say anything was impossible.
And there were times when some that I knew fully expected the impossible of their lawyers. [Laughter.]
I am not one to tell you, who know your business, how to lick that problem, lick the problem that we have before us. It reminds me of a story. You have all heard, I suppose, of the panhandler who met the very kindly disposed pedestrian. The panhandler asked the pedestrian for 50 cents for a cup of coffee. When the generous old man suggested that 50 cents was a little bit large for a cup of coffee, the panhandler said, “Listen, brother, either give the 50 cents or don’t give me the 50 cents, but don’t tell me how to run my business. [Laughter.]
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However, I will venture a suggestion, and I will venture the suggestion that you men who run the business and understand the problem have a further responsibility, and it is to see that all down the line those objectives which you understand are understood by the men.
If you get out into the mills and see that the men who are actually scheduling the rolling sequences knów what is wanted and do what is wanted, the process of solution will be well under way. I know it is hard to postpone the demands of old and good customers whose needs will continue long after this war is over, but we may be faced with a situation if we don’t win this war with the plenitude of our arms and the strength of our resolution in which we will face a world in which good old customers are no longer a prize.
I venture to raise one question: You know your problems, and we know ours, but I question whether the Government fully understands your problems or whether you fully understand the Government’s.
To be specific, I am told that we need good steel men, and there are a number among you who qualify, men who have been through the mill, who know the game and who command your high respect. The War Department and the Office of Production Management need such men, and I think you need to have them here.
I hope this meeting will lead to greater results, and before long we shall be able to chalk off the lack of steel deliveries as one of our headaches.
I see that my subject, according to the program, is “Overall Program and Requirements of the Army.” I am afraid I haven’t talked much on that subject. Upon reflection, I suppose, I can say all that I need to say about it by simply stating that we need all that you have and all that you can give us, and then some.
Thank you, very much. [Applause.]
Chairman Whiteside. I sat on a jury once, and I recall distinctly that I heard the plaintiff’s story, and before the defendant was up, and there is no defendant in this instance. I just thought there wasn’t any case for him at all. Directly after luncheon when we reconvene I will tell you some of the difficulties about the steel situation, the steels that are required of this industry, and the type of steels and the volume of steel. I will get off that now and introduce Mr. McCabe.
Mr. McCabe is here for Mr. Stettinius, who could not be here today, speaking from the standpoint of Lend-Lease.
Mr. Thomas B. McCabe. Mr. Whiteside, and honored guests and men of the iron and steel industry: Ed Stettinius has asked me to convey to you, to his many friends and former associates in the steel industry his warmest felicitations and keen regrets at not being able to be here today to greet you and tell you about the Lend-Lease organization.
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I was born in the Lend-Lease organization only 1 month ago and am very much of a rookie in this BigdLeague town, and because my chief unexpectedly had to leave town, I am called upon to pinch-hit in this momentous game in a batting order of world stars.
Judging from my lack of knowledge of the Lend-Lease operations as of a month ago, and from the number of inquiries we receive, I am sure that the public generally does not realize that the Lend-Lease organization places no contracts. Procurement is in the hands of the five procurement agencies of the Government—the Army, the Navy, the Treasury, and the Maritime Commission2 and the Department of Agriculture. These agencies have the organization and the experience for making purchases. They are aided by the OPM and the SPAB, who determine availability and priority. It is the function of the Lend-Lease Administration to receive the requisitions from the foreign governments and to make available these funds for procurement after determining that the requests are within the limits of the Lend-Lease Act and are consistent with American policy.
On March 27,1941, Congress appropriated the sum of $7,000,000,000 to implement the Lend-Lease Act of March 11. Of this appropriation, only $133,000,000 was allocated directly to the purchase of steel, but I do not need to remind this group that very substantial tonnages are required in the construction ot the tanks, armored cars, and trucks under the allocation of $427,000,000 for automotive vehicles. Large quantities of steel are going into the vessels that are being built under the ship allocation of $743,000,000.
Practically all of the $7,000,000,000 provided by the first Lend-Lease Appropriation Act has been allocated. Contracts for the greater part of the fund have been let and the balance will probably be obligated by the end of the month.
All of these appropriations are startling in their magnitude, but they become significant in our aid to the democracies only when they are translated into materials and equipment delivered at the theater of war. Speed in providing supplies to the British Empire, China, Russia, and the Allied countries is of vital importance—speed by the foreign governments in formulating their needs, speed by the Lend-Lease Administration in making available the necessary funds, speed by industry in the production of the tanks, aircraft, ordnance, and other materials that are required.
The Lend-Lease Administration is fully awake to the necessity of swift action in the performance of its functions. During the past 4 weeks, our operations within the organization have been examined closely in an effort to eliminate all unnecessary delays and to reduce to a minimum the interval between the initiating of a request for materials or services by a foreign government and the placing of the contracts in this country. There have been repeated interviews with the foreign purchasing commissions and with the procurement agencies. As a result of this study, two major changes—one in procedure and the other in organization—are being put into effect this week. As a change in procedure, we are asking the foreign purchasing commissions to program their requirements to a greater degree in order that the Lend-Lease Administration may act upon integrated programs and allocate funds of that basis rather than on the basis of the individual requisitions as is largely the case at present. Through this change, it is expected that the interval between the filing of a requisi-
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tiqn by a foreign government and the initiating of procurement action will be shortened to less than one-quarter of the time required at present.
As a change in organization, a clearance division is being established within the Lend-Lease Administration. The division will serve, in a sense, as the customer’s man and will assist the foreign purchasing commissions in the preparation of their requests and in accelerating the clearance of their programs not only by the Lend-Lease Administration but by the procurement agencies and the other branches of the government.
As a third change, an expediting section will probably be established shortly in the Lend-Lease Administration to follow and to speed the progress of all requisitions from the time they are accepted by the procurement agency through all the steps of manufacture and transport until the finished supplies arrive at the theater of war.
Thank you. [Applause.]
Chairman Whiteside. You men have heard the spokesmen of the four largest users of steel. They have left this work with you very definitely. They will tell you what they need when they need it, and we will expect that where we haven’t gotten it and will convey it to you very quickly.
We are going to recess now and meet at 2:30. Don’t forget the responsibility that the President placed on the steel industry of this country. He said distinctly and definitely that it was the greatest responsibility which any industry in America had to bear, and he depended on you to carry that responsibility through. I thank you.
(The meeting adjourned at 1 p. m.)
The afternoon session convened at 2:35 o’clock, Chairman Whiteside presiding.
Chairman Whiteside. The first speaker will be Mr. R. C. Allen* Chief of the Raw Materials Section. I think you will be very much interested in the statement he makes. It is quite significant, and while you listen to that statement have this thought in mind, that this unit of the steel branch has raised and planned with the help of the miners and the ore men and the crews and the staff and the transportation, to have adequate raw materials to deliver to the furnaces of this country, and that there is very little doubt, unless something occurs that is absolutely unforeseen at this time, that the blast furnaces will not have an adequate supply during the next 2 years. It is largely due to what Mr. Allen has planned and done. Mr. Allen.
Mr. R. C. Allen (Assistant Chief, Iron and Steel Branch). Mr. Chairman, Gentlemen, I hope that the inspiration which you have received from the morning’s program is still with you and will abide with you at least for the rest of the day while we struggle with some of the realities which this program of expansion in the steel industry has given us to conjure with.
A few weeks ago I spoke to the Defense Committee of the Steel Industry on raw materials in relation to the manufacture of steel in very general terms, stating that I had not at that time had an opportunity to analyze the program in relation to the industries which serve the finishing capacity in the steel industry.
Since that meeting I have given time to such an analysis and am now prepared to make to you a statement concerning it.
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I am sorry that I shall have to deal in figures. Personally, I, do not like figures, particularly because in dealing with figures one is so prone to misunderstand their implications and their origins. Furthermore, I don’t like to read statements to anybody; I prefer to talk ex tempore. But I was advised last evening by Charlie Halcomb and Mr. Whiteside, our Chief, that I am not any longer to be allowed to get away with that, that I shall have to confine myself to a statement condensed to a duration of 5 minutes.
Therefore, if you will pardon me, much against my inclination, I shall read to you what I have to say.
Available supplies of pig iron and scrap have been one of the limiting influences on the production of steel and iron products in 1941. It will continue to be in 1942 and in 1943 and thereafter, unless in the meantime by the building of new blast furnaces, the supply of pig iron is increased in an amount necessary to absorb the growing shortage of scrap and overtake the demand for metal to serve present and presently projected capacity for steel ingots and steel castings.
A careful check of all new capacity for pig iron, steel ingots, and steel castings expected to be available in 1942 and 1943, including only those projects which have been approved for execution, shows that the capacity for steel in these years will be far in excess of available pig iron and scrap supply.
The most intangible factor in any .estimate of future raw material for steel is, of course, scrap, but if it be assumed that 23 million net tons of purchase scrap will be available in each of the years 1942 and 1943, which we believe errs, if at all, on the high side and, further, that melters other than steel melters shall have their share of both pig iron and scrap on the basis of the division heretofore prevailing over a period of five years, it appears that, although in 1942, on the basis of capacity then existing, 87 million net tons of steel could be made, actually production will fall short by about 4 million net tons on account of a pig-iron shortage of 6,400,000 net tons.
And although in 1943, on the basis of capacity then existing, 93 million net tons of steel could be made, actually production will fall short by about 7 million net tons on account of a pig-iron shortage of 9,800,000 net tons.
This is to say that, as of this date, pans which are under execution by actual building and plans approved but remaining to be executed for expansion of steel production in the years 1942 and 1943, are out of balance with coordinated plans for increasing pig-iron capacity.
In order to bring these plans into balance by the beginning of 1944, it is necessary to provide for the building of about 32 additional blast furnaces of about 1,000 tons per day capacity each.
Iron ore will be available for the manufacture of 38,100,000 net tons of pig iron in 1942 and 60,200,000 net tons in 1943, which is the actually expected production of all blast furnaces now existing and building and to be built for service in those years.
This will require, from experience, 84,860,000 gross tons of ore, and 90 million gross tons of ore in 1943. Boat transportation on the Great Lakes will be available for this tonnage, but not for any more, provided that the new bulk freighters now on order by the Maritime Commission are delivered for service as scheduled; 8 by April 1, 1943, and 8 more by June 15, 1943. There will be sufficient coke fluxes and the refractories for the manufacture of all pig iron, steel ingots,
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and steel castings and foundered products which can be made in 1942 and in 1943 under the limitations imposed on production by the pig-iron shortage which I have just explained.
In short, if increased production of steel ingots and steel castings all now provided for by new capacity built, building, and to be built, is realized, it will be necessary to remove two bottlenecks now barring the way: One, shortage in blast-furnace capacity equal to 9,800,000 net tons, and a shortage in transportation facilities for moving iron ore from the mines of Lake Superior to the blast furnaces.
Thank you. [Applause.]
Chairman Whiteside. I am going to ask Mr. Thomas Akin, president of the Laclede Steel Company, if he has any comment to make regarding that statement. I would like very much to have Mr. Wright and Mr. Coursey and Mr. Furz come up, if they are in the audience.
Mr. Thomas Akin (president, Laclede Steel Co.). Gentlemen: I was asked in the middle of last week to speak to you on the question of scrap which, as I represent one of the nonintegrated mills in Illinois and Missouri, is a very pertinent thing to us, because we depend almost exclusively, at times, at least, upon the scrap that comes from our own territory.
Early this year the demands for scrap coming to the integrated mills farther East caused them to come into our territory, to pay high prices, to lower the grades, and today our territory is pretty well cleaned up of scrap—perhaps you all know it.
We are, I think, faced with lessened operations, perhaps with shutdowns. The crisis, gentlemen, is here, and we don’t know very much about what the condition is, what we are expected to do, whether we are going to shut down. whether we are going to run, and it seems to me that m a case of this kind the Government could do a great deal for us—more, perhaps, than they are doing now—so that some administrative head could tell the mills, especially away farther West, just what is expected, what we are going to do, what we are going to get in the way of raw material.
I cannot see why the Administration here (and I am not knocking any of them, but they are expecting a great deal from us) should not have some administrative office that would coordinate the thing so we would know first what we are expected to do, what we can do, and what we can depend on in the way of raw materials.
Thank you. [Applause.]
Chairman Whiteside I think some agencies in Washington can do quite a bit, but if anybody in God’s world can tell me where the scrap is coming from or going to, or will flow, without more detailed information than is available at the present time, I would like some suggestion.
We are in every way trying to expedite the collection of scrap. We have a mandatory scrap order at the present time which will direct the flow of scrap through the dealer to the defense requirements in the mills. I know of no mill that is down on defense because of scrap. That will be worked out in greater and more refined detail the moment we get the figures which we are now having tabulated by the Bureau of Mines. Up to the present time, there never has been in the history of America figures that were at all accurate regarding scrap, excepting as of the past situation. We are trying now to foretell the flow oi scrap. It is the most difficult thing to do. I cannot see how we can
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give anybody assurance that they will get an indefinite amount of scrap in the future.
Bear this thought in mind: Where the steel goes up and the production of home scrap keeps parallel with the steel production, the purchase scrap market does not vary to that degree, particularly under conditions where everybody is keeping the machinery as long as they can, where they are discarding automobiles about as many years ahead of time as they used to before time when they could get a car every 5 minutes, and when everybody on earth is conserving what they have in the fear that they cannot get more. I think there will be a further shortage of scrap, and I have no doubt there will have to be some steps taken to restrict the use of scrap in many instances.
I will leave that point for discussion when we ask and answer questions.
In the meantime, I do not know anything else to add.
Mr. Halcomb is Assistant Chief of the Iron and Steel Branch, and he will speak to us on the question of “Priorities and General Administration.” Mr. Halcomb-
Mr. Charles Halcomb (Assistant Chief, Iron and Steel Branch). Mr. Chairman, Friends in the Iron and Steel Industry, Members of the A. M. M.: We have had numerous opportunities to talk to some individuals and to some small groups of the steel industry, but this is the first chance that we have ever had to have representatives of the entire industry here at one time. I want to take just a few moments to explain briefly the function of priorities.
The purpose of the priorities system is twofold:
1.	To designate the relative need of the end product.
2.	To effect the delivery of the component parts required to produce the end product at the proper time to tie in with the required finished delivery date.
We are getting figures now on AIS-17, which are helping us to determine just how the business is going. Those figures that we have now were compiled as of October 1, and the rated orders of A-10 and higher were 59 percent of the total production for the month of October. The backlog for November was 60 percent, and the backlog of November was 57 percent.
When we receive the backlog figures as of November 1, we believe that they will show a step-up in the rated orders, and that will mean, as you heard Mr. Leon Henderson say today, a much heavier series of requests from the purely civilian supply industries.
We in the iron and steel branch fully realize that our job is to get the steel where it is needed, when it is needed, and in reasonable quantities. Our branch is set up as a manufacturing company. We have specific functions of management, such as the overall policy and administration, investigation of need versus capacity, consultations with industry experts, financial assistance where necessary, and legal conformity with established laws.
We have in our factory our production lines, divided into control of production to best meet the maximum requirements and the control of distribution.
It is in the control of distribution that priorities play their most important part. To properly function, we have divided the Iron and Steel Branch and our production lines into three main groups—raw
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materials, carbon steel, and alloy steel. Each one of these sections is further divided into units, and in that way we are able to cover all of the 26 various classifications shown on the AIS-17. Each unit in the above section has been set up to handle correspondence and applications for priorities.
There are four ways in which we are set up to implement priorities action: the P type of orders, which are extendable on down to the sub type of supplier; project ratings, where new facilities are required; allocation, and then the PD-1 application, which is becoming the bane of almost everyone in the country, both the applicant and the supplier.
On the P type and project type rating orders, the Iron and Steel Branch act purely in an advisory way. We try to help the establishment of the proper rating and we try to see that no more materials are given out under these ratings than are necessary to carry through the production lines.
On the subject of allocation, Mr. Stanley D. Adams will talk to you in detail in a few minutes.
The PD-1 applications at the present time are arriving in the Iron and Steel Branch on a daily average basis of 500, which is a considerable step-up in the last 3 or 4 weeks.
Now here is what happens to these applications: As soon as they reach the Office of Production Management they are put through what we call a case control. They are given numbers and a registry so that we are able to trace them—in most cases fairly consistently. In many cases these PD-1 applications specify the type of end product for which the material is required. In some of them they specify the rating that has previously been assigned to the end product.
Analysts in our various units carefully check the indicated needs of the application and wherever possible we look for the inventory on hand. That is not always given.
Through a knowledge of industry conditions which we gained through the use of AIS-17 and 17A we attempt to develop the proper kind of a rating which will get the material where it is needed on time.
After the application has been rated by the analyst, it then goes to our review unit, made up of men who are familiar with the general overall picture of the end product requirements plus a more general knowledge of the overall picture of the steel industry. If the rating suggested appears to be too high or too low, then a review unit consults with the analyst and arrives at a proper rating.
When the final rating has been established by the Iron and Steel Branch, it is then referred to the priorities representative of Mr. Donald M. Nelson, Director of Priorities. In this way we have a check and a double check on every rating that goes out of the O. P. M. and we hope eventually to improve and to standardize our type of rating so that there will be less confusion in the industry.
In a good many cases recently we have been asked to issue higher ratings than those originally put out because customers state that their suppliers are not able to meet the delivery required with the rating originally established. When these requests are received, they are given careful review, and we find in a good many cases that we can effect delivery with the rating issued by transferring the order to some other mill where the defense load is not as heavy.
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427164s—41------------3
This permits us to prevent the overcrowding of the higher rating classifications, and that is our objective wherever possible, to keep the ratings down so that we have room for emergencies.
Here is a thing that I have been thinking about considerably lately, and that is that the steel producers themselves can help us to a very large extent in eliminating some of these requests for higher ratings. I just want to cite one instance that came to my mind last week. A purchaser required several thousand tons of hot-rolled sheets. The order was placed in September with a rating of A-5 with two separate suppliers. And yet the delivery was not being made as needed. The suppliers both stated that they could not furnish the material in less than 120 to 150 days.
We studied the AIS-17 of each of these producers, and we found out that their hot-rolled sheet tonnage for the month of November did not rate more than 45 percent in ratings higher than A-9. One producer was 45, and the other was 50. So it just didn’t seem to make sense to us that it would take 4 or 5 months to deliver a couple of thousand tons of hot-rolled sheets.
In closing, I want to point out that General Preference Order M-21 specifically states, “Defense orders for steel, whether or not accompanied by a Preference Rating Certificate, must be accepted and fulfilled in preference to any other contracts, commitments, or purchase orders for such material.” Further, “Defense orders shall be accepted even if acceptance will render impossible, or result in deferment of, deliveries under nondefense orders previously accepted, or deliveries under defense orders previously accepted bearing lower preference ratings, unless rejection is specifically permitted by the Director of Priorities.”
We have had numerous complaints, gentlemen, in the trade, that orders will not be accepted even if they are accompanied by priority certificates or ratings, and that is something that is not according to the law. I think if the steel industry would think something along these lines it will be a help to us, that organized priority compliance will speed the defeat of organized pirate defiance. [Applause.]
Chairman Whiteside. I am going to ask Mr. Hauck to speak, next, with regard to the plant-expansion program.
Mr. W. A. Hauck. Five minutes have been allotted to me to discuss the steel-expansion program. However, being somewhat accustomed by this time to expansion, I am going to indulge in a little of it on my own account and talk for a few additional minutes, as there are several points that I think should be especially mentioned at this time.
Talking for 5 minutes reminds me of an incident that transpired on May 28 of this year, illustrating how rapid are the changes in thought on expansion.
I had been to the West Coast in the early part of May and, as many of you know, made a preliminary report in which I recommended some steel expansion out there, especially for strategic reasons. I was to discuss this report on the afternoon of May 28 with the then Chief of cur Materials Division. We did not, however, get around to it until that evening, when we were in a taxi that was taking us from our office to his hotel. That rapid taxi ride through the 6:30 traffic up Pennsylvania Avenue took about 5 minutes. During that time, as the taxi was speeding along, we discussed the question of steel expansion in general and on the West Coast in particular. The result, however, as
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the taxi reached the hotel, was that he felt no expansion appeared necessary, but that we would discuss it the next day.
The next day we did discuss expansion, but his talk then was on the possible expansion of 10 to 15 million tons to be established both in the East and on the West Coast. Recalling our talk during the 5-minute taxi ride of the evening before, I wondered whether this talk was in any way responsible for his changed mind and the rapid developments in plans for steel expansion. However, I was not the salesman. It developed that the President had asked Mr. Knudsen to investigate the possibility of an increase in ingot capacity for the steel industry by 10 millions, and also what would be involved in a still further expansion of 5 million tons. These increases were to be over and above the 89 million tons of completed capacity, including all additional capacity under construction as of May 31, 1941. It was understood, of course, that all integrated facilities necessary to produce and consume the 10-million-ton capacity were to be included in any program that might be authorized.
On September 24, 1941, the Steel Branch of 0PM submitted a report to Mr. Knudsen in answer to the request of the President. Most of you are familiar with the contents of that report, which not only stated that it was possible to provide additional ingot capacity of 10 million tons, but also recommended that it be done to meet certain specific defense requirements as we then knew them.
This report was submitted by Mr. Knudsen to the Supply Priorities and Allocation Board, better known as SPAB, at its meeting on October 1, with his recommendation that the 10,000,000 tons of additional capacity be promptly installed. This recommendation was approved, and 0PM was authorized and instructed to go ahead with this expansion.
It should be understood that this expansion is to be considered strictly as an emergency measure necessitated by present and prospective steel requirements for defense. What these requirements may be at the time of the completion of the program is not known.
' We do know, however, that present demands are taxing the current capacity of the industry, and the indications are that future demands will be much heavier, and may far surpass anything that has ever been contemplated.
At the present time we are providing additional capacity for specific defense requirements. Our general policy is to provide this additional capacity in existing plants wherever possible, in order to increase production of the present line of products, where the defense requirements are now in excess of their capacity for those products. This policy also provides earliest production. Capacity for new specialty products is also being installed in certain plants qualified to produce them.
We also propose to put into use every shut-down steel facility capable of producing any defense requirements.
Mr. Allen has already referred to blast-furnace capacity needed to balance ingot capacity. In the projects approved to date are included Bessemer converters for the production of 2,600,000 tons of synthetic scrap. We have also tentatively approved projects to increase ingot capacity by 6,500.000 tons, made up of 1,300,000 tons of electric furnace capacity and 5,200,000 tons of open-hearth capacity. Con
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siderable more electric furnace capacity will be needed and is being developed.
Approximately two-thirds of the expansion program has now been definitely allocated to certain steel companies. Negotiations are also under way with several other companies, and it is expected within the next few months that the balance will be definitely allocated. Additional blast furnace capacity will be likewise allocated.
While progress on steel expansion is measured by the additional ingot capacity there are, however, many projects approved and under way involving additional finishing capacity for balancing present ingot capacity. Likewise, additional ingot capacity is being installed to balance existing finishing capacity. The expansion program will include plants for which a method of financing has been arranged where possible and warranted.
Adequate project ratings to provide completion of the expansion program in the earliest possible time continue to be a problem. Some progress has been made, however, and it is expected that something satisfactory will be worked out. In fact, something satisfactory must be worked out, not only to take care of new capacity but to keep present capacity in operation. All expansion projects so far approved by OPM for financing or for specific products needed 100 percent for defense purposes, such as pig iron to offset scrap shortage, armor for tanks, aircraft parts, shell casings and ship plates—the companies, J believe, installing the facilities fully recognize the importance and their need for defense purposes.
The entire program will be developed along these same lines. It is expected that expansion on the West Coast will be taken care of at this time principally by the Steel Corporation and Bethlehem. The Steel Corporation proposes to install at least four additional blast furnaces and an open-hearth plant of 784,000 tons capacity, together with a blooming mill, at Proyost, Utah, and a plate mill and steel foundry at Pittsburg, California. Bethlehem proposes to install 648,000 tons of open-hearth capacity and 60,000 tons of electric-furnace capacity at its present plant in South San Francisco for the production of structural shapes and other miscellaneous products needed for defense.
It was first planned to establish this additional Bethlehem capacity at Los Angeles, but the War Department desired that this particular area be reserved for other defense needs.
Any program of steel expansion over and above all expansion now under way in the industry is, as we all know, a task of unprecedented proportions. However, this is also true of our tank program, our aircraft program, and our shipbuilding program, all of which are constantly increasing and on which good progress is being made.
As i previously mentioned, we hope to have the expansion program definitely allocated within the next few months. We will also set up additional pig-iron capacity. Some of the production from this program will start to become available in the next 6 to 9 months. A substantial part of it should be completed within the next 18 months, and possibly all of it within approximately 2 years. This will require all the ingenuity and resourcefulness and the all-out effort of the entire steel industry.
Steel is the most basic war material. It probably represents 75 percent of our defense effort. It is a supreme challenge to the industry
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to complete this program so essential to the defense of our country within the time limit mentioned. I am sure that challenge will be met. [Applause.]
Chairman Whiteside. There is one thing about the steel program I think you should think of. You all know there is going to be a great deal of difficulty in getting scrap and material. We all know we are building battleships against something that might happen in ’44 or ’45. I can’t see any reason, if we can get the equipment or the enlarged facilities to build the equipment for blast furnaces, why we should not take that direction with the same energy as we do in building battleships. It is just as vitally important if England and Russia demand it, and, as I said this morning, that is one thing we have to figure on here. We are further going to emphasize shortly having as many furnaces as possible try dry blasting to get additional pig, instead of waiting through the experimental stages, which will be 6 to 8 months. I don’t know that the equipment could be obtained now, but we are taking an inventory of orders on the books of the concerns that furnish that - equipment.
The next speaker is Mr. Stanley Adams, Assistant Chief, Division of Allocations. [Applause.]
Mr. Stanley B. Adams. Mr. Whiteside, Gentlemen: A child was born in Washington a few days ago, and his name was “Total Allocation.” Like all children, little does he realize what lies ahead of him, what obstacles he must overcome, and what experiences he will have before reaching manhood. We, the OPM, his parents, realize that a problem child had been thrust upon us. Like all children, he must crawl before he learns to walk. With this in mind we are going to attempt to raise this boy so that he may become a strong, healthy, well-disciplined, and able man.
Allocation means an apportionment. The application of allocation in times such as these, where there are specific customers, namely, the Army, thé Navy, the Maritime Commission, and those nations which are dedicated to the proposition that Hitlerism must be obliterated, shall by the very necessity of the situation receive preference over all other customers for iron and steel.
These customers are, comparatively speaking, new customers for iron and steel, and they are the preferred customers. If the demands of this group are large, it will mean an unequal distribution of materials with relation to the past distribution of such materials. If the demands of this new preferred group are so large that the total demand by all customers exceeds the available supply to a very large degree, it becomes obligatory that our preferred customer, “Defense,” be protected from any competitive fight for material, and so allocation becomes not only a necessity but a fact.
The success of our efforts with allocation will depend upon building up our system on a sound foundation. The realization of all of us of the magnitude of the job and the responsibilities resting only with us as to the effect of our decisions or actions upon our country seems to me to automatically define a policy of “Slow but sure.”
The success of the allocation system applied directly to the iron and steel industry will depend upon starting from a point where the industry is in balance. By that we mean that the relationship between the integrated and nonintegrated parts of the industry be clearly defined and that it be thoroughly understood that, in the distribution of
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raw materials or semifinished steel to the available finishing capacity, wherever possible, and, I think, in most cases, it will be possible, both integrated and nonintegrated steel plants should share and share alike. We believe that the first obligation of the steel industry with relation to semifinished steel is to the industry itself, both integrated and nonintegrated producers, for any given amount of finished steel which in the past has been produced by a combination of integrated and non-integrated companies. The position of all companies within the group should remain relatively in the same proportion as in past years. Any change in the rate of production of this group should affect everyone and not just a few. The first obligation of those producers which in the past have been the primary suppliers of semifinished steel shall be toward their original customers. We are going to apply the principle of allocation to the cold-finished industry within the next few weeks.
When requirements for additional quantities of semifinished steel are made by a new customer, such as Lend-Lease, this new customer, which will be with us only for the time being, should be shared by all steel producers and not superimposed, to a very large degree, upon those same producers which have our regular semifinished obligations.
We feel that this basic policy is sound and will tend to keep the steel industry in balance so that as, from time to time, industry programs for steel requirements are developed by the various sections of OPM it will be possible for us to assign these requirements for any given industry to their original sources and thereby make it possible for these groups to obtain their material, no matter how small an amount it may be, from those companies which served them in the past.
The mechanics of allocation are divided into two parts. First is the placing of orders for large blocks of products for shipment over a given period of time. This is relatively a simple job in that you place the requirements with those companies which are best suited, because of past experience and production facilities, to fill the specific orders. The second part of our allocation system is not so simple, because upon taking into consideration the past experience and proper facilities of every producer in originally placing or allocating the tonnage, the total amount of steel allocated for delivery or production in any one month with all companies may be far in excess of the amount of steel which they can produce. Then the problem arises as to what orders for what customers are to be produced or shipped in any one month in preference to all other customers whose requirements should be filled within the same period of time.
In order to arrive at some proper decision, it is necessary in such cases that all producers for a given product submit complete production schedules to the Iron and Steel Branch for review and decision. Producers will then have to be advised specifically as to what they shall produce for a certain period with relation to any certain product and its customers.
At the present time there has been a great deal of allocation of the first kind; that is, the placing of orders with producers. The second part of the system at the present time has only been applied to two specific items. The first is pig iron and the second is steel plate. It is our intention to assume full control of the distribution of only those products in which the total demand for said product is so great
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that it is necessary to control the distribution or flow in order that our defense program will be fully protected.
Pig iron and steel plate are two such products that come under the above definition. Other products which we feel are also within this category are shell steel, reinforcing bars, high-speed steel, ball-bearing steel, and rails. They will be acted upon shortly.
It is not our intention to attempt a total allocation of all products for the industry at this time or any other time, but only to conrol those products which are most vitally needed for defense and, even in this control, to keep it specifically to defense customers and allow the flow of any excess other than defense wherever possible to flow through its natural channels.
This job requires teamwork. It needs the help, advice, and counsel of the whole industry. As they say in football, we have to be five deep in every position to do this job well. There is plenty of material in the steel industry to fill every position five deep on our team, and rest assured everyone is going to get,a chance to play. There are not going to be any bench warmers in this game. This is the first call for candidates for our team, and we expect everybody out for practice. With your help the job will be done!
Now, Justice Holmes once said that the test of truth is its ability to defend itself in the market place. We take the same premise with regard to allocation. We will defend our allocations and our decisions in the market place.
Thank you! [Applause.]
Chairman Whiteside. I forgot to ask you when we came back if you have any questions that arise when any of these speakers are talking to you to wait until we finish and you can ask anything you like about anything. I am not sure we will be able to answer them.
Mr. Wright, of the Wright Steel & Wire Company, is going to comment with regard to allocation. [Applause.]
Mr. Wright. I haven’t decided yet why Mr. Whiteside asked me to come here to speak today unless it is because it is a penalty I must pay for coming down here so often to disturb and bother some of the O'PM men in the last few weeks.
The subject of how allocation will affect the nonintegrated mills is a very broad one, and I am not qualified to face that subject, only as it applies to my own industry, perhaps. Our company does operate a nonintegrated mill. It is one of perhaps a hundred mills in the country making wire, but to us our wire mill is merely a feeding mill for our weaving department. We do some poultry netting, wire cloth, and chain fencing.
Poultry netting, of course, is our major item, and we assume that— well, I would say poultry netting, by virtue of the fact that it is among the iron and steel list of products sold through warehouses, has been considered, or given, an A-9 rating in that field, so that 100 percent of the poultry netting produced today, you might say, is in a preference rating.
In spite of that fact, there will be a great shortage of poultry netting for farmers, who are depending upon it for the increase in production of food products.
Wire cloth is used in so many manufacturing plants that most of those orders have also carried priority ratings, and the same with chain-link fabric, which, goes to protect plants doing defense work.
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Ratings have carried A-l-A or -B, and so we haven’t had the difficulty in securing the steel for those items that we might face under an allotment plan.
So far as the rest of the nonintegrated mills are concerned, of which I am not qualified to speak, I know that they do produce a great many varieties of wire used in our everyday life and a great many of them for defense. It will be impossible, of course, to analyze every need of those wires to determine what percent of allocation they might have, but I hope that in this allocation plan, or I would simply assume, that perhaps the present preference ratings might be considered as they might reflect back to the importance of those various items in the defense program, so that they will still be given a sufficient allotment to carry them on and produce those items for their place in the defense program.
Thank you! [Applause.]
Chairman Whiteside. I asked Mr. Wright to speak because when we speak of the rated tonnage and the defense program, they always think of guns and ships and things of that kind. The rated tonnage is almost as heavy for those feeding industries, those industries that come up to help defense, as for defense itself. In other words, it is the essential industry to the life of this country under war conditions. I think we sit here now, I think we listened .to the Army and Navy this morning and we hear about a few tons here and there. When I say that, I mean relatively. That is not the defense program. That is a vital defense program, but it extends to every town and hamlet in this country, and those ratings come in from those spots and they come in for material that is absolutely essential for the welfare of this country on a subsistence basis which is utterly necessary.
The next speaker is Dr. Waterhouse, who will speak on “Ferro Alloys.” [Applause.]
Dr. George B. Waterhouse. Mr. Whiteside and Gentlemen: Mr. Whiteside has asked me first to speak a little about the industry as a whole. Those of us who have lived in and are members of this industry know its size and its importance, but it will not do any harm to repeat a few of the essential figures and enable a comparison to be drawn regarding our industry compared with some of the others.
For instance, our capacity this year for steel in the form of ingots and castings is estimated at 84,000,000 net tons. Now, the estimated production of aluminum, of which we hear a great deal these days, is 387,500 tons, so that steel is 217 times greater than the estimated tonnage production of aluminum this year.
In the case of copper, without going through the figures, the steel industry is 80 times the production of copper. In the case of lead, it is 160 times; in the case of zinc, 95 times.
Now just a few figures about our industry which will recall certain things to mind. There are 231 blast furnaces as of the middle of this year; 1,000 open hearth furnaces, and 175 electric furnaces. The total investment in the steel industry in this country is slightly over 4% billions of dollars. The employees of the industry number 652,000. The pay rolls estimated for this year are $1,285,000,000.
Now, I tried to get some measure of comparison in these respects with other industries, and I had to go back to the Census of 1940, which reflects the figures of 1939. For instance, in that year the total number of employees in all the other metal industries of this country,
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compared with ours—ours was 7 times greater—the total number of employees in all the other industries.
When we figured the steel plants, the foundries, and so on of our industry, it was 4.3 times the number of similar plants in all the other metal industries in the country.
When it came to pay rolls, our pay rolls in the steel business were 7 times greater than the pay rolls of all the other metal industries of this country.
And when it comes to the value of the product, and iron and steel on the whole are a low-valued product compared with the nonferrous industries, the value of the products, the iron and steel products, is approximately 2% times that of all the other metallic products.
Now then, to come down to my real subject, and that is, “Some of the Ferro Alloys Used in Our Industry.” I have taken seven of them. That does not exhaust the list, because there are many more, and those I have chosen are manganese first, then nickel, chromium, vanadium, molybdenum, tungsten, and cobalt. That leaves out one very important one, which is silicon, and that was done deliberately, because Mr. Paul Kruesi is to follow me and he is very familiar with the silicon and ferrosilicon industry.
Without reading what I have here, which extends over. 16 pages, I will abstract it rather quickly and try to leave with you the picture as it looks to us down here for the coming year, that is, for the year of 1942, in regard to these 7 alloy elements.
Manganese is taken as the element of the greatest importance because it is used in the making of every ton, practically every ton, of steel that is made, and not alone of course in the making of alloy steels. One very essential factor about manganese is how much is used per ton of steel, and those figures vary. They vary a great deal with the kind of steel being made. For instance, the records of one large steel company that has a number of subsidiaries making many grades of steel show that the amount of manganese per net ton of steel varies from 8.4 pounds in certain plants to 18.5 in the plants using the most, and the general average for that particular steel company is 12 8 pounds per ton. The general average for the country as a whole is taken as 12.4, and most of the figures I will give you are based on the estimates of our Commodities Branch of O. P. M., which takes the figure of 13 pounds per ton for the country as a whole.
One important thing about manganese is the form in which it is used, and the general form is ferromanganese, an alloy that runs from 79 to 81 percent, and standard ferro being 80 percent.
Now, in order to make that grade of ferro-alloy the ore that is used must be of ferro grade, and that means an ore running 45 percent and better in oxide of manganese. It happens that in this country there is very little manganese ore of that grade, and in this year we are not producing in this country more than about 3 percent of that grade of ore that is needed, and in the forthcoming year it will not be more than about 15 percent, which means, of course, that the balance of the manganese ore has to be brought in from other countries.
To get ahead of my story a bit, we are estimating that in the coming year 100,000 tons will have to be brought in each month, or at the rate of 1,200,000 tons annually. Roughly, one-half of that during the coming year will come from this hemisphere, that is, from Brazil and a little from Chile, and a good deal from Cuba, which still leaves over
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600,000 tons that will have to be brought from countries a long way from here, mostly Africa and the Philippines and British India. So you can see right off what importance has to be paid to bringing in this very essential material, to keeping the shipping lanes open, and keeping the boats bringing this ore freely to us.
Perhaps that is enough about this whole question, except to point out that the Government sees the importance of this question and has established the formation of a stockpile, and authorization is at hand now to build up a stockpile of 3,300,000 tons, and up to the present time only 10 percent of that amount is available.
In addition to that, this industry has a stockpile. It is estimated that at present the industry has on hand 1,389,000 tons, and from a year ago that has dropped down roughly 115,000 tons, while the Government’s stockpile has built up.
The next element to take up briefly is nickel, and nickel is one of the first elements used in making alloy steel, and is still one of the most important. We are not producing in this country any nickel ore. We rely mainly on two sources of supply. One is Canada and the other is New Caledonia, an island way off on the other side of Australia. The essential figures in regard to nickel for the coming year are that new nickel will be produced and will come to us either from Canada or in the form of raw material from New Caledonia, and the figures are 186,750,000 pounds, and from scrap, 21,600,000 pounds will be produced. But it is estimated that the defense industries, the very direct defense industries, next year will certainly use 204,600,000 pounds.
I will just read from my notes in regard to these figures. The direct defense needs may easily be very considerably higher than the figures shown above for ordnance material, for the demands of an increased machine tool production, for the increased steel plant expansion, and for direct military requirements of the United States, Russia, and China. Every effort will have to be made to conserve nickel and prohibit its less important uses, and in particular greater recovery of nickel-bearing scrap must be carried out and greater use must be made of the scrap so obtained.
One other possibility is that we may be able to get more from Canada, but we are now getting from them from 70 to 80 percent of their production, so it would not seem a great deal more may be available.
Mr. Whiteside wants me to point out that there will be a further production of between 2 and 3 million pounds a month coming next tall, but those have been included in the ’42 figures that I gave you.
The next element is chromium, which has become one of the most important alloy elements used in steel, and the steels containing chromium, either alone or with nickel, molybdenum and vanadium, are without any question the most important alloy steels we have.
We do not produce any chrome ore of high grade in this country. You will notice in the figures I am going to give you that some production is estimated for ’42, and we hope it will be considerably increased in ’43, but that ore is low-grade ore that is mined here and has to be concentrated or beneficiated to pull it up to grade.
The chrome ore is known as chromite, and we import it from other countries for three main purposes. First of all it is to make ferrochrome that goes into the chrome steels. A second great use for us
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in the steel business is as a refractory; and then a great deal of chromite is used in order to provide chemicals containing chromium.
I have a little table here showing where, in normal times, the chromite comes from, and in 1940, 43 percent came from Africa, 24 percent from the Philippines, 11 percent from Turkey, 8 percent from Cuba, 6 percent from New Caledonia, 2 percent from Greece and 6 percent from all the other countries. Some of these sources are, of course, not now available, and we have got to rely chiefly on Africa, Cuba, New Caledonia, and the Philippines.
Now, for next year the figures are something like this: The imports in gross tons are 900,000 of chrome ore; the domestic production, 125,000 tons and from Cuba 200,000 tons of ore of refractory grade, and the total is 1,225,000 tons. The requirements estimated are 500,000 tons for metallurgical purposes, 250,000 tons for refractory uses, and 110,000 tons for chemical uses, a total of 860,000 tons, which looks comfortably below what we hope, you see, to have. But that is almost entirely dependent on boats bringing it in from these long distances and nothing interfering with the flow of those ships and boats.
Now, vanadium. Vanadium has become, as most of you know, one of the most important alloy elements used in steel, and with the exception of a small amount used for chemical and other uses, all of it goes into the steel industry. Roughly, 95 percent of all the vanadium ore that is produced goes into the steel industry. One of its most important uses is in high-speed tool steel, and the production of this has increased very greatly in the last few years. Just a few years ago we made 10,000 tons a year. This coming year we estimate we will have to make 65,000 to 70,000 tons of high-speed tool steel. Now, vanadium is a very essential element in those grades of steel.
Another is tungsten, that I will speak of in a minute. We have had to replace a great deal of tungsten with molybdenum, and in doing that we simply had to use more vanadium than we did before. For instance, the vanadium in high speed today varies from 1 to over 4 percent and the average is taken as 1.5 percent. Vanadium is used very largely in ordnance materials, and the demands for these two things, tool steel and ordnance material, are rising steaoily and very rapidly.
Vanadium is used as an electric furnace alloy, as is ferro-chrome, as is ferro-silicon, as is ferro-tungsten and in many cases ferromolybdenum, and Mr. Kruesi will tell you how very delicate is the amount of electric furnace capacity we have and the amount of power we have available for such plants.
The main sources of production of vanadium are both here and abroad, and in 1940,45 percent came from Peru, 30.6 percent from our own country, 16 percent from southwest Africa, and 12.9 percent from northern Rhodesia. The estimates for 1942 are an increase in our domestic production, and it is estimated that in pounds of vanadium in 1942 we will produce 2,800,000 pounds, and that the imported amount will be slightly less, 2,700,000 pounds, a total of 5,500,000 pounds.
The requirements in ’42 for direct defense are exactly the same amount; for high-speed steel, estimated 2,950,000 pounds, for direct defense uses, 2,250,000, and for essential railroad uses, 300,000 pounds,
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and there will just be not any left over for the civilian uses, which it is estimated next year will require 2?750,000 pounds.
So, in the case of vanadium, as with so many of these other ferroalloys, every effort will have to be made along the lines of conservation and along the lines of changed specifications, to call for less of these essential critical things.
Now, what seems to be a bright spot is molybdenum, because that is produced in our own country. It seemed not very long ago as if there would be plenty of molybdenum for all uses, but the estimates for next year are a domestic production of 43,000,000 pounds and a requirement of 54,000,000 pounds and, of course, that is due to the fact that wherever possible we have tried to substitute what we had available and didn’t have to bring in from other places, and molybdenum has been one of the chief elements that we have been able to substitute for many of these other critical and strategic materials.
Just a little about tungsten, which is primarily used in the steel industry, where certainly 95 percent of all the tungsten produced is used. A considerable amount is used for tool steel; a great deal for hard-center products and special alloys to be used as cutting materials, like stellite and things of that kind.
Tungsten in normal times comes largely from China, and the figures for 1940 show 46.2 percent from China and 34.8 from South America. Of the imports (this little table is of the imports), 6.5 percent from Portugal, 6.4 percent from Australia, 4.2 percent from Thailand and Burma, and 1.9 percent from all other countries.
However, we produce considerable tungsten in this country, and the estimates for next year, for ’42, are as follows: Domestic production of 8,000 tons of tungsten; imports from South America of 8,000; imports from China of 5,000 and all others, including Portugal and the other countries, 1,000, a total of 22,000 tons, and the requirements are estimated at 21,000, so you see there is a very narrow margin there of surplus and those requirements may easily go very considerably higher, because the tool-steel requirements, not high-speed alone but the other grades, may be a great deal higher. Tungsten needed for certain types of ordnance may go a great deal higher than estimated, and that figure of 21,000 may be made considerably greater.
The last one that I wish to speak of is cobalt, and that is an element that not many people know is used greatly in the steel business. But it is estimated that this year 61 percent of the cobalt produced and used in this country will go into steel, high-speed tool steel, cobalt-based alloys and carbide tips, welding rods, permanent magnets, and things of that kind, and the remaining 39 percent goes into various uses like paints, enamelware, inks, glass, linoleum, and a great many very interesting applications that most people don’t think or know about.
The sources of supply of cobalt are mostly abroad, but we do produce a little here near New Lebanon, Pennsylvania, where it is recovered from an iron pyrite, and the cobalt there goes into chemical products which, in turn, go to the chemical industry.
The estimates for ’42: Domestic conversion of imported crude, which comes from the middle of Africa, Belgian Congo, and Rhodesia, 1,195 tons, and the requirements for next year are roughly 1,500 tons, so that certainly our requirements for cobalt are going to be a great deal more than the estimated conversion of crudes into the finished metal.
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However, it is estimated we have a certain amount of stock on hand, and the problem is not so much of getting the crudes in here but oi finding conversion facilities to give us the metallic cobalt that we need.
Thank you! [Applause.]
Chairman Whiteside. We will hear from Mr. Kruesi.
Dr. Paul J. Kruesi (President, Southern Ferro-Alloys Company, Chattanooga, Tennessee). Mr. Chairman and Gentlemen: There isn’t a steelmaker in the audience that doesn’t know a great deal more about this ferrosilicon and where it is used than your speaker and I am not going to worry you with statistics. We heard from the Secretary of War through his Assistant that he believes we will get the steel, as has been testified in the steel industry, and every patriotic American knows if we get into a shooting war with Hitler, the gods of war will be with us. But there is one god that hasn’t been with the ferroalloy industry, and that is Jupiter Pluvius. For six months there has oeen a great shortage of water in certain sections of the country and that has greatly affected the production of electric furnace ferrosilicon, which as you know is the second in tonnage of all the alloys used.
A panic situation developed in the spring. Mr. Whiteside was very quick to perceive it. He called the industry together. It was the first and only time they had met as an industry since the unlamented days of the Blue Eagle. He told us what to do and he was generous enough to say, “You people can police this thing better than we can. Go to it. Do it yourself.” So we went into allocation long before the new baby referred to came into being, and to the everlasting glory of the American Iron and Steel Institute and the industry, it has worked so well I think we are now out of the woods. In other words, instead of all ferrosilicon disappearing into the hands of a very few people as threatened to be the case, it is now being pretty widely distributed through your cooperation and the situation looks a lot better. People were laying in supplies. People sometimes use an offensive word and call that hoarding. I don’t think that is hoarding; that is enterprise when a man tries to get the material he needs in order to meet his obligations. In all events, no matter what actuated people, the producers of ferrosilicon, especially the electric furnace producers, had a lot of trouble. They had difficulty, and still have, in getting the necessary amount of coke. The electromakers did a wonderful job in keeping pace with large new installations of electric furnaces, both for steel making and for the alloys business.
The scrap shortages still are a great headache, but, fortunately, as you all know, this one important alloy depends on no imported raw materials. There is no mineral in nature as common as silica rock, and nothing, therefore, need frighten you in regard to the continued production, just so we get a certain amount of power.
Without going into any of the figures as to production, and so on, it may suffice to say that consumption in recent months has been running at the rate of 47,000 tons a month, and the stocks on hand, either in your hands or in ours—but mostly in yours, because you usually ship the metal so hot the freight cars catch fire in transit—increased from 84,000 to 85,000 to 88,000. In other words, there are in your hands or ours approximately 1.9 months’ supplies, and the production is keeping fully up with the demand today. Somebody said he knew of no defense industry but has suffered for lack of something. I know
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of no defense or civilian part of the steel industry that has shut down or been seriously embarrassed—admitting at times it has been awfully tight and awfully close, nevertheless we believe now we are out of the woods, and you can rest easily so far as ferrosilicon is concerned.
The figures, which are more available to the OPM than to me, indicate that about 35 additional furnaces have been planned at various places, such as Charleston, South Carolina; Portland, Oregon; Tacoma, Washington; some at Niagara Falls and the Muscle Shoals, Alabama. Just so we know your needs six or eight months in advance, in time to get the necessary transformers and other electrical equipment, we will accept the challenge, and I belive the ferrosilicon industry will fully meet your needs. Thank you I [Applause.]
Chairman Whiteside. Mr. LeRoy Whitney is now charged with a new division, or a division that has been there rather informally with regard to standardization and simplification and specification and many other things. Mr. Whitney! [Applause.]
Mr. M. LeRoy Whitney (Chief, Technical and Engineering Section, Iron and Steel Branch, Office of Production Management). Mr. Whiteside, My Fellow Workers in the Iron and Steel Industry, Army, Navy, and 0PM: Before proceeding with jny talk on specifications, I want to correct a misunderstanding which I am sure you all are laboring under at the present time. Over-all tonnage figures are completely misleading, asl will definitely show you, and when the Under Secretary of War states that they need only 8 percent of the entire steel output based on something over 8,000,000 tons, I want to tell you what that 8 percent consists of.
The total tonnage of alloy steel required by the Army only for aircraft (exclusive of armor plate), tanks (exclusive of motive power and armor plate), tank motive power, military automotive (exclusive of armor plate), guns (on order plus 3rd supplemental), guns (Victory Program), A. P. Shell (shot only, no high-test explosive shells, just the armor-piercing shot), bullet core, armor plate rolled and armor plate cast—this does not include any other shell steel, it does not include steel for cantonments, Army transports, or steel for explosive or aviation gas plants, or the tool steel necessary to produce this alloy steel—for 1942 is 3,600,000 net tons of ingots.
In 1940 we produced 5,000,000 tons of alloy steel. In 1941 we hope to produce between 8 and 9 million. An optimistic figure for 1942 is 12 to 13 million. So it is easy to see that 3,600,000 net tons equals 30 percent of 12,000,000 tons, and of that, if the present methods of production are continued and the present specifications are adhered to, 1,180,000 tons must be electric furnace steel, and that will equal 51.4 percent of the optimistic figure of 4,225,000 tons of electric furnace steel in 1942. We will have a capacity in December of 3% million tons a year of electric furnace, and I wish the Secretaries of War and Navy were here to hear these figures and to see what that 8 percent for the Army represents.
The Navy requirements, the overall steel requirements, are 8 percent. That is what that 8 percent consists of.
The Navy figures are equal in tonnage and even exceed the Army, so that with our most optimistic plans for 1942, with our new planned alloy steel expansion, with the highest priority ratings on the equipment necessary for those plants, I doubt if we can produce the alloy steel which the Army and Navy demand.
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Specifications, from my point of view, should indicate clearly the physical properties of the steel desired for a specific purpose. In many instances, a steel of given properties will serve many purposes. When heat or corrosion-resistant qualities are desired, the chemical analysis is most important, but specifications should not tell the steel maker how to make the steel and at the same time demand certain physical properties.
I am going to quote a paragraph from Mr. Harry W. McQuaid’s (an associate of the Iron and Steel Branch of OPM) article in the October issue of “Metal Progress,” entitled “Getting Maximum Results from Carbon and Low Alloy Steels.”
Before a steel of definite analysis and its treatment is selected for a certain part we must know the conditions under which it operates. An intelligent selection cannot be made until these conditions are known. Possible internal stresses, the degree of ductility required, the importance of machining costs and such factors as resistance to abrasion, temperature, and shock loads, all affect our choice of steel and its treatment. No metallurgist can make sure his recommendation is the best until he is familiar with the processing and working conditions of the part for which he is specifying.
It seems to me that is a maxim for all people using steel.
When I was younger I thought I knew a great deal about horses and could pick out the horse I wanted without asking the breeder’s or dealer’s opinion. The results were not so satisfactory. One day after looking at several horses, I told the dealer, a Virginia lad, exactly the kind of horse I wanted and said, “You know your horses much better than I do. What horse do you recommend? This is what I want. Pick out the horse for me.”
He called to his negro boy, Goliath, “Bring out that big seal-brown three-year-old.” The result was my purchasing the greatest heavyweight hunter I have ever ridden or seen.
I never forget that after specifying a given steel for a given purpose that the further processing and heat treatment is just as important as the chemical analysis. You can give the best coffee in the world to some cooks and still get a bad cup of coffee.
The dull times of the late thirties have had chaotic results on the number and form of specifications for steel. Both purchasers and salesmen are to blame, the former for taking advantage of the salesmen in insisting on a specification or tolerances which cause high rejections, and the latter for taking orders for a kind of steel, the production of which his company was not properly equipped to turn out. In either event, the result is loss of productive capacity.
Another result of the overzealousness of steel producers to make life easy for the designers is an infinite number of unnecessary shapes, sizes, and thicknesses. Here again the result is loss of productive capacity.
To increase the productive capacity of the present steel-mill equipment, a project has been instituted by the OPM known as the “National Emergency Steel Specifications and Simplification Project,” headed up by Mr. C. L. Warwick, Secretary-Treasurer of the A. S. T. M. An order will shortly be approved which will make mandatory the sole use of the specifications and size and shape schedules as issued. Many of the subcommittees are now at work, and the Schedule of Structural Shapes has already been issued to all producers in the form of a request.
We are faced with a shortage of many of the alloys used in the past. Nickel, for instance, will not be available in sufficient amount
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to make the armor plate stainless, and other nickel steels which the Defense Program calls for in 1942, if used or specified in the present quantities.
Yesterday I spent the day in Cleveland with the American Iron and Steel Institute Alloy Steel Technical Committee and from the work already done by this committee, under the able leadership of John Mitchell, of Carnegie-Illinois, it is evident that their recommendations to us, based on sound technical and engineering data, will result not only in the elimination of a great number of unnecessary specifications and also result, because of the wisest use of the available alloy scrap, in the optimum overall conservation of the scarce elements. I think you are all going to be amazed when that schedule of recommended specifications comes out. Then we can get production.
A few months ago I asked three producers of stainless steel to help in the production of a structural grade of this family in which the nickel used would be approximately half that of the usual 18-8 variety, the balance to be replaced by manganese. All three producers have already succeeded and I have here a piece of this material which is approximately 18 percent chromium, 4 percent nickel, 4 percent manganese. This steel has a yield point of 140,000 lbs. per square inch, more than double that of Dural. It is cold-formed and spot-welds perfectly.
This is a piece of steel which is carbon .12, chromium 17 percent, nickel approximately 4 percent, manganese approximately 4 percent, with a yield strength of 140,000 pounds, double that of Dural, cold-formed, hammered down without a crack, and it spot-welds beautifully. That is what can be done if you put your minds to it.
However, “The Past is Prologue.” Other new steels must be produced; the manganese molybdenum family must be given a chance to make the team; production methods of forging and heat treating must be developed if the ship, aircraft, tank, gun, and shell programs are to be met. And, again, to quote Mr. McQuaid, “When thinking of armor-piercing shot, think of a chipping chisel.”
To assist the Army, Navy, and Aircraft branches of the Services and Britain and Russia in procuring the type of steels needed to defeat the totalitarian powers, Mr. Whiteside has asked me to head up a section of the Iron and Steel Branch, to be known as The Technical and Engineering Section. With the usual generous help of Industry and Engineering Societies, I hope to surround myself with a small competent group, and, in addition, to have the benefit of the experience of an advisory committee. Invitations are going out to the following men to serve on such a committee to be known as The Senior Technical Advisory Committee.
These men have been selected and invited to serve not only for their knowledge of the production and use of steels but because of their forward thinking and outstanding personalities. I hope the heads of their respective companies and the Secretaries of the Navy and War Departments will consent to their serving.
SENIOR TECHNICAL ADVISORY COMMITTEE
A. L. Boegehold, Head Metallurgical Dept., Research Laboratory Division, General Motors Corporation, Detroit, Mich.
Walter Mathesius, Vice President in Charge of Operations, U. S. Steel Corporation of Delaware, Pittsburgh, Pa.
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R. H. McCarroll, Chief Metallurgist, Chemical & Metallurgical Laboratory, Ford Motor Company, Dearborn, Mich.
Capt. Gordon W. Nelson, Chairman, Specifications Board, Navy Department, Washington, D. C.
Lt. Col. F. B. Ritchie, Watertown Arsenal, Watertown, Mass.
Earle C. Smith, Chief Metallurgist, Republic Steel Corporation, Cleveland, Ohio.
E. G. Stillwell, Assistant Chief Metallurgist in Charge of Defense Program, Chrysler Corporation, Detroit, Mich.
Henry Wysor, Metallurgical Engineer, Bethlehem Steel Company, Bethlehem, Pa.
This committee will only be called when necessary to reach decisions as to the recommendations concerning problems of major importance to the defense program. Preliminary discussion, whenever possible, will be carried on by telephone or mail.
Captain Nelson of the Navy, only recently returned from England, knows what the British have learned about steel in ships, in trial by battle.
Colonel Ritchie is known and respected by every steel man in the country. He is responsible to a great extent for the development of molybdenum high-speed steels. His knowledge of ballistics and every requirement of Ordnance is synonymous with his name.
The others, likewise, are all known to you personally or by reputation. They know not only the chemistry of steel but its production and uses on a large scale.
I heard a very interesting definition up at Yale about a couple of weeks ago. We had a meeting of an engineering group. Professor Tracy, of Civil Engineering, opened his address with what he thought were the qualifications and the objective of an engineer, and he said “The Coordination of men and machines and materials.” I think that those men selected fill that bill.
With the help of these men, the men they will bring into consultation, the wisdom of Dr. Waterhouse, and the close cooperation of the Services and Industry, the steels needed for Victory will be produced. [Applause.]
Chairman Whiteside. Mr. Brace will speak regarding alloy steels.
Mr. Maxwell Brace (Head, Alloy Steel Section, Iron and Steel Branch, Office of Production Management). Mr. Chairman and Gentlemen: At this stage of the proceedings it has practically all been said, and I am afraid you are faced with some repetition, but I wrote a speech, and I am going to give it.
Last on the program comes alloy steel. In 1929 alloy steel production was 4,432,000 net tons of a total of 63,000,000 net tons, or 7 percent. In 1940—you have heard others give the figures—it remained about the same, or about 7% percent. In 1941 it has gone up to 11 percent, which is an impressive growth, but it is not enough. The desired requirements in 1942 are estimated at 12,000,000 net tons, as you have heard, and that would be about 14 percent of the same tonnage, which is what is expected to be produced in total next year. That include?' a small allowance for civilian use we had this year, not just small percentage-wise, but in total tons.
The increased war needs will be tremendous. The question facing us all in 1942 is, of course, how nearly we can come to supplying that large total of alloy steel, at the time it is needed, and how wisely we can decide what needs shall be denied or delayed.
Alloy steel production is more complicated than the majority of tonnage steels. Besides being subject to the shortages of pig iron,
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427164*—41----------4
scrap, etc., it faces inadequate supplies of critical alloying elements, such as nickel, chrome, vanadium, tungsten, and others. A large percent of the requirements call for many more processes, before the steel is ready to ship, than is the case with most of the carbon steel usages. This results in many possible facility shortages, nation-wide, which will retrict output. Our industry was geared for peacetime mass production. Wartime mass production is an entirely different thing. Therein lies the danger. The steel industry must be ready, just as rapidly as possible, to produce the new specifications in the quantities needed. I can hear you say, “You can do little until you know the requirements.” That is, of course, true, and yet it entails a Herculean task for the Army, Navy, Maritime, etc., to study and compile detail material figures; right in the midst of engineering, testing, and specification changes—but, it is well on its way to accomplishment.
This is half of the picture, and we must ask you for a mass of information ori your plant equipment and production, together with reports of inventory and detail of your use of critical materials. We shall have to ask for more details of your order books and backlogs ahead of bottleneck facilities in your plants. It is a great deal of work, but please realize, it is just as vital as the requirement figures, and this other half of the picture is not complete until all plants have reported. Many past cases of inconsistent requests on our part probably come to your mind. We have been growing very fast, so of course, have been subject to poor coordination. It has happened that the right hand did not know what the left hand was doing. Please be patient.
You know well, I believe, the serious situation facing us, the lack of raw materials, plant equipment, skilled labor, and do not forget time. I say it faces us because we are all in the steel industry together, whether we work in the O. P. M. steel branch or in a steel mill. Under such conditions, you will agree, it is essential to have a central information and control point. To accomplish anything, we must have the complete facts. Those responsible for war-equipment programs are going to give us complete detail figures, and, with your help, we will have complete facility and production figures, and schedule figures where necessary. It is my belief that any man with average good judgment, who knows the steel business, can make a satisfactorily nigh percent of correct decisions, if he has all the facts. We must have the facts and not be forced to go ahead on guesswork. The control from here of your plant operations should be only such as is forced by necessity. We shall have to allocate certain production for certain essential programs or certain steel products, and take the responsibility off your shoulders for the orders displaced on your schedules. To illustrate—when high-speed steel production is sold out with every mill on A-l-a priority orders for 2 or 3 months ahead, and a sizable amount for export has to be produced at once, it is a difficult question to determine which orders to displace. We shall need your help with detail information concerning schedules and also information from the consuming industries. We intend to give every consideration to present satisfactory relations between you and your customers.
You also should assist us to find experienced manpower to help administer the great additional amount of work before us.
Many plant bottlenecks will have to be expanded with additional equipment to take care of volume alloy steel specifications. It is our
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duty to determine these spots as quickly as possible from the total requirement figures and discuss them with you. Some expansions can probably be avoided by getting around restricted facilities with changes in specifications, or methods of manufacturing the item, so careful study has to be given these problems. And yet, where expansion is obviously necessary, all delays in decision or action must be reduced to a minimum.
One feature under our control, which is sometimes disturbing to the problem of getting best results, is the profit motive. Naturally, this cannot be forgotten, but the question is, how much influence shall it be permitted to exert? Some specifications are bound to be more attractive and more profitable than others. Some plants and branches of the industry are not going to be able to operate at a satisfactory rate, while others are overloaded. The total operations will unquestionably be very satisfactory and total profits, after taxes, will certainly depend on many more important factors than whether the price on one specification is more satisfactory than on another. If prices could be forgotten, and entire consideration given to quality and delivery only, it would undoubtedly be of great aid in accomplishing the most in the shortest space of time.
I have attempted to give you my views of the responsibilities facing us in alloy-steel production, and suggestions as to how best we can help each other. A completely united front in the steel industry is essential to accomplish the tremendous production necessary for the schedules of war materials in the making, and we must all do our utmost that it be not “too little” and not “too late.”
I thank you. • [Applause.]
Chairman Whiteside. Mr. Firth, of the Firth Steel Company, is going to speak regarding alloys, and right after that we will ask for questions. - We had a great many questions that came in, in reply to our invitation, but if there are any questions from the floor I think it would be well to start that way, because most of these questions have been answered.
Mr. Firth. Mr. Whiteside, Representatives of the Government, Gentlemen of the Steel Industry: Although a tool-steel manufacturer, I do not feel that I am qualified to speak for the tool-steel industry. Their problems are too varied, altogether, and there are, of course, differences of opinion; so with your consent I will confine myself to a few remarks on the tool-steel situation as it appears to us.
This morning, when Admiral Land was speaking, he referred to kissing. Well, I have always understood from hearsay that kissing, to be really satisfactory, must be mutually desired. We of the toolsteel industry are now being asked to stop kissing our old friends and start kissing very passionately a new lot of friends—I mean the Army, the Navy, the Lend-Lease, etc. Well, as a patriotic matter, we are ready and willing to do this, but sometimes I fancy that as we have the arms of our new love around our neck and they say, “Kiss me again,” they murmur beneath their breath, “Or I'll break your neck.” [Laughter.]
The first problem which we are all up against is increased production, and I think you can honestly say that every tool-steel company is doing that. In the President’s message he said something about selfish interests not being allowed to take part. Now, nobody can say that our expansion in the tool-steel industry is from selfish motives. The
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problems that we are undertaking by increased production are very, very great. After all this is over, the question of increased money in plant, in inventories, in machinery and equipment is a serious one, it is true, but an even more serious one is what we are going to do with all these new employees we are taking on in our mills and in our offices. Any possible extra profit that we can obtain now from increased production will be far more than wiped out by the difficulties and problems that will confront us in the post-war adjustment period. I think, therefore, that the tool-steel industry can say that our expansion is not from selfish motives but purely from patriotic motives.
Our next problem, as I see it, is the very vital one of costs and prices. These have to come in. In spite of very large wage increases, and an increase in the cost of almost all of our supplies, tool-steel prices today are the same as they were before the war. I think that speaks well for the stability of our industry at this time.
I consider this policy sound. Usually in a boom or a period like this production brings us much greater profits. Under those circumstances it is very foolish to increase prices, and yet that is what we always have done. That wouldn’t be so bad if we didn’t give them back immediately the reaction sets in. The result is that we build up a lot of inventories of high-priced materials, we get our customers loaded up, and then when the reaction comes we start cutting prices again, and everybody postpones buying. Now, from a profit and loss point of view, I am not so concerned with that as from the point of view that when this is over what are we going to do with all of these employees? We must have work to keep them going, at any rate part time. Therefore, I feel that we should go into the post-war adjustment period with prices as low as possible so that there can be no expectation of a reduction and postponement of buying. I think that is very, very important.	■
If we are going to do that—and Mr. Henderson said they were going to stabilize prices—prices and costs are tied together. We can’t stabilize prices unless we stabilize costs. I assume, therefore, that unreasonable wage demands will be taken care of in this bill, and that also the raw materials that we use will also be reasonably stabilized. Even then the increase in costs which we are all facing in the tool-steel industry will mean, if prices are stabilized as they are now, that at the end of this period in the post-war adjustment we shall find that our prices are inadequate. Our costs will not be able to be reduced, probably, and our prices, therefore, will not be adequate. The time to tackle that is then, I think, and not now. People say that you can’t get a price increase in a depression or a falling market, that you can get it in a rising market. That has been true in the past, and it has led to one trouble after another, and I think it is about time that we broke out and followed a new policy. We don’t need the price increase in most lines now, because we are all making what I call a fair return on our capital, but we shall need them badly when this is over. That is the time, I tnink, when we must show courage. Our customers who have had their prices stabilized during this period must be tolerant and willing to meet us. and the Government in their turn must look at our problems, not trom the point of view of politicians, but as statesmen.
I thank you. [Applause.]
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Chairman Whiteside. Are there any questions from the floor first? Has anybody any questions to ask ?
Someone has sent in questions; in fact, we have about two dozen of them here. We will dispose of one of them very shortly. I will get rid of one immediately regarding labor. I don’t think there is anything much to be said about that until we get the reaction of Lewis and a few other people to the decision of the Mediation Board. I think it will affect the whole production job from one end of this country to the other. I don’t know what he will do. He is apt to do anything, and I think that we had better dispose of that question and leave it in the air. Sidney Hillman spoke this morning as to the Government’s attitude, as far as he was concerned.
I am going to ask Mr. Allen to just briefly touch on the question of scrap collection. You know that scrap is under order for directed flow, and pig iron is under an order for complete allocation. On the question of scrap, I don’t know whether we disposed of it or not, but Mr. Allen might speak on the subject for a moment.
Mr. R. C. Allen. I don’t know what we are going to do about scrap. We have thought of every conceivable way of allocating scrap, and we conclude merely at this time that it is perhaps the most difficult of all of the allocations we shall have to make, because before you can allocate anything you must first have it. You must get it somewhere. Scrap, as you know, flows from numberless sources to the mills.
Kight now we are allocating scrap arbitrarily to those plants on defense work who are in desperate need of it, and which, after exhaustion of all efforts, have failed to get it; then we step in and order somebody, somewhere, to ship scrap to that plant. Probably a little later on we shall have to do something more than that, but before we decide on what methods we are going to use in allocating scrap we want first to get an over-all picture of the scrap situation.
Now, we have sent out to more than 15,000 people another one of these questionnaires with which you are beginning, I am sure, to be familiar. We hope to get returns on that questionnaire in about 10 days from now. That questionnaire will contain the information that we need, information on which we may base a rational method of handling what is coming to be called the scrap problem. This work is being done for O. P. M. by a trained group in the employ of the Bureau of Mines, located in Pittsburgh. However, we have had some experience in allocations in general. As you know, for several months we have been allocating pig iron. The allocation of scrap will follow probably the general lines which have developed in the allocation of jig iron. Administratively, however, the procedure will have to differ because the job is different on account of the nature of the thing that we are allocating.
The question which has been asked of me here by Mr. Whiteside has been asked by him of me a good many times in the last several weeks, and all that I can say to you is what I have already said to Mr. Whiteside, that while we have considered many ways in which we may attack this job we would like to hold our decision until we can measure the job and see what it is. In the meantime, all preparations are being made to make an allocation of scrap, the purpose of the allocation being that those plants needing scrap for defense shall have it, that plants needing scrap for other products shall have what is left, and what is left we shall allocate on an equitable basis.
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Chairman Whiteside. I believe, really, when we get through with scrap we will find out that we will have to direct a certain percentage of the flow of scrap through the various dealers to particular plants; that is, the percentage of the incoming scrap according to the experience which the dealer shows as to the receipt of scrap in the preceding quarter. At least we can start that way, and I think maybe that will be the way it is going to be done.
There are a number of other questions here regarding allocations. I don’t know that they haven’t been answered. If anyone here sent in a question regarding allocations which has not been covered, will you kindly repeat the question?
I am going to dare somebody here to ask a question in a minute. There is one question here that is quite in order, and I think that the meeting itself tended to answer it, and that is the question as to how the industry as a whole will be informed as to what is done in the over-all committee meeting or in the subcommittee meetings. I think I personally was probably negligent about that, but I started to write a monthly letter the latter part of August. I did send one, and I reported everything up to date at that time. I haven’t done it since. We will do it methodically from now on, and after each meeting we will send a report to everyone in the industry and try to report what occurred at that meeting as well as we possibly can. It is just one of those things that slips by.
There is another man who asks a question which I think should be answered, and it has my initials after it. He asks: What shall we do about our inability to produce sheets at a profit at present ceiling price? I don’t know just how to answer that, except to tell you to talk to Leon Henderson quite forcefully, because he told us today that he was susceptible to argument and was rather friendly.
I don’t know of anything else here that isn’t covered. There is one about iron for railways, for freight-car wheels, and there is something about billets.
Are there any questions at all that you have in mind? I think it is just as well not to go through those. If there are no questions, I would like to summarize just briefly about the situation as we see it. In the first place, I think you heard today, and I believe it is a fact, if no events occur other than what we can reasonably expect to stop the production of steel, we will not have more steel in 1943 or 1942 than we have today. We will have slightly less in ’42. We will have slightly more in 1943. The average will be exactly the same as we have now.
We know, and I think there is no question about it, that we are going to have greater demands for materials. That is obvious. The point that I want to bring out is this, that we must insure this country against defeat because of lack of steel, and that is the main basis on which we are going to build the program. These are some of the significant facts that should be known oy the public. In the first place, we must furnish steel, as you have heard, to England, Russia, Dutch East Indies—every country in the world that needs steel for essential civilian purposes—to Canada, in tens of millions of tons. The peculiar part about it, and the difficult part, is that those countries, excepting for the civilian needs, require the steels that we need for our armament program. When anyone says that the overall percentage which is required on steel is 5 or 8 percent,
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that doesn’t give the answer at all. The question is, how much steel of one type is going to be used, and as you know the defense program is concentrating very largely in the special alloys, special treatment steels, plates and construction. In addition to that, steel has to be used for steel. If the program goes into heavy production, there will be 2,000,000 tons of steel used. We will probably keep that at 1,750,000.
The other point that should be stressed is the fact that all of the factories where we expect to build everything, all of the cantonments, the pipelines, the oil wells, the mines, the warehouses, and the snipways, must be built of steel, made largely of steel at the same time that we are making the products that those factories are there to make. In other words, we have one paralleling the other during the present year. The construction program, as you know, has taken very heavy tonnage.
Another very significant thing regarding steel is that it is bearing the burden of all other metals. Every metal has designed into steel. It may not be large in tonnage as steel goes, but it is just one more thing that is taking millions of tons of steel. I think the significance of that isn’t realized yet.
Then we have the tremendous packing of oil and food which all must be in steel containers for the Allies. Russia today is drawing on us very, very heavily. The first requisition, the first item on the first requisition was for tons of steel of the steel that we have least of in this country. The second was for a steel that we had none of whatsoever except for our own program; and that is the position there. In addition to all these bearings on steel, we have the machinery and all the hoists and everything of that kind that must be made to make the products that we need.
In our Division, which has been organized for 4 months, we are starting with the raw materials that you heard about. The ore shipments have reached all-time highs, as I mentioned this morning. Pig iron and scrap are under allocation. Ingots are not under allocation but ingots are under supervision and we receive from the mills every month a complete list of the products which they intend to make, the number of ingots they have to be allocated or scheduled to those products, and where we find that those are not directly needed in certain phases, we will reallocate from that point. That is the focal point of the steel and we will see decided changes for the better in the production of the products which are needed most.
There is one significant thing that has been developed, and that is that the finishing capacity of the steel mills can take 30 percent more steel than they now have. The figure, the percentage, has always been. presumed to be 15 percent. If the figures which we have are accurate, and I believe they are, there is 30 percent there to be made up.
The next step, of course, in having anything to do with steel, is to control the products of steel. That is covered in the broad, mandatory order M-21; there is the warehouse order : there is the expansion to steel order which is not quite completed; and we have the steel maintenance and repair order giving a high priority to steel to prevent shutdowns.
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I just touched on compliance this morning. I didn’t get very far when I brought it up. It was suggested here very definitely by Mr. Crockett sometime ago. I still believe it must be explored if we expect to get steel within 2 years.
In conclusion, I want to give you some idea of the steel industry. You people have 40,000 customers. You handle millions of orders a year. You are delinquent on defense requirements a 30 days’ supply of steel. You are delivering 84,000,000 tons of steel. That is an enviable record for production.
The record is not as good as far as compliance is concerned. You are producing at the rate of 100 percent of your rated capacity. During the World War we never required in excess of 92 percent of the capacity of the steel mills. It was an entirely different war and an entirely different type of war, and during the World War the entire production of steel equalled only what is required now for the needs of essential industries.
The question of compliance is one which has concerned us. When the mandatory order M-21 went out, we expected compliance by the steel mills. We know it is more difficult for steel mills to comply than it would be for a concern such as the Aluminum Corporation of America, which is a single producer and is not subject to competitive influence, but we still believe that there was very definite deficiency in the adherence to that order up to this time. It is considerably better; during the past 6 days it has improved immeasurably, but we do expect after today, and we had this meeting for this very purpose—we do expect definitely that the priority rating system will be adhered to.
And bear this in mind, irrespective of what is printed generally in the newspapers and is widely commented upon, allocations cannot supersede priorities. Allocations cannot be based excepting on a basis of priorities, and while they will be simplified and changed somewhat, that system will be the underlying, basic system for the distribution of steel and most other products.
In closing, I just want to reiterate what the President has said: You have on your shoulders the greatest responsibility of any industry in America, and we know after today, and from what has occurred recently, that you will take that responsibility, you will carry it through and deliver as no other industry in America can. Thank you! [Applause.]
(The meeting adjourned at 4:45 o’clock.)
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