The nation's major steel companies, reeling from a sharp decline in orders, today announced a round of temporary price cuts to match those put in place by Bethlehem Steel Corp. early this month.
Effective July 1, Bethlehem, the nation's second-largest steelmaker, cut prices an average of 4.5 percent on its sheet and strip products, as well as on some of its bars.
Sheet and strip steel is the bread-and-butter of the industry and is used extensively in making consumer products such as cars, refrigerators and washers and dryers.
The severe recession in the housing and automobile industries has hit the steel companies hard. Industry giant U.S. Steel Corp. estimates that domestic steel makers will ship no more than 82 million tons of steel this year, the least the industry has shipped since 1975 when the worst recession in post-war history gripped the United States.
Last year domestic steel companies shipped 100 million tons of the metal.
Earlier this year, before the onset of the recession became apparent, steel companies thought the industry might ship as much as 90 million tons in 1980.
U.S. Steel started today's round of price-cutting and was followed by Republic Steel, National Steel and Inland Steel, among others. All termed their price reductions "temporary" -- to last until Sept. 30 -- and called them "allowances," which means the list price for steel stays in effect even though there is not a customer in the country that will pay that price.
Steel makers first felt the drop in orders for their products in March, and the decline worsened until the middle of June. Since then, the orders have leveled off, but there has not been any pickup, industry sources said.
Most steel consumers had expected steel companies to begin lowering prices much earlier than they did. Companies were able to resist price reductions for a time because competition from foreign steel producers has been blunted in recent months.
U.S. Steel Corp. has filed an anti-dumping charge against many European producers, complaining that those companies are selling steel in the United States below cost. Japan, the major exporter of steel products to the United States, has been careful both about size of its shipments here, as well as its price policies, because of the threat of a similar suit.
Because of increasing costs of energy, labor and raw materials, domestic steel producers have been less inclined to lower their prices to compete with one another than in earlier recessions.
In large part, steel companies feel that price reductions always are matched by competitors and the industry is then left in the same shape it was in before in terms of market shares, while all steel companies have lower revenues.
The Bethlehem allowances, which will be matched by competitors, averaged 4.5 percent and ranged from $19 of the list price of $369 for a ton of hot-rolled sheet steel to $23 off a ton of cold-rolled sheet, which lists at $438.
The decline in steel orders will have a sharp inpact on earnings of most steel companies and some of the less diversified firms may show losses in the second quarter. Today's price cuts make it likely that more firms will be in the red during the third quarter unless there is a sudden, unexpected surge in demand.