The Wall Street Journal just ran a fascinating series of articles entitled: Looking Back: the 1960 Steel Slump and once I stopped laughing over the constant reference to steel men say this and steel men say that, (sounds like some Men-in-Black movie title) some of the comments sound exactly like what we’ve heard some recent steel producers say in their latest earnings announcements.
We start with the last article in the series dated October 31, 1960 entitled: Steel Men Doubt Upturn Output for Rest of Year. The first most glaring element of all of the articles relates to the relentless focus on output as the be-all-end-all KPI (key performance indicator). The Steelworkers Union refers to this metric, and all of the industry executives seem to have a relentless focus on output. And though capacity remains of paramount concern for all manufacturing firms, the notion of profits and cost cutting are noticeably absent from all of the articles.
But we found the reasons for the pessimism, cited by the Ã‹Å“steel men’ as most interesting. First, they site, inventory cutting among their customers is lasting longer than anyone expected. Second, they claim, orders from the auto industry still are lagging, they go on to say that until the 1961 car showrooms are cleared out, output won’t increase. Finally, many believed the economy would move into recession that would not leave the steel industry unharmed. The parallels between these statements made back in 1960 vs. today are striking.
Output levels appeared ominous at 53.2% back in 1960 (domestic steel capacity numbers dropped to the upper 30’s low 40’s earlier in 2009). The article also touched on poor scrap sales and falling prices. As for a prognosis on the future, the Ã‹Å“steel men’ back in 1960 said of inventories, they will reach a dangerously low level and force some customers to re-order or even stockpile. The only bit of good news in the article pertained to an increase in OCTG sales (which will also happen now, given the recent anti-dumping case filed by domestic producers).
Two other articles contained some interesting points as well. The first, “Steel Union Says Slump in Output Affects 480,000” dated July 1, 1960 quotes a sad state of affairs, at this level [output level] the United States is producing less steel than is the Soviet Union, according to David J. McDonald (then President of the United Steelworkers Union). Again, the focus on output levels is striking. The article also sites that at that time, 48 domestic steel mills had over 1 m tons of capacity. The American Iron and Steel Institute reported, In the week ending July 25, 2009, domestic raw steel production was 1,254,000 net tons while the capability utilization rate was 52.6 percent, not too far off the output levels of 1960. Last year, the US produced 91.4 m tons of steel from a much more concentrated number of suppliers.
But perhaps the most humorous comment from these old articles appeared in one entitled: “Steel Mills End May With Biggest Production Cut Since ’58 Recession” in which the author discussed drastic production cutbacks and plant closures. Except the plant closures considered drastic included three steel plants closed over weekend, and holiday while other mills planned one week long plant shut-downs.
Indeed, times have changed or have they?