January 24, 1974
Page 749
SHORTAGE OF REINFORCING STEEL BARS
Mr. STEVENSON. Mr. President, on December 4, 1972, I and 27 other Senators wrote Dr. John Dunlop, Director of the Cost of Living Council, to express our concern about the shortage of reinforcing steel bars, and to request that the Cost of Living Council survey the steel industry to obtain better information about the shortage. The Cost of Living Council conducted a survey, the results of which are summarized in a letter to me from Dr. Dunlop dated January 22, 1974.
The results are ominous. Although demand for reinforcing bars is expected to increase sharply in 1974, production is likely to be off, imports down and exports up. Already contractors throughout the country are reporting delays and stoppages on major construction jobs; further deterioration of the situation will mean layoffs for hundreds of thousands of construction workers and declines in GNP.
We cannot permit that to happen. I have therefore telegraphed Dr. Dunlop and urged him to take all necessary action within his power to assure that an adequate supply of reinforcing bars is available to U.S. purchasers, and to advise the Congress in the event he concludes that he does not have adequate statutory authority to deal with the problem.
I ask unanimous consent that the December 4 letter, Dr. Dunlop's response, and my telegram be printed in the RECORD.
There being no objection, the correspondence was ordered to be printed in the RECORD, as follows:
U.S. SENATE,
Washington, D.C.,
December 4, 1973.
Dr. Joan T. DUNLOP,
Director, Cost of Living Council,
Washington, D.C.
DEAR DR. DUNLOP: We are very concerned about the growing indications that nonresidential construction activity will be severely curtailed during the first half of 1974 because of a shortage of reinforcing steel bars.
Some but not all the facts are known. During the first nine months of 1973, reinforcing bars accounted for 4.5% of the tonnage shipped from domestic steel mills, down 15% from the 1970-1972 average. In the same period, reinforcing bar exports increased 332 % over the first nine months of 1972, while imports declined 30%.
What we do not know is how much reinforcing bar our steel mills intend to produce during the first six months of 1974, and how much of what is produced will be exported.
In order to decide whether and how to act, we need answers to those questions.
We therefore request that the Cost of Living Council conduct an immediate survey of the steel industry and prepare aggregated estimates of reinforcing bar production and exports for the first half of 1974. We further request that the results be released to the Congress and the public not later than December 14, 1973.
Sincerely,
Adlai E. Stevenson, John Sparkman, Hiram L. Fong, Harrison A. Williams, Jr., Gale W. McGee, Robert Taft, Jr., William Proxmire, William D. Hathaway.
Bill Brock, Bob Packwood, John Tower, Lloyd Bentsen, Edward M. Kennedy, Edward W. Brooke, Edmund S. Muskie, Thomas J. McIntyre.
Thomas F. Eagleton, Dick Clark, Harold E. Hughes, Pete V. Domenici, J. Bennett Johnston, Jr., Hubert H. Humphrey.
Clifford P. Case, Gaylord Nelson, John O. Pastore, Claiborne Pell, Jennings Randolph, William V. Roth, Jr.
ADLAI STEVENSON III.
ECONOMIC STABILIZATION PROGRAM, COST OF LIVING COUNCIL,
January 22, 1974.
Hon. ADLAI E. STEVENSON,
U.S. Senate,
Washington, D.C.
DEAR SENATOR STEVENSON: Thank you for your recent letter in which you and your colleagues bring to my attention your concern with current shortages in reinforcing bars.
The Council shares your concern about the shortage of reinforcing steel bars and its effect on the construction industry. We have held numerous fact-finding meetings with representatives of the steel and construction industries on this problem, and we are continuing to meet with industry representatives on this and related problems in the steel area.
Our fact-finding efforts indicate that the principal causes of the shortage of reinforcing bars are as follows:
Strong demand. The demand for rebars increased significantly from 1972 to 1973 and is projected to increase still further in 1974.
High levels of capacity utilization in the steel industry. Available statistics indicate that the domestic steel industry was operating at 101 percent of capacity in the third quarter of 1973.
Moreover, the high level of capacity utilization is a worldwide phenomenon, which has contributed to the decline in U.S. imports of reinforcing bars.
Cost-price relations. Profit margins have traditionally been lower on reinforcing bars than for most other steel products; and, in addition, increases in input costs, especially for scrap, have put pressure on margins. Lower domestic prices of reinforcing bars compared to international prices have also contributed to the supply problem.
On the supply side, available statistics for the first 11 months of 1973 show shipments of reinforcing bars by domestic producers to have increased 14 percent over the same period for 1972. For these same periods, imports of reinforcing bars showed. a substantial decline of 33 percent. Starting from a relatively low base in 1972, exports of reinforcing bars increased by approximately 400 percent. The total supply of reinforcing bars (shipments plus imports minus exports) for the first 11 months of 1973 increased 9 percent compared with the first 11 months of 1972. These figures are summarized in Table 1 which follows.
The Cost of Living Council, in early December, requested information from some 23 large steel producers concerning their intended shipments for 1974 of certain steel products including reinforcing bars. All of the firms responded; and, of these, 10 stated that they produced reinforcing bars in 1973 and 9 stated that they intended to produce reinforcing bars in 1974.
These firms accounted for the production of 2,242,800 tons in 1973, approximately half of U.S. industry shipments in 1973, and project their production for 1974 to be 2,218,800 tons – a decrease of 1.1 percent. The data obtained did not pertain to exports and it would, therefore, be difficult to make useful projections at this time.
A more pessimistic outlook has been indicated by a survey conducted by the Concrete Reinforcing Steel Institute. From its survey of firms in the midwest and eastern United States the association estimates that shipments of reinforcing bars by domestic firms will be down approximately 11 to 12 percent in the first half of 1974 compared to the first half of 1973.
The situation offers no simple solution. When operating at such capacity levels, firms generally reduce or drop their less profitable items. Thus, it is questionable whether even substantially higher margins for reinforcing bars would cause the major producers to alter their product mixes and produce more bars, at least in the near future. However, prenotification of price increases for reinforcing steel have been submitted to the Council, and. we are committed to responding to them by January 25.
On December 21, after the public steel hearings on December 19 and 20, the Council announced that as of December 21, 1973 steel firms would be permitted to increase immediately their adjusted freeze prices of those items which have not had Phase IV price increases. These increases are limited to a dollar-for-dollar pass-through of purchased ferrous scrap cost increases incurred from June 1, 1973 through December 31, 1973.
Although that action should ease the reinforcing bar situation to a degree, the problem remains serious. The reinforcing bar problem is not unrelated to problems which exist for a wide range of steel products, and we are exploring what further actions, if any, the Council might take in this area.
If I can be of any further assistance, please do not hesitate to contact me.
Sincerely,
JOHN T. DUNLOP, Director.
[Table Omitted]