STATE OF BUSINESS: Boom

In Month I of War II U. S. production jumped from 102% of the 1923-25 average to 110. Beginning of Month II, production was around 115, headed for the 1937 peak of 118. Guarantee of its getting there is the fact that the output of U. S. industry is sold out until the end of the year, that most industries have stopped booking orders, are concentrating on making deliveries.

Steel. Typical of industries no longer making sales last week was Steel, whose customers will be amply stocked against any possible famine if only they can get delivery on orders already placed. Chief worry of the industry right now is how to keep the operating rate (last week: 87.5%, this week 88.6%; buying by consumers took up about 70%) above 85% of nominal capacity without dangerously deferring repairs, cracking up expensive new machinery, running shaky old machinery into the ground. Even small marginal companies like Tycoon J. H. Hillman Jr.'s Pittsburgh Steel Co. were defying the rule of producing with 85% of capacity and rotating 15% under repair, were actually smelting ingots at better than 100% of nominal capacity. Bethlehem's battery of 30 old and new furnaces at Buffalo is now working at 100% for the first time in Bethlehem's history. Steel's (mostly Big Steel's) last reserve of obsolescent capacity in Chicago and Pittsburgh waited to limp into action. When these furnaces are blown in to work once every five or ten years, steelmen prepare for overproduction and shutdown.

Pig & Scrap. Fourth quarter steel earnings will not be as lush as production because sheets will be going at June's cut prices until Jan. 1. And there is a menacing squeeze in raw materials. September pig iron production rose only 12% because blast furnaces for making pig iron are in worse shape than furnaces for smelting steel ingots. Quick to profit from the scarcity of pig (price $22.50) have been the railroads and other sellers of its rival raw material, scrap, who have put the price up to $26 a ton (Aug. 31 price: $15.25). At $26, sheet mills are buying bundles of scrapped sheets which they must re-roll to strict specifications to sell for only $7 to $8 more. Rail mills are buying scrap to go into rail selling for only $14 more. Small steel companies, buying nearly all their scrap have already passed $5 of this scrap advance on to their customers, are unable to get enough raw material to fill orders even at this advanced price. Scrap is one material Europe has actually bought heavily.