It's not at full blast, but Big Steel looks rosier

Is the US steel industry on the way out of its depression, a slump that has put more than a third of American steelworkers out of work? ''Yes. Yes. Absolutely yes. Totally yes,'' exclaims Robert Nickels, director of ferrous metals research at Chase Econometrics, a forecasting firm.

Mr. Nickels is not the only one acquainted with the industry to answer that question in the affirmative. Analysts, economists, and steel executives agree that a recent pickup in shipments is boosting the steel industry out of the $3 billion trough of steel losses last year.

But not everyone is as excited as Mr. Nickels. ''I don't feel quite the euphoria that some have expressed over recovery,'' E.Bradley Jones, chairman of Republic Steel Corporation, said in an interview. ''There's been an obvious improvement, but from here on the (steel) recovery will be gradual.''

And when the industry does get back on its feet, the recovery is expected to be seen in higher profits, rather than many more rehired steelworkers. Steel companies will be more efficient, smaller, and more specialized, and will employ a lot fewer people.

''These buzzwords are probably correct,'' agrees Robert Crandall, senior fellow in the economics study program at the Brookings Institution in Washington. ''All of those people (laid off) aren't going to be hired back.''

Although no one can say exactly what the industry will look like once it reaches the end of the recovery road, at least it has started to move along it.

For instance, in December the industry was operating at a ''shade below 30 percent of capacity, the worst since the (Great) Depression,'' says Sheldon Wesson at the American Iron and Steel Institute. ''But last week it was back to 54 percent. Now no one is shooting off rockets and dancing in the streets over 54 percent,'' he declares, but the figure is ''a sign of strength.'' The industry needs to operate at least at 65 percent of capacity before some profits can be made, Mr. Wesson adds.

Another hopeful indicator is steel shipments. Last year, shipments averaged a little over 5 million tons a month, and in December went down to just over 4 million a month, according to George McManus, steel editor of Iron Age magazine in Pittsburgh. In March, ''we're now up to about 6 million and are expected to stay there through about the second quarter,'' he says. ''The normal would be about 8 million in a reasonable (economy).''

One more encouraging factor is a strong reduction in imports. The October agreement of the European Common Market to limit its steel exports to the United States was a victory for American steelmakers. Japanese exports to the US ''are very much lower'' (partly because of political pressure, partly because of worldwide recession), according to Charles Bradford, a steel analyst at Merrill Lynch & Co. Though imports are down, he expects them to pick up in the second half of this year.

On the labor front, ''more than 30,000 workers have been recalled over a 10 -week period,'' Mr. Wesson says. ''But there is no cause for joy in 'only' 130, 000 laid off. That's a lot of people.''

One reason for the increased activity in shipments and orders is higher production of autos and appliances, analysts say.

Another big factor is inventory. ''Last year customers chewed up a lot of inventory. The result was that steel shipments were far below consumption,'' Mr. Wesson explains. ''But (inventories) now have gone down to rock bottom,'' and customers have begun to order again.

Customers clung to inventory instead of ordering because their production was down. But it was also a question of financing. ''Steel is almost exclusively sold on credit,'' says Republic's Mr. Jones. With high interest rates, customers preferred to work off inventory, he said. With lower interest rates, ''we have seen a positive effect.''

But is the current upturn for real, or just a blip in time?

''The key would be what happens to the economy,'' says Mr. Bradford at Merrill Lynch. ''If it rebounds for a few years and is reasonably strong, then it's not a blip.''

While autos are helping the industry, steel men are still holding their breath for recovery in the capital-goods sector. Building construction, company investment in plant and equipment, oil exploration - recovery here could give a big push to steel, experts say. But many economists don't see companies spending more in these areas until 1984.

Until then, the industry is expected to continue a gradual ascent toward profitability in the fourth quarter or the beginning of 1984 by relying on productivity gains, cost control, and the inevitable rebuilding of inventory. ''We would have more steel shipments in '83 even if the economy didn't improve one tick, simply because of inventory (rebuilding),'' says Mr. Nickels of Chase Econometrics.

Although the recent agreement by the United Steel Workers union to accept pay cuts of $1.25 an hour and forgo cost-of-living increases until July 1984 is ''solving none of the problems on either side in the long run,'' Bradford says, it is viewed as a positive step for the near-term.

With lower wage costs and many fewer workers, the industry is expecting to run a tighter operation. During this steel depression, about half of planned spending in modernization and plant improvement was put on the back burner. But the depression also forced the least profitable plants to be cut off faster and the most essential cost-cutting improvements to be made.

At Republic Steel, the result is that ''in the past eight to nine months we've reduced the break-even point by somewhere between 11 and 13 percent'' from the previous level of capacity, Mr. Jones says. At Armco Inc., based in Middletown, Ohio, the company has reduced by 11 percent the man-hours required to produce one ton of steel.

Both companies say they will emerge from the steel depression as much leaner, more-efficient producers. They are putting more emphasis on improved quality. The focus at Armco is on specialization.

''We are concentrating on special-purpose steels that we can make better than anybody else,'' an Armco spokesman says. ''Five years from now, no one is going to be a steel supermarket anymore.''

The steel companies are playing the upturn cautiously. Says Mr. Jones: ''Regardless of this (recovery) scenario, we have to continue to plan on the continuation of what we have. We have to maintain tight cost controls.''

The caution is there because many hurdles remain for full recovery. The biggest is the continuation of worldwide recession, followed by the high cost of labor, a need for more modernization, and improved productivity.

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