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INVESTIGATION OF CONCENTRATION
OF ECONOMIC POWER
HEARINGS
BEFORE THE
TEMPOEAEY NATIONAL ECONOMIC COMMITTEE
CONGKESS OF THE UNITED STATES
SEVENTY-SIXTH CONGRESS
SECOND SESSION
PURSUANT TO
Public Resolution No. 113
(Seventy-fifth Congress)
AUTHORIZING AND DIRECTING A SELECT COMMITTEE TO
MAKE A FULL AND COMPLETE STUDY AND INVESTIGA-
TION WITH RESPECT TO THE CONCENTRATION OF
ECONOMIC POWER IN, AND FINANCIAL CONTROL
OVER, PRODUCTION AND DISTRIBUTION
OF GOODS AND SERVICES
PART 18
IRON AND STEEL INDUSTRY
IRON ORE
NOVEMBER 1, 2, AND 3, 1939
Printed for the use of the Temporary National Elconomic Committee
UNITED STATES
GOVERNMENT PRINTING OFFICE
124491 WASHINGTON : 1940
TEMPORARY NATIONAL ECONOMIC COMMITTEE
(Created pursuant to Public Res. 113, 75th Cong.)
JOSEPH C. O'MAHONEY, Senator from Wyoming, Ctiairman
HATTON W. SUMNERS. Representative from Texas, Vice Chairman
WILLIAM H. KINO, Senator from Utah
WILLIAM E. BORAH, Senator from Idaho .
CLYDE WILI TAMS, Representative from Missouri
B. CARROLL i EECE, Representative from Tennessee
THURMAN W. ARNOLD, Assistant Attorney General
•WENDELL BERGE, Special Assistant to the Attorney General
Representing the Department of Justice
JEROME N. FRANK, Chairman
*LEON HENDERSON, Commissioner
Representing the Securities and Exchange Commission
-GARLAND S. FERGUSON, 'Commissioner
•EWIN L. DAVIS, Commissioner
Representing the Federal Trade Commission
IS AD OR LUBIN, Commissioner of Labor Statistics
*A. FORD HiXRICHS, Chief Economist, Bureau of Labor Stitistics
;t"('i:s'-'ntiiii; ihe Department of Labor
JOSEPH J. u'COXXELL, Jr., Special Assistant to the General Counsel
Ropreienting tlu Department of the Treasury
CLARENCE AVILDSEN, Special Adviser to the Secretary
Repn!sentius the Department of Commerce
J AMES R. BRACKETT, Executive Secretary
'Alternates.
II
CONTENTS
Testimony of — Page
Butler, Emmett, president, Butler Bros., St. Paul, Minnesota. 10290-10389
Butler, Patrick, Butler Bros., St. Paul, Minnesota 10291-10389
Greene, Edward B., president, Cleveland-Cliffs Iron Co., Cleveland,
Ohio 10235-10283, 10294-10389
Hoyt, Elton, II, manager and partner, Pickandp, Mather & Co.,
Cleveland, Ohio 10218-10234, 10294-10389
Humphrey, George M., president, M. A. Hanna Co., Cleveland,
Ohio -- 10283-10290, 10294-10389
Oglebay, Crispin, president, Oglebay, Norton & Co., Cleveland,
Ohio 10237-10243, 10294-10389
Statement of Arnold, Thurman W,, Assistant Attorney General of the
United States, Washington, D. C ,-. 10215-10216
History and background of the iron ore industry 10220
The major iron ore producers 10224
Financial connections between ore companies and steel companies 10225
Acquisition of stock in Oglesbay, Norton Co. by Cleveland-Cliffs Iron Cb_ 10237
Cyrus S. Eaton project for Midwestern steel merger 10256
Stabilization and competition 10271
Formation of the National Steel Corporation 10284
The Rowe Mine 1 0286
Pickands, Mather-Butler Bros., ore contract 10291
The "United Front" policy.. 10298
The Lake Erie base price 1 0305
Price rigidity 10311
Iron ore pricing 10329
Establishment of the base price ^ ■:0:.';52
Variations from the base price 10337
Effect of cutting the market price 103 '3
Limited market for ore sales 10350
Price discussions i 0352
Significance of ore prices to integrated and nonintegrated steel producers. 10300
Lake freight rates on iron ore 10372
Question of modification of existing laws to allow more freedom for business-
men . 10382
Iron ore reserves 10387
Schedule and summary of exhibits v
Wednesday, November 1, 1939 10215
Thursday, November 2, 1939 10267
Friday, November 3, 1939 ... 10329
Appendix 10391
Supplemental data 10446
Index _ . _ T
SCHEDULE OF EXHIBITS
Number and summary of exhibits
Intro-
duced
at page
1349. Pamphlet, prepared by the staff of the Department of
Justice, entitled "Major Characteristics of the Iron
and Steel Industry"
1350. Map showing movement of Lake Superior iron ore and
of Eastern and imported ore from sources to consum-
ing districts, 1937
1351. Chart: Percentage of Lake Superior iron ore shipments
by major iron ore companies, 1937
1352. Table: Relative industry position of major iron ore com-
panies, 1937
1353. Chart: Financial connections between major iron ore
companies and steel companies
1354. Appears in Hearings, Part 17, appendix, p. 9929
1355. Letter, dated February 17, 1930, from Crispin Oglebay,
president, Oglebay, Norton & Co., to E. B. Greene,
Cleveland-CliflFs Iron Co., outlining the advantages
to the companies involved of the acquisition of inter-
ests in Oglebay, Norton by the Cliffs Co
1356. Letter, dated May 29, 1930, from Wm. G. Mather, presi-
dent, Cleveland-Cliffs Iron Co., to S. R. Elliott, man-
ager of the mining department of the company, out-
lining the advantages to the Cliffs Co. of the acqui-
sition of interests in Oglebay, Norton & Co
1357. Letter, dated January 27, 1930, from Wm. G. Mather,
president, Clevelend- Cliffs Iron Co., to Crispin Ogle-
bay, president, Oglebay, Norton & Co., discussing the
advantages of the proposed acquisition plan between
the companies
1358. Telegram, dated January 26, 10:17 P. M. (1930), from
Crispin Oglebay, president, Oglebay, Norton & Co.,
to W. W. White, Cleveland- Cliffs Iron Co., stating
that "as individuals we are heartily in favor of Cleve-
land-Cliffs Co. acquiring Oglebay, Norton Co. under
the proposed plan, believing that this merger tends to
stabilize the market value of ore"
1359. Inter-office memorandum, dated December 11, 1933, by
E. B. Greene, president, Cleveland-Cliflfs Iron Co.,
outlining negotiations taken by his company in trying
to persuade the Republic Steel Co. to let its ore
properties be managed by it
1360. Statement of Wm. G. Mather, chairman, to the board
of directors of Otis Steel Co., on August 2, 1934, in
regard to the proposed consolidation of Otis Steel Co.
with Republic Steel Co
1361. Memoranduin. dated April 14, 1936, by E. B. Greene,
president, Cleveland-Cliflfs Iron Co., relating his con-
tacts with Thomas Girdler, president. Republic Steel
Corp., on the subject of investments in steel companies.
1362. Letter, dated September 4, 1928, from Patrick Butler,
Butler Brothers, to his father, Emmett Butler, presi-
dent, Butler Brothers, relative to the sale of ore to
Pickands, Mather & Co
' On file with the Committee.
10217
10218
10224
10224
10225
10235
10240
10240
10244
10250
10259
10260
10263
10292
VI
SCHEDULE OF E,XIIIBITS
Number and summary of exhibits
lutro-
duced
at page
Appears
on page
1363.
1364.
1364^A.
1365.
1366.
1367.
1368.
1369.
1370.
1371.
1372.
1373.
1374.
1375.
1376.
1377.
Letter, dated September 19, 1934, from E. B. Greene,
president, Cleveland-Cliffs Iron Co., to G. M. Hum-
phrey, president, M. A. Hanna Co., regarding the
appointment of A. C. Brown as a vice president of the
Cliffs Co
Letter, dated August 11, 1934, from E. B. Greene,
president, Cleveland-Cliffs Iron Co., to S. R. Elliott,
manager of the mining department of the company,
regarding the labor and tax situations in mining
operations
Letter, dated October 17, 1936, from E. B. Greene,
president, to S. R. Elliott, manager of the mining de-
partment, Cleveland-Cliffs Iron Co., regarding
working hours of employees of the company
Telegram, dated May 8, 1937, from A. C. Brown, vice
president, to E. B. Green, president, Cleveland-Cliffs
Iron Co., advising Mr. Greene of a proposed meeting
of officials of iron ore companies
Letter, dated May 24, 1938, from E. B. Greene, presi-
dent, to S. R. Elliott, manager of the mining depart-
ment, Cleveland-Cliffs Iron Co., regarding the em-
ployment of Fayette Brown, Jr
Chart: Iron ore prices, 1925-1939
Chart: Lake freight rates on iron ore, 1925-1939
Letter, dated April 10, 1934, from Patrick Butler, Butler
Brothers, to his father, Emmett Butler, president of
that company, regarding the price of iron ore
Letter, dated March 28, 1929, from Patrick Butler,
Butler Brothers, to his father, Emmett Butler, presi-
dent of that company, regarding the quotation of iron
ore prices to the Ford Motor Co
Letter, dated August 4, 1931, from Patrick Butler, Butler
Brothers, to his father, Emmett Butler, president of
that company, regarding the quotation of a price on
iron ore
Letter, dated March 25, 1931, from Patrick Butler,
Butler Brothers, to his father, Emmett Butler, presi-
dent of that company, regarding submission of iron
ore prices to the Ford Motor Co
Letter, dated March 27, 1929, from Patrick Butler,
Butler Brothers, to his father, Emmett Butler, presi-
dent of that company, retarding the quotation of iron
ore prices
Letter, dated April 16, 1935, from C. L. Wyman, Butler
Brothers, to Emmett Butler, president of that com-
pany, regarding the price of iron ore to be sold the
Ford Motor Co
Letter, dated April 23, 1935, from H. A. Raymond, Cleve-
land-Cliffs Iron Co., to E. B. Greene, president of that
company, regarding iron ore prices and the absorption
of freight rates
Letter, dated January 18, 1930, from Ernest Weir, chair-
man of the board. National Steel Co., to George M.
Humphrey, president, the M. A. Hanna Co., inquiring
as to the advisability of an increase in the price of iron
ore
Letter, dated February 28, 1937, from A. C. Brown, vice
president, to E. B. Greene, president, Cleveland-Cliffs
Iron Co., regarding sales of iron ore and the prices at
which it was to be sold
1378. Letter, dated March 28, 1934, from Emmett Butler,
president, to his son, Patrick Butler, Butler Brothers,
regarding the price of iron ore
10295
10296
10297
10300
10304
10310
10310
10321
10342
10342
10346
10351
10351
10354
10362
10370
10371
104 36
C)
10436
> On file with the Committee.
SCHEDULE OF EXHIBITS
VII
Number and summary of exhibits
Intro-
duced
at page
Appears
on page
SUPPLEMENTAL DATA
Unnumbered. Narration delivered by Edwin C. Hill during the
showing of the moving picture, "Steel, The Ser-
vant of Man", before the T. N. E. C. on Novem-
ber 1, 1939 - -- --
10446
Unnumbered. Letter, dated November 9, 1939, from Elton Hoyt,
IT, manager and partner, Pickands, Mather &
Co., to Senator Joseph C. O'Mahoney, chairman
of the committee, in reply to the Chairman's sug-
gestion that Mr. Hoyt recommend to the Com-
mittee his ideas as to what businessmen might
feel free to do without violating the antitrust
laws _____
10453
INVESTIGATION OF CONCENTEATION OF ECONOMIC POWEK
WEDNESDAY, NOVEMBER 1, 1939
United States Senate,
Temporary National Economic Committee,
Washington, D. C.
The committee met at 10:40 a. m., pm^suant to adjournment on
Friday, October 27, 1939, in the Caucus Room, Senate Office Building,
Senator Joseph C. O'Mahoney presiding.
Present: Senator O'Mahoney, (chairman) ; Representative Sumners
(vice chairman); Senator King; Representatives Reece and WilHams;
Messrs. Arnold, Henderson, Avildsen, Lubin, O'Connell, and Brackett.
Present also: Willard Thorp and John V. W. Reynders, represent-
ing the Department of Commerce; Willis Ballinger, representing the
Federal Trade Commission; Theodore Kreps, economic adviser to the
committee; A. H. Feller, special assistant to the Attorney General;
John W. Porter, Irving B. Glickfeld, Hyman B. Ritchin, Ward S.
Bowman, and Monroe Karasik, Department of Justice.
The Chairman. The committee will please come to order. This
hearing will be opened by Assistant Attorney General, Mr. Thurman
Arnold. Mr. Arnold.
STATEMENT BY MR. ARNOLD
Mr. Arnold. Mr. Chairman, this morning the Department of
Justice begins the presentation of testimony and materials relating
to the iron and steel industry. The importance of a study of this
industry in any consideration of national economic problems cannot
be emphasized too strongly. Our industrial civiHzation is fundamen-
tally based on steel. Automobiles, agricultural implements, machin-
ery, containers, railroads, shipbuilding, construction, and innumerable
other industries depend on the steel industry for their most essential
raw material. The steel industry itself constitutes a major segment
of our economy. It ranks first among manufacturing industries in
the number of its employees and third in the value of product. The
total capital investment by the companies who are its members is in
excess of $4,000,000,000; the annual value of its products is nearly
$3,000,000,000; and it employs in the neighborhood of 600,000 people.
In his message to the Congress requesting the investigation with
which this committee has been charged the President said, "One of
the primary causes of our present difficulties lies in the disappearance
of price competition in many industrial fields, particularly in basic
manufacture where concentrated economic power is most evident and
where rigid prices and fluctuating pay rolls are general". It is widely
believed that these phenomena are characteristic of the iron and stee'
10215
10216 CONCENTRATION OF ECONOMICS POWER
industry. The existence in this industry of a small number of verj
large producers is a matter of common information. The charge is
frequently made that this concentration is accompanied by other
manifestations of monopoly power and that the prices of many steel
products are artificipJly maintained.
For a number of months the Department of Justice has conducted
a painstaking study of the practical implications of this concentration
and of the extent to which this charge may be warranted. With the
cooperation of members of the industry, facts and statistics have been
and are being assembled and analyzed. These should tell us more
about the industry than we have ever known before.
The hearings which begin today will be concerned mainly with
price, the primary regulating mechanism in a free, competitive
society. But while the emphasis will be upon price — what it is, how
it is made, what factors are responsible for its behavior — other subjects
within the sphere of this committee's inquiry will be touched upon.
It should be emphasized that these hearings deal only with a part of
the Department's study. From, time to time within the next few
months reports on other aspects of the industry will be made to the
committee.
Our aim at this time is to show how the industry actually operates
in the present and how it has operated in the very recent past. So
far as possible matters primarily of a theoretical nature have been
eliminated.
I must emphasize that in these hearings the Department takes no
attitude for or against the industry or for or against any particular
company. Nor will it here present any judgment upon the industry
or make any recommendation with respect to public policy. Such
judgments and recommendations will be presented in due time after
the material has been placed before the committee. At this time, we
conceive our task to be to show you the facts.
Important as a consideration of this industry would be in normal
times, it is all the more important when we stand under the shadow of
the European war situation. Steel is the metal of war as well as of
peace. Extraordinary demands will be made upon the industry in
the near future. With these demands will come responsibilities which
the industry must meet if our own national well-being is not to suffer
as a result of Europe's war. We, as neutrals, have a great task before
us — to see to it that our economy is not distorted because of someone
else's war. It was therefore with considerable gratification that the
Department noted some weeks ago the decision of the major units of
the industry to confirm existing published prices to the end of the
current year. I do not pass judgment at this time on the problems
which wUl beset the industry in the coming difficult months, but I
confidently trust that the patriotic spirit which prompted that decision
will continue to rule the industry's decisions in the future.
Now, Mr. Chairman, I will turn the presentation of our material
over to Mr. A. H. Feller.
The Chairman. Mr. Feller, do you want to present a statement?
Mr. Feller. At the outset, Mr. Chairman, I should like to offer
for the record the pamphlet entitled "Major Characteristics of the
Iron and Steel Industry." This pamphlet was prepared by the staff
of the department and the text which it contains is in the nature of
background information? We have tried so far as possible to eliminate
CONCEx\TRATI()N OF PX'^^NOMIC POWER 10217
anything of a controversial nature. I suggest that it would be useful
to the committee to refer to the text, charts and tables in this pamphlet
from time to time during the hearing.
The Chairman. Without objection the pamphlet may be made a
part of the record.
(The pamphlet referred to was marked "Exhibit No. 1349" and is
included in the appendix on p. 10391.)
The Chairman. A few days ago, before the hearing was scheduled
to have opened, representatives of one of the large steel companies,
the United States Steel Corporation, approached the Department of
Justice and the chairman of the committee with the suggestion that
a motion picture showing the steel industry as a unit might be
advantageous to the committee. The committee was quite agreeable
to that presentation. It will now be made before we proceed with
the testimony.
In order to make it convenient I will ask the members of the
committee to take their seats in these chairs that face the screen.
(The motion picture "Steel, the Seraant of Man," as produced
for the United States Steel Corporation, was sllo^vn to the committee.
The narration by Mr. Edwin C. HiU is included in the appendix
on p. 10446.)
The Chairman. The committee will please come to order. Have
the photographers completed their work?
Before turning the hearing over to Mr. Feller, who will act on
behalf of the Department of Justice in presenting the testimony, it
may be appropriate for the chairman to express the appreciation
which the committee feels for the opportunity of witnessing this
motion picture which has just been throwai on the screen. I am sure
nobody could faO to be impressed by the magnitude of tliis industry.
Nobody could fail to be impressed by the precision of the machines
which have been made b^ men to mold steel into the various forms
in which it is used by society.
I notice that the picture was entitled "Steel, the Servant of Man,"
and that on numerous occasions, as the scenes were being flashed
before our eyes, Mr. Edwin C. Hill called attention over and over
again to the fact that the purpose of this industry is actually to
serve mankind.
I couldn't help but think that this is one industry, only one; this
committee has just listened for 3 weeks to part of the story of the
petroleum industry. It has been studying numerous other industries,
all of which are bmlt probably on the same proportions as the steel
industry, but the thought which is left with me is that while this
physical perfection has been attained by mankind in building these
wonderful industries, there still remains the discovery of the formula
by which the human resources of society may be conserved as well
as the material resources are conserved as indicated by this picture.
That, I take it, is the fundamental work of this committee, to study
how we may gear together all of these tremendous industries that
mankind has developed so as to make it possible to provide security
for all men, so as to provide a solution for the problem of unemploy-
ment— unemployment of men and unemployment of capital — which
remains with us in spite of all these tremendous achievements of
industry.
10218 CONCENTRATION OF ECONOMIC POWER
I am sorry to have taken this time to make these remarks, but the
picture seemed to me to indicate the desirability of pointing out what
seems to me to be the primary lesson of this picture.
Mr. Feller, are you ready to proceed?
Mr. Feller. Mr. Chairman, I think it might be of some use to
the committee if I outlined in a very few words the general substance
with which this hearing will deal. We will start literally from the
ground up, with the iron-ore industry, the testimony on which will
take the next few days. We will then proceed to consideration of
the general price policies of the steel industry and then, due to the
complexity of the industry, center our attention on price behavior
and price policies in certain specific product categories, some of the
products that the committee saw in the process of manufacture in
the motion picture.
Finally we will conclude the hearing with a consideration of exports,
the relations between the American steel industry and the rest of
the world.
In beginning the iron-ore industry we wiU first call on Mr. Elton
Hoyt.
The Chairman. Do you solemnly swear that the testimony you
are about to give in this proceeding shall be the truth, the whole
truth, and nothing by the truth, so help you God?
TESTIMONY OF ELTON HOYT H, MANAGER AND PARTNER.
PICKANDS, MATHER & CO., CLEVELAND, OHIO
Mr. Hoyt. I do.
Mr. Feller. Mr. Hoyt, will you give your full name to the
reporter?
Mr. Hoyt. Elton Hoyt, II.
Mr. Feller. And the company with which you are associated?
Mr. Hoyt. Pickands, Mather & Co.
Mr. Feller. And what is your position in that company?
Mr. Hoyt. I am manager and partner.
Mr. Feller. How long have you been a member of this part-
nership?
Mr. Hoyt. I think since '18.
Mr. Feller. What are your general duties?
Mr. Hoyt. Well, they are principally executive, but my experience
has come up primarily through the iron-ore end of the business.
Mr. Feller. You are also, are you not, a director of the Interlake
Iron Corporation?
Mr. Hoyt. I am.
Mr. Feller. AndB.a director and vice president pf Interlake
Steamship Co.?
Mr. Hoyt. That is correct.
Mr. Feller. And also president and director of the Mather Iron
Co.?
Mr. Hoyt. That is correct.
Mr. Feller. I offer for the record the map entitled "Movement
of Lake Superior Iron Ore."
The Chairman. It may be received.
(The map referred to was marked "Exhibit No. 1350" and is in-
cluded in the appendix facing p. 10424.)
CONCENTRATION OF ECONOMIC POWEtt 10219
Mr. Feller, A'Ir. Hoyt, looking at this map, I want to call your
attention first to the broad band indicating the movement of iron ore
through the Great Lakes. From what States does this iron ore come?
Mr. Hoyt. The broad band represents the shipments from Min-
nesota, Wisconsin, and Michigan. It is usually called the Lake
Superior district.
Mr. Feller. About how much of the iron ore consumed in the
United States comes from this district?
Mr. Hoyt. Well, approximately 85 percent.
Mr. Feller. Mr. Chairman, it might be of interest to the com-
mittee if at this point I indicated what other sources there are for iron
ore as consumed in the United States. As Mr. Hoyt has said, 85
percent of the iron ore consumed comes from the Lake Superior
region, the Lake Superior district. The other two large sources are
imports, which are indicated on the map by lines reaching into several
ports. About. 80 percent of the imported ore moves to Sparrows
Point, the plant of the Bethlehem Steel Corporation near Baltimore.
The largest producing State outside of the three that Mr. Hoyt has
mentioned is the State of Alabama. There are also iron-ore deposits
which are being mined in New York, Peimsylvania, Utah, and Col-
orado, and smaller ones in some other States.
The Chairman. Don't forget Wyoming.
Mr. Feller. And Wyoming.
The Chairman. Near my own home in Cheyenne we have Iron
Mountain, which is an untouched deposit of iron ore. Iron deposits
at Guernsey, Wyo., are, I am informed, the principal source of supply
for the Colorado Fuel & Iron Co., which operates at Pueblo, Colo.
Mr. Feller. I am glad to have that correction. Senator.
The Vice Chairman. While we are interrupted, Mr. Chairman,
may I suggest for the record and for brevity of procedure that those
factual references to iron which are not controverted be stated as
facts, rather than to draw them out from the witness by question and
answer? I rather appreciate what you have just done, as one member
of the committee. For those things that are not controverted I can't
see any reason why, as an individual member of the committee, they
should be drawn out question by question.
Senator King. I share that view — those which are noncontroversial,
and the facts with which at least some of us are partially familiar
you might state as facts.
The Chairman. Before the hearing began, at the outset, before
Senator King appeared and before Vice Chairman Sumners appeared,
Mr. Feller presented for the record and laid on the desk of each
member a pamphlet entitled "The Major Characteristics of the Iron
and Steel Industry," which I think contains a good deal of this un-
contro verted material.
Mr, Feller. We intend to foUow that procedure. Senator. At
present we are going to ask Mr. Hoyt to give something of the history
and background of the Lake Superior district, which, as has been
stated, produces 85 percent of the iron ore. That description by
Mr. Hoyt will give us most of the background of this industry.
Can you tell us something about the background?
Mr. Hoyt. If it is satisfactory, I wrote a few notes on this for
brevity and accuracy, which I will read, Mr. Chairman.
10220 CONCENTRATION OF ECONOMIC POWER
HISTORY AND BACKGROUND OF THE IRON ORE INDUSTRY
Mr. HoYT. While from a geological standpoint iron ore was known
to exist in what is now called the Lake Superior district prior to 1800,
its actual discovery from a commercial point of view did not take
place until the middle of the last centurv. On July 7, 1852, the
Marquette Iron Co. shipped 6 barrels of ore to New Castle, Pa.,
which represented the first shipment by the Great Lakes.
The Marquette Range, as shown on the chart, is located just south
of Lake Superior, on the Upper Peninsula of Michigan. In 1853
the Cleveland Iron Mining Co., which was the forerunner of the
Cleveland-Cliffs Iron Co., became active on this range and took over
the Marquette Iron Co. in that year. The year following, 1,000 tons
of ore were shipped from this district and 1854 is therefore credited
as the first year of iron-ore shipments in any volume, but it was not
until the completion of the canal at Sault Ste. Marie in 1855 that the
present iron-ore industry really got under way.
A few years later the Menominee Range, also in Michigan, started
operations. Early in 1870 enough ore had been developed on the
Menominee Range, south of the Gogebic, to warrant mining, but ship-
ping was delayed until 1877, until the Chicago & Northwestern Rail-
way Co. had built a line from Quinnesec to Escanaba and the initial
shipment from this territory amounted to about 10,000 tons. The
ore found on the Menominee, while mined by underground methods,
is nearer the surface and, while of good structure, on the average is
high in phosphorus, an element undesirable in the manufacture of
basic iron.
In 1884 the first ore from the Gogebic Range was produced from
the Coulby Mine. This range, as you can see on the chart, is located
partly in Michigan and partly in Wisconsin and the ore produced
therefrom is shipped through the port of Ashland on Lake Superior.
Until this period the production and shipment of iron ore were
confined to the State of Michigan and a relatively small tonnage from
Wisconsin, but for a number of years prior to tlus date rough explora-
tion had been going on in what is now known as the Vermillion
Range in Minnesota located 80 miles norto of Lake Superior. Before
development could actuallv get under way it was necessary to build
a railroad to the Lake and loading facilities at it'^ terminal. In 1882
the Minnesota Iron Co. was organized and during the next 2 years this
company built the railroad known as the Duluth & Iron Range
Railwav and shipments actually commenced in 1884.
The ranges herein briefly mentioned, particularly the Marquette,
Gogebic, and Vermillion, generally spoken of as the old ranges, were
noted for the quality of the ore, high in iron content and coarse in
physical structure, and the mines located thereon from which the ore
is produced are generally deep shaft mines, a number of them being
several thousand feet in depth.
With the gradual growth of the iron and steel industry during this
period, shipments from the four ranges had increased to a total yearly
tonnage in excess of 9,000,000 tons by the year 1892. A few years
prior to this time, ore had been discovered on the eastern and western
ends of what is now known as the Mesabi Range, but in both instances
the ore was of low grade and not merchantable in comparison with
ore from the old ranges. In 1891 and 1892 Mountain Iron and
CONCENTRATION OF ECONOMIC POWER 10221
Biwabik mines were located and with the completion of the Duluth,
Mesabi & Northern Railway in 1892 shipments actually commenced;
in the following year a total of 10 mines were operating and produced
a little over 600,000 tons. Mesabi is a Chippewa word meaning giant
and this range is therefore properly named, as the shipments increased
until in 1937 a total of 45,000,000 tons was shipped in 1 year.
It -was not until 1911 that the Cuyuna Range was commercially
developed, although it was known that ore existed in this locality for a
number of years earlier. This range is particularly noted for large
tonnages of what is known as manganiferous ore, running from 7 to 9
percent in natural manganese and while it is not possible to use
these ores in the manufacture of ferromanganese and spiegel, the
manganese content is beneficial in the manufacture of higher manga-
nese pig irons.
The rapid development of the Mesabi Range was held back for a
considerable period of time due to the fact that the structure of the
ore was materially finer tlian that produced from the old range.
However, the ore in the Mesabi is near the surface and by stripping the
overburden the ore can be produced by open pit methods at marked
decreased cost compared to deep shaft mining.
As improved methods of blast furnace practice enabled the use of
the finer ores in increasing quantities, aided of course by the cheaper
cost of mining, the development of the Mesabi Range really came into
its own. At the end of the year 1938 a total of 1,700,000,000 gross
tons of iron ore had been shipped from the six principal ranges,
indicating the growth of the steel industry, keeping pace with the
general industrial expansion during the first part of the present cen-
tury. The location of these ranges in close proximity to the Great
Lakes resulted in the development of bulk freighter transportation and
the movement of the ore to lower lake ports where it met coal produced
from the States of Kentucky, West Virginia, Pennsylvania, and Ohio,
brought about in large measure the industrial growth of the Middle
West area to the point with which we are all familiar today.
Prior to 1900 the mines were principally developed by companies
organized for that purpose or by individuals. Many of the lumber
companies in Minnesota found that when their timber was being
exhausted their lands contained large quantities of high-grade iron
oi'e and they either developed these mines themselves, or leased them
to companies or individuals, and also the railroads, in acquiring
rights-of-way, became owners of iron-ore lands. In 1899 a maximum
of 95 individual mines were operating and shipping ore, but many of
these, of course, were under the same ownership or operation.
Some of the iron and steel companies had acquired interests by
this time in iron-ore mines, but to a large extent the producers of
iron and steel relied for thoi]" supplies through purchases on the
market. It is commonly known that on the formation of the United
States Steel Corporation those interested in this consolidation felt it
desirable to protect the large investment in steel plants by actual
ownership of iron ore reserves and in 1901 the Minnesota Iron Co.,
which by this time had extended its activities from the Vermillion
Range to the Mesabi, and other mming companies, were included m
the consolidation. These properties are now operated by the Oliver
Iron Mining Co.
10222 CONCENTRATIjON OF ECONOMIC POWER
Mr. Feller. Mr. Chairman, I think at this point I should call
the committee's attention to the fact that the process of acquisition
of these properties by the Oliver Iron Mining Co., a subsidiary of
the U. S. Steel Corporation, was the subject of investigation by a com-
mittee of the House of Representatives in 1911, a committee known
as the Stanley committee. For the record, I think I might give the
citation of the Stanley committee report. It is House Report No. 1127,
Sixty-second Congress, second session, ana the discussion of this
subject commences on page 52.
The Chairman. Does that report contain any recommendation?
Mr. Feller. The report was a report on the U. S. Steel Corporation
as a whole, and it was one of the matters which was in a sense pre-
liminary to the institution of the suit by the Department of Justice
against the U. S. Steel Corporation.
Mr. O'CoNNELL. Could you in a few words tell us something about
that report? I doubt very much if the members of the committee
are apt to read the report.
Mr. Feller. On the matter which is now being discussed?
Mr. O'CoNNELL. Yes; particularly with reference to this point.
Mr. Feller. Briefly, I think perhaps it would be best if I read a
few extracts from the pages indicated. The Stanley committee
reported, and here I quote [readingl:
This great ore body was first discovered by Alfred and Leonidas Merritt in 1891.
They formed one company for the development of these mines and another
for the construction of a railroad from the Mesabi Range to Lake Superior.
I will skip a few lines here [continuing]:
In order that they might extend their railroad into Duluth and construct ore
docks there and for other purposes, the Merritts borrowed about $420,000 from
Rockefeller, hypothecating stock in these mining and railroad companies to
the extent of many millions of dollars. This loan was called on short notice
during the panic of 1893, and the Merritts lost their interest in the railroad and
the Lake Superior ores, and Rockfeller obtained them.
In detailing the transaction before this committee, Leonidas Merritt said:
"By whatever means these properties may have been obtained this fact remains
unquestioned: They were secured, together with the Duluth, Missabe & Northern
Railroad, for a sum hot exceeding $420,000, and that the mines and railroad were
immediately consolidated in a corporation, the Lake Superior Consolidated Iron
Mines, capitalized at $29,413,905, which stock was, upon the formation of the
United States Steel Corporation, exchanged for an issue of $39,708,771 of preferred
and a like amount of common stock, or a total of $79,417,542."
I will skip a few lines here [Continuing]:
The reasons for issuing to Mr. Rockefeller over $79,000,000 in the corporation's
securities for properties which eight years previously had cost him $420,000 were
twofold, viz: This company held by far the largest and richest ore mines on the
continent, and it was highly probable that the Rockefeller interests, if they con-
tinued to retain control of this iron range, would go still more extensively into the
business of manufacturing iron and steel products. The opportunity to at once
secure these extensiv,. holdings and to eliminate their last formidable competitor
induced those in control of the United States Steel Corporation in the payment of
an exorbitant prir
Second. It was . ..ecessary step in any effort to secure an effectual monopoly
of the iron ores of the country.
In fairness to the Steel Corporation, I should say here that the
testimony which will occupy the next day or two will show the extent
to which the Corporation now holds iron-ore reserves and the extent
to which it ships iron ore.
CONCENTRATION OF ECONOMIC POWER 10223
Mr. HOYT. It is unnecessary to comment on the growth of the steel
industry from 1900 to the present day, but as a result of large expendi-
tures in steel producing units the owners of the properties became
actuated by the same motive as mentioned above in the formation of
the Steel Corporation and felt it not only desirable, but necessary to
protect these plant investments with actual ownership of the necessary
ore reserves. In fact, capital was not always available without the
knowledge that ore reserves for a long period of time in the future
were assured to the steel companies involved. For this reason,
particularly from about 1910 to the present day, the steel companies,
through interests in mining companies, or direct leasing of mines,
have acquired their own ore supply to an extent that there is hardly
a steel company today operating its own blast furnaces that has not
from 50 to 100 percent of its ore supply under its own ownership,
although in many instances these properties may be managed by ore
companies.
It is estimated that the United States Steel Corporation, through
the Oliver Iron Mining Co. and other subsidiaries, OAvns in the neigh-
borhood of 50 percent of the Lake Superior iron-ore reserves and whUe
exact percentages are not available, I would estimate that other
integrated steel companies o\^'n by direct leases, or through ownership
in mining companies, in the neighborhood of two-thirds of the balance,
the remaining one-third owned by fee owners or merchant producers
who are not producers of steel.
In years when the steel industry is running at a normal rate of
capacity many of the steel companies' own supplies are augmented
by spot purchases from the merchant producers and also by time con-
tracts running usually for a period of several years. In 1931 the
marked depression in business generally affected the steel industry to
such an extent that in 1932 only a total of 3,500,000 tons was shipped
from the Lake Superior district, as compared with a maximum ton-
nage of nearly 67,000,'000 tons shipped in 1916 and a yearly average
of the years from 1916 to 1931, inclusive, of about 52,000,000 tons.
As is weU known, during the next few years the operations of the
steel industry continued at a low rate of capacity gradually improving
in 1936 and in 1937 shipments again increased to a total of 63,000,000
tons. Exact figures are not available, but it is generally recognized
that in a normal year about 85 percent of the ore produced from the
Lake Superior district is shipped directly to users who have a direct
ownership in the mines and in years when operations of the steel
industry are curtailed this percentage is even larger.
As a matter of interest to the committee, it is generally believed
that the known ore reserves in the Lake Superior district are in the
neighborhood of 1,400,000,000 tons, of which by far the greatest per-
centage is in the State of Minnesota, and to supplement this tonnage
there are large quantities of low-grade ore not now of commercial
grade which will be made available as time goes on through improve-
ments in the treatment and processing of low-grade ore.
Senator King. May I ask, are there any other mLncrals in your
ores other than iron; is there any lead or copper or zinc?
Mr. HoYT. Very little; practically none in the Lake Superior
district.
Senator King. What is the iron percentage in the ore?
124491—40 — pt. 18 2
10224 CONCENTRATION OF ECONOMIC POWER
Mr. HoYT. Id the average shipments they are something over 51
percent, in that neighborhood. Ores run up to 56 to 57, some a little
higher on the old ranges.
Mr. Feller. Mr. Chairman, I offer now a chart entitled "Percent-
age of Lake Superior Iron Ore Shipments by Major Iron Ore Com-
panies."
The Chairman. The chart may be received.
(The chart referred to was marked "Exhibit 1351," and is included
in the appendix on p. 10425.)
Mr. Feller. I should like the committee to have these charts
before it.
The chart itself is on the easel and a reproduction is now being
distributed to the committee.
I should also like to offer a supporting table containing figures for
the chart.
The Chairman. The table will likewise be received.
(The table referred to was marked "Exhibit No. 1352," and is
included in the appendix on p. 10426.)
THE MAJOR IRON ORE PRODUCERS
Mr. Feller. The committee will notice on this chart ("Exhibit
No. 1352") the shipments of Lake Superior iron ore in the year 1937.
Nineteen thirty-seven was one of the good years. The largest per-
centage of shipments indicated by the first bar is by the Oliver Iron
Mining Co., a subsidiary of United States Steel Corporation. The
percentage of shipments w^as in the neighborhood of 42 percent, as
the table will indicate.
Mr. Hoyt, is it generally known in the industry, in the iron-ore
industry that the Oliver Iron Mining Co. does not sell ore to compa-
nies which are not affiliates of the United States Corporation?
Mr. HoYT. Yes, sir.
Mr. Feller. For the record, I should like to read a sentence from
a letter which was sent to Mr. Thurmaii Arnold by Mr. Irving Olds,
counsel for the United States Steel Corporation, the letter dated
August 31, 1939. The sentence reads:
There ^re no term and spot sales contracts between the Oliver Comiiany or its
affiliates and companies not wholly owned by the Steel Corporation.
Mr. Hoyt, The Pickands, Mather & Co., is represented by the
second bar on the chart, is it not?
Mr. IIoYT. Yes, sir.
Mr. Feller. The committee should bear in mind the fact that dur-
ing the next few daj'^s representatives from the companies, beginning
with Pickands, Mather and including Cleveland-Clift's Iron Co., the
M. A. Hanna Co., Butler Bros, and Oglebay, Norton & Co., will appear
to give testimony.
The Chairman. Mr. Hoyt, is your company an integrated company?
Mr. Hoyt. In the sense of having steel plants connected; no, sir.
We are managing operators of mines in the Lake Superior district.
The Chairman. And your business is the production and sale of ore?
Mr. Hoyt. Primarily, Mr. Chairman, it is the production of ore
for a number of steel companies for whom we operate the mines as
managing agent.
CONCENTRATION OF ECONOMIC iH)\Vl']U 10225
The Chairman. Are those steel companies integrated companies?
. Mr. HoYT. Of the total there of some 13,000,000 tons, I would say
the big bulk of that, Mr. Chau-man, probably over 12,000,000, goes
directly to steel companies who have interests in these mines or own
them outright and for whom we act as operating agent.
The Chairman. As I understand it, your company is merely the
operating agent which is concerned solely in managing these mines,
but these properties in turn are actually owned for the most part by
companies which are engaged in the production of steel.
Mr. HoYT. That is correct.
Mr. Feller. Mr. Chairman, I offer for the record a chart wliich
appears on the easel, entitled "Financial Connections Between Major
Iron Ore Companies and Steel Companies." Copies of the chart are
now being distributed.
(The chart referred to was marked "Exhibit No. 1353" and is
included in the appendix on p. 10427.) __;;_
FINANCIAL CONNECTIONS BETWEEN ORE COMPANIES AND STEEL
COMPANIES
Mr. Feller. It would be helpful to the committee if I explained
in a few brief words the construction of tliis chart. The chart contains
the names of a number of companies which will occur throughout the
testimony to be given in the next few days. The first line of the
chart contains the names of four companies engaged in the produc-
tion, sale, and transportation of iron ore. These names are the same
as the names which appear on the base chart of shipments ("Ex-
hibit No. 1351") ^ with the exception of Butler Bros., which does not
appear on the chart I am now discussing.
The second line of the chart contains the names of six steel com-
panies with which one or more of the iron ore companies have financial
connections. The third fine of the chart contains the names of two
banks which also have financial connections with tliree of the iron-ore
companies and with one of the steel companies.
The steel companies which appear on the second line of the chart
rank as follows in the industry, that is, in the steel industry, m terms of
invested capital: The Republic Steel Corporation is third, the Youngs-
town Sheet & Tube Co. is fourth, the National Steel Corporation
is sixth. Inland Steel Co. is seventh, the Wheelmg Steel Corporation
is ninth. Otis Steel Co. is smaller than any of these, having invested
capital of about $36,000,000. The total capital investment of the steel
companies on the second Ime of the chart constitutes approximately
23 percent of the capital invested in the steel industry.
As the legend at the bottom of the chart shows, the connections
by virtue of the directorships are indicated by arrows. The con-
nections by virtue of percentages of voting stock control are indicated
by numbers that are placed in circles.
The Chairman. Will you give the order of size again of these six
companies?
Mr. Feller. Republic, third; Youngstown Sheet & Tube, fourth;
National Steel, sixth; Inland Steel, seventh; Wheeling Steel, ninth.
The Chairman. Then the Otis Steel, have you given that a number?
Mr. Feller. No; it is considerably smaller.
' Appendix p. 10425.
10226 CONCENTRATION OF ECONOMIC POWER
The Chairman. What about the total mvested capital of aU of
these six as compared with one and two on the list wliich are not
mentioned here?
Mr. Feller. If the committee will tm-n to the pamphlet which I
introduced at the outset, on page 15, table 16,^ it wdll give the rank-
ing of the 10 largest companies in the industry.
The Chairman. And that also shows the invested capital?
Mr. Feller. That is right; in terms of invested capital.
Now, Mr. Hoyt, you have already stated in answer to a question
by Senator O'Mahoney that your company is engaged primarily in
the management of ore properties. When was your company
founded?
Mr. Hoyt. In 1883.
Mr. Feller. WTio was the founder?
Mr. Hoyt. Col. James Pickands, Samuel Mather, and James C.
Morse.
Mr. Feller. What are your total approximate assets? Is $28,-
000,000 about right?
Mr. Hoyt. Yes; $28,000,000.
Mr. Feller. About how many ore-mining companies do you
manage?
Mr. Hoyt. I think there are 21 mining companies operating about
26 mines.
Mr. Feller. And these mining companies are owned in part by
various steel companies?
Mr. Hoyt. That is correct.
Mr. Feller. May. I read off a list of the steel companies which
are the main stockholders in these mining companies, and would you
tell me whether that is correct: Youngstown Sheet & Tube, Bethle-
hem Steel Corporation, Pittsburgh Steel Co., Carnegie-Illinois Steel
Corporation, Sharon Steel Hoop Co., Inla,nd Steel Co., International
Harvester Co., the Steel Co. of Canada, the Republic Steel Corpora-
tion, the Tonawanda Iron Corporation.
Mr. Hoyt. That is right.
Mr. Feller. Now, in managing these mines, you have a contract,
do you not, with the iron-ore company?
Mr. Hoyt. We do.
Mr. Feller. And as I understand it, you have two contracts with
each mining company, do you not, one a management contract
Mr. Hoyt (interposing). We have a management contract and
then there is a stockholders' agreement to take ore which is between
the stocldiolders in the company and the mining company.
Mr. Feller. Would you describe very briefly what is contained in
your typical management contract?
Mr. Hoyt. A typical management contract employs the firm to
operate the specific mine in question. The company agrees to fur-
nish to the firm aU of the necessary funds for exploration and develop-
ment and equipment, and the necessary actual operating expenses,
and to reimburse the firm for their out-of-pocket expense in their
N^arious departments strictly given over to this business, but without
any payment of any kind to the partnership, to the partners indi-
vidually. And then the compensation is arrived at by a fiat rate
per ton, usually on the shipments produced each year.
• "Exhibit No. 1349," at appendix, p. 10408.
CONCENTRATION OF ECONOMIC POWER 10227
Mr. Feller. And what are the main terms of your stockholders'
agreement to take ore, the stockholders being the steel corporations
which own stock in the mine?
Mr. HoYT. Not entirely that, Mr. Feller, because I don't know
whether you mentioned it but the Dalton Ore Co. in which we are
interested and the Mather Iron Co. have minority interests in a
number of these companies, but there are five or six stockholders, we
will say, in a mining company and the stockholders' agreement sets
up the obligations to those stockholders, and the stockholders to the
company; in other words, that they will furnish the money to the
company so that the company can furnish it to the operator for all
the necessary expenditures of 'the mining company, and that they will
agree to take their proportionate share of the ore, based on their
stock ownership in the mining company each year, the production
each year to be decided by the consent of the stockholdi rs, by mutual
agreement. They will take the ore forward each year in proportion-
ate amounts at the cost of the mining to the company.
Mr. Feller. And in each of these mining companies, Mr. Hoyt, it
is true, is it not, that one of the partners of your company is the
secretary-treasurer.
Mr. Hoyt. No; I think it would not be true, Mr. Feller.
Mr. Feller. Of about how many of the companies would that be
true?
Mr. Hoyt. I don't think there is a partner secretary and treasurer —
not secretary, but treasurer, probably. I don't think the secretary is
a partner, but the treasurer is a partner.
Mr. Seller. Is that Mr. Bool, Mr. Samuel Bool?
Mr. Hoyt. Yes.
Mr. Feller. Turning to the chart entitled, ''Financial Connections
Between Major Iron Ore Companies and Steel Companies"'
The Vice Chairman (interposing). May I ask a question? Do
any of the owners of the mines have any interest in your company?
Mr. Hoyt. No, sir.
Senator King. May I ask a question? Was your company organ-
ized primarily to operate mines and develop ore bodies for other
companies?
Mr. Hoyt. Well, no, in 1883 their principal idea was to act as
selling agents for pig iron and coal, and then it gradually worked into
the related industries. Mr. Mather and Colonel Pickands were very
active in developing the Lake Superior district; th*e Coulby mine on
the Gogebic range was the first one to ship. They were active in
getting that on a producing basis.
This situation has developed over a period of years into one where
we are primarily operating.
Senator King. Have any comparisons been instituted as to whether
or not your operations ton per ton with comparable conditions, have
produced or can produce ore on the surface cheaper than other
companies?
Mr. Hoyt. There have been records published in Michigan which
indicate that as far as the Michigan mines are concerned, our records
are very satisfactory compared with some of the other operators.
Senator King. Was there any effort on the part of your company
to exclude other mining operating companies from operating in that
field in which your company was located?
« "Eshiblt No. 1363",'ttppendlx, p. 1042T.
10228 CONCENTRATION OF ECONOMIC POWER
Mr. HoYT. No, sir; this relationship of ours and this operating
business grew like "Topsy", you might say.
Senator King. It started in in a small way and by reason, I sup-
pose, of your technique and the skill which you developed, and the
mechanical appliances which you employed, you found that you could
operate more cheaply than those who owned the ores?
Mr. HoYT. I think that many of them feel there is a little more
behind it than that, because back in say '15 and '16, back in about
that time, we invited two or three steel companies to come into partner-
ship with us in mines, specifically the Bennett and the Plymouth mines.
Those mines were too big, we felt, for us to undertake, purely as pro-
ducers and sellers of ore. They involved very large amounts of strip-
ping and development, and it meant too big a production for us to be
sure of a market, so at that time we proposed to five or six of these
companies that they join with us in this mine and on that basis they
agreed that we should operate that mine for its duration, or unless
the company voluntarily surrendered it.
Then we went on from there — of course, prior to this time we were
connected with a number of these other steel companies where we
brought the mines to them and built up the organization, and they
continued to have us operate them. Well, then in later days as these
steel companies have become merged in many instances, the mines
that were formerly in the hands of three or four companies became
in one company and that one company, therefore, had a large interest
in this property which either was tied up to us by contract or was
only tied up for a short period of time. That is the way the picture
grew.
Mr. Feller. Mr. Hoyt, with respect to one of these steel companies,
Youngstown Sheet & Tube Co., which is Hsted on this chart entitled
"Financial Connection," the chart indicates that your company,
Pickands, Mather & Co., is a large stockholder. By that I mean
that the company and the partners own a substantial block of stock
in Youngstown Sheet & Tube.
Mr, Hoyt. Your chart shows 3.6 percent, or 3.5 percent.
Mr. Feller. You hadn't calculated that?
Mr. Hoyt. Well, I know that the firm itself, through Mather Iron
Co., owns about 46,000 shares.
Mr. Feller. That is right, and the members of the partnership
owned about 1,000 shares?
Mr. Hoyt. I can't testify as to that.
Mr. Feller. Those figures were furnished by your company?
Mr. Hoyt, Yes ; and that is approximately correct.
Mr. Feller. Now your senior managing partner, Mr. H. G. Dal ton,
is chairman of the executive board of Youngstown Sheet & Tube, is
that corrept?
Mr. Hoyt, That is correct.
Mr. Feller. And Mr. Dalton, it would be fair to say, is an import-
ant figure in the management of Youngstown Sheet & Tube?
Mr. Hoyt, Yes; I would say that was correct.
Mr. Feller, Is it correct that you managed practically all of the
Lake Superior mines of the Youngstown Sheet & Tube?
Mr, Hoyt, Yes.
Mr, Feller. And that the Youngstown reserves constitute about
23 percent of all the reserves which your company controls?
C(^N(1KNT11AT1()N OF ECONOMIC I'OVVKU 10229
Mr. HoYT. I don't know what you mean by "controls,"
Mr. Feller. I mean manages.
Mr. HoYT. Operates.
Mr. Feller. Operates?
Mr. HoYT. If we have given you that figure, it is correct.
Mr. Feller. The figure you gave us was. Your company also,
Mr. Hoyt, manages a steamship company, does it not, the Interlake
Steamship Co.?
Mr. Hoyt. That is correct.
Mr. Feller. And that company carries iron ore?
Mr. Hoyt. Yes,
, Mr. Feller, How does it compare in rank among the fleets i>perat-
ing on the lakes?
Mr. Hoyt, It is the second largest — has the second largest carrying
capacity.
Mr. Feller. The Interlake Steamship ^o. which you manage
carries aU of Youngstown's ore, coal, and Hmestone, does it not?
Mr. Hoyt. It does.
Mr. Feller, And I beheve your contract provides the carriage shall
be at going rates?
Mr, Hoyt, Correct,
Mr. Feller. Now turning to the chart, it is also correct, is it not,
that at one time Mr. H. G. Dalton, who you have said is a partner
of your company, and also chairman of the board of Youngstown, was
a director of the Bethlehem Steel Corporation?
Mr. Hoyt. Well, when Bethlehem took over Lackawanna, the
Lackawanna Steel Co., I think in '21 or '22, Mr. Dalton had been a
director for many years in Lackawanna, I think, from the time that
Lackawanna moved from Scranton to Buffalo, and 1 think for the
time being he went on the Bethlehem board to represent the Lacka-
wanna stockholders, the old Lackawanna stockholders.
Mr. Feller. And he remained on the board of Bethlehem Steel
until about 1930; is that correct?
Mr. Hoyt, Yes; until 1930,
Mr. Feller. And your company also manages most of Bethlehem's
Lake Superior mines?
Mr, Hoyt. Those in which they have an interest. I think all but
one.
Mr. Feller, And you have stated to the Department that the
Bethlehem reserves constitute 33,9 percent of all the reserves which
you manage?
(Mr, Hoyt, nodding head, yes.)
Mr. Feller, Now, from time to time mention has been made of
the Interlake Iron Corporation. What is the Interlake Iron Cor-
poration?
Mr. Hoyt. The Interlake Iron Corporation is the largest merchant
producer of pig iron, which came about, I think, in '29.
Mr, Feller, What is a merchant producer of pig iron, for the con-
venience of the committee?
Mr, Hoyt. Well, a blast furnace that has no steel connections. In
other words, it produces pig iron for the trade and sells its product
as such.
Senator King. Where is it located?
10230 CONCENTRATION OF ECONOMIC POWER
Mr. HoYT. It has plants at Duluth, Chicago, Toledo, and Erie,
and there was a merger of these four furnace companies. in which the
firm in the early days had an interest and supplied them with its
iron-ore requirements.
Mr. Feller. And you are a director of the Interlake Iron Cor-
poration?
Mr. HoYT. That's right.
Mr. Feller. Your company owns, doe« it not, about 25 percent
of the stock of Interlake Iron?
Mr. HoYT. As of what date? Yes; about that.
Mr. Feller. And Interlake Iron, in turn, owns 40 percent of the
voting stock of another company, the Dal ton Ore Co., according to
the figures submitted to ns, Interlake Iron owning a total of 70 percent
of all of the stock of the Dalton Ore Co. What is the Dalton Ore Co.?
^Ir. HoYT. At the time of the merger of these four blast-furnace
companies one of the reasons for it from the standpoint of the large
stockholders in the companies was to have an adequate ore supply
which they owned, and the Pickands, Mather & Co.'s ore properties
were put into Dalton Ore Co., and 70 percent of the stock was sold
to Interlake Iron Corporation for its common stock.
Now, the reason for the difference in the ownership and voting stock
was because, without connections with these other steel companies,
as operators, we had to be left in the position of being able to have
the voting in the meetings with the other stockholders as to new im-
provements and all that without interference from the Interlake, be-
cause we were in a position of managers and operators and partners
with these companies, so that was all part of the arrangement when
the ore was turned over to Interlake Iron Corporation, and it i^ subject
to the limitation that none of the properties of Dalton Ore can be sur-
rendered, or new properties taken into Dalton Ore without the approval
of Interlake Iron Corporation.
Mr. Feller. And your company, Pickands, Mather, owns 60 per-
cent of the voting stock of Dalton Ore?
Mr. HoYT. For that reason, as I have explained.
Mr. Feller. Your company manages the Dalton Ore Co. proper-
ties, and is the sole and exclusive sales agent?
Mr. HoYT. That is right; but you must just keep in mind that the
Dalton Ore Co. as such is really the sum of the minority interests in
these other mining companies that we have spoken of, a minority up
to 50 percent of them.
Mr. Feller. You also have certain relations with the Steel Co.
of Canada, do you not?
Mr. HoYT. We do.
Mr. Feller. As I imderstand it, Mr. H. G. Dalton, one of your
partners, is a director of the Steel Co. of Canada.
Mr. HoYT, That is correct.
Mr. Feller. And all the interests of the Steel Co. of Canada in
Lake Superior mines are managed by your company?
Mr. HoYT. That is correct.
Mr. Feller. Going back for a moment with respect to Interlake
Iron Corporation, Interlake Iron buys all its ore requirements from
Dalton Ore, does it not?
Mr. HoYT. Providing that the interests of Dalton Ore, the mines
in which they are interested, can produce sufficient to satisfy their
CONCENTRATION OF ECONOMIC POWER 10231
requirements, and sufficient of the right kind of grade. Otherwise
they can buy outside.
Mr. Feller, And the purchases wliich Dalton Ore make for Inter-
lake Iron are at current market prices?
Mr. HoYT. Yes.
Mr. Feller. Now, lastly, in order to complete the elucidation of
the chart, Mr. H. G. Dalton is a member of the board of directors of
the National City Bank of Cleveland, is he not?
Mr. HoYT. Yes.
Mr. Feller. Then, in sunmaary, we may say, may we not, that the
various companies with which Pickands, Mather & Co. and its partners
have financial connections are Youngstown Sheet & Tube, Interlake
Iron, Dalton Ore, the Steel Co. of Canada, and the National City
Bank of Cleveland, connections by way either of stock ownership or
of a directorship, and you formerly had a connection with Bethlehem
Steel Corporation.
Senator King. Did he assent to that?
Mr. HoYT. Yes ; that is true, sir,
Mr. Feller. Mr. Chairman, the purpose of calling Mr. Hoyt at
tliis time was to place liis company in the general picture of the
industry. We should like to release Mr, Hoyt now, and call him
liter in the hearing for further matters that may be elucidated.
The Chairman. Are there any questions to be addressed to Mr.
Hoyt now by any other members of the committee?
Senator King, I prefer to defer any interrogatories until he comes
back, when we will have had an opportunity to examine these charts.
The Chairman. Would you be good enough to Ust these com-
panies again, please?
Mr. Hoyt, In which we have an interest?
The Chairman. Yes.
Mr. Hoyt. Interlake Iron Corporation; Dalton Ore is the ore
company; Youngstown Sheet & Tube, in which we have only 3,5
percent interest according to the chart' and Interlake Steamship Co.
The Chairman. And the National City Bank of Cleveland?
Mr, Hoyt. The only way we have any connection there, Mr,
Dalton has been a director of the National City Bank.
The Chairman, Are these the three companies?
Mr. Hoyt. You [to Mr, Feller] mentioned Steel Co. of Canada.
Mr. Dalton is a director of the Steel Co, of Canada,
Senator King. Does that company have any operating mines in
the United States?
Mr, Hoyt. They have interests in these mining companies such
as I have described, sir.
The Chairman. Where is your company chartered — by what
State?
Mr. Hoyt. I didn't hear that, sir.
The Chairman, By what State is your company chartered?
Mr. Hoyt. Delaware. Pickands, Mather, sir, is a partnership,
but Mather Iron Co., through which we hold our investments and
operate these properties, is a Delaware corporation.
The Chairman. All of the stock of that is owned by the partner-
ship?
Mr. Hoyt. All of the common stock, sir.
The Chairman. All of the common stock. The preferred stock?
10232 CONCENTRATION OF ECONOMIC POWER
Mr. HoYT. The preferred stock is held prmcipally by the families
of our partners who have died in the past few years.
The Chairman. "What is your ownership in the Interlake Steam-
ship Co.?
Mr. HoYT. I think we own 8,200 shares out of about 469,000.
Mr. Feller. But you manage the Interlake Steamship Co. and
you officer the fleet?
Mr. HoYT. Correct.
The Chairman. You manage it by means of a contract?
Mr. HoYT. Yes, sir.
The Chairman. Over a period of years?
Mr. HoYT. Yes, sir.
The Chairman. What period?
Mr. HoYT. I think it has about 12 years to run. I can't be sure of
that date.
The Chairman. Is it renewable?
Mr. HoYT. No; I think, except by mutual agreement. It would
be a new contract.
The Chairman. You have no preferred right to renewal?
Mr. HoYT. No; but the board of directors technically have em-
ployed Pickands, Mather & Co. to operate the Interlake Steamship
Co.
The Chairman. Now then, your ownership of the Dalton Ore Co.
Mr. HoYT. Thirty percent.
The Chairman. Do you have a contract with that company?
Mr. HoYT. Yes, sir.
The Chairman. Over what period?
Mr. HoYT. That runs for the life of the mines in which the Dalton
Ore Co. is interested.
Mr. Feller. Thirty percent of the total stock of Dalton Ore is
owned by you, but 60 percent of the voting stock.
Mr. HoYT. As I have explained before.
The Chairman. You have complete control, then, of that company?
Mr. HoYT. Purely as to operations, sir, as I have explained before.
The Chairman. As you have explained before, it was necessary for
you to have full authority to manage the properties of this company.
Mr. HoYT. That's right, because they were minority interests in
mines in which we had a great many other associates.
The Chairman. By what State is that corporation chartered?
Mr. HoYT. I can't tell you, sir.
The Chairman. How many corporations are represented in this
corporation by minority interests?
Mr. HoYT. You mean how many mining companies?
The Chairman. As I understand your testimony, this is an organi-
zation, which was formed to group together certain minority interests
in certain other mining properties.
Mr. HoYT. Yes. Well, I can't tell you offhand, but I would say 10
or 12 mining companies.
The Chairman. Who are the major interests in those companies?
Mr. HoYT. Well, they are very much diversified, sir, and according
to that list that Mr. Feller read, for example, if I can give you an
illustration, in one mine we would have Bethlehem, Youngstown, the
Steel Co. of Canada, Republic, and Dalton Ore as stockholders. And
CONCENTRATION OF ECONOMIC POWER 10233
it is varied. In other mines there is just Yoimgstown and ourselves,
or Bethlehem and ourselves, or I say Dalton Ore rather than ourselves.
The Chairman. Do those companies which constitute the majority
interests in certain pro]>erties also owned by the minority interests
whrch are organized in the Dalton Ore Co. exercise any control over
the properties held by the minority interests which constitute the Dal-
ton Ore?
Mr. HoYT. No, sir; you mean, have they any interests relating
through to the steel company or pig-iron company back of it, is that
it? No, sir.
The Chairman. Well, do I understand that the minority com-
panies, these minority interests organized into the Dalton Co., can in
effect manage the properties in which they have a minority interest?
Mr. HoYT. No, sir; Dalton Ore Co. is only related to Pickands,
Mather because we own 30 percent of the stock, and as such we have
a contract as a firm to operate the mine in which Dalton Ore Co. has
an interest.
The Chairman. That is just the particular property that that com-
pany has an interest in?
Mr. HoYT. That would be true of all of them. I think there are
no mining companies in which Dalton is interested where there is a
majority owner. In other words
The Chairman (interposing). Oh, then, though they may be the
minority interests, they are so large a minority interest that in effect
they control the property?
. Mr, HoYT. No, sir; very far from that.
The Chairman. Well, I don't quite get the picture. Let us take,
for example, mine A
Mr. HoYT (interposing). Yes, sir.
The Chairman. In which the minority is owned by X, Y, and Z,
Now X, Y, and Z have participated in the organization of the Dalton
Ore Co.
Mr. HoYT. Now wait just a second,^sir, if you will.
The Chairman. There seems to be a complicated arrangement here
which isn't quite clear.
Mr. HoYT. It really isn't complicated.
The Chairman. I knew you could make it clear.
Mr. HoYT. If I can take one mining company, I have already men-
tioned the Bennett earlier. There are four stockholders in the Bennett
mine. It was one of those properties that we, as a firm, asked this
group to come into back iu 1917.
Now, Dalton Ore Co. has a two-ninths interest, Youngstown Sheet
& Tube a three-ninths interest.
Senator King. In the mine themselves?
Mr. HoYT. In the Bennett Mining Co.
Pittsburgh Steel Co. has a two-ninths interest, and Bethlehem
Steel Corporation a two-ninths interest.
Now, that mining company hires Pickands, Mather to operate its
mines subject to the direction of the board of directors of the Bennett
Mining Co.
The Chairman. In other words, the Bennett Mining Co. is the
owner of this particular property?
Mr. HoYT. That is correct.
10234 CONCENTRATION OF ECONOMIC POWER
The Chairman. Dalton owns only two-ninths of the Bennett Co.?
Mr. HoYT. That is correct.
The Chairman. But it nevertheless is the manager of the com-
pany?
Mr. HoTT. No, no, sir; not the Dalton. Don't confuse Dalton Ore
with Pickands, Mather.
The Chairman. Then Pickands, Mather is the operating agent for
that?
Mr. HoYT. That is correct.
Ttie Chairman. And the Bethlehem Steel, Youngstown, and the
others have participated in that agreement by which Pickands, Mather
has become the manager?
Mr. HoYT. And the board of directors decides on the policy of the
Bennett Mining Co. as to improvements, developments, extensions,
production, and so forth, and instructs us what to do.
Senator King. The partnership has a contract with the Bennett
Mining Co. as I understand it.
The Chairman. So that your arrangement whereby you have the
voting power to control the Dalton Ore Co. does not extend to the
control of the Bennett Co.?
Mr. HoYT. It only extends to the fact that as far as any develop-
ments, expenditures, and so forth, in the Bennett mine; we vote for
the Dalton Ore Co. for the two-ninths.
The Chairman. And if the others, Bethlehem, Youngstown Sheet
& Tube and the others were to vote for a different sort of control, then
they would dominate?
Mr. HoYT. Yes, sir; surely.
Senator King. If I understand, the Mather partnership company,
separate from the Dalton Ore Co., and the Dalton Ore Co., together
with Bethlehem and others, have an interest in this Bennett Corpora-
tion. In dealing with it, then, you deal with it first in the contract;
in operating you deal with it as a partnership, but in the directorate
there might be one of your partners who would be a ^ director,
but at any rate the contract is between the Bennett Co. and the
Dalton Ore Co.?
Mr. HoYT. That is right.
Mr. Feller. Mr. Hoyt, in your contracts with these mining com-
panies such as the Bennett Mining Co., a provision is contained which
makes Pickands, Mather exclusive salesman for any ore produced for
the stockholders of the mine?
Mr. HoYT. Yes, sir.
(The witness, Mr. Hoyt, was excused temporarily.)
The Chairman. The chair wishes to announce that Mr. John V.
W. Reynders, consulting engineer of New York, is sitting with the
committee by appointment of Secretary Hopkins of the Department
of Commerce, as an alternate for Mr. Avildsen during this hearing
upon steel. Mr. Reynders was at one time engaged in bridge build-
ing and in steel manufacturing, from 1886 to 1916. Since that time
I understand he has conducted his own consulting engineering office
and is engaged primarily in steel making, mining, and bridge build-
ing. This is in harmony with the policy which the Department of
Commerce has been following in designating as an alternate some
businessman to work and consult with the Department of Com-
merce. It was first undertaken in the petroleum hearing, when Mr.
McConnell was designated as alternate.
CONCENTRATION OF ECONOMIC POWER 10235
The Chair wishes to file for the record a letter from Mr. A. A.
Stambaugh, vice president of the Standard Oil Co. of Ohio, trans-
mitting an aflBdavit which that company desired to put in the hearing
in connection with petroleum.
(The communication referred to was marked "Exhibit No. 1354,"
and is printed in Hearings, Part 17, appendix, p. 9929.)
The Chairman. The committee will hold an executive session at
2:15 this afternoon, but at 2:30 will resume the hearing on the steel
industry.
Mr. Feller. We should like to announce that the next witness
will be Mr. E. B. Greene, president of the Cleveland-Cliffs Iron Co.
The Chairman. The committee will now stand in recess until 2:15.
(Whereupon at 12:30 o'clock the committee recessed until 2:15
for an executive session with the hearing to resume at 2:30.)
AFTERNOON SESSION
The session was resumed at 2:35 p. m., at the expiration of the
recess.
The Chairman. The committee will please come to order.
Are you ready to proceed, Mr. Feller?
Mr. Feller. Yes, sir.
The Chairman. Do you solemnly swear that the testimony you
are about to give in this proceeding shall be the truth, the whole
truth, and nothing but the truth, so help you God?
Mr. Greene. I do.
The Chairman. Please be seated.
TESTIMONY OF EDWARD B. GREENE, PRESIDENT, CLEVELAND-
CLIFFS IRON CO., CLEVELAND, OHIO
Mr. Feller. Will you give the reporter your full name?
Mr. Greene. Edward B. Greene.
Mr. Feller. What is the company you are connected with?
Mr. Greene. Cleveland-Cliffs Iron Co.
Mr. Feller. What is your position in the Cleveland-Cliffs Iron Co.?
Mr. Greene. I am president.
Mr. Feller. You are also president of the Cliffs Corporation?
Mr. Greene. Yes, sir.
Senator King. What was that last name?
Mr. Feller. Cliffs. C-1-i-f-f-s.
And you were formerly a director of the Republic Steel Co., were
you not?
Mr. Greene. I was.
Mr. Feller. When was the Cleveland-Cliffs Iron Co. founded?
Mr. Greene. The Cleveland-Cliffs Iron Co. was founded in 1890
but it was then a holding company, holding all the stock of the
Cleveland Iron Mining, and say two-thirds of the Iron Cliffs Mining.
Legally it became one company, the Cleveland-Cliffs Iron Co., in 1914.
Mr. Feller. Is it correct to say that the Cleveland-Cliffs Iron Co.
is historically the family property of the Mather and Wade family
of Cleveland?
Mr. Greene. Well, that would be, I think, a slight exaggeration.
Those two families have held a large interest in that company for
several generations.
10236 CONCENTRATION OF ECONOMIC POWER
Mr. Feller. Will you tell us the name of the founder of the original
company?
Mr. Greene. The founder of the two companies, incorporators of
the Clev 4and Iron Mining Co. were Samuel L. Mather, John Outh-
waite, Morgan L. Hewitt, Selah Chamberlain, Isaac L. Hewitt,
Henry F. Brayton, E. M. Clark. The large stockholders of the Iron
Cliffs Co. were Samuel J. Tilden of New York, William B. Ogden, and
William H. Barnum, of Connecticut.
Mr. Feller. Mr. Samuel L. Mati. , the name you read first, was
the father, was he not, of Samuel Mather, one of the founders?
Mr. Greene. Samuel Mather and Mr. Wilham G. Mather, chair-
man of the board of the Cleveland-Cliffs Iron Co.
Mr. Feller. Is it correct to say the total assets of the Cleveland-
Chffs Iron Co. is about $65,000,000?
Mr. Greene. Approximately about $69,^00,000.
Mr. Feller. Now, Mr. Hoyt testified tL morning with respect to
the functions of Pickands, Mather & Co., and he told us that Pickands,
Mather & Co. was primarily engaged in the management operation of
ore properties which were owned by others and part-owned by various
connections of Pickands, Mather. Now, your company is different,
is it not? Your company mainly owns or leasco in fee ore properties.
Mr. Greene. We have, I believe, three mines only in which we have
a partial ownership. In two of them we own the majority and in one
it is about a quarter. All of our other properties are owned entirely
by Cleveland-Cliffs Iron Co.
Mr. Feller. Is it correct to say that the Cleveland-Cliffs Iron
Co. is the largest owner-seller of ore in the Lake Superior district?
Mr. Greene. Do you mean seller of its own ore?
Mr. Feller. Seller of ore which it operates in property that it
owns or leases in fee?
Mr. Greene. That is a little hard to answer. We sell more of
our own ore than any other company. We do not handle as much
ore as Pickands, Mather.
Mr, Feller. That appears on this bar chart which we produced
this morning^ which shows that your company in 1937 shipped 9.1
percent of the total shipments. Cleveland-Cliffs Co. also owns a.
fleet of vessels, does it not?
Mr. Greene, It does.
Mr. Feller, Could you tell us what ranking that fleet of vessels
has in the total lake transportation?
Mr, Greene, It is fourth in capacity.
Senator King. In what?
Mr. Greene. Capacity.
Senator King, You don't carry passengers, just ore?
Mr, Greene, We handle ore, coal occasionally, stone, and grain.
They are aU bulk freighters. We have one self-unloader in which we
have a half interest.
Mr. Feller. Which of the companies is larger than the Cleveland-
Cliffs in the transportation of ore on the Great Lakes?
Mr. Greene. Pittsburgh Steamship Co.
Mr. Feller. Subsidiary of United States Steel?
Mr. Greene. Sure; the Interlake, Pickands, Mather Co. 's fleet and
the Hutchinson fleet. The latter is a combination of two fleets. Our
fleet is a combuiation of 4 companies of which the Cleveland-Cliffs owns
> "Exhibit No. 1351", appendix, p. 10425.
CONCENTRATION OF ECONOMIC POWER 10237
15 and there are 7 boats in 3 other companies which we manage which
is called the Cleveland-Cliffs fleet, 22 bulk freighters and 1 is a self-
unloader.
Mr. Feller. The Cleveland-Cliffs Iron Co. also owns a large
interest in the Lake Superior & Ishpeming Railroad Co.
Mr. Greene. It does.
Mr. Feller. Seventy-five percent?
Mr. Greene. Yes.
Mr. Feller. And that railroad carries ore produced by the mines on
the Marquette Range, in Michigan, is that right?
Mr. Greene. That is right.
Mr. Feller. Mr. Greene, turning to the chart entitled "Financial
Connection Between Major Iron Ore Companies and steel Com-
panies", ^ I call your attention first to the indication on the chart
on the upper left hand corner that the Cleveland-Cliffs Iron Co. in
conjunction with the Cliffs Corporation, owns 66.7 percent of the
voting stock of that company.
Mr. Greene. It owns two-thirds of the so-called preferred stock.
I do not recall just whether the other stock votes or not, but I think
your statement is correct.
Mr. Feller. Mr. Chairman, at this point we are going to consider
also Oglebay, Norton & Co., and I should like to call Mr. Crispin
Oglebay at the same time as Mr. Green.
TESTIMONY OF CRISPIN OGLEBAY, PRESIDENT, OGLEBAY,
NORTON & CO., CLEVELAND, OHIO
The Chairman. Do you solemnly swear the testimony you are
about to give in this proceeding shall be the truth, the whole truth,
and nothing but the truth, so help you God?
Mr. Oglebay. I do.
The Chairman. Will you be seated, Mr. Oglebay, please.
Mr. Feller. Mr. Oglebay, will you give your name to the reporter,
please?
Mr. Oglebay. Crispin Oglebay.
Mr. Feller. And your position in Oglebay, Norton & Co.?
Mr. Oglebay. President.
acquisition of stock in oglebay, NORTON CO. BY CLEVELAND-
CLIFFS IRON CO.
Mr. Feller. Mr. Greene, when was this stock interest in Oglebay,
Norton & Co. acquired by the Cleveland-Cliffs Iron Co.?
Mr.^GREENE. I believe it was May 1930.
Mr. Feller. Mr. Oglebay, in 1930 was Oglebay, Norton engaged in
the mining and selling of iron ore?
Mr. Oglebay. It was.
Mr. Feller. At that time would you be able to tell us roughly
what percentage of its shipments was accounted for by Oglebay,
Norton shipments?
Mr. Oglebay. I don't know.
Mr. Feller. Well, in accordance with figures submitted by your
company it would appear that in 1929 Oglebay, Norton & Co. shipped
— I
> "Exhibit No. 1353," appendix, p. 10427.
10238 CONCENTRATION OF ECONOMIC POWER
4.2 percent of the total industry shipment and in 1930, 3.9 percent of
the total industry shipments. Mr. Greene, your company also at
that time was engaged in mining and sale of iron ore?
Mr. Greene. It was.
Mr. Feller. Oglebay, Norton was a substantial competitor?
Mr. Greene. Yes.
Mr. Feller. I should like to ask you, Mr. Greene, whether you
could tell us why the Cleveland-Cliffs Iron Co. acquired this stock
interest in Oglebay, Norton & Co.
Mr. Greene. I believe from the records of that time that the
interest in Oglebay, Norton was acquired for two reasons; in the
first place at that time, there were being created many larger units
in the steel business, being brought about by mergers, and it was
thought that by associating ourselves with Oglebay, Norton we might
have the opportunity of selling ore to the companies that Oglebay,
Norton were close to, only to the extent" beyond Oglebay, Norton's
ability to supply their requirements, and possibly kinds of ore which
Oglebay, Norton did not have. We also thought that from the stand-
point of mining properties the association of Cleveland-Cliffs Iron Co.
with two or three splendid properties on the Gogebic range was ad-
vantageous. I believe those were the two reasons that actuated the
Cleveland-Cliffs Iron Co. in acquiring that interest in the stock of
Oglebay, Norton.
Mr. Feller. Mr. Greene, I show you a letter which was taken
from your files which appears to have been written by Mr. William G.
Mather, dated May 29, 1930, and addressed to Mr. S. R. Elliot,
manager.^ What was Mr. Mather's position at that time with the
company?
Mr. Greene. He was then president of the Cleveland-Cliffs Iron
Co.
Mr. Feller. And Mr. Elliot?
Mr. Greene. Manager of the mining department with head-
quarters at Ishpeming.
Mr. Feller. I should lil^e to call your attention^ — the letter, I
might say, for the record, is certified to be a true copy by the secre-
tary of the Cleveland-Clifi's Co. I call your attention in particular
to the third paragraph which reads as follows treading from "Ex-
hibit No. 1356"]:
The Oglebay, Norton people will continue to run their business as heretofore.
The advantages that will acciue to us —
and by us I presume is meant Cleveland-Cliffs Iron Co.- —
are that we share in their net profits to an appreciable extent and that we are
placed in a position of greatly minimizing if not entirely preventing*tendencies
which have prevented iron ore producers from getting a reasonable price for their
product.
Now skipping to the next paragraph I read further from the same
exhibit:
I think it is an excellent move and will have a stabilizing effect on the conduct
of the iron ore industry, but you can see that it is a relationship which we do not
want to talk about as such publicity might result in opposition on the part of the
public or the consumers to a move which they may construe as tending toward an
undue control of prices.
> Introuuced infra as "Exhibit No. 1356"; included in the appendix on p. 10430.
CONCENTRATION OF ECONOMIC POWER 10239
Have you any reason to suppose that Mr. Mather's statement was
not a correct statement of the reasons for the acquisition?
Mr. Greene. Well, I am not able to testify as to what was in
Mr. Mather's mind. I, myself, can't understand those statements.
Mr. Feller. I would like to ask you, Mr. Oglebay, what was the
reason for the sale of the interests of Oglebay, Norton to the Cleve-
land-ClifFs Iron Co.? Were you at that time connected with Oglebay,
Norton?
Mr. Oglebay. I was the president. We were as- Oglebay, Norton
Co. at that time the managers of five mines and one steamship com-
pany. It was in the air at that time this possibility of another large
consoUdation headed by Cleveland interests, and it was in our mind in
our office that tliis might absorb interests that were independent in
the ore business and that it would be wise for us to cooperate with this
movement, not thinlcing at all of the welfare of Oglebay, Norton &
Co. Oglebay, Norton & Co. is a mine-managing corporation; it
owns nothing. It is a personal-service corporation and employed by
these companies to manage their properties. We felt that if there
was to be a consolidation, Cleveland-Cliffs would play a very promi-
nent part in this consolidation and if we could be seated around the
table with them, representing these various properties, it would be to
their welfare, and with that in mind, why, we negotiated a sale of this
personal service corporation, that is Oglebay, Norton Co., two-thirds
of its interests, to the Cleveland-Cliffs Iron Co.
Mr. Feller. As I understand, you sold this interest to Cleveland-
Cliffs Iron Co. because of your fear of what might happen to your
business in the event of a large-scale consolidation of steel companies?
Mr. Oglebay. I don't tlunk you are quite right in saying "fear."
I think we just felt that probably our bread would be buttered maybe
a little better if we were sitting around the table with a group of
fellows, if there were to be a consolidation, who would effect this
consolidation. Our hands were perfectly free as far as the individual
corporations that we manage. They are separately owned from
Oglebay, Norton Co., separate boards of directors, and each one of
them would have the privilege of reporting themselves to some new
consolidation or they would not. It just seemed to us in representing
tiiose corporations that we had more to gain by sitting around the
table than being on the outside.
Mr. Feller. I show you, Mr. Oglebay, a letter which appears to
have been sent by you to Mr. Greene. The letter is dated February
17, 1930. The letter was taken from the files of Oglebay, Norton Co.,
your company. I call your attention specifically to the second full
paragraph on page 2 of this letter, a very lengthy letter. Now that
paragraph reads in part as follows:
Our association with Cleveland-Cliffs will presumably strengthen our market
position with respect to the manganiferous grades known as Ontario and Quebec,
because it will give us a favorable standing with the steel companies associated
with Cleveland-Cliffs' operations.
That in part was your reason, was it not?
Mr. Oglebay. Yes.
Mr. Feller. I offer, Mr. Chairman, this exliibit and the exhibit
[jreviously shown to Mr. Greene.
124491— 40— pt 18 3
10240 CONCENTRATION OF ECONOMIC POWER
The Chairman. Yo\i want them in then- entirety?
Mr. Feller. I should like to have them in their entirety.
(The letters referred to were marked "Exhibits Nos. 1356 and
1365," respecti\'ely, and are included m the appendix on pp. 10430 and
10428.)
Senator King. Would you have assets other than your Cleve-
land organization?
Mr. Oglebay. We have no assets, other than just like assets
approximating $200,000 to finance our operations. We own nothing;
we are a personal service corporation and are responsible just like an
individual would be who might be appointed general manager of
these corporations.
The Chairman. But you had complete control?
Mr. Oglebay. Oh, no. Every one of thetn has a separate board
and each company has separate offices and we are —
The Chairman (interposmg). A service corporation with your
functions, a'^d what was the extent of your authority in the manage-
ment of these properties?
Mr. Oglebay. I would say about the same as the general manager
reporting to the board and the president.
The Chairman. Well, what was the term over which you exercised
this authority? Was it subject to cancelation day by day?
Mr. Oglebay. Year by year.
The Chairman. You had no contracts beyond the year?
Mr. Oglebay. No; year by year contracts.
Mr. Feller. Your cliief assets, then, were these contracts, were
they not? These contracts to manage mine properties?
Mr. Oglebay. Yes.
Mr. Henderson. Had they been renewed over a period of years
each year?
Mr. Oglebay. For a long time; yes. Now we only have two prop-
erties; three of these properties during the period of depression we
lost; that is, they decided to abandon them because they didn't have
enough merit to face these difficult times in the last 7 or 8 years,
so that today we only manage two iron-ore properties, and one of
those properties you might call a captive mine, in that I mean two-
thirds of it is owned by the Wheeling Steel Corporation and the
American Rolliug Mill Co.
The Chairman. Well, is it within your jurisdiction, or has it been
within your jurisdiction, as. the manager of these properties, to deter-
mine how much ore should be sold? How much should be mined?
Mr. Oglebay. No; to the contrary we endeavor not to place our-
selves in that position.
The Chairman. Well, who tt)ld'you
Mr. Oglebay. The board of directors. Our board meets three or
four times a year, each time any problems come up why we call the
board together.
The Chairman. You mean the board of directors of your company?
Mr. Oglebay. No; the board of directors of these separate cor-
porations that we manage. We are in a sense no different than you
if you were placed as general manager, instead of an individual being
general manager why Oglebay, Norton Co. is general manager, re-
porting to the board of directors of each one of these separate
corporations.
CONCENTRATION OF ECONOMIC POWER 10241
The Chairman. And carrying out the orders of the separate cor-
porations as to the amount of ore to be shipped and sold and produced?
Mr. Oglebay. Yes, sir.
The Chairman. What, in your mind, did you stand to lose and
what did you stand to gain when this proposed merger was discussed
;md the sale of this stock was proposed?
Mr. Oglebay. Well, these corporations, of course each one of them
is quite valuable and we as the managers of these corporations had
the feeling that if we, the personal service corporation, could get in
and have a close picture with these very large corporations we would
have two advantages, we would have the added advantage in being
able to sell them ore from these companies, and if there be a large
consolidation, we might be in a httle friendlier contact with them in
case it was to our advantage to sell these companies.
The Chairman. Well, if you were merely carrying out
Mr. Oglebay (interposing). I don't mean our advantage, I mean
the advantage of the corporations we represent.
The Chairman. Well, if you were merely carrying out orders of
these various boards of directors and exercised no original authority
upon your own part, what advantage was it to the Cliffs Co. to ac-
quire two-thirds of your control, since you had no control?
Mr. Oglebay. Well, I can't answer for Cleveland-Cliffs. I am
speakmg for the way we thought
The Chairman. Hadn't you any ideOt what it meant to them to get
control of your company, tliis purely personal service company?
Mr. Oglebay. Well, I really don't know exactly what was in
their mind.
Mr. Feller. Mr. Oglebay, in that connection, I should like to
show you what appears to be a telegram sent by you to W. W. White
January 26, 1930; the copy which we have is certified to be a true
copy by the secretary of the Cleveland-Cliffs Iron Co., and it was
secured from their files. ^ If I may read the first few. sentences.
[Reading:!
I have talked with Wade and Greene and they approve of general plan and ask
the following telegrams be sent as representing their thoughts. I think their
recommendations for specific considerations are entirely proper and have advised
them in my opinion they should be so recognized. STOP As individuals we
are heartily in favor of Cleveland-Cliffs Company acquiring Oglebay, Norton
Company under the proposed plan, believing that this merger tends to stabilize
the market value of ore.
Mr. Oglebay, could you tell us what you had in your mind then
when you used those words?
Mr. Oglebay. No; I can't. I think, in general thinking, I had
in my mind the general values of ore properties and the entire problems
associated with independent mines. One of the great big resj^onsi-
bilities that this office has.
Senator King. Which office, yours?
Mr. Oglebay. Ours, Oglebay, Norton Co., has the management of
one of the large independent iron ore mines and that is the Montreal
Mining Co. Mr. Wade, who is mentioned in this telegram, is the-
president of the Montreal Mining Co., and Mr. Greene married Mr.
Wade's sister and was on the board, and is now, and as I stated in
the beginning in my conversation here, one of our keen responsibilities
■ Introduced infra, p. 10250, as "Exhibit No. 1358," appendix, p. 10432.
10242 CONCENTRATION OF ECONOMIC POWER
is the welfare of the Montreal Mining Co., and we felt that due to this
possible consolidation of these corporations that in thinking of the
welfare of the Montreal Mining Co. it would be well for us as this
management service corporation to be on the inside of the picture.
Mr. Henderson. You felt that a stabilized price, if it could be
arranged by this new contract, would redound to the benefit of the
Montreal Mining Co.?
Mr. Oglebay. Yes.
Mr. Henderson. May I ask this question? You spoke of your
relationship being exactly like a general manager on these properties.
However, if you were general manager you would not be able to sell
two-thirds of your contract with the company to a rival organization,
would you?
Mr. Oglebay, Oh, no, no.
Mr. Henderson. Then in that sense there is quite a difference,
isn't there?
Mr. Oglebay. There is in that sense; yes. But I mean we our-
selves were, through the service corporation, putting our personnel
in closer touch with tliis bigger picture and in that way, in being in
closer touch with the possibly bigger picture, we were possibly aiding
in helping these various corporations whose responsibiUty we had for
their management. We looked upon that responsibiUty in the sense
that if there was to be consoHdation probably we would play a very
important part in the negotiations in trying to get as high a value as
we could and just like a general manager or president of the corpora-
tion would.
Senator King. You mean a higher value for the properties which
you were managing?
Mr. Oglebay. Yes.
Senator King. May I ask a question here?
Mr. Feller. Yes.
Senator King. Who fixed the prices at which the ore from these
respective companies, the management of which in part was in your
hands — who fixed the price that would be paid for the ore?
Mr. Oglebay. The board of directors.
Senator King. Well, did all of those companies imder whose
management you had charge of the mines fix the same price or did
each company fix the price of its own ore?
Mr, Oglebay. Each company fixed the price of its own ore.
Senator King. I presume there was a variance in the metallic
content of the ores in the various properties?
Mr. Oglebay. Oh, yes.
Senator King. And the ores of one mining company being dis-
similar, I assume, from the ores of others, would not command the
same price?
Mr. Oglebay. That is true.
Senator King. Did you attempt to fix the price monopolistically
or was there a system of competition in force among those whose
companies you represented?
Mr. Oglebay. Well, I can answer that probably better in detail.
One of these "companies, two-thirds of it is owned by the American
Rolling Mill Co. and WheeUng Steel Corporation and we sit around
every year and decide with those what is a fair value and agree on a
price and ship the ore to them, because they own two-thirds of the
CONCENTRATION OF ECONOMIC POWER 10243
ore anyhow, so they are not so keenly interested in what the value
of the ore is.
Senator King. Well, did the ores of all of the companies which you
represent go to the same vendee, the same purchaser?
Mr. Oglebay. Oh, dear; no.
Senator King. Went to different companies?
Mr. Oglebay. Different corporations.
Senator King. And was there competition among those different
corporations in bidding for the ores which you represented?
Mr. Oglebay. Well, the ores were all sold in different years. As
an example, I mean the Montreal Mining Co. Nearly all their con-
tracts have been made in different years and carry over anywhere
from 5 to 10 years, and nearly all those contracts were negotiated and
sold against labor values and material costs. We arrive with the
president of the steel corporation at about a fair value and then we
fix that profit factor and then that profit factor changes with the
different cost in labor and the different cost in raw material over a
period of years.
Senator King. What I am trying to get at is this, that the orders
being different in value because they had different metaUic contents,
there was no plan by which you were to standardize them and fix the
same price and pay as much for the poor ores as for the good ores?
Mr. Oglebay. Oh, yes; nearly all these ores are standardized at
approximately 51 percent iron, and if an iron ore goes 60 percent, as
an example, then you are paid for nine points more of iron, and if it
goes lower than 51, why you are paid less for your iron ore.
Senator King. Then the metallic content determined the amount
which would be paid for the ore?
Mr. Oglebay. Surely.
Mr. Feller. Mr. Chairman, further on in this hearing we shall
present rather extended testimony on the question of price along
the lines Senator King has been asking about.
Senator King. I thought it was material to ascertain just who fixed
the prices of the ores of these various corporations that his company
represented as merely service representatives; I was wondering just
what disposition was made of the ore.
Mr. Feller. Mr. Greene, reverting to the letter of May 29, 1930,
sent by Mr. WilUam G. Mather to S. R. EUiott,^ you will recall that
that letter contained these words:
The advantages that will accrue to us are that * ■ * * * we are placed in
a position of greatly minimizing, if not entirely preventing, tendencies which have
prevented iron ore producers from getting a reasonable price for their product.
I realize that this letter was written by someone else, but you were
at that time the director of the corporation, were you not?
Mr. Greene. I was.
Mr. Feller. Would you be able to explain what that means?
Mr. G'lEENE. I haven't any knowledge of what was in Mr. Mather's
mind. The only reason that I feel that Mr. Mather was right, and I
think I'lat is not what he expressed in the letter, was with the bigger
units and possibly the abihty to dea,l with the buyers on a bigger scale,
you could hope to get a better price for iron ore. That is the only
thing tha;. I can see about it; as far as price goes, I presume it was the
> "Exhibit No 1356", appendix, p. 10430.
10244 CONCENTRATION OF ECONOMIC POWER
customers of the two companies that were the ones he rather hoped
would not be discussed. I think the advantage comes in simply
dealing in smaller numbers.
Mr. Feller. Do you see any reason why in the next paragraph
Mr. Mather should have cautioned .against giving any publicity to
this relationship?
Mr. Greene. Yes; that is just what I alluded to. I think it was
a matter of the ore companies having strong friendships with their
customers, and probably it would be better for both Oglebay, Norton
and Cleveland-Cliffs that the relationship should be not discussed too
generally.
Mr. Feller. Well, if, as you have said, the way in which this
prevention of unreasonable tendencies in the price of iron ore would
operate would be by virtue of the fact that you would have a larger
organization, wouldn't it follow that people would have to know that
it is a larger organization in order for you to be able to get the ad-
vantages of size?
Mr. Greene. That is true. Of course this was a period when there
were a great many mergers taking place in the steel business, and
there was one at that time contemplated which if brought about would
have created a big unit and the steel companies that made up that
merger would have had a big purchasing power. Now Oglebay,
Norton, and Cleveland-Cliffs both wanted to participate in that busi-
ness to the full extent that they could, and I think that was in the
minds of Cleveland-Cliffs, and I think Mr. Oglebay has just testi-
fied that that was in their minds too.
Mr. Feller. Would you also say that this acquisition was con-
nected with the attempts to merge the steel companies at that time?
Mr. Greene. I wouldn't say connected ; I w^uld say that the pro-
posed merger was a strong motive which helped to bring about a feel-
ing on the part of the ore companies that maybe a close association
would be helpful to the ore men.
Mr, Feller. I should like to show you, Mr. Greene, a letter writ-
ten by Mr. William G. Mather to Mr. Crispin Oglebay on the letter-
head of the Cleveland-Cliffs Iron Co. This letter reads in part:
There are, to be sure, advantages which will accrue to the owners of the fees
and to those interests which are more or less associated with us, who have in mind
the desirability of enlarging the mergers of steel companies which are now in
progress.
I offer this for the record.
The Chairman. It may be received.
(The letter referred to was marked "Exhibit No. 1357" and is
included in the 'appendix on p. 10431.)
Mr. Feller. Was that in effect a restatement of what you have
just been saying?
Mr. Greene. Exactly it.
Mr. Feller. Then does it not appear that Mr. William G. Mather
had in mind two main thoughts when this transaction was in the
process of being accomplished; one, in his own terms, "preventing
tendencies which have prevented iron-ore producers from getting a
reasonable price for their product," or as it says in another place,
"stabilizing the conduct of the iron-ore industry." That would be
reason number one; and reason number two would be as an aid in
CONCENTRATION OF ECONOMIC POWER 10245
bringing about mergers of the steel companies. Is that a fair sum-
mary of these two letters of Mr. Mather?
Mr. Greene. Well, I think that is somewhat the same statement
I made a moment ago. I think it was brought about to strengthen
the ore people possibly, as opposed to the steel people, or rather as the
steel people grew in size why maybe the ore companies if they grew
in size would be better able to hold their own.
The Chairman. Are you the Mr. Greene referred to in this letter
of Mr. Mather?
Mr. Greene. I think I am.
The Chairman. Mr. E. B. Greene?
Mr. Greene. Yes.
The Chairman. Director of the Cleveland-Cliffs Iron Co.?
Mr. Greene. That is right.
The Chairman. And how long had you occupied that position?
Mr. Greene. The position of director, you mean?
The Chairman. Yes.
Mr. Greene. I was elected to the Board of Cleveland Cliffs Iron
Co. in 1926.
The Chairman. So at the time this letter was written you had been
a member of the board of directors for about 4 years?
Mr. Greene. About 3 years.
The Chairman. And you were also designated here as a representa-
tive of the Wade estate?
Mr. Greene. That is correct.
The Chairman. How long had you occupied that position?
Mr. Greene. I was an executor of the Wade estate.
The Chairman. How long had you occupied that position?
Mr. Greene. About 3 years.
The Chairman. How long were you familiar with the properties
of the Wade estate?
Mr. Greene. I had no connection
The Chairman. I said, how long were you familiar with them?
Mr. Greene. Oh, familiar, for nearly 20 years.
The Chairman. You were thoroughly familiar with all of the
properties and the events which go into this whole transaction?
Mr. Greene. All the major events; yes.
The Chairman^ I wonder if you could tell the committee what you
think were the tendencies to which Mr. Mather referred which had
prevented iron-ore producers from getting a reasonable price for their
product, tendencies which it was sought to minimize if not actually
prevent by the acquisition of two-thirds of the control of the Oglebay
company?
Mr. Greene. Well, it is rather a difficult matter to interpret another
man's letter, but I would feel that Mr. Mather just referred to the
fact that the steel units were getting larger and larger, following the
Great War, when freight rates were doubled; it was an advantage to
be in all markets or as many markets as you could be; there were in-
creased overhead expenses, and they called for the investment of a large
amount of capital. Now for all these reasons the steel companies
faced one of two alternatives. They either had to go to work and
each one of them integrate and add on all the products they didn't
have and attempt to reach all the markets; that would have required
10246 CONCENTRATION OF ECONOMIC POWER
an immense amount of capital and would have greatly oversupplied
this country with steel. The other and more obvious course was for
the steel companies to so merge as to supplement each other and in
that way avoid the overextension in capacity. I could take just
one case of that kind which I think will|illustrate that point.
I think in 1927 the Trumbull Steel went into the Old Republic,
located at Youngstown, only a few miles apart. The Trumbull Steel
had more mill capacity; they had outgrown the furnace and open
hearths. Just a few miles away was the Republic with more blast
furnaces and open hearths than they needed for their finishing mills,
and they had an oversupply of raw product or semifinish. Now they
could each one of them buUd and spend millions of money and add
the thing they didn't have, or by the simple operation of getting
together the oversupply of raw material went to Trumbull — the
combined company, of course — and Trumbull supplied the additional
finish. Now that was what was going on in between the period of
1921 or 1922, right up to 1930.
The Chairman. How was that affecting the prices that you were
getting for your ore?
Mr. Greene. I was coming to that. That was lessening the
number of customers all the time; when you decrease the number of
customers you are making outlet for your iron ore more difficult.
Now we all saw that going on.
The Chairman. In other words, as the mergers of the steel com-
panies tended to bring those companies under unified management
and to prevent duplication of effort, competition among the various
units began to disappear and the demand for ore was being steadily
cut down?
Mr. Greene. I don't think competition ever disappeared, Senator,
I think it was simply the smaller the number the greater power they
had in buying.
The Chairman. I didn't mean that in any hostile sense at all; I
was trying to interprat what you just described to me. As I under-
stood your description it was, here was company A which had certain
facilities, and company B wh^ch had certain other facilities. Now
company A, instead of spending a large amount of money to build
for itself the facilities of company B, chose rather to purchase com-
pany B and effect a merger?
Mr. Greene. That is right.
The Chairman. So that instead of having two units doing the
work that B was doing, you had only one unit?
Mr. Greene. Yes.
The Chairman. And when the merger was made effective therefore
the possibility of competition between the extended plan of A with
B was removed, was it not?
Mr. Greene. That is exactly right, Senator.
The Chairman. So that the merger did cut down the field of com-
petition and that in turn you say had what effect upon the price that
you were paying for your — or you were receiving for your ore?
Mr. Greene. It just had a tendency to make it more difficult to
maintain your prices.
The Chairman. How was that actually reflected in prices?
Mr. Greene. I would have to refer to the records there.
CONCENTRATION OF ECONOMIC POWER 10247
The Chairman. I mean can you testify there was a reduction in
prices about this time?
Mr. Greene. Oh, yes; there was, following the Great War there
was a very material reduction in prices.
Mr. Feller. Not in 1930?
Mr. Greene. Not in 1930, because ^he war carried over, but after
'30; I think it begms in '31.
The Chairman. Now how would this combination with Oglebay,
Norton, the exact character of which isn't altogether clear to me
since Mr. Oglebay has testified that it was merely a managing cor-
poration that took all its orders from boards of directors; it ap-
parently exercised no independent discretion of any kind. Perhaps
Mr. Oglebay may want to correct me on that?
Mr. Oglebay. Oh, no.
How did the acquisition of this management corporation which
was merely reflecting orders which it received from boards of direc-
tors, help you or Mr. Mather to stabilize the price of ore, since they
had no jurisdiction over the price at which they sold it?
Mr. Greene. Before I answer that, may I go on? I hadn't quite
completed my statement on the other matter, why it made it more
difficult maybe to sell ore, and that is this: These steel companies
all had in varying amounts and varying kind their own ownership in
ore. Now, some companies had a great deal and some had very
httle. When you put them together you see what I mean. Every
merger tended to better supply, maybe, those steel copapanies
and they were less in the market because maybe the oversupply
of "A" would take care of "B," where before that he would buy
from the merchant sellers of iron ore. So in addition to the mat-
ter you just gave us a summary of, in addition to that, you had
this idea of the increased steel company being 9 times out of 10 better
supplied with ore of different kinds than the separate units, so there
was another reason that made it more difficult.
Mr. Henderson. Was there another reason, Mr. Greene? Was
there anything like a customary relationship between ore companies
and steel companies, and if there were a merger, a dominant interest
would divert the ore contract to the one with which it was dealing
and it might conceiv^ably divert it away from your organization?
Mr. Greene. That is very true.
Mr. Feller. Now, Mr. Greene, it appears then that in the face of
this, shall we say, threat presented by the merger of steel companies,
it was the thought of your company to protect its position by increas-
ing its own size through a merger with an ore company?
Mr. Greene. That is right. When you say an ore company, you
mean ore manager.
Mr. Feller. Yes. Did you in fact coalesce Oglebay, Norton &
Co. with Cleveland-Cliffs Co.? Did you effect a true merger?
Mr. Greene. No; we did not.
Mr. Feller. You kept Oglebay, Norton in the position of being
an independent company?
Mr, Greene. Absolutely. Of course, those mergers, beginning
with about the summer of 1930, ceased to take place largely due to the
increasing depression, and the two companies have acted exactly as
if there had been no ownership of one in the other, and they have
10248 CONCENTRATION OF ECONOMIC POWER
competed, and I would say that as far as the practical results went,
they have been nil.
Mr. Feller. Incidentally, it is true, is it not, Mr. Greene, that the
contract in 1930 provided that Oglebay, Norton should be operated
independently?
Mr. Greene. That is right.
Mr. Feller. Now, how would it help your company to acquire the
controlHng interest in Oglebay, Norton & Co., and yet to leave the
management of Oglebay, Norton & Co. completely free and inde-
pendent, and at the same time not to let the world know that your
two companies were related in this fashion? In other words, would
you get the advantage which you were seeking, the advantage of
mcreasing your own size so as to cope with your customers who were
also increasing their size?
Mr. Greene. It is hard to look back and see today what the condi-
tions were then, but there was within the next 6 months what seemed
to be the almost certainty of a creation of a big steel company, I mean
a company in between the size of the United States and the next
company. Now, that company with its combined resources would
probably require a raw-materials company. In the minds, I think, of
Mr. Oglebay and of Oglebay, Norton & Co. was the idea that this
association might put them in a position to go in if they wanted or
stay out if they wanted. I think I shouldn't be testifying for them,
but I think that is what was in their minds.
I tliink in the minds of Cleveland-Cliffs was the thought that in that
company the two of them would exercise more influence and become
maybe a vital part of it if they worked together, and that is the
atmosphere that you don't get today and you don't see, but if you
went back to 1929 and 1930 I am sure you would realize that was a
more potent factor than we see now.
The Chairman. Do they work together?
Mr. Greene. That steel company never was formed, and the cause,
therefore, of the formation of Cliffs, I would say, maybe one of the,
if not the most powerful reasons for this relationship was "out the
window" within a very few months.
The Chairman. Was there any result at all from the conditions
described in this letter of Mr. Mather?
Mr. Greene. I think there were none whatever.
The Chairman. At any time?
Mr. Greene. At any time.
"Mr. Feller. Mr. Greene, you have testified correctly that under
the contract of 1930 Oglebay, Norton was to be run independently of
Cleveland-Cliffs. The contract also provides, does it not, that Cleve-
land-Chffs may in its judgment consolidate one or more departments
of the business of Oglebay, Norton with similar departments of
Cleveland-Cliffs?
Mr. Greene. That, I believe, was a clause of the contract.
Mr. Feller. Now, Mr. Oglebay, you testified previously that one
of the reasons why your company was willing to dispose of this con-
trolling interest was because of its expectation or hope that it would
receive a larger share of the business, is that correct?
Mr. Oglebay. I don't follow you.
Mr. Feller. The expectation or hope that through further con-
nections, your company would be able to sell more iron ore.
CONCENTRATION OF ECONOMIC POWER 10249
Mr. Oglebat. No, I think our thought mostly was that we had a
picture of this consolidation being effected, and if it was effected that
we by associating ourselves with Cleveland-Cliff's would have a better
influence in making better values for the corporations that we were
managing than if we were totally independent and left by ourselves.
Mr. Feller. Was your thought there that you would become a
part of the new consolidation?
Mr. Oglebay. Oh, I don't think anybody had any thought exactly
about what it would be. Some people felt if this consolidation were
effected that Cleveland-Cliffs Iron Co. might be made into another
Oliver Mining Co. and would be the company that would represent
the iron ore interests of this larger consolidation. That was in the
minds of some of us who were simply gossipilig and trying to think
what might happen.
In thinking what might happen, we were representing two or three
large corporations and we just felt, "Well, now, here that might
happen, we have got everything in the world to gain by sitting around
the table here with a personal service corporation, and if it doesn't
happen we have little or nothing to lose in relationship to the big
amount that we represented."
This little corporation had very few quick assets and we were
managing properties that you might think of as being worth $30,000,-
000 or so, and naturally we were thinking of the welfare of the $30,000,-
000 rather than the welfare of this personal service corporation.
Senator King. May I ask a question there without disturbing the
continuity of your procedure? As I understand it, your organization
was merely a service organization. It didn't fix the prices of the ores
which you sold to the various corporations that were producing steel.
Mr. Oglebay. That is right.
Senator King. Were there any other service organizations than the
one in which you were interested?
Mr. Oglebay. What do you mean ; you mean within our office?
Senator King. No; in this iron region.
Mr. Oglebay. I look upon Pickands, Mather Co. as a personal
service corporation.
Senator King. Who was it wanted the ore and who was it fixed the
price for the ore which you and the Mather Co. sold?
Mr, Oglebay. As I say, a good part of our ore was captive ore; I
mean owned, so that the owners fixed their prices on that ore, and
then the larger mine we operate in the name of the Montreal Mining
Co., that ore is all sold on 10-year contracts and it hasn't any relation-
ship to any price of any one year. It is based against cost of labor
and cost of raw materials, and, of course, when we could negotiate with
z corporation, we would arrive at a price where we were in sympathy
with each other as to a contract, and then we would go back with that
contract to our board and call our board together and ask them
whether they approved of it, and if they did approve of it, we would
make the contract.
Senator King. Wliat I am trying to get at is what conduct on your
part — when I say "your" I mean your service corporation — would
affect the price of the finished product which was put out by the
manufacturers of the steel commodities?
Mr. Oglebay. Oh, gee!
10250 CONCENTRATION OP ECONOMIC POWER
Senator King. Did your conduct have anything to do with the
price that I would have to pay for steel?
Mr. Oglebay. If it did, it is so small I can't imagine it having any
ofleefc.
Mr. Feller, Mr. Oglebay, did it have anything to do with the
price which would be paid by steel companies for iron ore?
Mr. Oglebay. Are you speaking now in relationship to the con-
solidation?
Mr. Feller. Yes; your company. In accordance with the tele-
gram which you sent to Mr. White — and by the way, may I offer it
for the record?
The Chairman. It may be received.
(The telegram referred to was marked "Exhibit No. 1358" and is
included in the appendix on p. 10432.)
The Chairman. Would you be good enough to read that telegram
again?
Mr. Feller (reading from ''Exhibit No. 1358"):
I have talked with Wade and Greene and they approve of general plan and ask
the following telegram be sent as representing their thoughts. I think their
recommendation for specific considerations are entirely proper and have advised
them in my opinion they would be so recognized (stop) As individuals we are
heartily in favor of Cleveland- Cliffs company acquiring Oglebay, Norton &
Company under the proposed plan believing that this merger tends to stabilize
the market value of ore.
The Chairman. Does this telegram refer to Mr. Greene, the present
witness?
Mr. Greene. Yes.
The Chairman. Does the telegram express your opinion?
Mr. Greene. I was in favor of the acquiring of two-thirds of the
preferred stock of Oglebay, Norton.
The Chairman. What did you think you were acquiring when you
were in favor of buying this two-thirds stock?
Mr. Greene. We were acquiring a well-established and profitable
service corporation. While their contracts may have been short-time,
they had made a conspicuous success in managing several properties,
one or two of them outstanding properties, and we considered that ac-
quiring an interest in that company and the association with Oglebay,
Norton and its mines and witn the men who ran that company was
worth the money and stock we gave them for it.
The Chairman. In what manner was it worth it?
Mr. Greene. It was the association.
The Chairman. What did you pay for it?
Mr. Greene. We paid 10,000 shares of Cliffs stock, and
Mr. Oglebay. Nothing more. There was no "and" to it.
The Chairman. Mr. Greene seems to be a little doubtful about that.
Mi'. Greene. I am sure he would remember.
The Chairman. Don't you remember what your company paid?
Mr. Greene. Ten thousand shares of Cliffs stock.
The Chairman. And you asked your associates about something in
addition. I thought I heard you say a million and something.
Mr. Greene. I was thinking — that is a no-par stock. You see, I
was thinking, I called it a par value of $1,000,000. Ten thousand
shares at $100 would be worth a million.
The Chairman. What was it actually worth?
CONCENTRATION OF ECONOMIC POWER 10251
Mr. Greene. Ten thousand shares of Cliff at no par value.
The Chairman. What was its actual value?
Mr. Greene. That would depend on the market.
The Chairman. What was the market at that time?
Mr. Greene. In my recollection, it has had a low
The Chairman (interposing). I mean at the time the transaction
was made.
Mr. Greene. There were times when it was above par. I couldn't
tell you now. 1 wasn't active then, Mr. Chairman.
The Chairman. You were paying a stock that was worth more than
$1,000,000 for a two-thirds interest in a service corporation which did
nothing but take orders from the directors of diverse property owning
corporations.
Mr. Greene. Their prospectus at that time showed their average
earnings and they anticipated earnings of around $200,000 a year,
which would make it not an unattractive investment. Of course, you
remember we were back in the golden period.
The Chairman. But Mr. Mather didn't make any mention of the
investment desirability of this exchange in the letter. He was
talking about controlling certain tendencies which had prevented
iron-ore producers from getting a reasonable price for their product.
Mr. Greene. You are speaking of the telegram.
The Chairman. I am speaking now of the letter.'
Mr. Greene. Of the letter.
The Chairman. Your mention now of the investment value of this
purchase has never appeared in any of this transaction. All of these
documents and letters and telegrams have to do with stabihzing the
ore industry, not in the acquisition of an investment.
Mr. Feller. May I say at this point, Senator, that the sentence
which talks about preventing unreasonable tendencies begins by saying
[reading] :
The advantages that will accrue to us are that we share in their net profits to an
appreciable extent, and * * *_
In other words, there are two reasons given.
Mr. Greene. Senator, I think it would be well for all of us to bear
in mind in connection with that telegram that it referred to Mr. Wade
and myself, not in any connection with Oglebay, Norton or Cleveland-
Cliffs. That was entirely due to the Montreal Mine and the question
of whether the merger of Oglebay, Norton and Cleveland-Cliffs
would be helpful or detrimental to Montreal Mine — there entered the
question of just how Montreal Mine would dispose of their ore. You
see what I mean? It wasn't addressed to Mr. Wade or me with
any reference to Cleveland-Cliffs although it so happens we were both
on Cleveland-Cliffs' board.
The Chairman. In acquiring this two-thirds interest in the manage-
ment company, did you acquire power, whether or not ever exercised,
to stabilize the prices paid for iron ore.
Mr. Greene. I am sure we didn't.
The Chairman. Then you want us to understand that actually
there was no meaning in the second part of this sentence in Mr.
Mather's letter, that it was so much surplusage and might just as
well have been left out.
• "Exhibit No. 1356," appendix, p. 10430.
10252 CONCENTKATION OF ECONOMIC POWER
Mr. Greene. I am quite sure that is correct.
Senator King. How could that service company fix the price of
ore if the ore was purchased by these big manufacturmg steel com-
panies? This service company didn't use- any of the ore and make
steel commodities out of it, did it?
Mr. Greene. I don't see how they could, Senator.
Senator King. You were merely buying in order to sell to the big
manufacturing companies, the big steel companies?
Mr. Greene. I am not speaking for Oglebay, Norton.
Senator King. This service company.
Mr. Greene. Yes.
Mr. Feller. Mr. Oglebay, to clarify the situation somewhat, at
that time, in 1930, Oglebay, Norton was the exclusive sales agent,
was it not, for three mines?
Mr. Oglebay. Yes, sir.
Mr. Feller. In other words, it sold ore on the open market.
Mr. Oglebay, according to the figures which you submitted to us,
and on the basis of the calculations which we have made, it appears
that in 1929 your company shipped 4.2 percent of the total shipments
of the Lake Superior iron-ore industry. In 1930, at the time of the
acc^uLsition, you shipped 3.9 percent. Now, it appears that in 1937,
which was the first year since 1929 to be compared in the matter of
tonnage with 1929, your mdustry position was 2.6 percent on the basis
of shipments. Would you say that your association with Cleveland-
Cliffs Iron Co. has proved to be profitable?
Mr. Oglebay. No; I would say it is totally negativ^e.
Mr. Feller. In other words, the association neither bettered your
position nor resulted in your position diminishing.
Mr. Oglebay. We diminished. Our picture diminished, due to the
adverse conditions in the steel business fr-om '30 to '38.
Mr. Feller. Of course '37
Mr. Oglebay (interposing). We did have about three mines more.
In 1929 we had five mines, and during this period of 8 years of adver-
sity we abandoned— that is, the various companies that owned these
three properties abandoned — these properties, and that is the reason
for the difference of these tonnages, so instead of operating five
raines, which we did in '29, we were operating two properties in '39.
Mr. Feller. Mr. Greene, at the present time you have testified
that Oglebay, Norton is operated independently, I think you said
wholly independently, of Cleveland-CIiifs. If Cleveland-Cliffs do-
sired, could it direct the activities of Oglebay, Norton & Company?
Mr. Greene. I think it has the legal power to do so, but it has
never exercised it, and doesn't have any intention to do so, so far as
I know.
Mr. Feller. Then would it be fair to say, in summary, that your
company in 1930 acquired two-thirds of the stock, of the voting stock,
of Oglebay, Norton & Co., which was a substantial competitor, that
the president of your company at that time stated that the reason for
the acquisitions were, first, to share in the profits, and secondly, to
stabilize the market value of ore; that you have since operated
Oglebay, Norton as an independent company and have not attempted
to control its policies? Is that a fair summary?
Mr. Greene. I think, while he may not have mentioned it in that
letter, I am quite certain that in the notices of the Cleveland-Cliffs
CONCENTRATION OF ECONOMIC POWER 10253
Iron Co., and I can't recall now whether it was in the annual statement
or whether it was the letter sent to stockholders in connection with
the approval of this item, the very first statement that Mr. Mather
made over his signature was that the investment was made because
it was regarded as a profitable and sound investment from the earnings
standpoint, so that I think that should have been as prominently
stated in the letter as it was in his communication, because I laiow
that is what Mr. Mather felt at the time the purchase was made, and
I agree with the rest of your statement.
Mr. Feller. I wonder if you could tell us again why you think
Mr. Mather thought that this relationship should not be given
publicity.
Mr, Greene. I think that had largely to do with the relationship
of the two companies with their customers.
Mr. Avildsen. Will you explain that, Mr. Greene, a little better?
Mr. Greene. Well, there are strong friendships, and at least you
can call them associations, in the steel business. Some of us are as-
sociated with some companies, and other ore companies are associ-
ated with others.
Mr. Avildsen. Could you hope to keep a thing of that sort secret
very long? Wouldn't it soon leak out?
Mr. Greene. I thmk over a period of time I have no doubt it
would become known. As a matter of fact there was so little control —
not so little; there was no control exercised — that the companies have
gone along as if this ownership never occurred, and I believe that the
first time it was known was in the fall of 1935.
Mr. O'Connell. Mr. Greene, I am not at all clear, from your ex-
planation, as to what your explanation means as to the reason for not
giving any publicity to this. Will you be a little more explicit?
\Vho would have been offended if they knew?
Mr. Greene. I really think this: As I say, in the steel and in the
ore business there are certain rather strong associations and certain
companies and groups of companies buy from one group, and certam
from another. Now it was probably advisable, or must have ap-
peared advisable, to the management of Cleveland-Cliffs at that time
that this matter should not be given publicity.
Mr Henderson. That is along the lines of the question I asked.
If one steel company was buying from a group managed by Oglebay,
Norton and knew that the ore company supplying a rival group was
a dominant interest there, they might be likely to make a change.
Senator King. Isn't it just the same situation that we frequently
have in business, some common buyer will not like John Jones, have
some personal antipath>' toward him, and if he knew he was associated
with Dick Jones, with whom he was dealing, he probably would not
buy from the latter either. It is a personal equation, personal likes
and dislikes, rather than a question of benefits to be derived from the
association.
(The witness nodded in agreement.)
Mr. O'Connell. Mr. Greene, you testified earlier that prior to the
acquisition of this stock the Oglebay, Norton Co. was a substantial
competitor of the Cleveland-Cliffs Co. Is that correct?
Mr. Greene. Yes.
Mr. O'Connell. Are you familiar with the prohibitions of section
7 of the Clayton Act? Did you ever hear of it?
10254 CONCENTRATION OF ECONOMIC POWER
Mr. Greene. I have heard of the Clayton Act, but I don't believe
I know of Section 7 as such.
Mr. O'CoNNELL. As I understand it, that is a provision that for-
bids a corporation to acquire stock in a competing corporation if the
effect may be to substantially lessen competition. I wondered if you
were sufficiently familiar with the transaction at the time it took
place to tell us whether or not any consideration was given to that
aspect.
Mr. Greene. I feel certain it was submitted to capable counsel and
passed on. I think if you will look at the figures of the volume of
business of the two companies together, of the ores sold, you will still
feel it was way, way below any possibility of getting within the range
of what I suppose, or have supposed, was the clause in the Clayton Act.
Mr. O'CoNNELL. You weren't sufficiently familiar with the details
of the transaction to know just what consideration was given to that?
Mr. Greene. I couldn't tell you now; I wasn't then active in the
company and couldn't answer.
Mr. O'CoNNELL. Would it be possible to direct a question to Mr.
Feller as to whether any investigation was made by any department
of the Government in that connection?
Mr. Feller. Not that I am aware of. I don't know whether any
Government agency knew of this transaction, and as Mr. Mather's
letter states, it was desired that not much publicity be given to the
matter.
Mr. O'CoNNELL. The reason I raised the point is that there might
have been other reasons for not giving publicity to the move, other
than the desire not to have the competitors or suppliers know about
it. But you aren't in a position to say?
Mr. AviLDSEN. You say this matter was mentioned to the stock-
holders in the annual report. Didn't that have the effect of publi-
cizing the transaction? You say this transaction was reported in the
annual report of your company, and Mr. Mather referred to it as a
good deal for the company.
Mr. Greene. I think I can give you that.
Mr. AviLDSEN. Didn't that have the effect of publicizing the trans-
action?
Mr. Greene. It might not have had so much — I will read it to you:
The acquisition of Oglebay, Norton & Company, extract from the annual report
for the year 1930 of William G. Mather, President, to the stockholders of the
Cleveland-Cliffs Iron Company, dated April 9, 1931.
This is the quote:
This acquisition, together with an interest purchased in the strong and ably
managed Oglebay, Norton & Company, considerably advances our position in the
Lake Superior iron ore industry.
That was in the annual report, and of course was known to the
limited number who were stoclvholders.
Mr. AviLDSEN. Is it a limited number? How many stocldiolders
did you have at that time?
Mr. Greene. Well, I would guess probably a thousand, or nine
hundred. I think it was in excess .of a thousand.
Mr. AviLDSEN. Then I would say the transaction was not kept
very secret.
Mr, Greene. A thousand or eleven hundred, the secretary states.
CONCENTRATION OV ECONOMIC POWER 10255
Mr. O'CoNNELL. I notice in reading again Mr. Matlier's letter that
he suggested other reasons for not according publicity to it. He says
[reading from "Exhibit No. 1356"]:
as such pnblicity might result in opposition on the part of the pubhc, or the con-
sumers, to a move which they may construe as tending towards an undue control
of prices.
Does that suggest to you that possibly that consideration might
have been pertinent?
Mr. Greene. Well, I don't know, of course, what was in the
writer's mind, but as I stated a minute ago, I feel that the total amount
of business out of all the ores shipped by these two companies was a
matter of so small a percentage of the whole that it would have no
public interest, or detrimental interest.
Mr. O'CoNNELL. You are in effect saying that you are not in
accord with Mr. Mather's view as expressed in that letter?
Mr. Greene. I am not. That is right.
Mr. Feller. Mr. Chairman, I desire to go on and question Mr.
Greene, with respect to other matters of which Mr. Oglebay would
have no first-hand knowledge, and may I request that Mr. Oglebay
be released for the time being?
The Chairman. Are there any other questions to be asked of^Mr.
Oglebay before he stands aside?
Very well, Mr. Oglebay, your presence will not then be required at
the table for a few moments. Perhaps Mr. FeUer may call you later.
Mr. Greene. Mr. Chairman, I have been told and I now recall,
that the Oglebay-Norton merger was announced in the papers, and
I believe in writing to Mr. Elliott, who is the manager of oiu- mining
department located at Ishpeming, but who is also the manager of oiu-
mines on the Mesaba and our mine on the Menominee Range, he may
haveMt, and the Oglebay-Norton people especially might lave felt, it
affected adverse!}^ their working organization, and while that isn't
made very plain in Mr. Mather's letter, you can readil}?- understand
that if our mining organization (and they are very keenly competitive
in a sort of technical and professional way) were to indicate to the
people managing the mines of Oglebay-Norton that they were taken
over by Cleveland-Cliffs, it woufd have a very detrimental effect on
their esprit de corps.
The Chairman. That idea was set forth very clearly in Mr.
Mather's letter in the second paragraph from the end, and he went
into it there at such length that it would seem almost to be an inde-
pendent thought from that conveyed by the sentence to which Mr.
O'Connell was referring.
Mr. Feller. Mr. Greene, referring again to the chart entitled
"Financial Connections Between Major Iron Ore Companies and
Steel Companies," you will notice that just above the name Cleveland-
Cliffs Iron Co. occurs the name The Cliffs Corporation. Can you
tell us what the Cliffs Corporation is and what was the occasion of its
formation?
Mr. Greene. The'formation of the Cliffs Corp. goes directly back to
the statement that I made in connection with certain questions a short
time ago. There had taken place between '22 and '29 a great many
mergers in the steel business, and I gave the reasons for those —
increased freight rates, taxes, overhead expenses and so on — and more
124491— 40— pt. 18 4
10256 CONCENTRATION OF ECONOMIC POWER
especially the desire of the steel companies to broaden their scope of
products and to reach all markets.
Now, to accomplish that, as I stated before, you can do it in two
ways. You could add on to all the existing units the portions they
didn't possess and you could build additional plants in the other
principal steel-consuming markets. The other way to do it was by
merger. Mr. Eaton had, through the investment companies
CYRUS S. EATON PROJECT FOR MIDWESTERN STEEL MERGER
Mr. Feller (interposing). Pardon me just a moment. Can you
tell us the full name of Mr. Eaton?
Mr. Greene. Mr. Cyrus S. Eaton. He had, through his invest-
ment companies, acquired large blocks of steel stocks.
Mr. Feller. Could you tell us which they were?
Mr. Greene. T doir t loiow as I am competent to say on the stand.
I know they included Central Alloy
Mr. Feller (interposing). May I read the list to you, Mr. Greene,
and you can then check?
Senator King. I suppose that would be hearsay, or are you speak-
ing of your own knowledge?
Mr. Greene. They passed from that into the Clifls. lie may
have had some others that didn't, but I know he did have tliesc.
Mr. Feller. They included Trumbull Steel, Republic, Inlaiid Steel,
Central Alloy, and Youngstown Sheet & Tube.
Mr. Greene. They included all of those, and Wheehng. He had
acquired these, and they were held in, say, four investment companies.
He had worked very hard for maybe a year or two to bring about
what was commonly called the Midwestern Steel Co., and had gotten
pretty far along in liis negotiations, as he thought and as we tliought.
The question then came up of wliether, with this merger and the
bringing together of the holdings of the ore of those companies, it
would not be an opportunity for Cleveland-Cliffs to become the raw
material, or the iron ore, company of that big projected steel company.
Ill the spring-
Mr. Feller (interposing). May I interrupt you just a inoment?
How would tliis projected steel company have ranked in the steel
industry?
Mr. Greene. It would have ranked second.
Mr. Feller. Larger than Bethlehem?
Mr. Greene. Yes, sir; if they had got all they hoped to get.
Of course, we were not participating in it; we were gettmg the story
second-hand. I am making this statement as of what I understood it
to be.
That went along for a number of months, and in the spring of '30
Mr. Eaton represented that be had reached the point where he wanted
to know whether Cleveland-ClifTs wanted to become the raw material
company or whether it did not. He not having a definite plan to
put down on the table to say "Here is what we have," naturally you
weren't in a position to either accept or dechne any such invitations
It progressed to the point where the management and the Board
felt that the chances of his success in bringing about that company
were very good.
Senator King. Speaking of your own company now?.
C(JN(JKN'LM{AT1()N OF KCUNUMIO POWElt 10257
Mr. Greene. Yes, our own companj'^ — were very good, and when
he suggested that lie would Uke to know definitely, for two reasons;
be wanted to consider some other ore ownership if we didn't do it,
and in the second place he was frank to say that possiblj^ the inclusion
of Cleveland-Cliffs in that might be helpful in getting the groups of
the steel companies together.
There was a meeting held in California in the spring of 1929 at
wliich the plan of organizing the Cliffs Co., which would tie Cleveland-
Cliff's in with blocks of stock of companies that there was a reasonable
feeling would go into that merger with the others, that would be a
proper step to take then, with the next step, of course, which would
have to be approved by Cleveland-Chffs, that they could vote to
become an integral part of it, but that was what I might call a
preliminary step. ^
They therefore arrived at a valuation, tentatively, of Cleveland-
Cliffs, Cleveland -Cliffs changed its capitalization, issued preferred
stock to its stockholders and then its stockholders contributed the
common stock of Cleveland-ClLffs into the treasuiy of the Cliffs
Corporation, receiving back Cliffs stock share for share in place of
their Cleveland-Cliffs common. These mvestment companies con-
tributed listed common stcei stocks to offset the common of Cleveland-
Cliffs, both of which had a valuation of approximately 40 million.
Therefore, you had created the Cliffs Corporation as a holding
company with, at that time, 40 million of common listed steel stocks,
and all the common stock of Cleveland-Cliffs Iron.
Now I am givhig approximate figures. All the stock didn't come
in for a year or 2. I think 200 shares stayed out, and the total stock
there was a little under 800,000.
I testified that Oglebay, Norton got 10.000 shares of Cliffs. Ogle-
bay, Norton technically got 10,000 shares of Cleveland-Cliffs Iron
common, and immediately deposited it in the Cliffs Corporation and
got 10,000 shares of Cliffs, so that brought the stock of the Chtts
Corporation to something like 808 or 810 thousand shares.
The formation of Cliffs, as you can readily see, was a direct carrying
out of a bigger plan which, in fact, never materialized.
Mr. Feller. Mr. Greene, in 1930 a merger did take place, did it
not, which resulted in the formation of the Republic Steel Corpora-
tion? Was that a step in this larger plan which, as you just said,
never fully eventuated?
Mr. Greene. It was, to a certain extent.
Mr. Feller. Do you remember wliich companies were merged
together to form the Republic Steel Corporation?
Air. Greene. The Republic Steel Company, the Central Alloy,
the Doimer Steel and the Bourne Fuller.
Mr. Feller. At that time Republic Steel Corporation was known
as Republic Iron & Steel Co.
Mr. Greene. It became the Republic Steel Corporation.
Mr. Feller. And Mr. Tom Girdler became the head of that cor-
poration at that time, did he not?
Mr. Greene. My recollection is he became chairman on April 8,
1930.
Mr. Feller. You and Mr. Mather asked him to assume that
chairmanship?
10258 CONCENTRATION OF ECONOMIC POWER
Mr. Greene. I did not.
Mr. Feller. Oh, I'm soriy. Do you know whether Messrs.
Mather and Eaton asked him to assmue that chainnanship?
Mr. Greene. I am not competent to testify to that. I was in the
banking business.
Mr. Feller. This is not very important.
Senator King. Did the RepubHc Steel Co. that was thus formed
survive?
Mr. Greene. Yes, sir.
Senator King. Is it functioning now?
Mr. Greene. It is functioning every day.
Senator King. Was it anticipated that the RepubHc Steel Co.
would take the place of the Midwestern Co. that Air. Eaton had in
mind?
Mr. Greene. That was to be one, possibly the largest, unit of five
or six that would have been in that company.
Senator King. And that was to be promotive of competition in the
steel industry?
Mr. Greene. I think probably it would Help stabilize the steel
industry. I think it was a sound idea. They were a group of steel
companies located in the Midwest
Mr. Feller (interposing). Mr, Chairman, merely to clear up this
small point, I should like to read for the record a few sentences from
a memorandum prepared by Mr. E. B. Greene dated May 3, 1935,
and taken from the files of the Cleveland-Cliffs Co.
The Chairman. Will Mr. Greene identify it?
Mr. Feller. Can you identify this as Having been taken from the
files of your company? It has your name typed at the bottom.
Mr. Greene. Yes.
The Chairman. That is from your files?
Mr. Greene. Yes.
Mr. Feller. The memorandum tells about a conversation with Mr.
Girdler and states:
He (Mr. Girdler) then went on to recite that he had come to Cleveland in no
small measure due to the fact that he understood that he would be closely asso-
ciated with the Mather interests; that he had had but little contact with Samuel
Mather or his firm, but that he had seen a great deal of Mr, Wm. G. Mather
and had a very strong feeling of friendship and admiration for him and desired
to do everything he could for their interests; that he regarded Cleveland-Cliffs
Iron Company and Republic Steel as members of the same intimate business
family, and felt that the relations should be not only close but mutally profitable.
Mr. Greene, you have previously stated Mr. Cyrus Eaton's plan
for large steel consoHdation never went through.
Mr. Greene. Never went through.
Mr. Feller. ^Vhen would you say it, shall we say, collapsed?
Mr. Greene. Well, it collapsed largely due to the depression.
That was the principal reason. I think there was one other con-
tributory reason.
Santor King. Then it collapsed substantiaUy in 1932?
Mr. Feller. Somewhat earHer, was it not?
Mr. Greene. It started to go off by, I would say, the late spring
of '30. The steel business carries over after a depression and comes
back last.
CONCENTRATION OF ECONOMIC POWER 10259
Mr. Feller. However, subsequent to the collapse of this plan,
your company still desired to see a further consohdation of steel com-
panies, did it not?
Mr. Greene. Could you be a little more specific?
Mr. Feller. Well, I think it would be clearer if I were to introduce
a memorandum signed by you dated December 11, 1933, certified to
be a true copy by the secretary of your company.
Senator King. A true copy of a letter by Mr. Greene?
Mr. Feller. Yes; I offer that.
The Chairman. Has the witness identified that?
Mr. Greene. Yes.
The Chairman. It may be received.
(The memorandum referred to was marked "Exhibit No. 1359"
and is on file with the committee.)
Mr. Feller. The memorandum states in part [reading]:
Messrs. William G. Mather and E. B. Greene were to see Mr. Girdler [that is,
the Chairman of Republic Steel] and urge the proposition on the broad view that
if we were to cooperate with them in consolidating steel properties, it was only
logical and fair for them to cooperate with us in managing ore properties.
It is not necessary to print the whole of the memorandum for the
record.
The Chairman. You want only that which you have read? The
reporter already has that.
Mr. Feller. In short you were, Mr. Greene pT.opoT>o;j to cooperate
with Kepublic Steel in consolidating steel properties?
Mr. Greene. That refers directly, I believe, to our ownership of
originally 62.5 percent of Corrigan, McKinney, which we purchased
in 1930, and which we merged with Republic later on. When I said
that I was referring directly to a steel company in which we had a
very large investment, that either we would have to go on and spend a
great deal of money because its principal product w is merchant bars,
semifinished, or we had to take stock for it in a s 3el company who
would develop it, just as Republic has, and they have spent many
millions there putting in mills adjoining, and an ir ral part of,
Corrigan, McKinney.
Senator King. As I understand your statement, it dia not refer to
the CHffs organization or the Cleveland-Cliffs Iron Co.
Mr. Greene. Cleveland-CUffs is the operating and owning com-
pany.
Senator King. You mentioned Corrigan, McKinney, and I sup-
posed it was a different corporation to which you referred.
Mr, Feller. May I clarify that? Mr. Greene, what you have
stated is this, that some time in the thirties, to be precise in 1935, a
merger was accomplished between Repubhc Steel Corporation and
another steel company known as Corrigan, McKinney & Co., and that
Cleveland-Cliffs owned at that time the controlling interest in Corri-
gan, McKinney & Co.
Mr. Greene. That is correct. That is what I intended to say.
Mr. Feller. Now by this merger in 193'5 Repubhc Steel became,
did it not, the third largest unit in the steel industry? It is such now.
Mr. Greene. If my memory is correct, it was the third before.
But it was third by a bigger margin.
10260 eONCEiNTTRATION OF ECONOMIC POWER
Mr. Feller. It became a still larger unit.
Is it correct to say that at that time the Cleveland-Cliffs Iron Co.
attempted to induce this Otis Steel Co. to enter this merger?
Mr. Greene. No; that isn't correct. They did nothing to induce
Otis. Republic, I think, carried — I loiow carried on negotiations
with Otis, but Cleveland-Chffs was interested in both companies and
did not endeavor to influence either.
Mr. Feller. Did Cleveland-Cliffs desire that the Otis Steel Co.
go into this merger?
Mr. Greene. I think they would have favored it.
Mr. Feller. Did the directors of Cleveland-Cliffs take any step
to convey this desire to Otis Steel?
Mr. Greene. I am sure they did not,
Mr. Feller. I show you a memo, headed "Statement of William
G. Mather to the board of directors of Otis Steel Co." WiUiam G.
Mather was then the president. The date of it is August 2, 1934.
At that time was Mr. WilUam G. Mather president of Cleveland-
Cliffs?
Mr. Greene. No.
Mr. Feller. What was his position?
Mr. Greene, Chairman of the board.
Mr. Feller, He was chairman of the board. This statement is
certified to be a true copy by the secretary of j^our company. See
if you can identify that. It has not your name on it, but it is certified.
Mr, Greene. I feel confident that it is a true copy.
Mr. Feller, I offer this for the record.
The Chairman. It may be received.
(The exhibit referred to was marked "Exhibit" 1360" and is included
in the appendix on p. 10433.)
Mr. Feller. Reading frorr the statement of William G. Mather
to the board of directors of Otis Steel Co.:
I desire, in behalf of myself and the other Board-members who are also Directors
of The Cleveland-Cliffs Iron Company —
How many such are there?
Mr. Greene. Then or now?
Mr. Feller. In 1934. How many members of the board of Otis
Steel were directors of Cleveland-Cliffs?
Mr. Greene. I am sure Mr. Mather and Mr. Raymond were and
Mr. Croxton might have been active then in Cleveland-Cliffs. I
don't recall just when he severed his connection. I would say three
directors:
Mr. Feller (reading from "Exhibit No. 1360"):
I desire, in behalf of myself and the other Board members who are also Directors
of The Cleveland-Cliflfs Iron Company, or officials of that Company, to state our
position with reference to the proposed negotiations with Republic Steel Cor-
poration and The Corrigan, McKinney Steel Company. We feel, and are advised
by counsel, that in view of the large ownership of The Cleveland-Cliffs Iron
Company in the stock of Corrigan, McKinney and its substantial ownership of
Republic stock, as well as its ownership of shares in Otis Steel Company, it
would not be proper for us to vote upon or participate in any corporate action
involving the sale of the assets and business of Otis Steel Company to, or its
consolidation with. Republic, and in case the time arrives when such questions
are presented to this Board for determination, we will withdraw, leaving the
other members of the Board free to act in such manner as they shall deem for
the best interests of the Company.
CONCENTRATION OF ECONOMIC POWER 10261
We are, however, advised by counsel that it is not only our privilege, but it is
our duty, to express to the other members of the Board our general views as to the
desirability of giving consideration to this subject so that j^ou may have the
benefit of such general information regarding the industry as we possess and be
advised as to how the large stock interest which we more particularly represent
regards it.
While no one appreciates more than we the excellent record made by the
management of Otis Steel Company, especially during the first half of 1934, we
think, nevertheless, that it would be for the best interests of the Company to
bring about the consolidation on some fair and proper basis of Otis Steel Company
with Republic and Corrigan.
In other words, it is true, is it not, Mr. Greene, that on the basis
of this statement the officials or the dii"ectors of Cleveland-Cliffs Iron
Co. who were on the board of Otis Steel urged on the other members
of the board of Otis Steel the advisability of entering into this merger?
Mr. Greene. No; I wouldn't say urged. I would say they ex-
pressed their opmion as to whether or not the future was brighter for
Otis, one way or the other, that is, the stockholders, but they did
nothing beyond expressing that opinion and then they withdrew.
Mr. Feller. I accept that.
Senator King. Would those companies, if they were merged, com-
plement each other, supplement each other?
Mr. Greene. Very much at that time.
Senator King. One having activities in ores and contracts quite
different from the other?
Mr. Greene. You can see that the Otis turned down the merger
in '34 and the Corrigan, McKinney was acquired in '35. Now it is
another example of just what I was speakmg about, of mergers which
are sound economically because they supplement each other and
take the place of the expenditure of millions of new money.
Senator King. I assume that some corporations would have large
transportation facilities, boats upon the Great Lakes or railroads, and
others, none. Some might have large iron holdings and others, none.
Some would manufacture one commodity, one form of steel com-
modity, and make a specialty of that, and others not. But a merger
or uniting of them would make for economy and for better results all
around.
Mr. Greene. That is right.
Mr. Feller. It was true, however, was it not, that Otis Steel and
Republic Steel at that time did manufacture products of the same
character; in other words, that they were competing corporations?
Mr. Greene. Well, Republic was anxious to have a sheet miU in
Cleveland, on the lake, and here was Otis with a continuous mill and
they would have been glad to have acquired it. They afterwards
acquired Corrigan, McKinney and built the mill.
Mr. Henderson. Mr. Feller, I don't think we got the answer to
that question. May I put it this way? There is no question, is
there, that Otis and Republic were competing in some products?
Mr. Greene. Which?
Mr. Henderson. Otis and Republic.
Mr. Greene. Well, they are all in the steel business, yes, competing
just like a big seel company competes with any small steel company.
Mr. Henders.^ N. Is there some special competition between a big
steel company and a small steel company?
10262 CONCENTRATION OF ECONOMIC POWER
Mr. Greene. What I mean is, Republic had a good many products
and Otis has a very limited number of products. It is a small com-
pany— "strip sheets and plates," and that is all.
Mr. Feller. Mr. Greene, do you know what the attitude of the
management of the Otis Steel Co. was toward their participation
toward tliis contemplated merger with Repubhc Steel?
Mr. Greene. I would draw the conclusion from the fact it didn't
take place that they were opposed.
Mr. Feller. Did the president of the Otis Steel Co. make known
to you the fact that they were opposed?
Mr. Greene. You mean at that time?
Mr. Feller. At that time.
Mr. Greene. I don't now recall. I think afterward he made it
known to me. I don't recall any conversations, I can't locate any
particular time, but afterward I know he was opposed from what he
said to me.
Mr. Feller. I show you a memorandum signed by you, dated
August 26, 1935.^ That is after the merger was accomplished, is it
not?
Mr. Greene. Yes.
Mr. Feller. It is certified to be a true copy by the secretary of
your company. Will you identify it, please?
Mr. Greene. I can identify it.
Mr. Feller. I should like just for a moment to clear up a point.
Do you remember exactly when the merger between Republic and
Corrigan, McKiimey went through?
Mr. Greene 'Thirty-five.
Mr. Feller. And the month?
Mr. Greene. My recollection is, it is August, but I am not certain.
It was between August and October; actually, September 25.
Mr. Feller. We have this memorandum which is dated August
26, 1935, which is prior to the complete consummation.
Mr. Greene. No; he said September 25.
Mr. Feller. It was just a month prior.
Mr. Day.^ The letter to Corrigan, McI inney went out in August
1^35.
Mr. Greene. It was definitely agreed upon in August.
Mr. Feller. But it had not yet been effectively accomplished.
Now, reading from this memorandum, signed by you, written on
August 26, 1935, you state as follows — this memorandmn relates to
conversations between you and Mr. Kulas, K-u-1-a-s, who was then
president of the Otis Steel, and you say in part [reading]:
Mr. Kulas, on the other hand, expressed frankly his feeling that Otis Steel
Company was not especially friendly, that he was violently opposed to the Republic
merger and that he felt that Cleveland-Chffs would have been glad to have
forced Otis Steel Company in.
And then, toward the end of that paragraph, you state [reading]:
Mr. Kulas said we had only one thing to do and that was not to force him into the
Republic merger. Every few sentences, Mr. Kulas reverted to the Republic
merger.
It is true then, that the Otis Steel Co. was opposed.
Mr. Greene. I think that is a mild statement.
1 Not introduced for the record.
' Luther Day, counsel for Cleveland-CiflS Iron Co.
CONCENTRATION OF ECONOMIC POWER 10263
Mr. Feller. The Republic merger, as has been said several times,
was accomplished in 1935. Subsequent to that merger, did Cleveland-
Cliffs stand ready to aid or cooperate with Republic in further con-
solidations or mergers, to your recollection?
Mr. Greene. I haven't any recollection of any cooperation that
was asked or offered. I know of none that was under contemplation,
offhand.
Mr. Feller. I show you a memorandum signed by you, dated
April 14, 1936, taken from the files of your company and certified to
be a true copy by the secretary. Will you identify that, please?
Mr. Greene. Right.
Mr. Feller. I offer this..
The Chairman. The document may be received.
(The memorandum referred to was marked "Exhibit No. 1361,"
and is included in the appendix on p. 10433)
Mr. Feller. This memorandum, a^ain, relates a conversation
between you and Mr. Girdler, the chairman of the Republic Steel
Corporation. You state [reading]:
The writer then said that he wanted to discuss with Mr. Girdler three things:
first, the big general policy which looked into the future of both companies,
then going back into the original plan of a midwest steel company and Cleveland
CliflFs' relation to it, and calling attention to the very large holding in ClifiFs
Corporation and the possibility that matters of investment in steel companies
might be arranged to further the growth and prosperity of Republic as well as
Cleveland CliflFs.
Is that a correct statement to your recollection, does that refresh
your recollection, Mr. Greene?
Mr. Greene. I don't recall it, but I don't question it at all.
Mr. Henderson, Could I ask a question there? Is it fair to
assume that all this time you considered the possibility of a midwest
steel company and had hoped to achieve that m the form of Ilepublic?
Mr. Greene. I can only express my personal view, that I liave
had no such hope for a good many years.
Mr, Henderson. Adverting to this language.
Mr. Greene. I think that is a general expression of hope as to
volume of business, that we both prosper, and maybe that was. along
the lines of feeling that we would like to enjoy mere business from
Republic. Rather a natural hope on our part.
Mr, Henderson, That you might get the same volume^ of business
from Republic that you expected to get from the proposed Eaton
merger.
Mr. Greene, Yes,
Mr. Henderson. And you think it was nothing more than that.
Mr. Greene, I haven't any recollection of anything more.
Mr. Henderson, In other words, you had no particular companies
in mind which you suggested Mr, Girdler make advances to concerning
coming into the Republic,
Mr. Greene. I can't now recall anything that was under con-
sideration or that I had in mind.
Mr, Feller. Mr, Greene, could you explain the meaning of this
phrase, this sentence in the memorandum (reading) :
calling attention to the very large holding in CliflFs Corporation and the possibility
that matters of investment in steel companies might be arranged to further the
growth and prosperity of Republic as well as Cleveland-CliflFs,
10264 CONCENTRATION OF ECONOMIC POWER
What I should like to ask you to explain is how an investment in a
steel company otiier than Republic could be used to further the growth
and prosperity of Republic.
Mr. Greene. Well, I presume that simply means that I was en-
deavoring to get a larger portion of Republic's business than they
might have had in mind. I haven't any specific thing in mind, but
just the general idea to discuss with him and see if he had anything
in his mind about this matter of more business.
Mr. Henderson. How would your holdings in Inland and Youngs-
town and Otis and Wheeling be an advantage in getting more Republic
business?
Mr. Greene. Our biggest holding is in Republic, much our biggest.
No ; it couldn't.
Mr. Henderson. I think that was the question Mr. Feller asked.
Mr. Feller. Yes, that was the question.
Mr. Henderson. Will you read that language again?
Mr. Feller (reading) :
calling attention to the very large holding in Cliffs Corporation and the
possibility that matters of investment in steel companies might be arranged to
further the growth and prosperity of Republic as well as Cleveland-Cliffs.
Mr. Greene. I think it was to find out from Mr. Girdler whether
he had any plans in mind. I know I didn't have any plan in mind.
Mr. Henderson. This is your memorandum and your language.
It is just that you don't recall what you did have in mind at that time
as to how you could further the business of Republic by your holdings
in rival companies?
Mr. Greene. I haven't any recollection. I would put it maybe
the other way, of whether a further investment in some other company
might benefit Republic, rather than investment of those
Senator King (interposing) . Did you have in mind — I will modify
that in view of your statement. The company mentioned in your
letter here would refer to your ore company?
Mr. Greene. Oh, it would refer to the ore business, yes.
Senator King. And that was the purchase of ore and the selling of
ore, rather than the manufacturing of steel commodities?
Mr. Greene. We are not at all in the iron and steel business.
Senator King. So if there was any union or combination or business
relations between your company and the Republic, it would be a seller
upon your part of ores and the purchaser by the Republic Company
on the other side of the ores wliich you had to sell.
Mr. Henderson. This memorandum refers to matters of invest-
ment in steel companies. Did you have in mind at the time that
perhaps you might througli Cliffs buy into some other steel companies
and thereby assist the growth of Republic and yourselves at the same
time?
Mr. Greene. I think that that must have been my general thought,
but I had nothing specific in mind.
Mr. Henderson. You don't laiow of companies that you thought
of at that time?
Mr. Greene. None that I recall.
Senator King. And did you acquire any companies after that time?
Mr. Greene. None.
Senator King. You have none now''
Mr. Greene. No.
CONCENTRATION OF ECONOMIC POWER 10265
Mr. Feller. At the present time, Mr. Greene, you hold stock —
referring now to the chart ^ — Cleveland-Cliffs Iron Corporation, con-
sidered as a unit, have stockholdings in Wheeling, Otis, Republic,
Inland, and Youngstown? That is correct, is it not?
Mr. Greene. Between the two companies?
Mr. Feller. Yes.
Mr. Greene. Correct.
Mr. Henderson. And they act in the nature of an investment
trust, do they not?
Mr. Greene. Cleveland-Cliffs got one or two stocks in different
ways. They got their stocks from having turned in some furnaces.
We turned in the Cleveland furnaces to Otis and were paid in stock,
so what we had formerly was a furnace and what we had later was
stock. That is in Cleveland-Cliffs. The four stocks that are in Cliffs
Corporation are Wheeling, Republic, Inland, and Youngstown, and in
Cleveland-Cliffs we have Otis, a little Wheeling, and a large amount
of Republic that we got in trade for investments like Corrigan, Mc-
Kinney, and one or two small investments, TrumbuU Furnace, that
became part of the Trumbull plant after the company took it over.
Mr. Henderson. After the acquisition of Corrigan by Repubhc,
the plant facilities of Corrigan have been utilized pretty completely,
have they not?
Mr. Greene. Yes, indeed. In general you can see that the steel
stocks held in Cleveland-Cliffs are the result of receiving those stocks
in trade for assets that were turned over to the steel companies.
Mr. Feller. Is it correct, or would you be able to state, that of
the five steel companies mentioned, your company is the largest stock-
holder with the exception of Republic? That is to say, that your
stockholdings in Wheeling, for example, are larger than that of anyone
else, and the same with Otis, Inland, and Youngstown.
Mr. Greene. No; I would question that. We are the largest
common-stock holder in Republic.
Mr. Feller. I am considering now voting stock.
Mr. Greene. WeD, maybe it would be less than that for voting
stock. Some of these, Otis
Mr. Feller (interposing). You are the largest holders.
Mr. Greene. We were not for a number of years, but, I think, a
larger holding has been dispersed, so I think we are the largest hi Otis.
In Wheeling we have 30,000 only of common, and what we got in
the preferred; when that was delinquent we were paid the delinquency
in common. That is all we have.
In Inland we are the second or third interest there. It may not
be so registered, but we are not better than the third.
And in Youngstown, again I think we may be the largest in a single
name, but if you were to take a group of holdings we would not be
the largest there.
Mr. Feller. Mr. Chairman, I shall go on with other subjects in
connection with the testimony of Mr. Greene, and I would suggest
that since those subjects will take considerable time, it might be advis-
able for the committee to conclude questioning Mr. Greene at this
time before the recess on matters which have already been discussed.
The Chairman. You have no further questions?
1 "Exhibit No. 1353," appendix, p. 10427.
10266 CONCENTRATION OF ECONOMIC POWER
Mr. Feller. On these matters which have been elicited up until
now.
The Chairman. Do any members of the committee desire to pursue
this matter now? If there are no questions, then the committee will
stand in recess until 10:15 tomorrow morning.
(Whereupon, at 4:40 p. m., a recess was taken until Thursday,
November 2, 1939, at 10:15 a. m.)
INVESTIGATION OF CONCENTKATION OF ECONOMIC POWER
THURSDAY, NOVEMBER 2, 1939
United States Senate,
Temporary National Economic Committee,
Washington, D. C.
The committee met at 10:30 a. m., pm-suant to adjournment on
Wednesday, November 1, 1939, in the Caucus Room, Senate Office
Building, Senator Joseph C. O'Mahoney presiding.
Present: Senators O'Mahoney (chairman) and King; Representa-
tives Williams and Reece; Messrs. Henderson, Avildsen, O'Connell,
and Brackett.
Present also: Willis Ballinger, representing the Federal Trade Com-
mission ; John V. W. Reynders, representing the Department of Com-
merce; Gordon Dean, representing the Department of Justice; A. H.
Feller, Special Assistant to the Attorney General; John W. Porter,
Hyman B. Ritchin, Irving Glickfeld, Ward S. Bowman, and Monroe
Karasik, Department of Justice.
The Chairman. The Committee will please come to order. Mr.
Feller, are you ready to proceed?
Mr. Feller. Yes,. sir.
Air. Greene, yesterday we had been discussing the acquisition of
stock interests by Cleveland-Chffs and by the Cliffs Corporation, in a
number of steel companies, as part of a step to bring about a merger —
a larger merger of steel companies. Isn't it also correct to say that
one of the reasons for the acquisition of these stock interests in steel
companies by Cleveland-Cliffs was to secure a market for iron ore?
TESTIMONY OF E. B. GREENE, PRESIDENT, CLEVELAND- CUFFS
IRON CO., CLEVELAND, OHIO— Resumed
Mr. Greene. I would say not, except as it related to the formation
of that company.
Mr. Feller. I am afraid I don't quite understand that.
Mr. Greene. Well, the idea that was in the minds of the Cleveland-
Cliffs in forming the Cliffs Corporation was that the larger company
would be formed and that Cleveland-Cliffs, if they chose to, would
have the opportunity of becoming a raw-material division, you might
say, or company, of that larger company.
Senator King. Is that larger company the one that was envisioned
by Mr. Eaton or by the Republic, or what company?
Mr. Greene. It was envisioned by Mr. Eaton, who submitted it to
Mr. Mather.
Mr. Feller. In other words, if I understand you correctly, at the
time of the formation of the Cliffs Corporation, which was about 1929,
10267
10268 CONCENTRATION OF ECONOMIC POWER
it was then hoped that by acquiring these interests in steel companies,
it would be possible to bring about a merger and that Cleveland-Cliffs
Iron Co. would then have a larger market for its ore?
Mr. Greene. It is a little more complicated, possibly, than that.
It tied the equity of the Cleveland-Cliffs into a portion of the equity
of four or five steel companies, with the thought that if Cleveland-
Cliffs did go into that larger unit as the raw-material company, it would
naturally convert those steel stocks into the stock of the new company
and would give it a commanding or rather an influential position in
that new situation, and that if the Cleveland-Cliffs became the raw-
material division or company of that larger unit, why the needs of
that company would undoubtedly take care of its support.
Mr. Feller. And do you consider that your holdings in steel com-
panies at the present time are an aid in disposing of your ore?
Mr. Greene. Well, I don't consider they are a detriment, but I
think we have to work pretty hard to sell our ore in competition with
the others. I have found it so in the last 6 years.
Mr. Feller. I show you, Mr. Greene, a copy of the directors'
minutes of the Cliffs Corporation, dated April 13, 1937, certified to
be a true copy of the secretary by the Cliffs Corporation.' Would you
identify that, please?
Mr. Greene. That is correct.
Mr. Feller. In these minutes there occurs the statement by the
president of Cliffs Corporation — that was you — to this effect [reading]:
The president stated that thjs company and the Cleveland-Cliffs Iron Company,
the entire common stock of which is owned by this company, are both owners of
large amounts of stock in steel corporations. He stated that this company was
not an investment trust in the accepted sense of the term, but was organized for
the definite purpose of holding certain securities, the ownership of which might be
helpful in disposing of its ore.
Now that statemeU't was made in 1937. Would the recollection of
that statement in any way modify your previous answer?
Mr. Greene. No ; I said they might be helpful. I stated a moment
ago it certainly wasn't detrimental. What I meant by that was that
we exercise no control or effort in any way to bring any influence on
those steel companies to do business with us. We know that we have
to meet competitive conditions, and we have to serve them as well,
if not better, than our competitors, and I think the two are entirely
compatible. The Cliffs Corporation was formed for the purpose I
stated, and having been formed, we find ourselves tied into that Cliffs
Corporation, and we got those stocks. You read just part of it.
The rest of it shows exactly the point I am going on to make, that we
wanted to hire a young man as analyst to spend all his time in study-
ing these steel stocks from the investment standpoint, and for our own
and confidential use to make a study of them as investments. What I
mean there by contrasting it with an investment trust, an investment
trust buys and sells; now we weren't buying and selling; we simply
held the stocks that we acquired in '29, and we felt it was due to the
stockholders of the Cliffs Corporation to fully inform them about
these companies. That was the introduction to suggesting the
employment of the young man to do that.
Mr. Feller. Would you say, then, that at the present time your
interest in these steel companies in which you hold stock is merely to
• Not introduced for the record.
CONCENTBATION OF ECONOMIC POWER 10269
receive the proportionate share of the profits which your stockholding
represents?
Mr. Greene. T would say that having: them, that that is the
reason. I would say if the cause of the Cliffs Corporation formation
had not existed in 1929 that we would not own those stocks today, or
would not purchase them. And I also think that my statement is
borne out by this fact, that we have since the formation of the Cliffs
Corporation not bought a single share of additional stock in any of
these companies, with the exception of a small amount of rights under
the market that we were awarded a few years ago. So that we had
no intention of carrying on the idea that we bought in '29, or rather —
not bought, they were acquired in that merger; and they have con-
tinued to be held, even though the reason for being so has been done
away with.
Mr. Feller. Then I take it from your statement that your only
interest in these corporations at the present time is to receive dividends
on the stock as dividends accrue?
Mr. Greene. Well, we would be foolish if we didn't have friendly
relationships with companies which we are interested and have
a large investment, to the extent that it is proper. I hoped it would
bring about friendly relations, but I am quite positive, and I speak
from personal knowledge of at least 6 or 7 years, there never has been
any pressure brought on any of those companies to give us business
except as anyone would have obtained it.
Senator King. May I ask a question to determine the relevancy
of this testimony.
I don't quite understand perhaps all of its implications. Was your
corporation, the Cliffs Corporation, organized primarily and solely
in the beginning for the purpose of buying ore and selling ore?
Mr. Greene. Do you mean Chffs or Cleveland-Cliffs?
Senator King. Cleveland-Cliffs.
Mr. Greene. Cleveland-Cliffs and its predecessors go back to,
well, 1845, 1850, and their sole purpose was to mine ore and transport
and sell it, and that has been their primary interest. Any other
things that they go into were due to two things ; first, because we were
pioneers and went up into a wilderness, and second, because there
weren't any facilities up. there and we had to get them. Your ques-
tion leads directly to this: Why do we own timber and have other
interests? Originally the iron was made up in the Lake Superior
region, and there were a great many small charcoal bee hive furnaces,
and then a httle later, as early I tliink as the fifties, they built furnaces
up there, charcoal iron furnaces. Those furnaces consumed a great
deal of hardwood, and in order to have the hardwood, you had to
buy the land. Well, then, quite a good many years later the charcoal
iron goes out of ft^vor, the better made steel took its place, and
Cleveland-CHffs was left with those large holdings of land, and on the
land was the timber.
We developed and went into certain things to use the hardwood. We
used it in our mines, we used it in the wooden ware, and the softwood
we took an interest in, and then mostly disjjosed of it, and the paper
company, and we began to take an interest in the chemical company.
As time went on we lessened rather than broadened our interest in
those things, but they all grew out of the iron-ore business.
10270 CONCENTRATION OF ECONOMIC POWER
Now we had a lot of land with some swift-flowing rivers, and we
developed hydroelectric power for our own use. We were the first
people in this country to use power in a mine. Electricity had been
used for Ughting purposes but not as power. Our plant was originally
only a plant facility. Well, then, the district grew a little bit, other
people wanted that, and we turned it into a pubhc utility. The
same way with the railroad. Originally there was a plank road
with a little 3-ton car pulled by mules down from Ishpeming to Mar-
quette. Later on, in order to furnish better facilities, we built a
railroad in conjunction with one of the Jones & Laughlin's mining
subsidiaries.
You see, all of these things were tied back to the iron ore and the
fact that in order to have the charcoal furnaces up there we needed
land and timber, and that is why the Cleveland-Cliffs, they were a
pioneer and were able to centralize their operations in one place,
they were able to own fees, and they built up this picture because of
that fact, but it all ties back into iron ore.
Senator King. Your company now is primarily an ore-buying and
selling company.
Mr. Greene. Absolutely; yes, sir.
Senator King. Not an investment company.
Mr. Greene. No, sir.
Senator King. You have acquired some stocks in some corporations,
primarily, I suppose, or at least one of the purposes was to widen your
market for sale of your commodity.
Mr. Greene. Yes, sir; that is exactly correct. I am alluding to
Cleveland-Cliffs Iron Co., not Cliffs. That is exactly what happened.
In those days, say 1900 to 1915, the companies weren't as well inte-
grated as they are now, and there were a number of concerns that
wanted to get blast furnaces that didn't have them. Cleveland-Cliffs
was then in a position to finance those and to become partners, in a
way. We helped build, for example, the fiu-nace for the Trumbull
plant at Warren, and took stock in that and received a contract, .
formed with them the TrumbuU-Clifi's Furnace Co., of which we
owned half the stock, as I recall, and they owned half. We made that
investment for the purpose of selling iron ore. As a matter of fact,
I think we acted as a sort of agent in the construction, helped them in
that way, and then helped them run that furnace, as a separate
company.
Central Alloy developed a fine business in alloy steel. They were
buying their pig iron. They wanted to become integrated, so we
offered to help finance them in the same way.
W^ell, they said they would prefer we would take the interest in
stock, so we said all right, and Cleveland-Cliffs took a third interest
in their company and furnished the money to build their blast furnaces
and open hearth.
Senator King. Does the greater part of the iron ore which you sell,
is it mined from your own properties, or from other properties,
properties owned by other companies?
Mr. Greene. It is all mined from our properties, which are owned
considerably more than a majority, in fee. We only operate one
property for others. We are owners of fee to an extent considerably
above 50 percent.
CONCENTRATION OF ECONOMIC POWER 10271
Senator King. What competition do you experience in the selling
of your ores? What competition do you have?
Mr, Greene. We are seUing, for the most part, our own ore.
Practically all of it is our own ore. We are merchants of ore and we
are also the owner of the mineral deposit.
Senator King. Do you have any competition in the purchases?
Are there other corporations mining ores that are in competition with
you in the same markets?
Mr. Greene. Oh, yes, indeed. We are all competitors.
Senator King. That is what I am trying to get at, the extent of the
competition which your company has in finding markets for the ores
which you mine and sell.
Mr. Greene. We have very keen competition with somewhere
between, I should think, eight or nine, all disposing of ore and all of
them, practically all of them, with a great deal of ore.
Senator King. Has there been any effort made by your competition
to fix the price of ore?
Mr. Greene. No. sir.
Senator King. Or to create a monopoly for the mining and the
disposition?
Mr. Greene. We are naturally, like all sellers, all merchants,
taking all the steps we can to get as much money for our ore as we can.
Senator King. And is there competition in that field, Mr. Greene?
Mr. Greene. Very keen competition.
Mr. Feller. Mr. Greene, the purpose of the questioning up until
now was whether these aoquisiuons of stock in steel companies
were made in part in order to enable you to secure a wider market
for your ore. That was the question which Senator King put to you
at the beginning, and I understood you to answer "Yes."
Mr. Greene. Will you repeat that? I didn't get it.
Mr. Feller. Senator King, as I understand it, asked you whether
one of the reasons for the acquisition of these investments in steel
companies w^as to secure a wider market for your iron ore. Is that
correct?
Senator King. That was one of the questions.
Mr. Feller. And I understood you to say "Yes."
Mr. Greene. Senator King's remarks were addressed to the
holdmgs of steel stocks by Cleveland-Cliffs Iron; the matter we were
discussing was the Cleveland-Cliffs ores. The stocks in Cliffs arose
in a different way from those in the Cleveland-Cliffs Corporation, the
story of which I already told you. Does that clear that up?
stabilization and competition
Mr. Henderson. Yesterday, Mr. Greene, you testified, and I think
very well, if I may be permitted to say it, as to the choice which lies
in a period of integration and merger of an independent company,
as to what it shall do to mamtani its place in a period of integration
and merger. Using my own phrasing, you said it had the choice of
either expanding in order to make nearly all the products of its com-
petitors, or of associating itself with a group which would give it a
larger line of products. You felt, on account of the lack of demand
for all the steel capacity that exists in ordinary times, that it was
niucli preferable to go the merger method, and that was, I believe,
J 24491—40 — pt. 18 fj
10272 CONCENTRATION OF ECONOMIC POWER
the route that was to be chosen in the Eaton enterprise and that was
the purpose, was it not, to bring about a large integration which would
make Midwest rank second in the industry?
Now, running through the correspondence and the telegrams which
we had yesterday was this emphasis on the desirability of Cleveland
and Oglebay Norton joining in an effort to stabilize, and the effect
it would have on the stability of price. And then you responded
later, I believe, to a question by Senator King whether this large umt
that might be put together — he asked you whether it would be pro-
motive of competition, and you said, "I think it probably would help
stabilize the steel industry."
Do you have some distinction in j'^our mind between stability and
competition?
Mr. Greene. Yes, yes.
Mr. Henderson. Would you mind
Mr. Greene (interposing). Well, I feel some hesitancy in discussing
the steel business.
Mr. Henderson. You have shown yourself pretty alert about the
steel business so far, Mr. Greene.
Mr. Greene. I think that units that are integrated are better able
to produce a sound economic condition than companies that are on
a very different basis. I think that if you have, I believe, the 10
well-integrated companies would be a great deal better than a hundred
less well-integrated companies.
Mr. Henderson. What would be the difference?
Mr. Greene. I think you have better chances of producing the
goods at a cheaper cost, which benefits the public, permits you to
pay better wages, and makes for the prosperity of this country.
Mr. Henderson. You think, then, that the tendency toward in-
tegration is likely to have a better effect on cost, and I presume you
mean consumer price also.
Mr. Greene. I do.
Mr. Henderson. Than vigorous competition by a hundred small
units?
Mr, Greene. I certainly do. I think the mechanical ability of
this country has produced what we call mass production, production
in large amounts, at lessened cost. I think that is one of the greatest
reasons that we liave prospered in this country. I don't see how we
could go back to small units and experience the benefits we have
got now.
I know very little about those matters, but that is my firm convic-
tion.
Mr. Henderson. Then in this drive toward bringing in a new
large unit in the steel industry, you felt that would get away from
the kind of competition which was unstabiHzing and get toward a
sounder basis of production and price.
Mr. Greene. Well, when you refer to those papers or letters, those
weren't mine. That was before my time, but I agree with just what
you stated.
CONCENTRATION OF ECONOMIC POWER 10273
Mr. Henderson. But you did follow those up. You remember,
as I recall, the memorandum of your conversation with Mr. Girdler
was that [reading!^:
If we were to cooperate with them —
meaning Republic —
in consolidating steel properties, it was only logical and fair for them to cooperate
with us in managing ore properties.
In other words, that was in 1933, as I recall, and you were looking
forward to Republic expanding and getting toward this stabilized
level and your own organization expanding in the matter of ore
properties.
Mr. Greene. My reason for commenting to Mr. Girdler in that
way was a Uttle bit more selfish than that. Cleveland-Cliffs had
acquired, and unwisely, a large interest in Corrigan-McKinney. For
their size thej^ had acquired a 62K-percent interest in a steel company.
We were anxious to have that steel company, whose main product was
semifinished, merchant bars — we were very anxious to get that into
a bigger group, because we were not only financially embarrassed
ourselves at that time, but that company required the expansion
which would take a good many millions of dollars, so we were in the
position of owning something that was sound, excellently located,
would be a valuable addition to a steel company located in that
district, but which, in our hands, was something that we wanted to
convert into another form ^ of investment.
We had acquired a short-time debt of $25,000,000 due to the pur-
chase of that, and it was my job to try to get that funded and then
to try to get it reduced.
At the present time that is largely accomplished so that I was
trying to accomplish a definite thing with Mr. Girdler, which was to
have him take over something I knew was good for him, and at the
same time was a burden for us.
Mr. Henderson. But your group also wanted Otis brought into
Republic.
Mr, Greene. Well, we wanted — we thought that it was a good
thing for Otis, but we did not want to bring the slightest pressure on
them to do it. Let them decide that, because we were on boths sides
of the fence, and felt we ought not to do more than express our opinion
to them. At that time Mr. Mather, you remember, made a statement
of what his opmion was, but said that was all he was gomg to do,
express his opinion, and he and his associates withdrew from that
directors' meeting, so they would not be there when the others
reached that decision, and they decided not to do that.
Mr. Henderson. Let me ask you this, which follows logically, I
think, from what you have said as to the effect of integration on com-
petition and price. Do you feel that the present price of steel is kept
higher than it would be by reason of the fact that there are numerous
small competitors in the industry?
Mr. Greene. Is kept higher, no. I don't.
Mr. Henderson. I thought you said if you had an integrated com-
pany, you would have a lower price.
I Referring to "Exhibit No. 13^," on file with ths committee.
10274 CONCENTRATION OF ECONOMIC POWER
Mr. Greene. I think greater efficiency is generally brought about
by large integrated companies, and I think greater efficiency brings
about a lower price.
Mr. Henderson. That is about the same thing. Say the presence
of a large number of small units, or the absence of a consolidated
integrated company, whichever way you go, leads to the conclusion
that the existing status is responsible for higher prices than would
obtain with an integrated system.
Mr. Greene. As I said before, I am not qualified to answer technical
questions, but let me recite just one or two companies, smaller ones,
that I know something about.
The Trumbull plant bought their pig iron and had to reheat it.
When they built this furnace, that molten metal, stOl called pig
but it is molten metal, is carried right over to the mills and used there.
That meant an immediate saving of one to two dollars in the cost of
every ton in an ingot of steel. That is what I mean by economies of
integration in larger units.
Mr. Henderson. Let me ask you: You have interests in several
steel companies, some of them substantial. Do you think that the
cost of making steel is higher in those companies than it is in Bethle-
hem and U. S.?
Mr. Greene. "Well, I couldn't quote any costs. I have no way of
knowing.
Mr. Henderson. But you have an impression that if you brought
those six together there would be a reduction in price due to the
advantage of integration.
Mr. Greene. I am not making any comparisons of specific steel
companies. I am comparing two companies, one integrated and one
not integrated, and I say the integrated company in my opinion
would be more profitable than the other.
The Chairman. May I interrupt you, Mr. Commissioner, to ask
this question? Mr. Greene, in the light of your experience and
knowledge, both of the ' ore-producing industry and of financial
structure of corporations, do you think it would be desirable now if it
were possible to proceed with the organization of another large
integrated steel company in the manner that you had planned in
1930, when these negotiations were in progress? ;
Mr. Greene. Senator O'Mahoney, I think there would be less
argument for it. I think the principle holds good, but there is less
argument for it on account of the great expansions and additions that
have been made in the meantime.
The Chairman. By whom?
Mr. Greene. Oh, pretty nearlj^ everybody.
Thev have all added to their plants to the extent of many millions.
When I say all, I mean three-quarters of them have. There has
been a very heavy investment in additional facilities in the steel
business; I am quite sure, if you look at the statements of the com-
panies you will find that their plant accounts have all increased.
The Chairman. But your independent concerns, the ones in which
the Cliffs has its investment, are still operating successfully, are
they not?
Mr. Greene. Yes; it doesn't mean that they can't be successful, it is
just a question of
The Chairman. That, I think, is what Commissioner Henderson
was trying to develop, whether or not the integrated company is
CONCENTRATION OF ECONOMIC POWER 10275
likely to be more successful economically in the interests of every-
body concerned, than the small independent concerns, the noninte-
grated concerns. Now I was just curious to know what has transpired
since this attempt was made, and abandoned, to make it undesirable
to proceed and what are the circumstances that seem to make it pos-
sible for the independent companies to continue to operate successfully.
They are economically sound?
Mr. Greene. Economically sound, but I wouldn't say that the
steel business has been profitable in the last 10 years^.
Mr. Feller. May I just clarify something here for a moment?
Is it not a fact, Mr. Greene, that in. 1930 all of these companies which
appear here, Republic, Otis, Wheeling, Inland, Youngstown, were all
integrated companies as that term is known in the steel industry?
Mr. Greene. I am not competent to answer that.
The Chairman. Are they all integrated companies now?
Mr. Greene. I wouldn't say they were completely integrated; no.
I think
The Chairman. But they are not nonintegrated companies?
Mr, AviLD^EN. Mr. Greene, what is your definition of an integrated
company?
Mr. Greene. You are getting over my head. I have stated I am
not a steel man.
Mr. Avildsen. 1 don't see how we will get anywhere talking about
something; if we can't define it.
The Chairman. You said at the opening of this technical discus-
sion that it was your conviction that 10 integrated companies would
operate more successfully in the public interest than 100 nonintegrated
companies?
Mr. Greene. Yes, I said that.
The Chairman. Now, then, you had a definition in mind when you
made that comparison. Just what did you mean by an integrated
company?
Mr. Greene. Mr. Feller asked me to compare specific companies,
which require you to know just what products they are in. You see
what I mean? And I am not able to do that, but what I am speaking
of is a company that has blast furnaces and open hearths, and a reason-
able degree of entry into the various kinds of products. Now when
you get down to the question of the degree of integration, I am not
competent to express any opinion.
Mr. Feller. May I also ask you this, Mr. Greene? You were
talking in terms of profitableness of operations. Is it not a fact that
at least two of the companies which it was contemplated bringing
into this large unit, the Mid- West Steel organization, at least two of
them, Inland Steel — well, at least Inland Steel was one of the most
profitable companies in the business?
Mr. Greene. I think it has a very fine record.
Mr. Feller. You think that the large aggregation which would
liave resulted if Mr. Eaton's plan had been carried through, would have
been likely to be more successful than Inland?
Mr. Greene. Well, I think that the success of the new company
would have been more successful than the average of each of the
component parts, the average.
Mr. Henderson. Mr. Chairman, I have one more question. Mr.
Greene, I understood you to reply to the chairman that conditions
having changed, the strong ijrge which your group had toward
10276 CONCENTRATION OF ECONOMIC POWER
consolidation may not exist today, but regardless of that you found
yourselves, by reason of this exchange of stock, with holdings in several
companies and particularly with Corrigan, and you did, following
along the line of what you thought was sound policy, urge at
times actions which would bring about a larger integration. I mean
that you found yourselves in the position of having the stocks and
since you did have them, you went toward the effective use of them
of course, rather than merely drawing dividends on them. Would
that not have produced in an integrated company that might have
resulted, a different kind of competition from what exists today?
Mr. Greene. I don't think I am competent to 9,nswer that question,
but I would like to call attention that Corrigan, McKinney was
owned by Cleveland-Cliffs, while the other stocks are held in Cliffs
Corporation, but to answer your question
Mr. Henderson (interposing). There was an identity of interests,
was there not?
Mr. Greene. Quite different; you see we had to dispose of one on
account of the financial conditions, and the fact that it was a burden.
Mr. Henderson. Independent of that delicate distinction you
want to make, which is all O. K. with me, the basic question is this,
If what you had been led to believe was a proper thing, development,
of an integrated company had resulted, you would have had a different
situation as far as competition is concerned, would you not?
Mr. Greene. You mean the Cleveland-Cliffs?
Mr. Henderson. Suppose the Republic had been made the basic
unit and the rest had been brought into it. You would have had a
quite different situation, not only as regards competition between the
units that went to make up Republic, but as between Republic and
the rest of the industry, would you not?
Mr. Greene. Well, I don't know as I quite understand.
Mr. Henderson. Well, you have said that probably it would have
helped to stabilize the steel industry, and I understood you to testify
that the presence or the absence of integrated companies did produce
a different kind of competition.
Mr. Greene. I don't recall saying that. I said I thought it would
help to stabilize to have competition of, as I said, 10 integrated com-
panies as compared to 100; I did state that.
Mr. Henderson. It would be different, would it not?
Mr. Greene. I didn't say I thought it would be a different kind of
competition. I think you would still have the keenest kind of compe-
tition if you had 10 companies.
Mr. Ballinger. Mr. Greene, do you get competition when you
get 10 big integrated companies?
Mr. Greene. I think you do. I think you get the keenest kind of
competition.
Mr. Ballinger. Our experience down at the Commission is that
when integration proceeds free and untrammeled and integration sets
in so that the number of competitors is reduced iu industry, all at once
price competition ceases and then we hear arguments from businessmen
that the industry must be stabilized, and then we run across confiden-
tial memorandums in the files of businessmen in which they say they
can't afford competition any more; too big now; be very careful about
competing; they don't want to wreck one another. Now you don't
CONCENTRATION OF ECONOMIC POWER 10277
want to make a statement to this committee that you think there is
price competition in the steel industry today, do you?
Mr. Greene. I am not familiar with it. I would say there is com-
petition in the industry. That would be my personal view.
The Chairman. What do you mean by stabilization?
Mr. Greene. Well, I mean that producing a profit and producing
an article that will render a reasonable profit on invested capital, and
at the same time permit of paying proper wages.
The Chairman. Now how does integration produce stabilization?
Mr. Greene. Well, I was just speaking a minute ago of the case of
Trumbull Steel saving in having a furnace which would save one to
two dollars which it wouldn't have if it just had the mill without the
raw product.
The Chairman. Well, that was a reduction of costs rather than
stabilization, was it not?
Mr. Greene. Well, stabilization permits of an economy in the
production and means profit and generally speaking in industry, in
my opinion reasonable profit produces best results.
The Chairman. Well, now, what would be the effect of integration
upon the price paid by steel companies and received by ore companies
for their products?
Mr. Greene. Well the ore is no different from any raw material
that goes into the finished article. I don't Imow that I understand
the question.
The Chairman. Well, we are talking about integration and its effect
upon stabilization. Now I am proceeding to what you mean by
stabilization so far as the ore producer is concerned. Does that
picture taking bother you?
Mr. Greene. Yes. I am sorry I don't remember the question.
The Chairman. Well, I was asking what in your opinion would be
the desirable effects of integration upon the stabilization of the ore-
producing interests, and what do you mean by stabilization so far as
it affects the producers of ore?
Mr. Greene. Well, I think if it leads to prosperity in the steel
business — if it leads to increased business in steel, why the ore people
will automatically benefit by it.
The Chairman. Do you think that integration produces a better
market for ore?
Mr. Greene. Well, speaking of volume; yes.
The Chairman. I am speaking of volume, too, now.
Mr. Greene. Well, I don't know about price.
The Chairman. Well, I won't anticipate that now. I think Mr.
Feller will be going into that question.
Senator King. Would this be a fair illustration of the steel business?
I give it from my personal experience. When I was a very .young
chap we had a sawmill to produce lumber. We didn't have any
timberlands, and we had to make contracts with persons who owned
the timber to get the logs. We thought they charged too much.
We didn't have the necessary oxen to haul the lumber from the
mountains, and we had to pay too much, as we thought, in order to
get the lumber hauled. Thereupon we acquired the timber ourselves
and we bought oxen and hauled the lumber ourselves. We were thus
10278 CONCENTRATION OF ECONOMIC POWER
integrated and we made a little money, whereas when we had to
depend on all the others we lost. Would that be a sort of illustration?
Mr. Greene. I think it would.
Mr. Feller. Mr. Greene, I should like to look very briefly
Mr. Henderson (interposing). May I ask one more question,
please, before we leave this? In this interchange between Mather
and Oglebay, Norton, in which you had no part, stabilization, a better
price and the like were mentioned in the telegram and letter referred
to. I think Mr. Oglebay testified here yesterday that the}^ had about
$200,000 assets for which you people were willing to pay with stock
having a value of over $1,000,000 for a 66-percent interest. Because
of the pro rata share of the earnings of Oglebay, Norton, you felt this
would be a wise investment. Did you have in mind that you could
get a continuance of that kind of earnings or that you could increase
them by the jointure?
Mr. Greene. Well, I think the acquisition of Oglebay, Norton and
the formation of Cliffs were both due almost entirely to the assump-
tion that that mid western steel company would be formed. That
was the real
Mr. Henderson (interposing). It would help to stabilize price?
Mr. Greene. No; I think it was not that, but the real reason in
my opinion, the unconscious reason here, was the fact that it would
permit of the properties managed by Oglebay, Norton on their part
to have the opportunity, if they chose, to come into the new company
as part of their reserve and as Mr. Oglebay testified
Mr. Henderson (interposing). You think we could safely disregard
the reference to the stabilization of price?
Mr. Greene, I think that when we look back at it now we forget
the atmosphere that existed then, but what they were thinking about
then was the reason I am giving you, and Mr. Oglebay
Mr. Henderson (interposing). It might be "business Hterature"
as a witness testified last week? The president of an insurance com-
pany testified that there were occasiona,l things in communications
which he termed "business hterature" and reaUy were not to be taken
at their face value. ^ Is that what you mean?
Mr. Greene. No; I rnean this, I think Mr. Oglebay expressed it
very well when he said he wanted the opportunity of sitting around
the table and discussing the affairs and relations of the iron ore to
the new company. I think that was what attracted them.
Mr. Henderson. That means disregard the emphasis on stability
of price?
Mr. Greene. I think so.
Mr. Feller. Mr. Greene, I would like to look for a moment very
briefly at your contractual relationships with one or two of the steel
companies which appear on the chart entitled "Financial Connec-
tions." In the case of the Republic Steel Corporation, you had a
long-term contract to supply the Republic Steel Corporation with ore?
Mr. Greene. We have.
Mr. Feller. And you supply Republic with a substantial portion
of their ore requirements?
Mr. Greene. We do.
Included in Hearings, Fart 13.
CONCENTRATION OF ECONOMIC POWER 10279
Mr. Feller. You also have a long-term contract with the Otis
Steel Co?
Mr. Greene. Yes, we have; still running.
Mr. Feller. And you supply them with a very large proportion
of their ore?
Mr. Geeene. Yes; all but what they own themselves, which is
small.
Mr. Feller. You do not, as I understand it, have such long-term
contracts with Wheeling, Inland, or Youngstown; is that correct?
JMr. Greene. We have a long-time contract with Wheeling.
Mr. Feller. You have one with Wheeling, but you do not have
one with Inland and with Youngstown?
Mr. Greene. To Inland we lease a property, etc. and they operate it
under what you might call a long-time contract.
Senator King. Does Wheeling have any ore at aU?
Mr. Greene. Yes; they have interests in ores.
Senator King. In other words, you don't furnish them all the ore,
then, which they use?
Mr. Greene. Oh, no ; they must get it from a number of sources.
Senator King. There is competition in the acquisition of ore§?
Mr. Greene. Keen competition.
Senator King. Would that be true of the Otis?
Mr. Greene. Yes; keen competition.
Senator King. And the Republic?
Mr. Greene. Very keen competition.
Senator King. And the Inland?
Mr. Greene. We don't seU them; we lease them a property that
they desired to operate, which belonged to us.
Senator King. And they operate that themselves?
Mr. Greene. Yes.
Senator King. Excuse me, ^^r. Feller.
Mr. Feller. Mr. Chairman, that is aU I. have to ask Mr. Greene
at this time. I should like to have him stand aside.
Mr. Greene. Mr. Chairman, may I make one correction? I made
the statement yesterday that we were the largest stockholder of
Republic. I am reliably informed that that is not the case; that there
is a stockholder larger than we are, and that our total holding in that
company, according to our records, is 7.8 percent, which I think agrees
exactly
Mr. Feller (interposing). Do you happen -to know who the
largest stockholder is?
Mr. Greene. I couldn't give you the name.
Mr. Feller. Would this refresh your recollection? As I under-
stand it, it is a Dutch group?
Mr. Greene. I think it is; and I want to make a further correction
that I stated we were the largest stockholder of Wheeling. I want to
just amplify that by stating that there are stockholders owning pre-
ferred stock, which as you know is far more valuable than ours, that
are larger than ours, so that while we may be the largest common-
stock holder, it is only a matter of thirty-odd-thousand shares out of
some 577,000; that they have in addition 381,000 shares of preferred,
and our total holding there is only 3.7 percent.
Senator King. In which fields does your company, which mines and
sells ores, operate? Principally in Michigan or Minnesota?
10280 CONCENTRATION OF ECONOMIC POWER
Mr. Greene. We are almost entirely on the Marquette range; we
have 11 mines there and we operate one on the Menominee and one
on the Mesabi in which we are interested, and one which we just
manage.
Senator King. Do you know approximately the number of tons of
ore consumed by the companies that are producing steel in the district
in which you have been operating?
Mr. Feller. Senator King, the bar chart which appears there, and
which you perhaps have before you, and the accompanying table, ^ ^vill
show that in 1937 there were 63,000,000 tons of ore.
Senator King. I wanted to get that in the record. Now the next
question is what proportion of the ore that is consumed does your
company mine and sell?
Mr. Greene. In what year, Mr. King?
Senator King. During the past 2 or 3 years.
Mr. Greene. I have those figures.
Mr. Feller. The record shows that in 1937 the shipments
amounted to 9.1 percent.
Senator King. That is all.
The Chairman. Mr. O'Connell, did you want to ask any questions?
Congressman WiUiams? Mr. Avildsen? Mr. Reynders? May I ask
you just one question before you go and one or two perhaps that may
develop? Your response to a question asked by Senator King was, as
I understood it, that there is keen competition among these various
steel companies in which the Cleveland-Cliffs and the Cliffs companies,
respectively, own a large share of stock?
Keen competition between the steel companies in which you are
interested?
Mr. Greene. I would feel quite certain there is.
The Chairman. In other words, that competition among the Wheel-
ing Steel, Repubhc Steel, Youngstown, and Inland is very keen?
Mr. Greene. Very keen.
The Chairman. And there is no effort upon the part of the joint
stock ownership to control or prevent that competition?
Mr. Greene. None whatever. I can illustrate that by saying that
occasionally we have occasion to buy steel ourselves for our use in the
mines, and so forth, and I want to tell you that the criticism we get
because we can only give it to one company is so immediate and so
very critical that I know there is keen competition.
The Chairman. And you want us to imderstand that the directors
of the Cleveland-Cliffs Iron Co. make no effort to ameliorate that
competition among these companies in which it has a stock interest.
Mr. Greene. They make no such effort.
The Chairman. And the same is true of the CUffs Co.
Mr. Greene. The same is true.
The Chairman. Then is it your advice to this committee, as a
person of prominence in industry, that the competitive system should
be maintained?
Mr. Greene. I certainly think it should.
The Chairman. Do you think it would be inadvisable for Congress,
by law in any way to weaken the competitive system?
Mr. Greene. Well, I think the freedom of business from regulation
is very important, very desirable.
> "Exhibit No. 1352," appendix, p. 10426,
CONCENTRATION OF ECONOMIC POWER / 10281
The Chairman. Well, that isn't exactly the question I asked. I
say, is it ypur opinion that Congress should not pass any legislation
which would tend to weaken the competitive system?
Mr. Greene. I don't know what kind of legislation you refer to,
Senator,
The Chairman. I am not referring to anything in particular, but
we all know that there is an argument going on all through the country
among persons who are thinking about this thing as to the desirability
of competition. Some people have advanced the idea that we have
passed beyond the competitive stage, and that permission ought to be
granted to industrial executives to at least ameliorate competition,
particidarly with respect to prices.
Mr.jGrREENE. Well, I am only expressing my personal views.
The Chairman. Yes, certainly.
Mr. Greene. I feel very strongly that a Government-controlled
economy is a very bad thing.
The Chairman. Thereagainyoudon't answer my question. There
are other ways of controlling an economy besides Government action.
There are some hints that there have been efforts upon the part of
private institutions to control economy, too, so that my question is,
Do you think that the competitive system ought to be maintained?
Mr. Greene. I do.
The Chairman. Regardless. And it ought to be protected from
attack, from whatever source that attack comes, whether it is from
private sources or Government sources.
Mr. Greene. I believe thoroughly in the competitive system -of
business.
The Chairman. Then do you believe in the thorough enforcement
of the antitrust laws?
Mr. Greene. I think I would have to be familiar with all the details
of the law. I am thoroughly in favor of competitive business con-
ditions.
The Chairman. Well, you are thoroughly familiar with details of
the Sherman antitrust law and the Clayton Act and the Federal Trade
Commission Act.
Mr. Greene. Not as a lawyer, I am not familiar with it.
The Chairman. As the ordinary person.
It is your opinion and your advice to this committee that the anti-
trust laws ought to be maintained and be made effective.
Mr. Greene. I would say so.
The Chairman. I just wanted to get your point of view with re-
spect to it because it is a matter of great importance.
Senator King. Do you beUeve competition is better than regimen-
tation?
Mr. Greene. Yes, sir.
Senator King. And you believe the competitive system, while it
may leave some wrecks behind it in the weaker, by and large compe-
tition will solve better than any other plan the economic and indus-
trial problems that we have to meet.
Mr. Greene. I do.
Senator King. Would you say from the experience which you have
had that there is competition in the steel industry?
Mr. Greene. I would say there is very keen competition.
10282 CONCENTRATION OF ECONOMIC POWER
Senator King. You stated that there is competition in the selling of
ores, and you only sell, as I understand it, 9.1 percent of the ores in
the area to which counsel have referred.
Mr. Greene. I want to correct that. We don't sell 9.1 percent.
That is the shipments, and those shipments are made up of three
items — our own ores, the ores that are mined from properties we lease,
and what we mine from partners. Am I correct, Mr. Feller?
Mr. Feller. That is right.
Mr. Greene. So that probably the amount that we sold in that
one, which is maybe the second biggest year in the industry, was
about 6 percent, or only about two-thirds of the 9.1. The 9.1 in-
cludes ore that actually belongs to six or eight different steel com-
panies. It is their ore.
Senator King. Was their competition among the purchasers of
ores and the owners of property with respect to the acquisition of
ores?
Mr. Greene. Keen competition.
Senator King. You had competition?
Mr. Greene. Absolutely.
Senator King. Did you have to compete to sell the 6 percent to
which you have referred?
Mr. Greene. Yes, sir. You have to work from Monday morning
till Saturday noon.
Senator King. Some of the steel companies, I presume, from your
testimony, own their own ore deposits?
Mr. Greene. Oh, they own maybe — I think the figures that were
given here by Mr. Hoyt showed that the steel companies own about
five-sixths of the ore.
Senator King. If the prices which you and others who are mining
ore for sale to sellers were too high, were higher than the steel com-
panies believed warranted, would they mine their own ores? ,
Mr. Greene. Certainly they would.
Senator King. What proportion of the ores consumed by them are
mined by these companies named upon the chart here?
Mr. Greene. Well, now, do you mean mined by them, or do you
mean shipped? This chart here is the shipment of ores.^
Senator King. I am speaking of mining.
Mr. Greene. I can only give you, as I state, our figures. Our
figures are that out of the 9 percent, we sold about two-thirds of it,
and the other third is divided between mines we lease and mines we
manage for steel company ownership. About 3 percent of it was due
to those two causes.
Senator King, The other 91 percent of the ores which are consumed,
by whom are those ores mined?
Mr. Greene. Well, five-sixths of them belong to the steel com-
panies, and one-sixth of them belong to the other merchant dealers
in ore.
Senator King. So that in selling the ores which you mine and which
you handle, that is the 6 percent, you are in competition with the
mine owners who own five-sixths of the ore deposits and mine the same.
Mr. Greene. That is correct. If we go over a period of 30 years,
our shipments all together are 6.4, and I think our own interest over
30 years is a trifle under 5 percent.
« Exhibit No. 1351, appendix, p. 10425.
CONCENTRATION OF ECONOMIC POWER 10283
Senator King. Then you have to compete in the selling of your
6 percent with the mine owners who own five-sixths of the ores
themselves.
Mr. Greene. We compete with the other merchant sellers.
Senator King. And all of you, of course, compete with the mine
owners. That is to say, they have the deposits, and if your prices
are too high, presumably they would mine them themselves, and they
do mine some, as I understood you.
Mr. Greene. You are competing with those steel companies that
have ore reserves in excess of their needs, plus the merchant sellers.
There are notable cases of companies whose reserves exceed their
needs.
Mr. Henderson. Taking this 6 percent, if you isolate Oliver which
does not sell in competition with merchants, you have about 10 percent
of the free market. Oliver takes about 42 percent of production, to
be compared with your 6 percent.
Mr. Greene. On the assumption that they have, that would be
about right.
Mr. Henderson. One other question. You mentioned the example
of when you buy steel— do you get bids on that, when you buy steel
for the iron company?
Mr. Greene. I am quite sure we check the prices.
Mr. Henderson. Are they all alike?
Mr. Greene. No. I am not personally familiar with that. We
have a buying department, and they go into it very thoroughly. We
have a competent man that does that.
Mr. Henderson. You mean the basing pomt price is not followed.
Mr. Greene. I couldn't tell you that.
Mr. Henderson. If you can't tell me, I will abandon that line of
examination.
Mr. Feller. May I say, Mr. Chairman, that there will be a great
deal of testimony in this hearing with respect to steel prices and this
afternoon we hope to begin taking testimony with respect to that.
The Chairman. In other words, questions from the committee
with respect to price structures are a little bit premature.
Mr. Greene, you may stand aside.
Call the next witness, please.
Mr. Feller. Mr. George Humphrey, please.
The Chairman. Do you solemnly swear the testimony you are
about to give in this proceeding shall be the truth, the whole truth,
and nothing but the truth, so help you God?
Mr. Humphrey. I do.
TESTIMONY OF GEORGE M. HUMPHREY, PRESIDENT, M. A.
HANNA CO., CLEVELAND, OHIO
Mr. Feller. Will you give the reporter your full name and the
company with which you are connected, and your position with that
company?
Mr, Humphrey. George M. Humphrey, president of the M. A.
Hanna Co., Cleveland.
Mr. Feller. You a,re also a director and chairman of the execu-
tive committee of the National Steel Corporation?
Mr. Humphrei. I am.
10284 CONCENTRATION OF ECONOMIC POWER
Mr. Feller. Could you iA\ us something very, very briefly, of the
history, of the M. A. Hanna Co.?
Mr. Humphrey. The M. A. Hanna Co. was a partnership formed
in the late sixties and has carried on in the iron ore, coal, and in-
vestment business ever since that time.
FORMATION OF THE NATIONAL STEEL CORPORATION
Mr. Feller. When was the National Steel Co. formed?
Mr. Humphrey. 1929.
Mr. Feller. At that time, in 1929, is it correct to say that M. A.
Hanna Co. was engaged in owning and operating iron-ore mines?
Mr. Humphrey. At that time M. A. Hanna Co. owned merchant
blast furnaces,, made and sold merchant pig iron, and owned ore
mines.
Mr. Feller. You also at that time owned a fleet of boats operat-
ing on the Great Lakes?
Mr. Humphrey. That is right.
Mr. Feller. At the present time what are your approximate
assets?
(Senator King assumed the Chair.)
Mr. Humphrey. I think about sixty million.
Mr. Feller. Could you tell us what your functions are today in
contradistinction to your fimctions in 1929?
Mr. Humphrey. Well, in 1929, when National Steel Co; was formed,
our assets that related to the iron ore and pig iron business were turned
over to National Steel, and we took stock for those assets, in National
Steel. We became the raw material department of the National Steel
Co., and National Steel engaged the Hanna Co. to operate and handle
their raw material properties.
Mr. Feller. You act, with respect to National Steel, very much as
Oliver acts with respect to U. S. Steel?
Mr. Humphrey. I don't know just how Oliver acts. We operate,
as far as National Steel is concerned — the ore mines and the vessels
for them.
Mr. Feller. National Steel owns no stock in M. A. Hanna?
Mr. Humphrey. It does not.
Mr. Feller. But M. A. Hanna owns quite a substantial block of
stock in National Steel?
Mr. Humphrey. That is correct.
Mr. Feller. You are the largest stockholder?
Mr. Humphrey. I believe so.
Acting Chairman King. You got that stock from the sale of assets
of the Hanna Co.?
Mr. Humphrey. That is correct. Senator, and we have held it
ever since.
Mr. Feller. To clarify this matter just a bit, could you tell us
something of the formation of National Steel, what units went into it?
^Ir. Humphrey. Well, in 1929 we had a merchant pig-iron business
and we had more ore than we used in our own furnaces, and sold ore to
other customers. We had a pig-iron business in Detroit. George
Fink had a sheet-steci business in Detroit, and we decided that would
be a wise thing to build a steel plant in Detroit which would take our
pig iron and supply the steel for Mr. Fink's sheets.
CONCENTRATION OF ECONOMIC POWER 10285
Mr. Feller. You were also interested in Mr, Fink's business in
Detroit?
Mr. Humphrey. We were, and we together formed the Great Lakes
Steel Co., which was the connecting link between our pig iron, our
iron ore, and his finished sheets.
Mr, Feller. And there were at that time, in 1929, three companies,
the Great Lakes Steel Corporation in Detroit, in which you and Mr.
Fink were interested, the M. A. Hanna Co., operating iron ore mines,
and blast furnaces, and thirdly the Weirton Steel Co.?
Mr. Humphrey. Weirton Steel Co. was one of our largest customers
for iron ore. We supplied them with iron.
Mr. Feller. Was Mr. Weir the head of the Weirton Steel Co. at
that time?
Mr. Humphrey. He was.
Mr. Feller. And the merger brought about National Steel, and
consolidated these three interests, Great Lakes Steel, the iron ore
properties and blast furnaces of M. A. Hanna, and the properties of
the Weirton Steel Co.?
Mr. Humphrey. Each of those units, you see, was supplementary
to the other unit, and we found that by putting those supplementary
units together in a single company we would have a stronger, better
company group than we had as independents.
Acting Chairman King. Did the identity of those two companies,
when the consolidation took place, cease?
Mr. Humphrey. No; the identity is maintained.
Mr. Feller. Could you tell us the approximate market value of
your investment in National Steel?
Mr. Humphrey. Today?
. Mr. Feller. Yes.
Mr. Humphrey. I don't Imow that I could.
Mr. Feller. Would it be in excess of 45 millions?
Mr. Humphrey. I don't know. You can figure it out; there are
approximately 600,000 shares. I don't pay any attention to the
market.
Acting Chairman King. Has the Hanna Co. any assets whatever
except the 600,000 shares of stock to which you have referred?
Mr. Humphrey. Oh, yes; we have other business. We have a
larger volume in the coal business than we have in the iron-ore busi-
ness. We are engaged in other lines of activity besides.
Mr. Feller. You also manage some mines which are owned by
yourself and some mines which are owned by steel companies other
than National Steel?
Mr. Humphrey. Only mines in which the National Steel has
interest. There are some mines in which National Steel has interest
with others.
Mr. Feller. And do you also act as National's exclusive sales agent
for all the ore produced above the requirements of National Steel?
Mr. Humphrey. We do.
Mr. Feller. Mr. Humphrey, 1 should like to show you an exchange
of correspondence which appears to be between you and Mr. Ernest
Weir. Who is Mr. Weir?
Mr. Humphrey. Mr. Weir is the chairman of National Steel.
10286 CONCENTRATION OF ECONOMIC POWER
Mr. Feller. These documents were taken from your file. Will
you please identify them? They have your initials typed on the
bottom. One of them is addressed to you. They are from your files?
Mr. Humphrey. Yes; I recognize them.
THE ROWE MINE
Mr. Feller. Mr. Humphrey, these three letters deal Vith a mine
called the Rowe mine. They are dated, respectively, August 14, 1930,
November 5, 1930, and November 7, 1930. Do you have^n}'- recol-
lection of the transactions involving the Rowe mine at that period?
Mr. Humphrey. Yes; I do.
Mr. Feller. Could you tell us something about it?
Mr. Humphrey. The Rowe mine is a very low grade property.
It has a fairly substantial tonnage of somewhat questionable ore
that has to be beneficiated and requires a substantial plant develop-
ment and a good deal of experimentation to know whether or not it
can ever be made merchantable.
We own — we have bought — something more than half of the fee
which we own that we regard as a possibility for ore many years
hence.
Acting Chairman King. The ore is refractory r
Mr. Humphrey. It is all mixed up with chert and rock, and it has
to be separated from the rock to be of any use whatever.
Acting Chairman King. Is it in Michigan?
Mr. Humphrey. It is in Minnesota. It is a very difficult thing
to do.
Mr. Feller. Merely for the record, Mr. Humphrey, one of these
letters says you owned a six-sixteenths interest.
Mr. Humphrey. I should think that would be about it.
Mr. Feller. Do you recall an offer made by Butler Bros. Mining
Co., with offices in St. Paul, to operate the mine?
Mr. Humphrey. Well, Butler Bros, never talked to us on the sub-
ject. There was another man in Duluth who came to us and said that
he thought Butler Bros, might be interested to develop that property
if we would be interested to lease our part portion of it.
Mr. Feller. May I read yo"u a paragraph from the letter dated
November 5, 1930, written by you to Mr. Weir: ^
Mr. Crosby, of Duluth, came down to see us yesterday to try to induce us to
join with him and other fee owners in making a lease of the property in which we
own a six-sixteenths interest, and he and his associates own the balance adjoining
the Rowe mine. They have agreed with Butler Brothers on a 45-cent royalty
compared with 20 cents to 25 cents which were offered them, and very high
minimals as compared to our offer of very nominal minimals for the next ten
or fifteen years.
Is it correct to say that at that time you understood that Butler
Bros, had come to some sort of agreement?
Mr. Humphrey. That letter says that Mr. Crosby told us that, and
I have no doubt that that is correct .
Mr. Feller. What was your attitude v,^ith respect to the operation
of this mine biy Butler Bros.?
Mr. Humphrey. I didn't want to see it opened. I thought it was
very inopportune to open that property, that that property shouldn't
be opened for 20 years.
1 Not introduced for the record.
CONCENTRATION OF ECONOMIC POWET? 10287
Mr. Feller. Could you tell us why?
Mr. Humphrey. Because of the character of the ore and the
difficulties of doing it. It is a very difficult thing to do, and I think
very foolish to open that sort of property at this time.
Mr. Feller. You thought, in other words, that Butler Bros., if
they were to open that mine, would probably lose money?
Mr. Humphrey. I didn't know whether they would or not. I
don't know myself of any way of operating the property now.
(Senator O'Mahoney resumed the Chair.)
Mr. Feller. I should like to read you a letter dated November 7,
1930,^ addressed to you and signed "Ernest." "Ernest" would be
Mr. Ernest T. Weu-?
Mr. Humphrey. That is right.
Mr. Feller. The letter reads as follows (reading) :
I haye read with interest j'our letter of the 5th relating to the possible activity
of Butler Brothers on the Ciiyuna — •
The Cuyuna is the range on which this mine is located?
Mr. Humphrey. That's it.
Mr. Feller (reading):
Certainly hope you can persuade them to withhold development, because I am
afraid there will be too much ore over the next year and possibly two, and once
they develop they will want to sell it.
Another reason why they should not want to do anything to crowd the market
is that it would certainly affect the price of the ore they are now producing. .
Mr. Humphrey. If you will read, Mr. FeUer, the other letter, you
will see my reasons for not wanting to do it.
Mr. Feller. I think that should be read. The letter of November
5,' which Mr. Humphrey wrote to Mr. Weir, reads, in part, as follows
(reading) :
We explained to Mr. Crosby that this was a most inopportune time to open
another property, that we not only wanted to reserve our own ore for years to
eome, but we did not want any operation to raise o"ur taxes on our adjoining land
so as to force us to open them in the near future, that if we did so, we might have
to cancel some of our other properties which we hold from him, which would be a
very serious matter for him, and urged him to go back to Butler Brothers and get
them to postpone any activity for at least five years, stating that we would work
with them if they were short of ore in the meantime to take care of their require-
ments on some of the property which we now have operating on some fair ex-
change basis, to be paid back later.
Mr. Humphrey. You see, this is an unmerchantable property, and
it would be very bad to start.
Mr. Feller. As I understand from this correspondence, and check
me up on this, you told Mr. Crosby first that this would be a most
inopportune time to open another property; secondly, that you did
not want any operation to raise your taxes on adjoining land. Isn't
that a fair statement?
Mr. Humphrey. That is correct. The rule of taxation in Minne-
sota is that unmerchantable idle property takes one rate of taxation,
and merchantable property takes another.
Mr. Feller. There is nothing in this letter which gives as a reason
the fact that the ore was of low grade and could not profitably or
properly be operated.
•Not introduced for the record.
124491— 40— pt. 18 6
10288 CONCENTRATION OP ECONOMIC POWER
Mr. Humphrey. Mr. Weir knew that just as well as I did. Every-
body knows that.
Mr. Feller. In other words, this letter doesn't tell the whole story.
Mr. Humphrey. He knows it. He knows just as much about the
property as I do.
Mr. Henderson. May I ask a question there? When you say
unmerchantable, what does that mean?
Mr. Humphrey. It means that the iron content of this ore in the
ground is very low, and it is mixed up with rock and dirt, and to make
it of a grade that you can ship to use in a blast furnace, you have to go
through an elaborate mechanical process that will separate that rock
and dirt from the iron ore so as to raise the iron content sufficiently to
make it worth while to ship.
Mr. Henderson. And it is your opinion that this is unmerchant-
able?
Mr. Humphrey. It is definitely.
Mr. Henderson. Does Butler Bros, consider it unmerchantable?
Mr. Humphrey. I think so. Their only hope would be that they
could build a plant and devise some means of separating it to make a
merchantable product out of it. We, as I say, know of no way of
doing that. They perhaps did. I don't know.
Mr. Henderson. Are they fairly well experienced in the business?
Mr. Humphrey. Oh, yes; they are good operators.
Mr. Henderson. So this question of whether it is unmerchantable
or not is a difference of opinion between your company and Butler
Bros.
Mr. Humphrey. There is no question about the unmerchantability
of the ore. It is an unmerchantable ore. The only question of
opmion would be whether they could devise some means of treating
it so as to make it merchantable, and we weren't smart enough to
devise any. They were discussing it.
Mr. Feller. May I say some of the partners of Butler Bros, will
be on the stand shortly.^ The question might be addressed to them.
Senator King. They haven't developed it, have they?
Mr. Humphrey. No, sir.
Senator King. Or found anybody to develop it.
Mr. Humphrey. No, sir.
Senator King. There was an abundance of ore then on the market
with a higher iron content than this.
Mr. Humphrey. That is correct.
Mr. Feller. In view of the fact that it is very questionable as to
whether this ore was merchantable, could you explain Mr. Weir's
statement in the letter to you that he is afraid tha.t once they develop,
they will want to sell it, and they should not want to do anytliing to
crowd the market, since it would certainly affect the price of the ore
they are now producing.
Mr. Humphrey. If they went in there and invested what they
would have to invest, which would probably be several million dollars,
they would have to go ahead and operate. You can't go into a
property and open it, even thoygh it is a mistake, and spend all that
money, and not have to go ahead and try to get it back, and this
was not a good time to do anything of that kind.
' p. 10290 etseq.. Infra.
CONCENTRATION OF ECONOMIC POWER 10289
Mr. Feller. Mr. Weir's company is primarily interested in the
matter of ore as a purchaser, is it not, as a consumer of ore?
Mr. Humphrey, National Steel consiunes ore. It produces all of
its own ore, and sells some.
Mr. Feller. Can you explain to us why Mr. Weir should be
concerned that the price of ore might go down in consequence of the
operation of the Rowe mine?
Mr. Humphrey. National Steel Co. is a large owner of ore and is
desirous of getting as much for its ore as it can.
Mr. Feller. That is all, Mr. Humphrey.
The Chairman. Are there any questions to be asked of Mr.
Humphrey by members of the committee?
Senator King. At that time, as I understood you, there was an
abundance of ore from various companies available for blast furnaces
and for the steel industry.
Mr. Humphrey. And of very much better quaUty than this.
Senator King. Could it be mined much cheaper?
Mr. Humphrey. Yes, sir.
Senator King. I suppose iron ore is very much like copper ores
and others, where you have a variety of geological formations, so
that the ore veins have been shaken up and a lot of detritus and
materials are thrown into the entire mass, so that to separate and get
the wheat from the chaff is an almost impossible task, or at least one
that involves large expense.
Mr. Humphrey. And it is very difficult, very expensive to do it.
Mr. O'Connell. I understand the proposal was that Butler Bros,
would invest their money and attempt to develop this low-grade ore.
Mr. Humphrey. That was the suggestion that was brought to us,
and we did not care to participate.
Mr. O'Connell. You wouldn't have had to participate.
Mr. Humphrey. Yes; they wanted to take our property, and we
said we were not interested to go along with them.
Mr. O'Connell. Would you have participated in the operation in
a financial way, had Butler Bros.' plan gone through?
Mr. Humphrey. We would have leased them our property, and
they would have had to pay us, and we didn't care to take that chance.
Mr. O'Connell. You didn't care to let them risk their money?
Mr. Humphrey. It was their money and our money, both. We
didn't care to have this property opened and have it become on the
active list, an active operation, so it would be a burden to us, with
Butler Bros. obUgated to pay us royalty. If it came back to us it
would be a burden to us, and it would have come back to us if they
couldn't have made this arrangement pay.
Mr. O'Connell. It would have come back to you in no worse con-
dition than it left you.
Mr. Humphrey. I don't know.
The Chairman. It would have come back to you taxable at the
higher rate, and not the lower.
Mr. Humphrey. And partially opened, and nobody knows in what
condition.
Mr. Henderson. The reason Mr. Weir urged on you was that if
that ore came on the market, it would tend to disrupt the price at
wliich ore was sold.
10290 CONCENTRATION OF ECONOMIC POWER
Mr. Humphrey. It would be that much additional ore, and prob-
ably be a poor grade.
Mr. Henderson. Well, if it were a poor grade, would it affect the
price of your higher-grade ore?
Mr. Humphrey. You can judge that as well as I.
Mr. Henderson. I cannot, Mr. Humphrey, because I am not an
ore man.
Mr. Humphrey. I was going to give you the figures, Mr. Hender-
son. You misunderstood. This property would probably produce
from two hundred fifty to three hundred thousand tons a year in a year
that would — you know what our figures run, somewhere from thirty to
sixty five million tons. To that extent it would have had an effect
on price.
Senator King. Suppose the operation had proven a failure and ob-
ligations had been incurred buying machinery and developing me-
chanical processes for the separation of the ore, the property might
have been subjected to lien and you, being the owner of the property,
would have had litigation to protect your interests.
Mr. Humphrey. That is right; we would.
The Chairman. Thank you, Mr. Humphrey.
(The witness, Mr. Humphrey, was excused.)
Mr. Feller. I should now like to call, Mr. Chairman, Mr. JDmmett
Butler.
TESTIMONY OF EMMETT BUTLER, PRESIDENT, BUTLER BROS.,
ST. PAUL, MINN.
The Chairman. Do you solemnly swear that the testimony you
are about to give in this proceeding shall be the truth, the whole
truth, and nothing but the truth, so help you God?
Mr. Emmett Butler. I do.
Mr. Feller. Y7ill you give the reporter your full name and the
company with which you are connected?
Mr. Emmett Butler. Emmett Butler, president of Butler Bros.
Mr. Feller. What is Butler Bros.?
Mr. Emmett Butler. Butler Bros, is a mining company.
Mr. Feller. And your offices are located in Minneapolis?
Mr. Emmett Butler. St. Paul.
Mr. Feller. St. Paul, I am sorry. That is a very bad slip. Could
you tell us just a little bit about the history of your company, Mr.
Butler?
Mr. Emmett Butler. We originated as general contractors, build-
ing work, ffaally as contractors for the removal of overburden in the
mining of iron ore, for mining companies, and then took mining leases
and mined and sold the ore that was produced from the mines.
Mr. Feller. Do you have any financial connections with any steel
company?
Mr. Emmett Butler. We do not.
Mr. Feller. You own no stock in any steel company?
Mr. Emmett Butler. I may own some personally, a few shares.
Mr. Feller. Your company owns none?
Mr. Emmett Butler. None.
Mr. Feller. In your opinion, if you owned substantial blocks of-
stocks in steel companies, would it make it easier for you to sell your
ore to those steel companies?
CONCENTRATION OF ECONOMIC POWER 10291
Mr. Emmett Butler. I don't know.
Mr. Feller. Do you have smj difficulty in getting contracts with
steel companies for the sale of ore?
Mr. Emmett Butler. Well, we don't have any more difficulty, I
don't think, than is general to sell a product. We have difficulty,
we are not able to sell our entire capacity output at times. Some-
times we do.
Mr. Feller. Mr. Butler, with which company do you have your
most important contracts for the sale of ore?
Mr. Emmett Butler. Well, that is a little hard to say. There
are two or three important outlets, for our ore.
Mr. Feller. You have a long-term contract for the sale of ore to
Pickands, Mather & Co.?
Mr. Emmett Butler. Pickands, Mather & Co. acts more or less
as our ore agent, I would say, to different companies.
Mr. Feller. About what proportion of your output is sold to
Pickands, Mather?
Mr. Emmett Butler. Roughly a third, I should say.
Mr. Feller. According to the figures which you submitted to us,
in 1937 the proportion of sales made to Pickands, Mather was about
50 percent.
Mr. Emmett Butler. They may vary from year to year.
Mr. Feller. They may vary from year to year.
Senator King. Pickands, Mather & Co. buy and sell ore, do they
not?
Mr. Emmett Butler. Yes; I would say so.
Mr. Feller. Mr. Chairman, I should like also to call Mr. Patrick
Butler at this time.
* TESTIMONY OF PATRICK BUTLER, BUTLER BROS., ST. PAUL,
MINN.
The Chairman. Do you solemnly swear that the testimony you
are about to give shall be the truth, the whole truth, and nothing
but the truth, so help you God?
Mr. Patrick Butler. I do.
Mr. Feller. Mr. Patrick Butler, will you give your full name?
Mr. Patrick Butler. My name is Patrick Butler.
Mr. Feller. And you are connected with Butler Bros.?
Mr. Patrick Butler. I am an executive of Butler Bros. I am
the son of Emmett Butler.
pickands, MATHER-BUTLER BROS. ORE CONTRACT
Mr. Feller. Mr. Emmett Butler, the contract that you have with
Pickands, Mather & Co. provides, does it not, that the Pickands,
Mather Co. has the exclusive right and option to purchase in each
and any year, any surplus tonnage which Butler Bros, may have
available and can ship from said property or any of them, over and
above the tonnages therefor covered by the outside contracts herein-
before mentioned. Is that correct?
Mr. Emmett Butler. With the property, certain subscribed pref-
erences. That is correct.
10292 CONCENTRATION OF ECONOMIC POWER
Mr. Feller. In other words, Pickands, Mather & Co. has an option
to purchase your surplus tonnage above the contracts which you had
at that time for the sale of certain properties?
Mr. Emmett Butler. That is correct.
Mr. Feller. Mr. Patrick Butler, when your company entered into
this contract with Pickands, Mather & Co. did you have any opinion as
to why Pickands, Mather & Co. took this option to purchase your
surplus tonnage?
Mr. Patrick Butler. Why I gather that it was to insure themselves;
it was additional reserve of iron ore.
Mr. Feller. May I show you this letter? This letter is to Mr.
Emmett Butler, signed by you, and dated September 4, 1928, taken
from your files. Do you identify it?
Mr. Patrick Butler. Yes.
Mr. Feller. I offer this for the record.
(The letter referred to was marked "Exhibit No. 1362" and is in-
cluded in the appendix on p. 10435.)
The Chairman. It will be received.
Mr. Feller. I will read the first two paragraphs of this letter.
[Reading:]
I talked with Hoyt this afternoon relative to our counterproposal.
The minimums and maximums as you suggested are agreeable to him. How-
ever, he wants first call on any additional tonnage our present properties might
show up. This is to keep us out of the market as much as possible. This first
call means that should we feel we ought to produce more, or that we are in a
position to take on additional contracts, that we should offer the ore to them
before we do so to anyone else.
Will you explain what you meant by this sentence: "This is to keep
us out of the market as much as possible."
Mr. Patrick Butler. That, of course, was a surmise on my part.
Although the letter says it was not, it must be surmise. I can't
testify as to what their intentions were in calling for optional tonnage.
It may have, been a collateral advantage to them in making the deal
with us. It may have been, as I say, that it would tend to keep us
out of the market.
Mr. Feller. If your company were free to sell this surplus tonnage
to any purchaser and if you offered it at a price below the market
price, then under this contract Pickands, Mather & Co. could exercise
its option and control that part of the ore v^hich you were willing to
sell below the market price?
Mr. Patrick Butler. If we felt as though we wanted to sell addi-
tional ore from the surplus ore, so to speak, at a price, at any price,
we would have to give Pickands, Mather & Co. a refusal at the price
we were willing to sell. It is definitely so stated in the contract.
Mr. Feller. Doesn't it follow, then, that Pickands, Mather & Co.
has the power under this contract to prevent you from selling below
the market price with respect, that is to say, to ore which is additional
to that now in the contract?
Mr. Patrick Butler. Definitely not.
Mr. Feller. If they wanted to they could take the ore off your
hands and you couldn't sell it to someone else at a lower price, is that
correct?
Mr. Patrick Butler. They could buy the ore from us at the price
we were willing to sell it. Naturally we wouldn't have the ore to sell.
CONCENTRATION OF ECONOMIC POWER 10293
Mr. Feller. Can you explain the basis of your surmise that
"this is to keep us out of the market as much as possible." How
would it help Pickands, Mather & Co. to keep you out of the market
as much as possible?
Mr. Patrick Butlek. They would only be helped as other iron
ore merchants would be helped in that there would be less ore offered
on the market.
Mr. Feller. And you thought it would be to their interest to have
less ore offered on the market?
Mr. Patrick Butler. I would think so; yes.
Mr. Feller. Was that the basis of your surmise?
Mr. Patrick Butler. I think it was; yes.
Mr. Feller. Just to clear up the matter with respect to which
Mr. Humphrey testified a few minutes ago, Mr. Emmett Butler,
did you enter into negotiations with respect to the Rowe mine in 1930?
Mr. Emmett Butler. No; no negotiations were considered. A
sum was offered to me, I think, but I did not seriously consider it,
as I recall.
Mr. Feller. Would you say, then, that Mr. Humphrey was mis-
taken when he said that there had been an agreement with Butler
Bros, on the royalty?
Mr. Emmett Butler. I would definitely say he was mistaken.
Mr. Feller. Would you say that, too?
Mr. Patrick Butler. Yes.
Mr. Feller. That is all I have at the moment.
(Senator King assumed the Chair.)
Acting Chairman King. Just one other question. Was it custom-
ary among the four purchasers and the ore sellers to make contracts
to acquire all of the output of a given vendor with the provision that
if the amount exceeded a given standard that the purchaser, or the
seller, would have an option upon the residue? That is to say, if a
man made a contract to purchase, say 50,000 tons, mined by the Rowe
mine, might the contract provide that if there were more than 50,000
tons mined, that he would have the opportunity to buy the residue?
Mr. Patrick Butler. Yes.
Acting Chairman King. And that was the contract you had, as X
understand it, it didn't preclude you from selling the rest of the ore
at any price that you pleased.
Mr. Patrick Butler. That is right.
Acting Chairman King. But the person with whom you had the
contract had the call on the ore.
Mr, Patrick Butler. That is correct.
Acting Chairman King. Isn't that common in business, you would
buy a clip and the understanding is, or the expectation is that the clip
will be, say, a million pounds, but the contract provides that if there
is any tiling more than a million pounds, the purchaser shall have
the option to buy the residue?
Mr. Patrick Butler. That is right.
Mr. Feller. Mr. Emmett Butler, are you aware of any other con-
tract in the iron ore business which has a provision similar to the option
provision in your contract with Pickands, Mather & Co.?
Mr. Emmett Butler. I am not at the present time.
Mr. Feller. Mr. Patrick Butler?
10294 CONCENTRATION OF ECONOMIC POWER
Mr. Patrick Butler. I can't recall at the present time. We have
had contracts which called for the output of all the ore in a mine.
Mr. Feller. Mr. Chairman, this concludes the portion of the testi-
mony on the iron-ore business which elucida-tes the position of the
various iron-ore companies and various steel companies. We wUl
proceed, and perhaps it might be advisable to proceed after recess.
[Laughter.]
(Senator O'Mahoncy resumed the Chair.)
Mr. O'CoNNELL. Will you repeat that for Senator O'Mahoney,
please?
Senator King. It was stated that the testimony on the iron-ore
business was concluded and you suggested we take a recess.
Mr. Feller. Not with respect to iron ore but wdth respect to that
portion of the testimony on iron ore which deals with the position of
the individual companies and relations between certain of these com-
panies and the steel companies.
The Chairman. Do any of the committee members desire to address
any inquiries to either of these witnesses?
Mr, Feller. Mr. Chairman, after the recess I should like to call
all of the witnesses who have testified up to this point. In other
words, there wiU be six.
The Chairman. Very well. The committee will stand at recess
until 2:15,
(Whereupon at 12:10 p, m, a recess was taken until 2:15 of the
same day,)
afternoon session
The hearing was resumed at 2:40 p. m. upon the expiration of the
recess.
The Chairman. The committee will please come to order.
Mr. Feller. I would like to recall the six gentlemen who have
already been sworn in.
Mr, Hoy t, Mr. Greene, Mr. Humphrey, Mr. Oglebay, Mr. Emmett
Butler, Mr. Patrick Butler.
TESTIMONY OF E. B. GREENE, PRESIDENT, CLEVELAND- CLIFFS
IRON CO., CLEVELAND, OHIO; ELTON HOYT, II, MANAGER AND
PARTNER, PICKANDS, MATHER & CO., CLEVELAND, OHIO;
GEORGE M. HUMPHREY, PRESIDENT, M. A. HANNA CO.,
CLEVELAND, OHIO; EMMETT BUTLER, PRESIDENT, AND PAT-
RICK BUTLER, BUTLER BROS., ST. PAUL, MINN.; CRISPIN
OGLEBAY, PRESIDENT, OGLEBAY, NORTON & CO., CLEVELAND,
OHIO — Resumed
The Chairman, Are you ready to proceed?
Mr. Feller. Mr. Chairman, yesterday and this morning we were
discussing the individual situation of these companies and their
relation to each other. I should like to go into the relationships, if
any, which exist among the ore companies, and then go on to the
question of price of iron ore.
Mr. Greene, I show you that letter, which purports to be signed by
you, taken from the files of your companv. Will you identify it,
please?
CONCENTRATION OF ECONOMIC POWER 10295
Mr. Greene. Yes. I identify it.
Mr. Feller. I offer this for the record.
The Chairman. Will you read the date of the letter?
Mr. Feller. The letter is addressed to Mr. Humphrey, and is
dated September 19, 1934, signed by Mr. Greene. The letter reads
as follows:
Many thanks for your note regarding Alec. I am very much pleased to find
that such men as yourself, Leonard, Elton, and others have been pleased by the
appointment and so sincerely welcome Alec into our "union".
I am glad that the iron ore business is so largely in the hands of a small group
of men who all work on a close and friendly basis.
The Chairman. The letter may be admitted.
(The letter referred to was marked "Exhibit No. 1363" and is
included in the appendix on p. 10436.)
Mr. Feller. Mr. Greene, is that a proper characterization of the
iron-ore business?
Mr. Greene. No; I think not. That was a very friendly and per-
sonal note I wrote to aclaiowledge a letter from Mr. Humphrey
expressing his pleasure that we had employed Mr. A. C. Brown,
formerly of Cleveland, who was up in the machinery business at Bay
City and who had done conspicuous work in civic matters and educa-
tion and so on, a very able fellow, and we employed him and put him
in as first vice president, and he was a personal friend of all of ours.
Mr. Humphrey thought it was a nice thi^-g to do, and that is all
there is to that note. The rest of it is facetious,
Mr. Feller. Is the second sentence facetious? I am referring to
that specifically [reading]:
I am glad that the iron-ore business is so largely in the hands of a small group
of men who all work on a close and frienr'ly basis.
Mr. Greene. I think we are all friends, and I think we do work
on a friendly basis, but that is not an improper friendly basis. That
is on a personal friendly basis.
Mr. Feller. I had not made any statement about propriety.
Senator King. How many men were there in the iron ore business
at that time. 1934?
Mr. Greene, You mean employees?
Senator King. No, how many companies were there, or partner-
ships, in the iron-ore business?
Mr. Greene. I wouldn't laiow the exact number, but probably at
least 10, I should say.
Senator King. Exclusive of the plants of the steel companies?
Mr. Greene. Yes, indeed; I mean those that sell ore, merchants,
sellers of ore.
Mr. Feller. Just to clarify the record, Mr. Greene, I should like
to identify the various people mentioned. You have already identified
Air. Brown. Who is Leonard?
Mr. Greene. Leonard is Leonard Hanna. Those are all personal
friends^ of mine who probably wrote me a note expressing their
appreciation,
Mr, Feller. I think that is clear on the face of the letter. Elton
would be Mr, Hoyt?
Mr, Greene. Mr. Hoyt.
Mr. Feller. Mr. Greene, I show you now a letter which purports
to be signed by you, addressed to Mr, Elliott, manager of some of
10296 CONCENTRATION OF ECONOMIC POWER
your mines, dated August 11, 1934. This letter was taken from your
files. Will you identify it, please?
Mr. Greene. I identify it.
Mr. Feller. Mr. Chairman, I don't think it is necessary to have
the whole letter printed, but I offer it for the record.
The Chairman. You mean you offer the letter or a part of the
letter?
Mr. Feller. I offer the letter, but not for printing in its entirety.
I should like to read you the last paragraph.
(The letter referred to was marked "Exhibit No. 1364" and is on
file with the committee.)
Mr. Feller (reading):
The writer —
That's you, Mr. Greene —
feels indebted to Mr. Hoyt and his firm for their fine cooperation in our negotia-
tions with the Bethlehem Co. the past year. I know you fully concur with the
writer that close cooperation with our competitors is of great mutual advantage.
Would you explain that, please?
Mr. Greene. I am very glad to. I think the whole letter there
ought to be explained.
The Chairman. Well, perhaps the whole letter should be read.
Mr. Feller. Would you like me to read the whole letter?
Mr. Greene. I think it would be well to read the whole letter.
Mr. Feller. The letter is addressed to Mr. Elliott. [Reading:]
You will recall that when the writer was in Ishpeming, we discussed at length
the general situation and the very great disadvantage, not only to the mines them-
selves, but to the general situation, should the mines be closed down this summer.
At that time, you will recall, we prepared data with a view to forwarding it to
the Bethlehem Steel Company.
On the writer's return a conference was had with Mr. Henry G. Dalton, with
reference, not only to their interest in the Athens mine, but also their influence
with the Bethlehem people in connection with the Negaunee mine. Mr. Dalton
informed the writer that he had that morning talked with Mr. Buck and told him
that both Mr. Hoyt and myself had visited the mine and on our return we would
give him our views on the matter, after checking up with the management at the
mines, expecially with reference to the labor and tax situation. He asked me to
defer the matter until Mr. Hoyt's return, and further, as you know, not to suggest
any operation less than the equivalent of three days per week.
Upon Mr. Hoyt's return we took the matter up and it was agreed that my
letter, with yours attached, and all the data should reach Mr. Buck just prior to
Mr. Hoyt's talk with him. Mr. Hoyt had a long conference with Mr. Buck in
New York last Thursday, and the writer, who was tied up in merger negotiations,
talked with both Mr. Hoyt and Mr. Buck over the 'phone regarding the matter.
We are pleased to advise you that both Bethlehem Steel Company, as to the
Negaunee, and Pickands, Mather and Company, as to the Athens, have advised
us that they are willing to continue the operation of these mines on the present
basis. They decline in both cases to make a firm commitment to operate the
mines on this basis until next May, as should conditions greatly change, they
might feel obliged to change their minds.
You might be interested in a statement Mr. Buck made — that he would expect
to operate the Negaunee mine just the same as he would conduct his own mining
operations or as he would authorize the operation of mines under the management
of Pickands, Mather and Company.
And then the matter which is read previously.
The writer feels indebted to Mr. Hoyt and his firm for their fine cooperation
in our negotiations with the Bethlehem Company the past year. I know you fully
concur with the writer that close cooperation with our competitors is of great
mutual advantage.
CONCENTRATION OF ECONOMIC POWER 10297
Mr. Greene. Mr. Chairman, I think the facts in this matter are
these. Where our operations are centraUzed on the Marquette
Range, where we operate probably somewhere between 7 and 11
mines, we were very much interested in keeping those mines open
almost entirely to give the men work and the Neguanee mine is
owned one-half by the Cleveland-Cliffs, one-half by Bethlehem Steel.
The operation of that mine has to be on a mutually satisfactory basis.
The Athens mine, which is alongside of it, is controlled a trifle over
half by us and the other half with Pickands, Mather.
The Chairman. Then when you say on a mutually satisfactory
basis you are referring to the mutuality between the owners?
Mr. Greene. I mean in that particular mine. The Pickands,
Mather are the general operating agents for the Bethleheiri. Now
we wanted to operate that mine 3 days a week to give the men employ-
ment. We are very keenlj interested in that whole district. We
knew that the companies did not want, the Bethlehem did not want,
the ore. It was a matter of running the mine and piling up ore that
they wouldn't ship. We took it up with them and tried to show them
that they would favor that larger operation, even though it meant
stock piling the ore. They were kind enough to agree with our point
of view and Mr, Hoyt was helfpul in getting it, and I am pleased to
say that I think that is a good sign of the result you get from friendly
cooperation.
Mr. Feller. This letter then, indicates a friendly cooperation in
the matter of operating a mine which is under joint ownership?
Mr. Greene. That is correct. There are two mines there.
The Chairman. What was the date of the letter, may I ask?
Mr. Feller. August 11, 1934.
Mr. Greene, I should like to show you another letter which purports
to be written by you addressed to Mr. Elliott, your manager, dated
October 17, 1936. This letter was taken from your files, will you
identify it please?
Mr. Greene, Identified.
Mr. Feller, Mr, Chairman, I offer this letter to be printed.
The Chairman. It will be received.
(The letter referred to was marked "Exhibit No, 1364-A" and is
included in the appendix on p. 10436.)
Mr, Feller. I shall read a portion of this letter and, if Mr, Greene
cares to, I shall read the whole of it.
The Chairman. Let us read it all, as long as it is going into the
record.^
Mr. Feller (reading):
This will confirm our conversation over the long-distance phone last evening.
Yesterday morning Mr. Elton Hoyt called the writer asking for an appointment
with him and Mr. Brown, saying he had an important matter to discuss with us.
At the ensuing conference he stated that he had been north for a couple of
weeks and had had a long conversation with you in which you mentioned a change
in working hours. He was somewhat disturbed by this as there has been an
understanding for several years, originating, I imagine, at the time of the first
discussions over the N. R. A,, that any changes in pay, hours, working conditions,
etc. would be discussed among the big employers before action was taken so that
the industry might present a united front. He further stated that in view of the
numerous connections our two companies had, that he was surprised that we
should have made this change without explaining the matter to him. Both Mr.
Brown and the writer told him frankly of the conference which you had had with
Mr. Brown when you were in Cleveland on September 22nd, and with the writer
1 The letter, in its entirety, appears In the appendix.
10298 CONCENTRATION OF ECONOMIC POWER
on our boat going north, and that at both these conferences we had inquired
particularly as to whether the new regulation was the same as that in force at the
mines of our competitors. Both of us assured him that our new arrangement was
complying with their condition, and that we had been the only one of the big ore
companies who brought our men to the surface for lunch, and we saw no reason
to advise the others when we were simply getting in line with them.
Mr. Hoyt then went on to say that we had not gotten in line with them but in
his opinion, and in the opinion of Mr. Salsich, we had given the equivalent of a
raise in pay inasmuch as we were paying for eight hours and not receiving that
amount of labor. Mr. Brown then went into it in some detail with Mr. Hoyt but
Mr. Hoyt insisted that either we were misinformed or that the situation in our
own mines was not as we stated.
He left our office, not satisfied that we were correct, but greatly pleased to
find out that we had not knowingly changed working conditions without notifica-
tion to them, Mr. Hoyt called the writer later in the afternoon saying that he
had investigated the matter carefully by telephone, and I think he had talked
with both his own men and the Oliver Mining men, and stated that the facts of
the matter were these: that their men reached their working places at 8:00 and
left the working places at 4:30, and that they were allowed 30 minutes for lunch;
that our men arrived at the working places at 8:00, left them at 4:00 and therefore
ate their lunch out of the eight hours time, our men reaching the surface half an
hour earlier than either the Pickands Mather or Oliver Mining men. He then
asked us if we were willing to have you meet with either Mr. Chisholm or Mr.
Chinn, and Mr. Salsich or whoever he nominated, and discuss this matter. He
said it might not be possible to change our position, but he felt that at least we
ought to be willing to talk it over. The writer agreed that his request was reason-
able, and put in a call for you. As you were down in one of the mines we could
not reach you until after I had reached my home.
Mr. Chairman, there is further discussion along these hnes. I
wonder whether it is necessary to continue to read this.
Senator King. About the hours of labor?
Mr, Feller. Yes,
The Chairman.. The letter will be printed in the record and you
may read the saUent points.
THE "united front" POLICY
Mr. Feller. The point about which I should like to ask you, Mr,
Greene, is this sentence [reading from "Exhibit No. 1364-A"]:
At the ensuing conference he stated that he had been north for a couple of weeks
and had had a long conversation with you in which you mentioned a change in
working hours. He was somewhat disturbed by this as there has been an under-
standing for several years, originating, I imagine; at the time of the first discus-
sions over the N. R. A., that any changes in pay, hours, working conditions, etc.,
would be discussed among the big employers before action was taken so that the
industry might present a united front.
Mr. Greene, is that a correct statement of an understanding which
had been reached among the members?
Mr. Greene. It is my recollection that with the adoption of the
N, R. A., which I recall as 1933 or 1934, 1 don't remember which — was
it 1934?
Senator King. 1933.
Mr. Greene. That it was not only suggested to us, but I think
we were more or less mandatory to have similar conditions. I think
that was one of the underlying principles of the N. R. A. and in order
to comply with at least the spirit if not the absolute letter of that, we
used to talk over those things so there would be a comparative similar-
ity, and I have no doubt that Mr. Hoyt referred back to the N. R. A.
I don't recall the exact date when the N. R. A. was declared uncon-
stitutional, but it was perfectly natural that at that period when we
CONCENTRATION OF ECONOMIC POWER 10299
were urged by the Government to do it, that we did just those things.
Maybe this was sUghtly after that, but that is the situation that Mr.
Hoyt is referring to and I would say that as we got further away from
the N. R. A. we discontinued it, probably we just naturally discontin-
ued it. This time, it was shortly after that, we did meet and discuss
that sort of situation.
Mr. Feller. You would say, then, at some period after the N. R. A.
was declared unconstitutional this united front that you referred to
was dissolved or disappeared?
Mr. Greene. I wouldn't say the words ''united front" were used
in the same exact meaning that they are used in present European
pohtics. [Laughter.! It just meant a similar footing or basis.
Mr. Feller. Was it facetious?
Mr. Greene. No, it was using possibly a stronger term than might
have been apphed, that is all.
Mr. Feller. Would you say that the united front that you referred
to in that letter — the letter written in 1938 — still continues?
Mr. Greene, I just testified that it did not, the idea of meeting
and discussing those Idnds of conditions.
Mr. Henderson. May I ask, then, suppose you are going to make
a change affecting pay or hours or any worldng conditions, do you get
together with 3^our competitors and talk it -over now?
Mr. Greene. I would say we did not.
Mr. Henderson. Not at all?
Mr. Greene. We might make a casual remark, but don't get to-
gether as we used to in the days of the N. R. A.
Mr. Henderson. And as this shows, it was sometime after N. R. A.
Mr. Greene. Yes; h^it as I say, a custom begun Hke that didn't
break right off immediately. It is broken off now.
Mr. Henderson. I am quite sure there were several other industries
that had that same continuation of poHcy.
Mr. Greene. It wasn't a very important matter. It was largely
a matter of keeping the good wiU of our men. The two matters re-
ferred to are the matter of eating your lunch, and one was whether
you began your work at your worldng place, or at the collar of the
mine. They are small matters of administration, you might say.
Mr. Feller. Would you recall when the last time was when the
members of the industry met to discuss these matters of pay, hours,
and working conditions?
Mr. Greene. Why, I have forgotten. It was several years ago.
Mr. Feller. Did you meet in 1937?
Mr. Greene. I don't recall meeting.
Mr. Feller. I show you a telegram signed A. C. Brown, addressed
to you at the Waldorf-Astoria Hotel, dated May 8, 1937. This is
taken from the files of your company. Will you identify it, please?
Senator King. I assume, Mr. Feller, there is no criticism because
the companies got together under the N. R. A. and carried out the
mandate of the N. R. A. with respect to wages and hours and so on.
Mr. Feller. May I ask you, Mr. Hoyt, was there a code for the
iron-ore industry under the N. R. A.?
Mr. Hoyt. We had a code committee that had several meetings,
I would say half a dozen. We discussed it. We got down to prac-
tically the last terms, but it was never finally put into effect, but
10300 CONCENTRATION OF ECONOMIC POWER
during that period all of the mining companies were adhering to the
propos.ed code.
Mr. Feller. Did the proposed code provide for identity of working
conditions and identity of pay?
Mr. HoYT. That I can't remember.
Mr. Feller. Senator, may I state in answer to your question, that
none of my questions imply criticism.
Mr. Greene. I can't identify it, because I haven't any recollection
of it. I notice the certificate of our secretary that it is a copy of a
telegram in our files, and I don't question that, but I have no recollec-
tion.
Mr. Feller. You don't question the fact that it was taken from
your files.
Mr. Greene. I do not.
Mr. Feller. I offer this.
The Chairman. It may be received.
(The telegram referred to was marked "Exhibit No. 1365" and is
included in the appendix on p. 10437.)
Mr. Feller. The telegram reads:
Very important meeting Tuesday morning Pickands Mathers office same
personnel previous meeting and in addition Butler representatives will be present
EUiott cannot attend account of meeting on Mesaba but will send Jackson believe
important you should be here Stop After discussing with Veach I telephoned
Elliott compromise suggestion I made you by telephone today which he says
helps situation but still is not convinced though entirely willing to do his very best
Stop Schneider advises he wired you Waldorf yesterday regarding White he tells
me thinks he is all right but not had whole lot of experience and is pretty green
White wishes to discuss with Bob and Chris and will advise Schneider Monday
Schneider told him any definite arrangement would have to be considered after
your return.
Mr. Greene, as you notice, there is nothing in this telegram which
gives any clue to the substance of this meeting, the matters under
consideration, but am I correct in assuming that this is an account of
a meeting of various members of the industry, including at least
your representatives, Pickands, Mather, and Butler?
Mr. Greene. By whom is the telegram signed?
Mr. Feller. A. C. Brown, addressed to you at the Waldorf-
Astoria Hotel.
Mr. Greene. The date?
Mr. Feller. May 8, 1937.
Mr. Greene. I haven't any recollection, Mr. Chairman, of that
telegram, or I don't know what it refers to. The names in there
confuse me. I am not sure what two or three of them are. I regret
to say I haven't any recollection of that telegram.
The Chairman. Do you have any recollection of any of the sub-
stance of the message?
Mr. Greene. I don't know what it refers to.
Mr. Feller. Mr. Greene, if I were to tell you that at that time the
United Steel Corporation was contemplating increasing its wage rate,
would that refresh your recollection?
Mr. Greene. It might be but, no, Schneider is the manager of our
marine department, and I can't imagine — and Bob and Chris might
be that, but I am not positive.
Mr. Feller. Do you have any recollection of that, Mr. Hoyt, of
any such meeting in May of 1937, in New York?
CONCENTRATION OF ECONOMIC POWER 10301
Mr. HoYT. I haven't any recollection of a meeting as of that partic-
ular date, Mr, Feller, but we have had meetings in our office and
general discussion. What that particular one was I don't remember
offhand.
Mr. Feller. Mr. Patrick Butler, do you recall any such meeting in
New York in May 1937?
Mr. Patrick Butler. I don't recall attending any such meeting.
Mr. Feller. I am informed that the meeting was in Cleveland.
I am not sure of that.
Mr. Oglebay, do you recall any meeting in May of 1937?
The Chairman. May I suggest to the witnesses that responses
ought to be verbal. We can't record the nods of the head very well.
Mr. Oglebay. I do not.
Mr. Humphrey. We don't seem to be mentioned. I don't think
we were there.
Mr. Feller. You were not mentioned specifically. It merely
says [reading]:
same personnel previous meeting and in addition Butler representatives.
Mr. Hoyt, do you recall the nature of the meeting which members
of the industry had during 1937, perhaps the early part of 1937?
Mr. Hoyt. I remember a number of different meetings on a good
many different conditions and things. We have had representatives
of the industry on such things as silicosis, and labor conditions and
taxes. It might be any one of those.
Mr. Henderson. It might be any one of those, because you did, at
that period, have frequent meetings to discuss things which were
common to all of the ore companies.
Mr. Hoyt. I wouldn't say frequent meetings, but any matter that
came up of general interest to the group, such as taxation or silicosis,
we have had a number of meetings on that sort of thing.
Mr. Henderson. Mr. Greene, since it is suggested that your
marine man, Mr. Schneider — is that it? — was there, might it have had to
do with any increase in the rates of pay on your steamship lines?
Mr. Greene. That is possible, but I just don't recall, you see. I
was in New York, and I just haven't any recollection. It might be,
but the ore companies and Schneider rather confuse me. I haven't
any recollection of it at all. It could be that, Mr. Henderson, but I
don't know.
Mr. Feller. Mr. Greene, you testified previously that the united
front which was formed during the discussions in the early days of
the N. R. A. continued for some time after the N. R. A., and then
lapsed or dissolved. At any rate, it is not continued today.
Mr. Greene. I didn't testify to that. I said we started those
discussions under the N. R. A., and whether or not they were cut off
shortly when the decision of the Supreme Court came, I don't know.
I rather think they ran on. I couldn't tell you.
Mr. Feller. You don't know just how long they did run on.
Mr. Greene. No; I haven't any idea.
Mr. Feller. But they are not running on today.
Mr. Greene. They are not.
Mr. Henderson. Could I ask a question there? Mr. Hoyt, did
all the principal ore companies sign the President's reemployment
agreement on minimum wages and maximum hours?
10302 CONCENTRATION OP ECONOMIC POWER
Mr. HoYT. I don't think we did, on account of working on the
code at that time.
Mr. Henderson. You remember the F. R. A., as it was called, was
in the fall of 1933, in which employers were asked by means of cards
that were distributed by the postmasters to agree to certain minimum
standards, minimum wages and maximum hours?
Mr. HoYT. I think that the reason perhaps that we didn't was
because our hours and wages were in excess of those minimums at
that time.
Mr. Henderson. But yo-li indicated that you had these code com-
mittee meetings, and you did establish certain standards that you all
adhered to.
Mr. HoYT. It is my recollection that would be the case.
Mr. Henderson. That' is, growing out of your discussions, you did
set certain standards that had to do mth things ordinarily covered by
a code, but you never got to the adoption of a code.
Mr. HoYT. No; we did not.
Mr. Henderson. Did you have any meeting after the Supreme
Court decision in which you agreed to continue those standards?
Mr. HoYT. No, sir; but we have continued them, and I don't know
of any specific meeting that was held to do it. Up in that Lake
Superior country, with' the mines as close together as they are, it is
pretty difficult for a mine on one side to be doing one thing, and one
next to it the other. It has been the custom to be fairly uniform over
a long period of years.
Senator King. The standards that you had applied in the various
mining companies there, prior to the N. R. A., in wages and hours,
were lugher than those prescribed by the N. R. A.?
Mr. HoYT. Well now, when was the N. R. A.? Was that 1933?
Senator King. Yes; '33.
Mr. HoYT. I tliink about that time there was an increase; I tliink,
sometime in '33; the hours were changed from 10 hours to 8 hours for
surface labor. The underground men had been on an 8-hour basis
(the miners), for a long period of time and in order to adjust the
surface labor to an 8-hour basis, there was some increase of pay which
brought their hourly rate up on a relative basis.
Mr. Feller. Mr. Hoyt, could you tell us which companies were
usually represented at these meetmgs that you have mentioned?
Mr. Hoyt. Well, I would say that on certain questions practically
everybody in the industry was present.
The Chairman. Would it break the continuity of your examination
if I should direct a few inquiries to Mr. Grec'^e with respect to this
telegram?
Mr. Feller. Not at all, sir.
The Chairman. You will observe that it is dated at Cleveland on
May 8.^ It is addressed to you at the Waldorf-Astoria Hotel, signed
by Mr. Brown. The first sentence refers to a very important- meeting
of the industry. Do you have any recollection of any meeting of the
industry at or about that time which would justify the characteriza-
tion of being a very important one?
Mr. Greene. No, I don't.
The Chairman. If you will glance through the telegram a little
further down, you will notice a statement by Mr. Brown that he
telephoned to Mr. Elliott. Mr. Elliott is your manager, is he not?
1 Referring to "Exhibit No. 1365," appendix, p. 10437.
CONCENTRATION OF ECONOMIC POWER 10303
Mr. Greene. That is right.
The Chairman. Where are his offices?
Mr. Greene. Ishpeming, Mich.
The Chairman. He says in that telegram that he telephoned to
Mr. Elliott with respect to a compromise suggestion which he had
made to you on the date of the telegram on the telephone. Do you
have any recollection at all of any situation or any discussion with
Mr. Brown which would justify him in saying that he had telephoned
to Mr. Elliott .about a compromise suggestion which he had made to
you that day? Apparently he was in Cleveland, you were in New
York, and Mr. Elliott was in Ishpeming.
Mr. Greene. Yes; he was.
The Chairman. Does that revive your recollection at all?
Mr. Greene. No; it doesn't. It is confusing, Mr. Senator, because
here are Jackson and Elliott, who are confined entirely to the mining
business, yet Schneider to boats. It just doesn't make sense.
The Chairman. As I read the telegram, all the references to
Schneider and to White are distmct from the first part of the telegram,
I think that that might be divided into two paragraphs dealing with
two different subjects. At least I can see no connection between
them on the face of the wire. So, just overlookmg all reference to
Mr. Schneider, does the first part of the wire arouse any recollection
of any kind?
Mr. Greene. It does not. You see, I wasn't at the meeting or the
previous meeting, and whatever it was, I have completely forgotten.
The Chairman. Of course it is obvious that the author of the
telegram was dealing apparently with a matter which he regarded
as very important, and concerning which he telephoned to New York
and he telephoned to Ishpeming, and he had offered a compromise
to you and he then detailed that-compromise to Mr. Elhott, and in
the wire he says that Mr. Elliott wasn't entirely convinced that the
compromise should be accepted or was a good one; and it has all
vanished from your mind?
Mr. Greene. I haven't the slightest recollection.
Mr. Feller. Mr. Hoyt, will you tell us why members of the indus-
try think it necessary to have uniform labor conditions in the ore
mines? Supposing one of the companies should desire to introduce
shorter hours. Why should it have to consult the other members of
the industry?
Mr. Hoyt. I don't think it necessarily has to consult them, but as
I mentioned before, the mining country is so set up that in operating
mines adjoining each other, any of the large operators making a
change in wages or hours, the other mines adjoining and in that dis-
trict would immediately have to follow.
Mr. Henderson. Let me ask you, when you had these discussions
on labor and taxes and other things affecting the industry, did you
have rnuch difficulty in getting to a general agreement about labor
conditions?
Mr. Hoyt. I can't remember if the general discussion on labor con-
ditions
Mr. Henderson (interposing). Take it on any specific labor con-
dition.
Mr. Hoyt. I have talked with a great many people in the industry
at different times.
124491 — 40 — pt. 18 7
10304 CONCENTRATION OF ECONOMIC POWER
Mr. Henderson. Well, did you get a uniformity, as you say?
Mr. HoYT. We get it automatically.
Mr. Henderson. I am, talking about when there is a proposal for a
change. Do you have much difficulty in getting general agreement
as to the desirability of the change?
Mr. HoYT, Very often, sir; it is published in the newspapers that
one or more of the large steel companies have increased the base labor,
and I would say automatically from that point on the rate up in the
Lake Superior district is also modified.
Mr. Henderson. You might have your industry meeting and
consider a change which had come around on account of the steel
companies' posting a new rate, and therefore the desirability of meeting
that?
Mr. HoYT. I don't remember of ever having an industry meeting
where we sat and just discussed whether the rate should go up or the
hours should change, except in connection with the code. Indi-
vidually I have talked to a great many operators many times on con-
ditions affecting labor,
Mr. Feller. Do the words *'a united front". have some meaning in
the industry?
Mr. HoYT. It had definitely at that time, because we were coming
down here, the code committee; I think there were five to meet with
the representative of the N. R. A. and we wanted to be able to tell
them that the industry was doing such and such and so and so, and
definite.
Mr. Feller. In other words, that term was in use at the beginning
of the N. R. A.?
Mr. HoYT. I never heard of the term excepting as you read it
out here.
Mr. Feller. Mr. Greene, may I pass you this letter? It is dated
May 24, 1938; piuports to be written by you, and is addressed to Mr.
Elliott. Wni you identify it, please? Do you identify it?
Mr. Greene. I do.
Mr. Feller. I offer this letter, Mr. Chairman.
The Chairman. The letter may be received.
(The letter referred to was marked "Exhibit No. 1366" and is in-
cluded in the appendix on p. 10438.)
Mr. Feller. I should like to read you, IVIr. Greene, this sentence
[reading]:
During the troublesome times which started with, say the NRA, right up to
the present time, the interests of Pickands, Mather and ourselves have been
working in the closest harmony, and the combined eflforts of these two interests
have brought about a united front in the ore industry. I am speaking from
absolute personal knowledge of these matters.
I want to recall to your mind the fact that tliis letter was written
May 24, 1938. Is it correct to say that the "united front" continued
at least until that date?
Mr. Greene. I am again referring to the same thing there. Unfor-
tunately, the iron-ore industry was pretty flat from about the summer
of 1930 until shortly before that time it was wTitten, and each year
I had to take up with the Bethlehem and with Pickands, Mather the
question of the operation of the Athens & Negaunee mine and each
time I wanted to operate that mine more than either one of them
wanted to do, and I was grateful to both the Pickands, Mather and
CONCENTRATION OF ECONOMIC POWER 10305
especially to Mr. Hoyt, for not only agreeing as to Pickands, Mather's
operation of the Athens, but also assisting and recommending to
Bethlehem that our judgment in that matter prevailed.
And I have always felt grateful to those two companies for having
permitted us to operate those mines, collecting an undue amount of
ore, and rather against their judgment permit us to give that employ-
ment. I am again referring to that same matter.
Mr. Feller. Mr. Greene, in these meetings were prices discussed?
Mr. Greene. Were what?
Mr. Feller. Were there any discussions of the prices of iron ore?
Mr. Greene. I don't recall any.
Mr. Feller, And the term "united front" would apply, then, to
matters other than price?
Mr: Greene. Absolutely. That refers to the operation of the
mines and to the matters that Mr. Hoyt referred to, silicosis and so on.
THE LAKE ERIE BASE PRICE
Mr. Feller. Mr. Hoyt, as I understand it, the shipment of ore is
a seasonal business, is it not?
Mr. Hoyt. That is correct.
Mr. Feller. And it depends on the weather on the Great Lakes?
Mr. Hoyt. Well, it depends on the open season of navigation on
the Great Lakes.
Mr. Feller. That is right. When does that season begin?
Mr. Hoyt. It varies. I would say on the average, May 1; some-
times earlier, sometimes a little later.
Mr. Feller. And when does it usually conclude?
Mr. Hoyt. Around usually the middle of November; sometimes
later when we are pressed for ore.
Mr. Feller. Now, Mr. Hoyt, it is true, is it not, that one of the
standard terms in the iron-Ore industry is the Lake Erie base price?
Mr. HoYT, Yes, sir.
Mr. Feller. Could you tell us what the Lake Erie base price is?
Mr. Hoyt. The Lake Erie base price is a result of the negotiations
that go on between the ore sellers and their customers which result
in an agreement between them as to a price that will prevail as
between them during a certain year or in many cases as it might
maintain between them on a long-time contract.
Mr. Feller. Is it correct to say that the Lake Erie base price is
the price at which iron ore is sold during the season, determined by
the first substantial chance sale of the season?
Mr. Hoyt. No, sir.
Mr. Feller. In other words, if a sale is made at the beginning of
the season at a certain price, a substantial sale, the Lake Erie base
price may vary durtag that season?
Mr. Hoyt. No; that isn't true. You said a substantial "chance"
sale. That was the term that I didn't agree with.
ivir. Fel,l£.r. It is the word "chance" with which you do not agree?
Mr. Hoyt. Yes.
Mr. Feller. Then let me put it this way. When the first sub-
stantial sale of the season is made, does the price at which that sale
occurs become known to the industry?
10306 CONCENTRATION OF ECONOMIC POWER
Mr. HoYT. It does; for example, if I have negotiated with our
customers and arrived at a satisfactory pi;ice, to me, I am anxious to
get that set and published as rapidly as possible on account of deter-
mining the balance of the tonnage that we have on the contract
based on that Lake Erie price.
Mr. Feller. Then the Lake Erie base price for the balance of that
season would be the same price that was arrived at in this first sub-
stantial sale which you negotiated?
Mr. HoYT. It would be the same base, Mr. Feller, but from this
base price, or we will say 51.50 standard guaranteed ore; there are
many deductions for quality, for analysis; sometimes for structure;
sometimes and very often for a long-time obligation that it sells —
that the purchaser is willing to commit himself for over a period of
years.
Mr. Feller. Let me see if I understand that, then. A substantial
sale is made at the beginning of the season, let us say by } ov.r company.
That sale we will say consists of iron ore having a 51.50 iron content.
That would then be published, would it not, in the trade journals
and would be the Lake Erie base price for the year?
Mr. HoYT. No, sir; because none of these orders run exactly on the
analysis of 51.50. In other words, the standard as set up is the
custom in the trade over many years of base ores, old range Bessemer,
Mesaba Bessemer, old range non-Bessemer, Mesaba non-Bessemer,
which are 51.50 as a base ore; that is a theoretical base. Now when
the ore is delivered from any of these mines they are guaranteed to
the average that that mine is expected to produce. It may be 52
percent; it may be 50^ and there are adjustments as between the base
price for a 51.50 ore and the ores actually delivered.
Mr. Feller. Yes. In other words, the price for 51.50 ore, which is
the standard, as you said, for the industry, would be determined by
this first sale, first substantial sale, and every sale that is made there-
after, the price would depend upon the variation of the iron content
from the 51.50 standard?
Mr. HoYT. That would be true, but it might vary for other reasons
as well. The one thing that you have to keep in mind, Mr. Feller,
in this business, you say it is a seasonal business. It is a very defi-
nitely seasonal business. In the early spring the purchasers of ore have
to figure out their very best estimates for their requirements, not on
a month-to-month basis, or 4 months or 6 months, but to take them
through until the opening of the next season of navigation. Just on
that alone you can see that the steel companies and other purchasers
of ore have to estimate a great deal on what their requirements are
going to be.
Now usually they make the very best guess they can on their
present operating rate, as to how it wUl continue through the open
season, but normally they would expBct to take down^enough ore to
run their blast furnaces through the winter in t^ event that
sudden changes in conditions in the steel industry occurred. Further
than that you must remember that in making these various kinds of
pig iron and kinds of steel a great many different kinds of ores have
to be used. In other words, it is a mixture in the blast furnace; it
may be four to five grades, with special grades thrown in, that he
has-|-that the purchaser has — to take into consideration when he is
making his estimate.
CONCENTRATION OF ECONOMIC POWER 10307
It is impossible to make pig iron — I won't say it is impossible, but
these various special grades of pig iron, out of just one ore. Therefore,
he is bringing down maybe five or six different kinds and he is also
hmited by the amount of a dock space either at lower lake docks or
at his own plant. That is the reason why we consider it, and you
have said properly that it is a very seasonal business and it is also
one of the reasons that makes a very great fluctuation in the ore
industry from year to year.
Mr. Feller. Well, again may I ask you this. It is correct to
say that there is a standard price which is published in all the journals
concerning themselves with the ore industry, which is called the Lake
Erie base price; that that price is based upon a 51.50 iron content
in the ore and further that that price, that standard base price, the
Lake Erie base price, is determined by custom in the industry, by
the first substantial sale of each season?
Mr. HoYT. By the first substantial sale of each season which would
be the result of the negotiations say between our company and the
steel company, and it might very easily be a tonnage applying on a
long-time contract, or it might be in years before the recent times
on just ordinary spot sale, but during the last seven or eight years,
since '31, the ore industry has been burdened down with an accumula-
tion of ore which was brought about by the general basis of under-
standing in business generally back in '27 to '29, that things were going
on perhaps indefinitely on that basis, and since that time the iron ore
industry has been sufferiug with, you might say, overproduction and
overinventories, untU we will say the year 1936 it began to come out
of it; '37 it looked as if it was coming out, and before '37 was over there
was a change, very violent change, so that the shipments in '37
were some 63,000,000 tons and m '38 dropped down to 19,000,000 tons.
Mr. Feller. Now I understand that it is correct to say that the
standard price in the industry is the Lake Erie base price. That this
price is determined on the basis of the first substantial sale of the
season, which may, as you have stated, be a spot sale or may be on a
long-term contract; that is correct.
Mr. HoYT. It is. It is published, recognized price in the trade.
Senator King. May I ask for my own information? Suppose two
men came with say 1,000,000 tons, or any given quantity of ore, to
the boat for sale.
Mr. HoYT. To the what, sir?
Senator King. By boat; it is shipped by boat, isn't it?
Mr. HoYT. Yes, sir.
Senator King. And the ore of one assayed 65 percent iron content
and a httle sulphur, a little phosphorus, and other metals, and the
other, B's ore, assayed 50 percent, plus this 20, would there be any
difference in the price?
Mr. HoYT. Very definitely on the base price, Senator. As I ex-
plained, 51.50 is a base guarantee in which all ores are figured. The
unit value is arrived at by dividing the base published price by 51.50,
and you arrive at a unit value; roughly, we will say 10 cents a unit.
The Chairman. What is a unit?
Mr. HoYT. A Unit of natural iron. In other words, it is a value for
a unit of natural iron.
Now, if the ore should figure 65 percent in iron, naturally, you
would multiply that unit value by the 65 percent.
10308 CONCENTRATION OF ECONOMIC POWER
Senator King. Supposing the ore contained deleterious matter. I
don't know whether any of the ore does contain phosphorous or some
other refractory elements. Would that affect the value of the ore?
Mr, HoYT. It would make it very much harder to sell. For
example, if an ore runs high in silica, it is very customary, if you
want to sell it, to make some reduction for that silica. In the same
way the high phosphorous ore on the Menominee range sells on a
base differential lower than the old range, the Mesabi' range.
Senator King. I know in the West if there is phosphorous or if
there is arsenic or some deleterious refractory element you are penal-
ized a considerable amount because of the diflficulty in working out
the ore and freeing it from those deleterious substances. I was
wondering' if the same principle applied with respect to your iron ores.
Mr. HoYT. The same principle apphes, sir.
Senator King. So that one iron ore would have the same value as
another, depending on whether there were any deleterious elements
in the ore.
Mr. HoYT. Yes.
Mr. Henderson. Mr. Hoyt, after this base price of 51.50 has been
fixed by the first substantial sale, that becomes the price, then, which
is charged for that particular quaUty bv all other ore sellers, does it
not?
Mr. Hoyt. I can say this, that it is pretty definite that if that
price has been published, no other ore seller can get a higher price
than that from his customers, because he will just simply end by
losing the trade.
Mr. Henderson. I can understand that, but does that become the
accepted base price in the industry?
Mr. Hoyt. The accepted base from which the prices covering
respective and individual ores are figured.
Mr, Hendersg*^. Mr. Greene, suppose Mr. Hoyt's company had
the first negotiated contract, and that was published. Would that be
your price then for the balance of that season?
Mr. Greene. Well, most of our ore is sold under time contract,
but our contracts are based on that price, just as Mr. Hoyt says, and
if we had a current sale we would try to get that price. We would do
the best we could.
Mr. Henderson. Is that true, Mr. Humphrey, of your company?
Mr. Greene. We have a great many prices. We get as near as we
can to them.
Mr. Humphrey. We start with that as a base and we figure from
that the premiums and penalties, and finally arrive with our customers
at a value of the ores that we have to sell. That may be our price or
another price.
Mr. Henderson. But for exactly the same grade above or below
51.50 it would tend to be, throughout the trade, the same price, would
it not?
Mr. Hoyt. It would tend to be, but I haven't any idea that it
necessarily would follow, sir.
Mr. Henderson. But the tendency would be for that to be the
base from which any negotiation took place?
Mr, Hoyt, That's right. Any negotiation would take place from
that price.
CONCENTRATION OF ECONOMIC POWER 10309
Mr. Feller. It is correct to say, is it not, that the Lake Erie base
price is the delivered price? It also includes the freight from the
upper lake to the lower lake port?
Mr. HoYT. It includes that as a pubhshed base, but by deducting
the lake freight, rail freight, and unloading charges in the trade you
can bring that same price back to an f. o. b. mine price.
Mr. Feller. How is the freight rate determined?
Mr. HoYT. The freight rate is determined on the basis of the owner
of the vessel tonnage, who hasn't tonnage, and the operator of a mine
or steel company who has ore and coal, possibly, and not tonnage,
getting together and agreeing on a rate that is satisfactory to them.
Mr. Feller, And does that rate become the standard for the indus-
try for the balance of that season?
Mr. HoYT. During the early part of the season the people from the
trade papers are constantly in the offices of the iron ore people and
coal people and vessel people to get this information as soon as it is
available, and when it is published they find out about it, it gets
known, it sets the rate. It doesn't mean that someone isn't going to,
if they want to, take a lower rate. It becomes a published rate which
is used in the trade.
Mr. Feller. Mr. Oglebay, to complete the record on this point, do
your term contracts contain a price which is related to the Lake Erie
base price?
Mr. Oglebay. Some of our contracts do. The majority of our
contradts have no relationship with the Lake Erie selling price.
Mr. Feller. Would it be correct to say that perhaps (you may
disagree with this) five of your contracts are related to the Lake Erie
price and four are not?
Mr. Oglebay. I don't know that. That is a long relationship, I
think, as to tonnage, but in detail I don't know whether that is true
or not.
Mr. Feller. Mr. Emmett Butler, may I put the same question
to you? Are your contracts also related to the Lake Erie base price?
Mr. Emmett Butler. Yes, sir.
Mr. Feller. To keep the record straight, our information is that
you have three contracts which are not.
Mr. Emmett Butler. Three contracts which are not?
Mr. Feller. The others apparently are.
Mr. Emmett Butler. I would like to answer it truthfully. We
have two contracts, I am sure, that are related to market price, one
that is not. We had three last year.
Senator King. Suppose that a company consumes the mineral, the
ore, manufactures steel, owns its own vessels and hauls its own ore
and its own coal from the mining district to the place where the mills
are operated, who fixes the price that they charge?
Mr. Emmett Butler. You mean
Senator King (interposing) . They fix their own price?
Mr. Emmett Butler. As far as I am concerned, they fix their
own price.
Senator King. And there are a number of companies who own their
own boats and ship their own ore?
Mr. Emmett Butler. That is right.
10310 CONCENTRATION OF ECONOMIC POWER
Senator King. Do you know what relation those prices bear to
the prices that are charged by the other persons who are hauling for
the mine owners?
Mr. Emmett Butlee. I don't know definitely, but I imagine they
are pretty much in line.
Mr. Feller. Mr. Chairman, i offer for the record two charts
prepared by the Department of Justice. One chart is entitled "Iron
Ore Prices, 1925-1939." The source is Lake Superior Iron Ore
Association and the prices, as it is explained on the chart, are base
prices per gross ton of Lake Superior Iron Ore at Lake Erie ports —
Mesaba non-bessemer ores^ — 51.50 iron natural content.
T also offer for the record another chart entitled "Lake Freight
Kates on Iron Ore, 1925-1939." The source is Lake Superior Iron
Ore Association, and the footnote states that the rates are per gross
ton — to lower lake ports from head of Lake Superior — includes
unloading charge.
The Chairman. The charts may be received in evidence.
(The charts referred to were marked "Exhibits Nos. 1367 and 1368"
and are included in the appendix on pp. 10439 and 10440).
Senator King. I would like to ask one question. Mr. Hoyt, do
you know what proportion of the ore hauled from the mining section
which we jusf referred to, is hauled in boats owned by the companies
that are utilizino: the ores for proper purchase and what are hauled
by freight companies that are not mine operators, but engaged purely
in the hauling of ore?
Mr. Hoyt. It would be a guess, Senator, but it might be somewhere,
I would think, between 30 and 40 percent that would be hauled in
vessel companies which were not connected directly with the steel
companies or the producers, but that is a guess.
Mr. Feller. To clarify the record further, Mr. Hoyt, we nave asked
the various gentlemen the relations between the Lake Erie base price
and the contract sales. There is also another type of sale, is there
not, the spot sale?
Mr. Hoyt. Yes, sir.
Mr. Feller. The Lake Erie base price is used in making spot sales,
is it not?
Mr. Hoyt. That would depend on the individual. As far as our
concern, it involves spot sales on the Lake Erie price.
Mr. Feller. Mr. Greene?
Mr. Greene. Yes.
Mr. Feller. Mr. Ermnett Butler?
Mr. Emmett Butler. Yes.
Mr. Feller. Mr. Oglebay?
Mr. Oglebay. Yes.
Mr. Feller. Mr. Humphrey?
Mr. Humphrey. I'm sorry, I didn't hear the question.
Mr. Feller. The question is whether the Lake Erie base price is
used in making spot sales by your company.
Mr. Humphrey. Yes; I think it is, that is the basis.
Mr. Greene. That is the basis; I would like to make that clear.
Mr. Feller. Yes; that was the meaning of my term as used.
Mr. Humphrey. That is where we begin the credits and debits,
CONCENTRATION OF ECONOMIC POWER 10311
PRICE RIGIDITY
Mr. Feller. Mr. Chairman, if the members of the committee
would look at the chart entitled "Iron Ore Prices," ' I might state farther
here, the line wliich begins at the left-hand side of the chart is at the
level of $4.25. That was the Lake Erie base price of 51.50 iron ore
m 1925, 1926, 1927, 1928. In 1929 the Lake Erie base price was at
$4.50 and it was also at $4.50 in each succeeding year through 1936.
In 1937 the Lake Erie base price was $4.95 and remained at that price
in 1937,' 1938, and 1939.
Looking at the companion chart entitled "Lake Freight Rates on
Iron Ore,"^ the line beginnmg at the left-hand side of the page is the
freight rate at 83 cents in each of the years from 1925 through 1936.
In 1937 the lake freight rate on iron ore was 93 cents and it continued
that way in 1938 and 1939.
Mr. Hoyt, can you explain the fact that the Lake Erie base price
remained at precisely the same level for 4 years between 1925*and 1928
and then for all the years between 1929 and 1936?
Mr. Hoyt. I don't think I can explain specifically except generally,
prior to 1928, except that that was the best price that could be arrived
at at that time on the basis between the customer and the purchaser,
or the customer and the seller. But 1929, as you remember, costs
had gone up, prices had gone up, and the steel industry was running
at a high rate and we were able to get a higher price for 1929.
I think we are all famiUar with what happened at the end of 1929
and from that period on the whole Lake Superior district — as I have
touched upon before — and the steel industry generally, was laden
down with iron ore, both that they had at their properties at lower
lakes, and through overdevelopment of mines which had taken place
in the 4 years prior to 1929. It was, I can state definitely, that the
steel business, up until about 1925, had gone along over a long period
of time on a pretty satisfactory basis, as far as volume was concerned,
and with the boom conditions in that period steel companies went
out and were anxious to increase their ore reserve because they felt
they would need additional resources back of their steel plants if this
steel rate went on which at that time we were all, I think, foohsh
enough to believe it would. It was during that period that we
entered into the contract with Butler Bros, for Bethlehem Steel Co. and
ourselves, or, in other words, not ourselves but for Dalton Ore Co.
in order to give them additional ore reserves against the future.
Now, starting in 1930, from 1930 to 1931, there was unquestionably
the thought, generally speaking, as I remember it, that prosperity
might be pretty close around the corner and to try and keep things
at a level during that period. In 1931 or 1932 the coUapse came and
the steel industry took forward in that year three milhon and a half
tons of ore, and you had to go back to 1884 or very close to that
period, to find a comparable year.
That was an industry that had been set up to produce I don't
know how much tonnage, but at least they had been able to ship
sixty-plus million tons and there isn't any doubt that they could
have shipped a considerably larger tonnage. That meant that every
steel company, every owner of ore, was faced with the problem of
tremendous carrying charges on these idle properties during that
period. Taxes, as I remember offhand, in Minnesota in 1932, on the
' "Exhibit No. 1367", appendix, p. 10439.
2 "Exhibit, No. 13(58". appendiT. n. 10440.
10312 CONCENTRATION OF ECONOMIC POWER
basis of tlae ore shipped, were over $7 a ton, and in Michigan, say,
over $2 a ton, on the ore that was shipped in that year.
There were minimiuns that had to be met on these mine leases
and there was a constant endeavor on the part of the whole iron ore
industry to keep the labor situation — to keep all of their old employees
aUve and fed and clothed.
Now, it was impossible to operate the open-pit mines and produce
ore from them, but everybody that had an opportunity to do stripping
or other useful work which did not have its producer, employed their
men that way. They did their best to employ the underground mines
and pile the ore up in a stock pUe, although it was difficult, under the
conditions, to operate them better than 2 days a week.
Everybody in the industry was in the same situation whether
he was a buj'^er or a seller, or a steel plant, or an ordinary merchant
producer, and the long-time contracts that had been entered into
during the heyday of the late twenties became a matter of negotiation
between the buyers and the sellers or the parties to the contract.
Mr. Feller. Mr. Hoyt, are you familiar with the course of steel
prices in the years 1930, 1931, and 1932?
Mr. Hoyt. I am not. I would like to finish, Mr. Feller.
Mr. Feller. Yes, please, I am sorry, I thought you had finished.
Mr. Hoyt. I was answering your question.
For example, on purchase contracts a steel customer, say, would
come to us and would want an adjustment. He couldn't take
tonnage. We told him he would have to take tonnage or we would
be in great difl&culty. We had obligations to meet, as I have ex-
plained, at our properties, and as a result of that we would come to
an agreement that they would pay us as high a price as we could
get and we would relieve them of some tonnage. It was a question
of compromise, and that condition went through pretty nearly this
whole period until the steel business began to pick up in 1936. 1 would
say that during that period the spot sales were practically nil, and
it is pretty obvious why.
Mr. Feller. I would like to make a statement for the committee.
Mr. Hoyt has testified in answer to the question as to the behavior
of steel prices that he wasn't familiar with that. If the committee,
will turn to page 27 of the pamphlet introduced, chart 8,' it gives the
finished steel composite price index from 1926 through 1939 by months.
Mr. Henderson. As I understand, from your previous testimony
Mr. Hoyt, the way in which this price, as it appears on the chart,'
is arrived at is by the first substantial contract negotiated in the be-
ginning of the season. Was that true of the prices in 1929, 1930,
and up to 1936?
Mr. HoYT. I know it was true in one or two instances, and I
assume it must have been true in the other years.
Mr. Henderson. You testified there was a surplusage of ore
above ground in all of those years, and yet the volume that was
sold seemed to have had no effect on that negotiated price at the
beginning of each year.
Mr. Hoyt. I explained, I think, that there were no what Mr.
Feller referred to as "spot sales." The tonna,ge brought down was
the result of negotiation on these long-time contracts, compromised
in many instances as to what the purchaser could take forward and
what the seller would agree to consider as the limit.
« •• Exhibit No 1349", at appendix p.El0420.
CONCENTRATION OP ECONOMIC POWER 10313
Mr. Henderson. Aren't a number of the contracts made from
year to year?
Mr. HoYT. Not on the long-time contracts.
Mr. Henderson. No; but it was testified I think by some of the
witnesses that they have these year-to-year contracts. Isn't that
what it is, Mr. Oglebay, with most of the contracts of the companies
that you manage?
Mr. Oglebay. No; we have no — I should say in the last 10 years
we have made only two spot sales. One in '37 and one '38.
Mr. AviLDSEN. I believe he testified as to employment contracts
being year to year.
Mr. Oglebay. That is right. We have sold spot sales in '37 ana
we have sold it this year, but those were the only two sales we have
made since '29.
Mr. Henderson. Mr. Butler, how about your sales during this
period from '29 to '36? Were they on long-term contracts?
Mr. Emmett Butler. For the most part.
Mr. Henderson. What was the long-term contract, was it supposed
to be at the Lake Erie price; was it made each year?
Mr. Emmett Butler. Not the long-term contract; they had a re-
lation to the Marquette price.
Mr. Henderson. Mr. Greene, how about what you sold in the
open market?
Mr. Greene. We had a few spot sales over these years, but they
weren't important in amount or number.
Mr. Henderson. Mr. Humphrey.
Mr. Humphrey. We had very few, Mr. Henderson, and very small
tonnages.
Mr. Henderson. Did you have the same experiences, Mr.
Humphrey, with the steel producers as far as your contracts are con-
cerned? Did they agree to pay this uniform price in each of those
years?
Mr. Humphrey. I don't think you quite understand, Mr. Hender-
son. This uniform price that is traced here is the base price.
Mr. Henderson. That is right.
Mr. Humphrey. From that base price there are all sorts of allow-
ances made. That does not mean that all the ore moves at that
price, a great tonnage moves below that price and at varying amounts
below that price, I don't think there are very many ore moves above
the price, but there is a great deal of ore that will move at or somewhat
below for all sorts of reasons.
Mr. Feller. But related to that price?
Mr. Humphrey. It has a relation to the price, that is the base you
begin your computations. But these gentlemen have in their files a
lot of contracts for ore and they can show you there are many, many
prices for ore in this business. It is not a uniform price.
The Chairman. Do these prices vary in a uniform degree according
to the content of the ore, from the base price?
Mr. Humphrey. That is one of the provisions of variation, but there
are also a number of other provisions for variation which are not
uniform.
The Chairman. Now, let us take this chart which has been pre-
pared by the Department of Justice. > The line which is drawn upon
the chart represents the base price for 51.50.
> "Exhibit No. 1367," appendix, p. 10439.
10314 CONCENTRATION OF ECONOMIC POWER
Mr. Humphrey. Non-bessemer ore.
The Chairman. That is natural content. Now, let us assume a
content of 55. Is that a normal content?
Mr. Humphrey. There are such ores.
The Chairman. Would you name to me an ore which is well-
known throughout?
Mr. Humphrey. An ore can run very easily, there are ores that
run up as high as 55, there are ores that run down as low as 47 or 48.
The Chairman. Would 52 or 53 be a normal ore?
Mr. Humphrey. There are ores within all of those limits.
The Chairman. Generally speaking, out of your experience, if this
chart were plotted for 53 percent ore, would the line follow the general
trend represented here for 51.50?
Mr. Humphrey. It would follow the same line except it would be a
little higher or a little lower if you took into account only adjustments
for iron content.
The Chairman. Yes.
Mr. Humphrey. But there are other items.
The Chairman. What are they?
Mr. Humphreys. There are penalties for silica, phosphorus.
The Chairman. If the penalties were assessed that would be the line
below this line.
Mr. Humphrey. Those are not all standard; there are penalties or
premiums dependent upon whether it is for one year or a period of
years or a high minimum. Now all of those things vary from this
price and an ore that I might deUver and an ore that someone else
might deliver would not follow this line at all.
The Chairman. When you say it would not follow thfe line, you
mean it would have no relationship to the line?
Mr. Humphrey. It might not at all, so an allowance we made
might not be made for someone else.
The Chairman. Divergence for this line would depend, I take it,
upon the presence in the ore of some unusual material for which there
was a penalty or a premium which would not be characteristic of
other ores?
Mr. Humphrey. That would be a matter of agreement between us
and our customers or it might also vary because we had sold it for a
period or because our customer agreed to take a large tonnage a year
or something of that kind. We might make any concession that we
and our customer would agree to.
The Chairman. It is perfectly obvious that there might be natural
conditions in the properties owned and managed by your company
which are altogether different from those operated by Pickands,
Mather, for example.
Mr. Humphrey. Not only natural but commercial. We might
make an allowance that Pickands, Mather would not make.
The Chairman. I think I understand. Now let us eliminate those
natural conditions of content which would bring about a premium or
penalty, and consider the normal run of ore as found, generally
speaking, throughout the ore countiy. Then, with the prices depend-
ing now largely upon the natural iron content, would they vary from
this chart, would they follow this chart generally speaking?
Mr. Humphrey. I think not. I think they would follow in a way,
but they would vary in quite a wide degree, depending upon the
CONCENTRATION OF ECONOMIC POWER 10315
various agreements that had been come to between various buyers and
sellers with respect to their particular contracts.
The Chairman. What would be the variation between spot con-
tracts and term contracts?
Mr. Humphrey. The spot sales would be, as a rule, higher than the
term contracts. There are broader concessions. The spot sales
would more closely follow the line; the term contracts would vary
more from the line.
The Chairman. How far would the term contracts vary from the
line?
Mr. Humphrey. They might vary a good many cents a ton.
The Chairman. Then what is the significance of the base price in
the industry as a whole?
Mr. Humphrey. It is the base from which all calculations are
started. That is where you begin.
The Chairman. That is uniform throughout the industry? Every
producer of iron ore will use this base for the beginning of all cal-
culations?
Mr. Humphrey. I think it is simply this, Mr. Chairman, that
when any seller finds that another seller has made a certain price and
has goods for sale at that price, he realizes at once he can't get more
for his goods of an equivalent value and of an equivalent kind than
that man is willing to take. He can get less, and make arrangements
to get less, but he can't get more, so that when somebody agrees with
their customer and has ore for sale, and "Sells ore at a price, it is pretty
generally recognized that you can't get more for it at that time.
There is just one other thing that you ought to have in. mind about
this and that is this, that ore is not sold continuingly over the year.
While it is delivered over the whole summer months, it is all sold, and
the commitments are all made, very early in the spring and within a
very short space of time.
Now, those commitments can't readily be changed throughout the
rest of the year. The tonnages can be increased or decreased, but
generally spealdng the purchasers have to take the same tonnages of
ore and deal with the same people throughout the rest of the year,
and on the same basis that they start with, do you see, because of the
dark space and because of the transportation and because of the
closed season of navigation, so that these prices are the prices pre-
vailing and at which you start to do your business and to make
your calculations over a short period of a few days or a few weeks in
the spring when the business is done and completed for the year.
Then you wait for the next year.
The Chairman. Then is it a spot contract or a term contract that
determines this Lake Erie base price?
Mr. Humphrey. It can be either.
The Chairman. Well, then, if it can be either and the spot contracts
are, as I understood you to testify, normally higher than the term
contracts, how are we to accoimt for the practical uniformity of this
base price through this long period?
Mr. Humphrey. You would start from the same base in both in-
stances. It would be the same base. A spot sale and a term sale
would be made at the same base. The difference in actual money paid
would be arrived at by variations from that base.
The Chairman. I didn't make myself clear. Mr. Hoyt testified,
and my mind was pretty clear about it after listening to him, that the
10316 CONCENTRATION OF ECONOMIC POWER
Lake Erie base price was determined by the first substantial sale at
the opening of each season. That is correct, is it not?
Mr. Humphrey. That is correct, as a rule.
The Chairman. Now, then, if there is a difference between the spot
price and the contract price and the spot price is higher, and if, as you
say, this may be determined by either a spot sale or a term sale, I am
at a loss to explain the practical uniformity.
Mr. Humphrey. The difference that you fail to grasp, I think, is
this, that the price in both instances is a computed price starting from
the same base. It is the same base, do you see. In other words,
whether it is a spot sale or whether it is a contract sale, you start with
the same base. If the spot sale is made at the base price — —
The Chairman (interposing). What I am trying to find out is how
do you determine that base? My understanding is that the base is
determined by the first sale. Now you tell me it is not the first sale,
it is something else which has not appeared.
-Ir. Humphrey. The first sale is determined by the price agreed to
between the buyer and the seller as a base for that first sale.
The Chairman. Then, if you will look at this chart,» you will observe
that between the years 1929 and 1937 there was no variation whatso-
ever.
Mr. Humphrey. That is accounted for, as Mr. Hoyt has explained
to you, because of the fact that during this period our customers were
obligated to us, under contracts in amounts which they could not per-
form. They were coming to us and asking concessions from us. We,
on the other hand, with our reduced tonnages, had costs that were very
high. We were asking concessions from them and price was a matter
of mutual agreement between the buyer and the seller, both of whom
were under obligations to the other, because they had overbought and
were overcommitted over a period of time because of the very low
tonnage of 1931 and '32.
The Chairman. Well, then, the base price was not fixed in the
maimer that has been described. It was fixed in some other manner.
Mr. Humphrey. It was fixed usually in those periods on a settle-
ment based on the long-term contracts upon which the money was
paid, and you started from that base to make the sale for that year
under that contract.
Mr. Henderson. How did it come about, though, that it always
fell at that particular price in each of those years, in a world that was
experiencing a tremendous amount of change, in which costs, outside
of these freight rates, were being changed, in which the volume was
being changed, and in which the prospects were different at the begin-
ning of each of the contracting seasons. How do you explain why it
happened to come out just at that point, that the first substantial
contract arranged in each year turned out exactly at the same point?
Mr. Humphrey. That was the best compromise base that could be
got to do what was fair to buyer and seller under the respective obliga-
tions.
Mr. Henderson. Did all the respective buyers and sellers negotiate
and come to this as a composite thought?
Mr. Humphrey. No; I think what happened was that some buyer
and seller would agree to settle on tiiat basis, and all the others
followed suit.
« "Exhibit No. 1367."
CONCENTRATION OF ECONOMIC POWER 10317
Mr. Henderson. Was there any understanding as to how that first
contract would get made in each year, so that it might serve as the
basis for the other ore sellers?
Mr. Humphrey. No; I think not.
Mr. Henderson. Doesn't it strike you as strange, as it does me,
that it should happen to turn out that way each year?
Mr. Humphrey. I don't think so, Mr. Henderson, when you think
that in a good many of thes« years we had costs at our mines, because
of the reduced volume and excessive overhead, that were way in excess
of the prices.
Mr. Henderson. I can understand that very easily.
Mr. Humphrey. And the reason we had those high costs was be-
cause our customers, who were obligated to us, to take from us — I am
talking about ourselves now — tonnages of ore that if they had taken
them would have given us low costs, refused to take those tonnages,
couldn't take those tonnages.
Mr. Henderson. But it turned out that so far as each of you is
concerned, this adjusted basis got to be, and stayed for years, at
exactly the same price. Taking into account all the things you have
spoken about as being true as to the obligations of the producers to
take a certain contractual amount of ore, with as many buyers and
as many sellers in any other commodity you would expect most
certainly that that base price would have changed a jot or a tittle,
would you not, some time during that period?
Mr. Humphrey. I think the changes that took place, instead of
being made in the base, were made in the allowances that were made
up or down.
Mr. Henderson. I am quite sure of that.
Mr. Humphrey. And I think the base itself, when you had this
matter of dispute it was quite a natural thing, when you couldn't
agree on a change, to continue on the same base you had been pre-
viously on.
Mr. Henderson. I can understand that as between you and all the
parties with whom you deal, but what I still haven't got a satisfactory
explanation of is why it came out for all of the sellers and all of the
buyers at this particular base point. Was there a feeling that this
was just nominal? Let me ask you this. Was there any discussion
among the 10 principal ore sellers about how to arrive at this base
price?
Mr. Humphrey. We discussed many times, of course, what the
conditions were and how movements would be and what the tonnage
would be, and people's obligations, but what would happen would be
that if we settled with our customer on a base, couldn't agree on a
change in base and therefore went along for one more year trying to
work ourselves out of our trouble on this base, somebody else — or, if
somebody else agreed on that and we heard of it and we had to make
some little adjustment, we would make the adjustment not in the base
but in the additions or subtractions to or from that base.
Mr. Henderson. Would you hear about the prospect of continuing
that rate before the first substantial sale of the season in each of these
years?
Mr. Humphrey. You would hear a lot of talk about it; you and
your customers would talk and you would hear a good deal of discus-
sion about whether you could get more or less ore in a particular year,
10318 CONCENTRATION OF ECONOMIC POWER
but you wouldn't know what it would be until somebody did it and
you re^d it in the newspaper,
Mr. Henderson. You haven't answered the question as to whether
or not there were any definitive discussions among the sellers about
this base price.
Mr. Humphrey. I have talked to practically all of the sellers and a
good many of the buyers almost every year about prospects and con-
ditions and prices and what could happen, but when we come right
down to brass tacks, so far as we are concerned we had to settle wdth
some customer that was buying our ore, and agree vnth him.
Mr. Henderson. And that depended upon the strength of your
bargaining position. You are telling me that the actual price that
was made easily could be something different from this, but as to the
basis of this, there is a uniformity that probably derives from the
conversations you have had.
Mr. Humphrey. That went along ^rear after year.
Mr. Feller. You are also, in addition to your connection with the
iron-ore company, connected with National Steel, as you previously
testified.
Mr. Henderson. Mr. Greene, you heard the question, I think, that
I asked Mr. Humphrey.
The Chairman. Do you recall the question?
Mr. Greene. I think I recall the question.
Mr. Henderson. Is that the way you understand, as far as your
company is concerned, this nominal base price was arrived at in those
years?
Mr. Greene. Yes, If I understand correctly, you asked him about
the '32 price, why it stayed. I know in our case that our customers
much preferred to get relief in volume rather than in price, and they
readil}^ agreed to maintaining a higher price under their contract and
asking for no help there, if we would give them relief in volume.
Mr. Henderson. And then you negotiated from that base on
anything else?
Senator King, Frequently above the base, and sometimes below?
Mr. Greene. Never above the base.
Mr. Henderson. Mr. Patrick Butler?
Mr. Patrick Butler. Our general procedure was the same. We
gave relief in tonnage, mostly, and sometimes gave relief in price.
Mr. Henderson, Mr, Humphrey testified that there were frequent
discussions as to this matter, and that is how it happened to get to
this fixed price through all these years.
Mr. Humphrey. I didn't say that that is how it happened. I
said I had a number of discussions and we finally decided what we
would do.
Mr. Henderson, And I asked you if that is how we explained this,
and I think the answer given was yes,
Mr. HuMPHREi, I didn't think, Mr. Henderson — or, if that is what
I said, it was not correct.
The Chairman. This is a matter of implication. Will the reporter
please read the questions and answers?
(The series of questions by Mr. Henderson and answers by Mr.
Humphrey immediately preceding the chairman's last question of Mr.
Greene wa^ read by the reporter.)
CONCENTRATION OF ECONOMIC POWER 10319
Mr. Humphrey. That was your suggestion, Mr. Henderson, not
my answer.
Mr. Henderson. You said that went along from year to year.
Mr. Humphrey. These discussions; yes, sir; and this method of
doing business.
Mr. Henderson. Did that method have an effect on what turned
out to be the continuance of the Lake Erie price from year to year?
Mr. Humphrey. I don't understand.
Mr. Henderson. I am referring now to these conversations which
you have from time to time on tonnage and prospects, and so forth,
and I was asking you if those had something to do with the fact that
this price in this period from '29 to '37 turned out to be exactly the
same price, as far as the contract price is concerned?
Mr. Humphrey. The conversations we had with our customers
eventually resulted in our agreeing on a price with them which was
the same base price year after year, and from which variations were
made.
Mr. Henderson. Well, the question I asked, did the conversations
have anything to do with the fact that this coincidence took place
in the continuance of that year-to-year, exactly the same, price?
Mr. Humphrey. It was as a result of the conversations we had with
our customers that we finally made a deal with those customers.
Mr. Henderson. Well, how about these discussions you have with
your competitors? Did they have anything to do with the fact that
this uniform price continued in that period?
Mr. Humphrey. No; when we finally have to make a sale to a
customer, it is our agreement with that customer that settles it.
Mr. Henderson. But do you know how the first substantial con-
tract in these years was negotiated?
Mr. Humphrey. No, I do not.
Mr. Henderson. And you don't know anything at all
Mr. Humphrey (interposing). Some of them, I don't recall each
one now. I knew at the time.
Mr. Henderson. Have you had any discussions with your com-
petitors about the desirability of that uniform base continuing?
Mr. Humphrey. Well, I don't know what effect my conversation
might have on them, but I do know that when you finally make a sale
that it is the conversation between you and your customer that settles
the mattu
The Chairman. Mr. Humphrey, what puzzles me about it is simply
this, that looking at this chart one finds that there were only two
variations in the base price. In the period from 1925 to 1939, that
is to say, during 14 years there were only two changes in the base price.
I am reminded of the fact that when the discussion was opened by a
(question directed by Mr. Feller at Mr. Hoyt, Mr. Feller asked him if
it were not a fact that the Lake Erie base price was determined by the
first substantial chance sale in each year, and Mr. Hoyt objected to
the use of the word "chance," and I think with apparently very good
reason, when one looks at the chart. Now how does it come that
through this period of 14 years there is an absolute uniformity of the
base price if that base price depends upon conversations year by year,
or contracts at the opening of each season?
Mr. Humphrey. Suppose you are my customer, and we are negoti-
ating for the sale of ore this year, and I say to you, "Now we will start
124491 — 40— pt. 18 8
10320 CONCENTRATION OF ECONOMIC POWER
with last year's base price, which was $5.95." That is the base from
which we start. Now you owe me the obligation of taking from me a
substantial tonnage of ore. You can't comply with that. I say to
you, "Well, we will adjust for iron content and I will make you an
allowance of 25 cents from the base price provided you wUl take
150,000 tons this year; if you will only take 100,000 tons, I won't
allow you anything." But if you would take 250,000 I might allow
you 35 or 40 cents, and after negotiations and discussion we finally
settle on a tonnage that you can take at a price that you will pay.
That all comes from the sariie base price.
The Chairman. Last year's base price?
Mr. Humphrey. And then that would become this year's base price.
The Chairman. Now then, your conversations are independent
from the conversations that Mr. Hoyt has, I assume?
Mr. Humphrey. Entirely. Mine are with my customers.
The Chairman. And his are with his customers?
Mr. Humphrey. That is right.
The Chairman. Although from time to time you gentlemen among
one another may discuss price, may you not?
Mr. Humphrey. The price may go higher or lower or what condi-
tions are, what justifications there might be for increasing or decreasing.
The Chairman. There is that possibili*"-y, that that has happened?
Mr. Humphrey. It has happened.
The Chairman. Yes; now then, if there are six different ore sellers —
acting independently with these conversations with consumers — and
the base price is made by the first substantial sale, how does it happen
that during all of this period there was such a degree of uniformity,
although the first substantial sale might have been made by any one
of the six?
Mr. Humphrey. Well, they could start with that same base and
arrive at a different answer than you and I arrive at.
The Chairman. Of course, they could.
Mr. Humphrey. That is the way in the last analysis the ore moves
on.
The Chairman. You see what you are telling us is, or at least the
implication that I get from what you say is, that this price is deter-
mined normally and naturally by conversations that take place each
year?
Mr. Humphrey. That is correct.
The Chairman. And it is difficult for me to understand how there
could be such absolute miiformity if there were not some permanent
factor entering into this matter which actually determines the result,
because here we have one rise in 1929, another rise in 1937, and except
for those two rises it was uniform and the rises were uniform.
Mr. Humphrey. Well, you see from 1932 on it was a compromise
each year.
The Chairman. I beg your pardon; my attention was diverted.
Mr. Humphrey. From 1932 on it was a compromise each year.
Mr. Feller. Mr. Chairman, I should like to introduce a letter
which might be helpful in this situation. Mr. Patrick Butler will
look at this, please? Will you identify that as coming from your files?
M . Patrick Butler. Yes.
Mr. Feller. May I have it, please?
Mr, Patrick Butler. Yes; I want to make myself familiar with it.
CONCENTRATION OF ECONOMIC POWER 10321
Mr. Feller. The letter is dated April 10, 1934, signed by Mr.
Patrick Butler, addressed to Mr. Emmett Butler. The letter reads as
follows:
I saw Hoyt yesterday at which time he told me the ore magnates had decided
to retain last year's market price. This price will be held regardless of what Ford
does. We mailed our bid to Ford yesterday as did the others.
Hoyt says Pickands- Mather hope to take their minimum from us of 200,000
tons plus all the stockpile which we figure to be 117,000 tons.
Archibald is to be in Detroit the last part of this week and I am holding myself
in readiness to meet him there.
I offer tliis for the record.
The Chairman. The letter may be received.
(The letter referred to was marked "Exhibit No. 1369" and is
included in the appendix on p. 10441.)
Mr. Henderson. Mr. Hoyt, did you ore magnates get together that
year and decide to attain last year's market price?
Mr. Hoyt. It is the first I heard of it, Mr. Henderson.
Mr. Henderson. Do you have a practice at all of discussions of
any kind as to what that price would be?
Mr. Hoyt. I haven't any doubt, Mr. Henderson, that we have had
many discussions on all the factors that enter into price in the hope
that we can get, or could get during that period, the ore industry
straightened out to a point where we could run on a normal basis and
make some money. Now I had talked with Mr. Butler very often
about the ore price situation.
Mr. Henderson. And the other gentlemen here?
Mr. Hoyt, Very generally with the other gentlemen.
Mr. Hendersojn Wouldn't it be the natural thing, Mr. Hoyt?
Mr. Hoyt. May I just finish, Mr. Henderson?
Mr. Henderson. Pardon me.
Mr. Hoyt. Because with Mr. Butler, it has been testified to he has
sold Pickands, Mather, and while it wasn't testified to until I men-
tioned it today, Betlilehem Steel, a large tonnage of ore over a long
period of time. I am naturall57^ in a position with Mr. Butler in that
instance of a purchaser, not as a seller, and I am arriving at a fair
price with hiin on the basis of adjustment in tonnage as against the
requirements. Now to say that I have never discussed with any of
these gentlemen here whether we hoped we could get a higher price
or not, that would be ridiculous ; of course I have.
Mr. Henderson. That would be a natural thing to do in the situa-
tion with which you are confronted, with a very low tonnage and
large stocks.
Mr. Hoyt. And with tremendous carrying charges which for 2 or 3
years were pretty serious matters to a number of the people interested
in ore. I have without any question, if there was any place where
someone else had a contract with the same person I had, I might
say, "Well, who can get the best deal out of this?" I might very
easily do that.
Mr. Henderson. Now, considering the trade's seasonal character,
there is most certainly an advantage in having a stable base when the
continuing price is made within a few short weeks about May, is
there not?
Mr. Hoyt. Unquestionably.
10322 CONCENTRATION OF ECONOMIC POWER
Mr. Henderson. It would be the normal thing, would it not, in a
time of great uncertainty, that you would prefer to have something
stable on which you could tie?
Mr HoYT. Oil, absolutely.
Mr. Henderson. And wouldn't it be natural, then, that you would
by conversations about prospects and the like, let it become known
to your competitors and they would probably let it become known to
you, the desirability of having last year's base retaiued, and then
negotiating up and down the ladder?
Mr.HoYT. I can't agree with that, because, Mr. Henderson, there
are many times when these ore contracts, and perhaps there is some
difficulty, Senator, in your interpretation of a sale. Now my con-
tention is that during this period from '30 to '31 to '36 to '37, there
were practically no new sales on account of the fact that the ore
business was in a condition of stagnation. What I mean by a sale,
either spot or contract, is an adjustment of a contract already in
effect. In other words, I would negotiate with a customer of mine
not for a new contract, but on a contract that I already have in effect,
and see what price he will pay me for that. I don't know whether that
clears up that fact of what we mean by first substantial sale.
Mr. Henderson. It would still be of advantage to know what the
base is. Let me put it this way. If there had been a lower base
which would have reflected the changes in volume and what the
inventory was, it would have seriously affected your contracts. You
would have had a lower base from which to negotiate, would you not?
Mr. HoYT. Right; that is correct.
Mr. Henderson. So you are interested in what that price gets to be?
Mr. HoYT. I am interested, Mr. Henderson, in getting the very
highest price I can for the material that was shipped from the mines
in which I have an interest.
Mr. Henderson. That is a legitimate interest ; yes.
Mr. HoYT. Now when you take in a normal year 85 percent of the
ore, as near as can be estimated, in the Lake Superior district, goes
directly from mines to consumers who own the ore either directly or
through interests of mining companies, and then you come into a
year like '32 or '33, you can easily see that there is practically no ore
which is subject to what you have called spot sales. In other words,
what the volume is is left entirely subject to negotiation as between
the buyer and the seller on his long-time contract.
Mr. Henderson. Now this committee — one of its principal tasks,
as I see it, is to undertake to get an explanation of how prices are made?
Mr. HoYT. Yes, sir.
Mr. Henderson. Because they seriously affect the whole industrial
activity, l^ow here is a price which runs directly counter to the be-
havior of prices duriug that whole period. It certainly ran entirely
different from the price of finished steel in that period.
Mr. Reynders. May I make a comment in regard to that? There
was this difference in the price range, but I think we should bear in
mind that these people were selling a diminishing asset; in other words,
they have a minimum which sooner or later will be exhausted. Now
it is up to them to determine whether they are willing to dispose of a
diminishing asset here on a basis of a dropping market, as is indicated
in the finished steel prices.
CONCENTRATION OF ECONOMIC POWER 10323
. Mr. Henderson. The behavior of this price in that period differs
very much from that of prices of other things, such as copper, which
have the same characteristics you mention. What I am saying is, we
are not so much interested in whether there was a concert of agree-
ment or whether there was anything shady in the transaction. What
we are trying to find out is what was responsible for the uniformity of
the base price in that period since price is of such material importance
in industrial pohcy. I suggested to you that it would be the most
natural thing in the world, since you have a definite interest in the
price being the same or a httle higher, that there be conversations
current among your competitors as to the desirability of keeping the
price at about the same level. I also suggested that probably these
discussions are responsible for the fact that the first negotiated con-
tract each year came out exactly as it was the previous year. Now is
that incorrect?
Mr. HoYT. Well, I would say the way you state it it was incorrect,
but it could easily happen, Mr. Henderson, that out of one or two
conversations that sort of thing might be arrived at, but I think the
point that you are overlooking really, when you compare it \vith cop-
per or pig iron or steel, is what we have tried to explain about the
difl&culty of this iron ore business being tied up to a lake shipment.
Mr. Henderson. And these long-term contracts?
Mr. HoYT. And going down through the Lakes.
Mr. Henderson. And these long-term contracts needed ad-
justment?
Mr. HoYT, I am not commenting on that now; I am commenting
on the seasonal nature of the business where a consumer negotiates or
settles, if he has his own ore, on his requirements for a year ahead of
time, not from month to month or day to day or week to week, but a
year ahead of time. Now take for example, Mr. Henderson, in '37.
They brought down 63,000,000 tons of ore in '37. The consumer of
the ore, the average consumer, expected the rate of steel operation to
continue through that year at the high rate it was going the first
4 or 5 months. He had no indication, at least according to the
general information available, that there was going to be a slump.
Therefore he wasn't really figuring on a year's supply of ore ; it turned
out he was figuring on a 2 year's supply of ore because he got it down —
the slump came so late that he got the ore down before he had time to
stop it; therefore he had that accumulation.
Mr. Henderson. But the prospects in all these other years were
different from that year, and I am suggesting that if they were different
during that short compressed period for making contracts, and if they
followed these factors you suggest, the price would have been, as I said
before, some jot or tittle change?
Mr. HoYT. There were no sales during that period in the sense
that you sell copper or pig iron or steel, from day to day. It was
practically the actual fact, Mr. Henderson, that this ore was just
accumulated from the '31 period and had just hung over the steel
industry like a tremendous burden. Now
Mr. Henderson (interposing). That is the reason why I suggested
that even with those conditions in any other commodity there would
have been some change.
Senator King. May I ask one question of Mr. Humphrey? You
stated in giving your description of that apparent uniformity that
10324 CONCENTRATION OF ECONOMIC POWER
there were concessions made, and were not those concessions — did
not those concessions amount to a considerable deviation from a
straight line in the ultimate cost to the buyer and the ultimate return
to the seller?
Mr. Humphrey. That is exactly correct.
Senator King. So that it wouldn't be a uniform line so far as the
seller was concerned?
Mr. Humphrey. That is exactly right. That is what I tried to
explain.
Senator King. When he made those concessions that line would
exhibit many variations?
Mr. Humphrey. The actual cash paid by the buyer for the ton
of ore to the seller was not a straight line.
Senator King, Would it in some instances materially depart in a
straight line?
Mr. Humphrey. I think so.
Senator King. Were there concessions each year during that period
and modifications and changes from the base line?
Mr. Humphrey. Yes.
Senator King. Speaking of your own business?
Mr. Humphrey. Yes.
Mr. O'Connell. May I ask one question to be sure I understand
this? Do I understand that in the year 1933 that if you sold any
given quantity of 51.50 non-Bessemer ore, that it would not follow
this line quite closely?
Mr. Humphrey. When we settled with a customer under our con-
tract in one of those years, the contract might — one contract might
be on the basis of that line. They would start from that line and
then they would vary, depending upon the allowances or the pre-
miums or the penalties that were involved in the contract that changed
the price from that line.
Mr. O'Connell. But assuming that there was no penalty or
premium?
Mr. Humphrey. They are in all contracts.
Mr. O'Connell. Always penalties and premiums?
Mr. Humphrey. Always penalties and premiums.
Mr. O'Connell. It would result in a substantial character of this
line if we were to take your prices and compare them with a particular
kind of ore of another company, selling the same type of ore.
Mr. Humphrey. I don't know what would happen in another
company, but you would see that our prices would vary.
The Chairman. I understood Mr. Humphrey to testify in re-
sponse to my inquiries that when these unusual factors of difference
are eliminated and the price is based upon the usual factors of ad-
vance, the percentage of iron content, for example, the lines would
approximate this line.
Mr. Humphrey. If there were no unusual variations.
The Chairman. Eliminating the unusual variations.
Mr. Humphrey. But in most cases there were those other varia-
tions.
Senator King. In view of the variations which occurred, which
you stated would result in a departure from the straight line, would
you say that those variations, plus the conditions which prevailed,
and the conduct of the various parties, the buyer and the seller,
amounted to competition?
CONCENTRATION OF ECONOMIC POWER 10325
Mr. Humphrey. It was very definite competition.
Senator King. So you would say you were then in the competitive
market in the seHing of your ores?
Mr. Humphrey. We were in a competitive market all of the time
in the sale of our ores; not only were we competing with other sellers
of ore, but in many instances we were competing with our customers'
own production of ore. In other words, your customer himself, in
many instances, owns ore and if he is to buy ore from you, you must
agree on a price with him that makes it more attractive for him to
buy your ore than to mine his own.
Senator King. Then he would pay less for your ores, when he had
ores to sell of his own he would want to market his own ores first.
Mr. Humphrey. He may not be a seller, he may just mine for his
own consumption but he may mine for only a portion of his own
consumption or for all of his own consumption, depending upon what
he does.
Mr. Henderson. Mr. Chairman, I want to ask Mr. Patrick Butler
a question.
The Chairman. May I ask you to wait a moment until I clear this
up?
Mr. Humphrey, I understood you to testify that this base price is
fixed from year to year largely by the conditions which you have, so
far as you are concerned, with your consumers.
Mr, Humphrey. Well, it may be that it is however — if we agree
with our customer on a base and get cleared first, then that becomes
the base that is published.
The Chairman. Yes; but that is done from year to year.
Mr. Humphrey. Maybe somebody else does it and we start in our
negotiations with our customer from a pubUshed base.
The Chairman. I didn't mean to say you were the leader or any-
thing of the kind.
Mr. Humphrey. Sometimes it is one and sometimes the other.
The Chairman. But it is done from year to year,
Mr, Humphrey. That is right.
The Chairman. Now, Mr. Hoyt, in explanation of the uniformity
of this line explained, as I understood him, that the iron ore industry
was in such a condition due to the falling off of activity in the steel
industry that a large volume of ore was overhanging the market and
that there were not actually annual sales?
Mr. Hoyt. That is correct.
The Chairman. Now are the two statements in harmony with one
another?
Mr. Hoyt. Yes, sir; because I explained, Senator, that from our
point of view an annual sale or an adjustment of a long-time contract
which I had in effect, we wiU say at the start of this period — in other
words, suppose I had sold one of these steel companies a very large
tonnage of ore, we will say, over a 10-year period and I was in the second
year of the 10 years, I had to go and work just as hard on that
customer to arrive at a price under that long-time contract as if I was
making a new sale.
The Chairman. But at a final price?
Mr. Hoyt. All right; but my contract, for example, says that he
will take the ore forward at, we will say, 50 cents below the published
10326 CONCENTRATION OF ECONOMIC POWER
base price, so when he says to me, "Alright; I will take this ore this
year at 50 cents below the base price," I have no hesitation in telling
the newspaper man who comes around that I have made a sale at that
price, because the long-time contract is based on it. It takes into
consideration the fact that I as a seUer have a minimum where I have
to spend over a period, we will say of 5 or 6 years, a large amount of
money to develop it. I don't want to take the risk, if I am subject
just to sale from year to year, so I go to him and say, "If you will take
from me so much ore each year for a period of years, I will give you
50 cents off the base price."
The Chairman. Now, when you say to your customer that you will
give him so much off the base price, and you do that year by year iti
fixing the actual return that you get for the sale of your ore, I can
imderstand that as explaining the eventual price which you receive,
but I can't understand it as an element in fixing the base price, be-
cause you begin with an assumption of the base price, the determina-
tion of which, the method of determination of which, is the precise
question that I am trying to get an anwer to.
Mr. HoYT. I have given you the answer as I see it, Senator,
Mr. Henderson. Do you teU your customer how that base price is
going to be arrived at?
Mr. HoYT. I go down there and I tell him frankly and I say,
"Now, listen: I want to get under the conditions this year the best
price I can," and he says, "Well, I have a great inventory of ore here
and I don't want to take any," and we come to an agreement, and
finally he says to me, "All right, you let me off some tonnage, and
I wUl pay you the same price 1 paid you last year," which is $4.50,
we will say, but 50 cents under the base price. Now it has been
customary in the trade that that kind of negotiation establishes the
base price. I can't tell you more than that. That is just the custom.
It is done.
Mr. Henderson. I want to ask, Mr. Patrick Butler, do you recall
the circumstances under which you wrote this letter of April 10, 1934? ^
Mr. Patrick Butler. No; I can't recall that definite conversation.
I have been in personal contact almost personally for 15 years, and
that particular one doesn't come to mind.
Mr. Henderson. This particular one to the [effect that the ore
magnates would decide whether or not they would retain last year's
market price?
Mr. Patrick Butler. Definitely I did not mean that the ore
magnates got together and decided on the price. That is shorthand
conversation from one person that knows how the market price is
arrived at, to another person that is familiar with how the market
price is arrived at. I meant in that case, if I was going — if I were
writing a letter to you, Mr. Henderson, I would say that the negotia-
tion between the ore concerns and their customers have not developed
into setting a price for this year, or it has in this case of this letter.
Mr. Henderson. Yes; but there would have to be some basis for
that decision. How do you understand that the retention of the
same price is decided? Is it Mr. Hoyt's version or Mr, Humphrey's
version?
Mr. Patrick Butler. I didn't see any difference between their
versions.
1 ReferriBg to "Exhibit No. 1369", appendix, p. 10441.
CONCENTRATION OF ECONOMIC POWER 10327
Mr. Henderson. You didn't see any difference in their versions?
Mr. Patrick Butler. The market price, as I understand it, is
arrived at by the negotiation of the iron-ore producer and the con-
sumer.
Mr. Henderson. Well, it was said in one case it was the current
year's base price, and in the other case it was said it was last year's
base price.
Mr. Patrick Butler. I don't follow that difference.
Mr. Henderson. And then it turns out that all the contracts are
on a uniform base.
Mr. Patrick Butler. It might be for the current year or it might
be the current price for the contract that took place over a term of
years.
Mr. Henderson. I understand your testimony is that this means
something different to your dad, to whom it was addressed, than it
does to me?
Mr. Patrick Butler, I would think so; yes. That letter, the
implication or the idea that you would get from that letter would be
that the ore producers, the large ore producers, get together.
Mr. Henderson. Don't avoid that word "magnate," Mr. Butler.
Mr. Patrick Butler. The ore magnates got together and estab-
lished the price. That would be the thought that you would derive
from it. I am under no impression, or I don't believe my father is,
that the ore magnates get together and establish the price of ore. It
must be on the face of it a subject of negotiation, not between ore
magnates, but between ore magnates and their customers, not as
between themselves.
Mr. Henderson. Suppose a competitor wanted to establish a lower
base price that year and you rushed some tonnage down on the first
negotiated contract, and you made a lower base price. That would
affect every one of your competitors, wouldn't it?
Mr. Patrick Butler. I would think so; yes.
Mr. Henderson. That never takes place, does it? It didn't take
place in all those years.
Mr. Patrick Butler. I have never wanted to establish a lower
price for iron ore.
The Chairman. Do you ever establish the prJce?
Mr. Patrick Butler. Not that I know of.
Mr. Henderson. I can understand that. You might want to
move your tonnage as other industries do, and therefore make a
variation in price. What I am suggesting is that this particular base
price doesn't act like other prices in a competitive order.
Mr. Patrick Butler. I think you are right when you say that; the
base price doesn't vary as the price of other cormnodities ; no.
Mr. Henderson. But the actual price arrived at revolves around
that line.
Mr. Patrick Butler. It is based on that line. It is a base price.
Mr. Henderson. And therefore if that line is high or low, the
revolution around it will tend to be high or low.
Mr. Patrick Butler. I would think that is correct.
The Chairman. Mr. Hoyt, when does the season open?
Mr. Hoyt. On the average. May 1, Senator. Sometimes in April,
if it is a very early spring. But over a period of years you can depend
on the season opening about May 1.
10328 CONCENTRATION OF ECONOMIC POWER
The Chairman. Would yeu care to make any comment on the fact
that according to this letter Mr. Patrick Butler wrote to his father on
the 10th of April in such a maimer as to assume that the price for
that year had already been fixed, though the season was not yet
open?
Mr. HoYT. These discussions, Senator, as to ore requirements, may
start in January or February, as far as that goes. It depends on the
kind of year it is, and whether there does look to be an increase in
volume. Then they start to figure much earlier.
The Chairman. Bearing in mind that on the average the season
opens on about the 1st of May, bear in mind that the uniform testi-
mony here has been that the base price is fixed by the first substan-
tial sale after the season has opened
Mr. HoYT (interposing). No, sir; not after the season has opened.
That is not in the testimony. At least I never said that, and I
haven't heard it said. Not after the season opens.
The Chairman. The first substantial sale of the season.
Mr. HoYT. It might be made in January; yes, sir.
The Chairman. Might be made in January.
Mr. HoYT. I don't know that it has ever been made that early,
but it might be made.
The Chairman. Let's read the first sentence of Mr. Butler's letter.
[Reading from "Exhibit No. 1369"]:
I saw Hoyt yesterday at which time he told me the ore magnates had decided
to retain last year's market price.
That seems to me to refer to a future act, to a condition that would
arise in -the future, and not to a matter which had already been
closed Do you think that is a justified interpretation of the sen-
tence?
Mr. Hoyt. Senator, I don't know anything about Mr. Butler writ-
ing to his father, and how he does it or anything of that kind, but
may I ask this question? Do you think that this distinguished
group here could sit in a room and decide that the steel companies,
and a great many of them, wiU pay them a fixed price for the ore?
The Chairman. I am not making that impUcation at all.
Mr. Hoyt. That is really what* it amounts to, as far as I can see.
The Chairman. No, no. I wouldn't want you to think that I had
had that in mind at aU.
Mr. Hoyt. Mr. Henderson's question led me to believe that.
Mr. Henderson. I am saying this, that there is something very
unusual about the situation.
Mr. Hoyt. Wo tried to explain it to you, Mr. Henderson, on this
whole general situation.
Mr. Henderson. You have explained to me how the actual price
get^ made, but you haven't explained to me satisfactorily how that
particular contract, that Lake Erie rate, turned out to be exactly
the same every year.
The Chairman. If it is satisfactory to the committee, we will
recess until tomorrow morning at 10:15, and then perhaps we will
take this matter up with clear minds.
(Whereupon, at 5 p. m., the committee recessed until the following
day, November 3, 1939, at 10:15 a. m.)
INVESTIGATION OF CONCENTRATION OF ECONOMIC POWER
FRIDAY, NOVEMBER 3, 1939
United States Senate,
Temporary National Economic Committee,
Washington, D. C.
The committee met at 10:30 a. m., pursuant to adjournment on
Thursday, November 2, 1939, in the Caucus Room, Senate Office
Building, Representative B. Carroll Reece presiding.
Present: Representative Reece (acting chairman); Senator O'Ma-c
honey (chairman) ; Representative Sumners (vice chairman) ; Senator
King and Representative WiUiams; Messrs. Henderson, AvUdsen,
O'Connell, and Brackett.
Present also : Gordon Dean, representing the Department of Justice ;
John V. W. Reynders, representing the Department of Commerce;
A. H. Feller, special assistant to the Attorney General; John W. Porter,
Irving Glickfeld, Hyman Ritchin, Ward S. Bowman, and Monroe
Karasik, Department of Justice.
ActLQg Chairman Reece. The Committee wiU please come to
order. Are you ready to proceed, Mr. Feller?
Mr. Feller. Mr. Chairman, I should like to call the witnesses who
were testifying when we recessed yesterday.
TESTIMONY OF E. B. GREENE, PRESIDENT, CLEVELAND- CLIFFS
IRON CO., CLEVELAND, OHIO; ELTON HOYT H, MANAGER AND
PARTNER, PICKANDS, MATHER & CO., CLEVELAND, OHIO;
GEORGE M. HUMPHREY, PRESIDENT, M. A. HANNA CO., CLEVE-
LAND, OHIO; EMMETT BUTLER, PRESIDENT, AND PATRICK
BUTLER, BUTLER BROS., ST. PAUL, MINN.; CRISPIN OGLEBAY,
PRESIDENT, OGLEBAY, NORTON & CO., CLEVELAND, OHIO—
Resumed
iron ore pricing
Mr. Feller. Mr. Chairman, yesterday afternoon there was some
discussion as to the significance of the Lake Erie base price for ore.
I think it is pertinent to read into the record at this time a paragraph
from a letter sent by Mr. Irving S. Olds to Mr. Thurman Arnold,
Assistant Attorney General, dated August 31, 1939; Mr. Irving Olds
being coimsel and director of the United States Steel Corporation.
The paragraph which I will read indicates the basis on which the Ohver
Iron Mining Co., the largest operator of iron mines in the country and
a wholly owned subsidiary of the United States Steel Corporation,
bills other subsidiaries of the United States Steel Corporation for ore
10329
10330 CONCENTRATION OF ECONOMIC POWER
The letter reads as follows :
The Oliver Company bills in the constituent steel manufacturing subsidiary
ores delivered for their account at the established Lake Erie base price less certain
structural and . shrinkage allowances. In determining the actual price of any
particular grade of ore an adjustment up or down from the base price has to be
made on account of variables for iron phosphorus, and a penalty is applied to
high silica ore.
In this connection the Oliver Company i& subjected to a penalty amounting to
seven and one-half cents per unit of silica in excess of 10 per cent dry silica. The
prices thus arrived at, and at which the ore is so billed, are therefore the published
Lake Erie prices, and such prices are entered upon the books of the company as
the selling price of the ore.
That is the end of the quotation from Mr. Olds' letter.
I think it will appear, therefore, that the pubhshed Lake Erie base
price is, at least in the operation of the United States Steel Corporation,
a significant factor in the cost or selling price of steel, and if you will
refer to the booklet which was introduced at the beginning of the
hearing, you will see that approximately 2 tons of ore are used in
the production of 1 ton of steel.
Mr. Oglebay, could you identify this letter, please, as coming from
your files? It was written by Mr. Hilton, vice president of the Steel
Co. of Canada, and addressed to Mr. Bourne of your company.
Mr. Oglebay. Yes; I do.
Mr. Feller. I should Hke to read this letter for the record. I
don't think it will be necessary to print it as an exhibit. It bears
the heading, "Ore Prices," and is dated May 2, 1939. [Reading:]
I have been going to write you about the iron ore price structure since last
season's prices were reaffirmed this year. We are frankly quite disappointed as
these prices seem to us higher than any level which current business conditions
will justify. There does not appear to be any possibility of a general increase in
price of finished steel. In fact, the sporadic outbreaks of price cutting from time
to time would indicate the contrary might be expected. Sales of merchant iron
are dwindling year by year in proportion to the decreased gray iron foundry melt.
We are in this position. Unlike the majority of United States Steel producers,
a relatively small proportion of our total ore requirements comes from ownership
properties. It is true that, on the other side of the ledger, we do not have the
investment in ore properties which the other companies have. Our purchases of
ore have, in the main, been covered by long-term contracts, but since these are
based on fixed differentials of some kind below the prevailing season market
prices, this does not help a great deal if the season prices are maintained at
fictitiously high levels.
In this connection could you give me any estimate of the amount of ore which
is sold on some basis predicated upon the open market price during a typical
season? I would expect that only a very limited portion of the total season
movement would fall into this category.
On the other side of the picture, we have to compete with United States pro-
ducers, and the type of competition existing in the steel trade in the U. S. at the
present time is making itself felt here continually, as in a number of lines we are
forced to compete on a duty-free basis. Many of these American producers, of
course, draw the bulk or aU of their iron ore supplies from ownership properties,
some of which at least enjoy very advantageous costs. Frankly, we believe that,
in any kind of open competitive buying, the price level for iron ore would be sub-
stantially below the levels set for this year's market prices.
We are further of the opinion that, should any substantial lowering of price
leVels for steel products occur, the question of the established market price for
Lake Superior ores ought to be reconsidered in the light of such a condition.
We would be very much interested in the views of your company regarding the
foregoing.
The letter is signed "H. G. Hilton," who is, as I stated before, vice
president of the Steel Co. of Canada, Ltd.
CONCENTRATION OF ECONOMIC POWER 10331
Mr. Oglebay, 1 should like to ask you whether you agree with two
of the remarks made in this letter. One is the remark that season
prices are maintained at fictitiously high levels. Would you care to
have the letter?
Mr. Oglebay. No; I don't.
Mr. Feller. Do you agree with that remark?
Mr. Oglebay. I had better answer that as I see it, in the way m
which we answered it to Mr. Hilton.
Mr. Feller. Would you tell us that, please?
Mr. Oglebay. This contract calls for dehvery of 150,000 ions of
ore per year, and he was asking us to ship this year somewhere approxi-
mating a minimum of 50,000 tons and, as a maximum, 75,000 tons.
Others to whom we were to ship ore from this mine also were
requesting us to ship far less ore than their contracts called for. This
placed the mine in a position where the production would not meet
its cost. So we said to Mr. Hilton that in using the yardstick of this
price, as of 1939, we thought we were perfectly fair, in that that in
itself, the price that we would get from him for the ore would hardly
allow us to pay expenses at the mine.
(The vice chairman assumed the Chair.)
Mr. Oglebay. That is the answer that we made to Mr. Hilton.
, Mr. Feller. What about the word "fictitious"? Would you say
that the market price is fici-itious, either at a fictitiously high level or
a fictitiously low level?
Mr. Oglebay. I have the feeling that this is not a market price as
applied to our office, and I will have to look at it from that point of
view. We use the Lake Erie selling price with some of our long-term
contracts, including the contract with the Steel Company, of Canada.
And in the last 7 or 8 years those who had contracts with us have
asked for adjustment in shipping from the mine that did not allow
the mine to produce sufficient ore to hardly carry it, so that as a yard-
stick applying to our office I would say that price was not too high,
but probably too low, in fairness to the effect it had on our costs.
Mr. Feller. What I asked you was whether you thought the price
was fictitious. I understood you to say that the price had relatively
little significance so far as the transactions of the ore business are con-
cerned. Isn't it a fact that in those contracts which are related to
the Lake Erie base price, or the market price, like the contract with
the Steel Company, of Canada, the contract provides for a price which
bears a fixed relationship to the market price; that is, so many per-
cent off the market price?
Mr. Oglebay. That is right; yes.
Mr. Feller. Consequently if the market price were to go down the
buyer, the consumer of the ore, would have to pay less, would be able
to pay less, would he not, as the market price varied?
Mr. Oglebay. That is true.
Mr. Feller. In other words, then, the market price does have very
definite significance in connection with such a contract.
Mr. Oglebay. It does from one point of view, but from the other
point of view this company was not taking all the ore that was called
for in the contract and they were asking us for an adjustment down-
ward for less in quantity than they were obligated to take, thereby
increasing our costs. It was not necessary for us to accept this price
10332 CONCENTRATION OF ECONOMIC POWER
or any other price. We could, of course, adjust on probably some
other base, because they did not want to fulfill their contract for the
delivery as called for in the contract.
Mr. Feller. Was there such an adjustment made?
Mr. Oglebay. Yes; there was.
Mr. Feller. Wliat was the adjustment?
Mr. Oglebay. Oh, you mean the price?
Mr. Feller. Yes.
Mr. Oglebay. No; we accepted the price as of 1938.
Mr. Feller. Mr. Patrick Butler, I should like to refer back
The Vice Chairman (interposing). Wait, if you don't mind. Is it
in the record with reference to the adjustment, the details of the ad-
justment in regard to quantity delivery, quantity acceptance? I have
heard some testimony about it, but is it in the record?
Mr. Feller. The record contains statements by several of the
witnesses.
The Vice Chairman. No; I mean this witness. Unfortunately I
just got in. This witness testified that the contract which he had with
his purchaser was not compHed with because the purchaser did not
take quantity according to contract. I understood this witness to
say that there had been some adjustment but not as to price I was
asking if it was clearly in the record as to what adjustment is made as
to quantity acceptance.
Mr. Feller. No; the record does not contain the exact amount.
Could you state that, Mr. Oglebay?
Mr. Oglebay. We accepted the price as of '38.
The Vice Chairman. You have been testifying that there was
some failure on the part of the purchaser to receive ore from you
according to the contract.
Mi". Oglebay. Well, in my testimony what I wanted to imply was
that we had the privilege
The Vice Chairman (interposing). No; I am asking you
Mr. Oglebay (interposing). No; we did not, we accepted-
The Vice Chairman (interposing). You didn't answer my question.
I asked you what adjustment you made with regard to quantity
dehvery.
Mr. Oglebay. We made none. We accepted their shipping
schedules which were less than the contract called for.
The Vice Chairma^. I am asking you what |Was that difference.
Mr. Oglebay. Their contract called for the dehvery ot 150,000
tons.
The Vice Chairman. How much did you accept?
Mr. Oglebay. They took 75,000.
The Vice Chairman. That is what I have been trying to get in the
cord.
ESTABLISHMENT OF THE BASE PRICE
Mr. Feller. Mr. Patrick Butler, I should like to revert to the letter
which was introduced at the close of yesterday's session.^ As you
recall the first paragraph of that letter reads as follows:
I saw Hoyt yesterday at which time he told me the ore magnates had decided to
Retain last year's market price. This price wiU be held regardless of what Ford
iocs. We mailed our bid to Ford yesterday as did the others.
Exhibit No. 1309", appendix, p. 10441.
CONCENTRATION OF ECONOMIC POWER 10333
That is the end of the quotation. Now, Mr. Butler, considerable
discussion was had yesterday with respect to the first sentence. I
should Uke to ask you with respect to the following two sentences.
What did you mean by the statement: "This price will be held regard-
less of what Ford does." I take it that "Ford" refers to the Ford
Motor Co. which is a large buyer of iron ore.
Mr. Patrick Butler. That is right. Will you read that sentence?
Mr. Feller (reading):
This price
This price
that is to say last year's market price
wiU be held regardless of what Ford does.
wiU be held regardless of what Ford does.
Mr. Patrick Butler. That to my mind means that regardless of
what Ford does — what price Ford pays for his ore, the pubhshed
market price would remain the same as it had in previous years.
Mr, Feller. Now I take it that the custom in the industry, as
has been testified to yesterday, is that the price at which the first
substantial sale of the season is made becomes the Lake Erie base
price. I take it from your testimony that if the Ford Motor Co., by
virtue of its bargaining position, were to make the first substantial
purchase of the season at a price less than the preceding yeaffe market
price, that the industry would not recognifeie that as the established
Lake Erie base price.
Mr. Patrick Butler. I don't know that to be a fact — whether the
industry would recognize it as the first substantial sale and set the
market price, set the Lake Erie price.
Mr. Feller. What other meaning could y6ur answer to my
previous question have? Your answer was that the last year's
market price would remain the market price regardless of what
Ford did.
Mr. Patrick Butler. The only deduction I can make is that
there would be a sale prior to the Ford sale.
Mr. Feller. Supposing Ford were the first purchaser,
Mr, Patrick Butler, If Ford were the first purchaser and that
price was published, that, I think, would establish the market price
of the ore for that year.
Mr. Feller. Then the market price would not be held regardless
of what Ford did?
Mr, Patrick Butler. It could be. If the iron ore people and
their customers thought that the price that Ford paid did not reflect
the economic conditions of the industry at that time, I would think
they would be perfectly free to say that they would not recognize
the Ford sale as binding upon them on their contracts for that year.
Mr. Feller. Then I take it that the custom is one that could be
broken very easily if the price were not suitable to the producers of
iron ore.
Mr. Patrick Butler. I wouldn't gather that.
Mr. Feller. Isn't that the implication from your statement?
Mr. Patrick Butler. No,
Mr. Feller. You said that if the sellers of iron ore decided or
judged that the price at which the Ford purchase had been made
did not reflect the economic conditions in the industry that they
would not recognize that price although the record clearly indicates
10334 CONCENTRATION OF ECONOMIC POWER
that the first substantial sale of the season is by long established
custoni the market price for that season.
Mr. Patrick Butler. I would like to give an example of what I
mean by saying that they would not have to recognize the Ford sale
as the market price for that year. Suppose in one year a producer
went to the Ford Motor Co. and, on account of economic conditions,
he was so pressed to sell ore, I don't beUeve that that sale under
pressure should govern the price — that comparatively small tonnage —
of all the other ore brought down that year.
Mr. Feller. How do you determine whether a sale is made under
pressure or not?
Mr. Patrick Butler. There are times, as far as I am concerned,
when we are more anxious to sell ore than others; I mean, in
other words, our burden of doing business is heavier than in other
times and we are more anxious to make sales at one time than at
anothei".
Mr. Feller. Do you recall any given year in which the first
substantial sale of the season was considered by the industry to have
been a sale made under pressure and consequently the price would
not be recognized for the balance of the season?
Mr. Patrick Butler. I do not.
Mr. Henderson. Might I ask a question then?
Mr. Feller. Yes.
Mr. Henderson. Mr. Butler, what do these contracts you have
read have as their basis?
Mr. Patrick Butler. We have two types of contracts in effect
now. One of them is that a contract has a base price plus a percent-
age of the difference between that base price and the published Lake
Erie price. That is one type. The other type of contract is based —
calls for a base price plus increase for variables in labor and supplies.
Mr. Henderson. Suppose I had a contract with Butler Bros, of
the first type, and the first substantial contract was with Ford that
year and it did not get to be the first one published, what would be my
contract rights with you?
Mr. Patrick Butler. On the published.
Mr. Henderson. It would be on the published?
Mr. Patrick Butler. Yes.
Mr. Henderson. Therefore, if under pressure you say a substantial
contract was made, if it could be kept from getting published it
wouldn't affect these contracts which you and other ore sellers have.
Mr. Patrick Butler. It wouldn't affect the contracts that we have.
Mr. Henderson. Mr. Hoyt testified yesterday, I think, and I
think Mr. Humphrey did, as to how this price got into a publication.
I think you said, Mr. Hoyt, or maybe it was Mr. Humphrey, that
after you ^had negotiated one of these continuing contracts you called
in the press and told them about it.
Mr. Hoyt. That is correct.
Mr. Henderson. And that becomes the published price. Do you
have any general understanding in the industry — or did you have,
particularly in this period when there admittedly was pressure of the
over hanging volume — that no price below the previous year's base
price would be published?
Mr. Hoyt. Absolutely not.
CONCENTRATION OF ECONOMIC POWER 10335
Mr. Henderson. But you fellows pretty much have control as to
whether or not the contract gets published, is that not so?
Mr. HoYT. I wouldn't say so, Mr. Henderson.
' Mr. Henderson. Let me put it this way. Isn't that how the
trade journals get the information? Do they not get it from the sellers
rather than from the buyers?
Mr. HoYT. Absolutely, from the sellers but they might get it just
as easily from a sale to Ford as they would from anybody else.
Mr. Henderson. Do you recall any year in which they did get it
from Ford?
Mr. HoYT. No, sir; I don't.
Mr. Henderson. Do you recall any year of the years covered by
this chart, '25 to '39,^ in which the publication did not arise from
information given out by one of the ore companies?
Mr. HoYT. I don't think I can answer that specifically, but my
guess would be that it wouldn't — that it didn't — but I would Uke
to. explain one thing, Mr. Henderson, for the basis of this discussion.
Ford Motor Co. has part of its own ore supply and buys relatively
small tonnage. They always send out formal inquiries when they
are about to buy ore. To be perfectly frank with you, if those in-
quiries come in and there is pressure on the market, as Mr. Butler
has described, and I think in one of these exhibits Mr. Feller has
shown that there were seven or eight other ore companies shipping
in the neighborhood of a milUon eight hundred thousand tons, I
would go to my customer and try and settle with him on a price satis-
factory to him and publish it, because I don't want some chance sale
on a pressure basis to settle tonnage which was from all the properties
in wliich I might have an interest.
Now if I can't do that, if I can't arrive at anything like that, why
imquestionably so far as I am concerned, I would feel that a chance
sale to Ford, if it became known would set the price, the base price.
Mr. Henderson. But you have a little advantage in getting one
of those contracts negotiated in advance of the Ford closing, have you
not, and that is true of some of the other ore companies, on account
of the relationsliip which you have as an ore company with the steel
companies?
Mr. Hoyt. No, sir; I wouldn't say so.
Mr. Henderson./ You mean you think you stand in the same rela-
tionship exactly to the steel company as somebody who does not have
an interest?
Mr, HoYT. That would depend on the steel company you are re-
ferring to.
Mr. Feller. You have an interest in Youngstown?
Mr. HoYT. Yes.
Mr. Feller. Your senior partner is also chairman of the board.
Mr. HoYT. That is correct, but we don't sell Youngstown ore; we
operate the properties for them. I couldn't possibly establish a
published base price on a negotiation which Youngstown had.
Mr. Henderson. Let me ask Mr. Greene. Mr. Greene, do you
have the same procedure as far as the Ford contract or some other
chance sale is concerned? Let me put it this way. You have heard
Mr. Hoyt's testimony, and if you were afraid that a sale under pressure
I "Exhibit No. 1367," appendix, p. 10439.
124491 — 40 — pt. 18- 9
10336 CONCENTRATION OF ECONOMIC POWER
to Ford might be the first of the season and might get pubHcation
and therefore be the base, would you feel it desirable to get a contract
negotiated and published?
Mr. Greene. I from my personal experience wouldn't know about
that, but 1 think Mr. Hoyt has testified correctly on that. I don't
know of that happening but I feel that we would make every effort
to make a sale if we could.
Mr. Henderson. I think I would, too.
Mr. Greene. And naturally at the best price we could obtain.
Mr. Henderson. Yes; I tliink I would too if I were in your shoes.
Then this question I asked Mr. Hoyt as to the possibility of your
concluding a contract, you would have an advantage, for example,
over Mr. Butler in making a contract, would you not, on account of
your ownership in some of the steel companies?
Mr. Greene. No, I don't think so. They keep us at full arm's
length. I tliink the relations would be perfectly friendly but when
it comes to buying ore I have a pretty tough lot of buyers because I
don't think there is any special consideration given us as a result of
our relationship with the steel companies. I think we stand right on
a competitive basis.
Mr. Henderson. If you stood on a competitive basis, isn't it
likely that in some one of those years competition would have varied
that price?
Mr. Greene. I thought you were addressing one of the others,
Mr. Henderson. Let me put it another way. In any one of those
years when there was pressure stock available, did you lose any con-
tracts to the pressure. group?
Mr. Greene. I tliink, if I understand your question correctly,
throughout that period, beginning with '31 or '32, and lasting for
several years, we were under pressure to reduce the volume or the
price, and we adjusted with our customers on a basis of volume, and
not on a basis of price. The reason for that was that we needed the
money to run. If we had to keep our mines open and run, in our
particular case udth a very large debt, we had to deliver some ore to
run our mines and pay our men, and so we adjusted these matters in
volume.
Mr. Feller. Mr. Greene, when you speak of adjustment in volume,
do you mean that for the same price you gave more ore?
Mr. Greene. Not more ore, less ore.
Mr. Feller. In other words, your concession was this, was it not?
It was a relaxation of the term of the contracts which required the
purchaser to take so much ore per year. Is the purchaser still under
obligation to take that ore, the delivery of which was deferred in those
years?
Mr. Greene. That is exactly what I mean. They wanted relief
and we had to have cash, and while we say we had a contract for
300,000 and they wanted to take nothing or 100, we said, "We'll let
you off" — we went pretty carefully into what they needed and how
much cf a burden it was, and then we said, "We'll let you off, say,
two-thirds or a half; the price is the same."
Mr. Feller. We'll let you off for this year, but the extra third
that you didn't take this year you will take in succeeding years in
installments?
CONCENTRATION OF ECONOMIC POWER 10337
Mr. Greene. There couldn't be said to be any standard. In some
cases we just added that onto a year after the expiration of the con-
tract. Sometimes we got an additional amount added. Each one
was separate. You had to have a meeting of minds. There wasn't
any standard of adjustment. Each one of us sat do\vn and maybe
spent days working this thing out. It was pretty important to us
and it was fairly important to them.
Mr. Henderson. Because you took the practical way, rather than
go on your contract.
Mr. Greene. That is right.
Mr. Feller. But with respect to that ore which the purchaser took
in that particular year, the cost to him was exactly the same?
Mr. Greene. As provided in his contract; yes.
Mr. Henderson. Well now, I didn't get the answer, Mr. Feller,
to the question I asked. In any of these years, when there was tliis
overhanging volume, did you lose any of your customers because of
sales under pressure? Did you lose any of your customers that did
not have a long-term contract?
Mr. Greene. Those that didn't have a long-term contract, the
conditions were so bad there were very few sales. Undoubtedly
we lost some. They didn't need the ore. They had too much in-
ventory. There is no question about it.
Mr. Henderson. Did you lose any to anybody else that you remem-
ber?
Mr. Greene. I presume so.
Mr. Henderson. You don't know definitely.
Mr. Greene. Yes; I could name, I think, one or two
Mr. Henderson (interposing). I wouldn't ask you to name them.
Mr. Greene. I am not familiar with the details. I have no doubt
we lost customers. People took our business from us the same as they
do in every other business.
variations from the base price
Representative Reece. Some of us couldn't be here yesterday
afternoon, due to the situation in the House, and in looking over the
record I observe the discussions had with reference to the base price,
and I gather from these discussions, and together with what has been
said this morning, that the base price is not the price at which the ore
is uniformly sold throughout the year, that it is adjusted in accordance
with varying conditions, so that the customers actually pay a different
price from what is stated as a base price. Is that correct?
Mr. Feller. The conditions are physical conditions of the ore.
In other. words, the base price is a standard price which is figured on
the basis of a certain iron content. Now, if there is more or less iron
content, adjustment is made up or down in accordance with the
amount of iron which exceeds or is less than the standard. Also
there are adjustments made ^\ath respect to certain impurities in the
ore. For example, if there is too much phosphorus, you pay a penalty
for that. In other words, the conditions are conditions in the charac-
ter of the product, physical characteristics.
Representative Reece. But are there other conditions, such as
relate to the varying quantities of ore that might be taken under the
contract? That is, I mean to say, conditions arising out of the acts
of the purchaser, rather than the seller.
10338 CONCENTRATION OF ECONOMIC POWER
Mr. Feller. Congressman, I take it what you mean is, are there
such things as quantity discounts or differentials.
Representative Reece. Yes; from the base price.
Mr. Feller. As apprears in the record, there are two types of sales
made in this industry. One is the spot sale, a sale made without a
contract. You just come to the seller and you buy so much ore. As
I understand it, there are no quantity differentials in this industry.
Perhaps one of the witnesses might check up with respect to that.
There are no quantity differentials with respect to the spot sales.
Now, on the long-term contracts it was testified to yesterday that
under these long-term contracts in many instances a reduction is
made from the Lake Erie base price in order to give a consideration
for the fact that a great quantity of ore is taken over a long time, but
that deduction appears to be in most contracts uniform. In other
words, if the Lake Erie base price were to go up, your contract price
would also go up. If the Lake Erie base price were to go down,
your contract price would also go down. It appears then, and I
think it is correct to state, that the ore moves c^enerally speaking in
relation to the Lake Erie base price.
Representative Reece. Thank you.
The Vice Chairman. While you are making that explanation,
would you add another, and that is, is it in the record yet — if it is I
won't ask the question — as to the variation in proportion to quantity?
I believe it is in testimony here that there are also variations dependent
upon increased labor costs, increased production costs, variations of
the base price. I understood one of the gentlemen to testify to that
effect.
Mr. Henderson. I think Mr, Patrick Butler covered that. That
was the second type of contract you spoke of. That is a sort of
managerial contract in which there is an adjustment for certain costs.
Mr. Feller. I may explain. Congressman, that there are two types.
The Vice Chairman. I was asking about that one proposition. Is
it in the record as to the difference in price dependent upon quantity
contracted for in the contract?
Mr. Feller. Yes; the record states that.
Representative Reece. If this could be summarized in a few words,
I wouldn't be averse to hearing it, although it is jn the record.
Mr. Henderson. Both Mr. Hoyt and Mr. Humphrey gave very
excellent accounts yesterday.
Mr. Humphrey. Mr. Henderson asked me a good deal of questions
about tliis yesterday, and apparently I didn't make myself clear,
because you don't seem to have in your mind, Mr. Feller, that there
are variations and allowances from the price, based on exactly the
conditions Mr. Reece is talking about. For quantity, for the term
that the contract may be, or for just trade allowances, just for an
allowance to get the business. That is true of the contracts I am
speaking about, variations from the base price which are made to get
the business that are competitive allowances. There are any number
of allowances that are made, premiums and penalties that are figured
on the physical qualities of the ore and that are also figures based on
the commercial conditions under which the ore is sold, whether it is
for a long period or a short period or for a large quantity or a small
quantity, or just a trade concession in order to get the business
competitively.
CONCENTRATION OF ECONOMIC POWER 10339
The Vice Chairman. Do you think you are clear in the statement
which you have made for the record with reference to the variation
dependent upon quantitj'^ purchases. You think that is clear in the
record?
Mr. Humphrey. I hope with what I have said just now it is.
Apparently these gentlemen haven't understood it.
The Vice Chairman. Let me ask you one other question, and see
if this is clear in the record. When you speak of variations from the
base price made in an effort to make the sale, what difference is there
between that sort of situation and some one else negotiating with
regard to the sale of a commodity without regard to a base price?
Mr. Humphrey. There isn't a bit of difference. We start with the
base and make whatever concession you and the purchaser agree on.
You make adjustments in various ways and finally arrive at a price
that the purchaser pays.
The Vice Chairman. Is there any favoritism depending on who
your customer is, with reference to what difference there is in adjusting
your price?
Mr. Humphrey. You may make a sale under as favorable condi-
tions as possible, trying to get the best price you can.
The Vice Chairman. My question is: If you have two people
come mto your office at the same time, and each of them is just
about as hard to sell as the other, do you have customers who have
less difficulty in persuading you to make a better price?
Mr. Humphrey. You mean through some association we have
with them?
Th# Vice Chairman. I don't care what kind of route you go.
Mr. Humphrey. Not as far as we are concerned, no. The differ-
ence would be, in our case, if conditions were different. If we sold
one customer at one time and another at another, conditions might
make it harder.
The Vice Chairman. If they all got there on Wednesday morning
at ten o'clock, your conditions would be the same.
Mr. Humphrey. They would be the same, and if we sold them under
the same terms, I see no reason why we would not get the same price.
Mr. Feller. May I ask you this: In the case of a spot sale, sup-
posing the purchaser came into the market and said, **I want to buy
a lot of ore from you, Mr. Humphrey, at a spot sale," what price
would you quote?
Mr. Humphrey. I think I would drop dead. [Laughter.]
Mr. Henderson. By that I guess you mean, Mr. Humphrey, that
any steel producer in a position to make a large contract is already tied
up with one of the large companies to a large extent.
Mr. Humphrey. Not for his entire requirements. We have already
outlined to you gentlemen that about 85 per cent of this ore moves
between the o\\'ner of the ore in the ground, and the owner of the plant
to which it goes, and that what is being sold is a relatively small
amount.
We also explained to you that which perhaps isn't clear, that in
making steel or making pig irqn you have to have various kinds of
ore. There isn't any one ore that is found that I know of that ^ou
can just put that one ore in and make pig iron out of it of the kind
you want to make steel with. You have to have, because of its
physical characteristics or its chemical characteristics — in the making
10340 CONCENTRATION OF ECONOMIC POWER
of steel and in the making of pig iron, you go into thousands of a per-
cent, hundredths of a percent, in certain qualities or certain elements
of that ore.
Now, to get a proper burden for your furnace that will make the
chemical product that you want, you must balance your burden and
you must have ores of varying chemical analyses which are weighted
out, and it is a long and dijfficult calculation and they are weighted
out, and those various ores are brought together to get you the result
you want of a mixture of chemical elements.
There are a good many cases where people don't have — well, they
may own a large tonnage of ore. They may have a large tonnage on
hand, but they don't have exactly the kind of ore with a certain in-
gredient in it, or lack of ingredient in it, that is necessary to make the
kind of steel they have to make. In that case they look around to
see who has that and buy it from them. That is a matter of negoti-
ation between the buyer and the seller, and the seller buys that ore
and has it.
Mr. Feller. I should like an answer to my question other than
the somewhat depressing one that you gave. Suppose a seller next
year — business, we hope, will be good — or a purchaser, rather, of ore,
comes to you and says, "I would like to buy 10,000 tons of ore on a
spot sale." What would the price to him be?
Mr. Humphrey. If the market was strong I would hope to get an
increase in price over what we are getting this year.
Mr. Feller. It would be the market price, would it?
Mr. Humphrey. It would be whatever price I agreed upon with
that purchaser and made a sale at.
Mr. Feller. Based upon the Lake Erie base price?
Mr. Humphrey. After a sale had been established? If somebody
had previously sold ore at a price so I knew there were other people
that had ore available. Let's say ore had been sold at $4.95 when
I was talking to my customer. If somebody had previously sold ore
at $4.95 I would know right then that there was no use in my trying
to get a higher price from any customer, so I would meet that price.
Mr. Feller. I am talking about a customer here who comes to
you and says, "The Lake Erie base price is $4.95. I would like to
take 10,000 tons of ore from you at $4.60," what would you say?
Mr. Humphrey. If the market was strong I could say no, because
I would hold it and sell for more money, or feel that I could.
Mr. Feller. Was there ever a case in which you sold ore below
the Lake Erie base price, as it had been established for the season?
Mr. Humphrey. I can't tell you. There is no reason why I
couldn't, but I don't think I would, because I think I would feel that
I should get that price.
Mr. Feller. I should now like to resume
Mr. Henderson (interposing). I want to get back to the line and
would like to ask the following questions. I would like to ask Mr.
Oglebay, in any of the years between '29 and '37, did you make a
substantial contract below the last year's Lake Erie price before the
new year's price was established?
Mr. Oglebay. No.
Mr. Henderson. I should Uke to ask Mr. Emmett Butler the same
question. Did you understand my question, Mr. Butler?
Mr. Emmktt Butler. No; I would Uke to have you repeat it.
CONCENTRATION OP ECONOMIC POWER 10341
Mr. Henderson. In any of the years from '29 to '37, when, as Mr.
Patrick Butler and others have said, pressure sales were liable to occur,
<iid you make any substantial contract lower than the last year's price
which was not published, and thereby did not become the price for
the next year, as it would have if published?
Mr. Emmett Butler. I don't recall any now; no.
• Mr. Henderson. Exclusive, maybe, of Ford.
Mr. Emmett Butler. We sold Ford, I think, at the published price
in 1930.
Mr. Patrick Butler. May I add here we also sold Ford at less than
the published market price?
Mr. Henderson. Was that, in any of those years, before the season
price had been established?
Mr. Patrick Butler. No; that was after the season price had been
established. I am quite sure of that. I would have to check my
records.
Mr. Henderson. In addition to Ford, did you sell?
Mr. Patrick Butler. Yes; we have sold spot sales at less than the
market price.
Mr. Henderson. At less, and that did not become the price for that
season because it did not get published?
Mr. Patrick Butler. Those prices, as I recall it, were made after
the price had been established.
Mr. Henderson. You see what I am getting at. I am trying to
find out in addition to Ford — I ask you and Mr. Oglebay because you
are more likely, because of your contractual relations, to have made
those — where would the pressure sales be likely to have come from?
Mr. Patrick Butler. Other than from
Mr. Henderson (interposing). Other than from the industries here
represented?
■ lAr. Patrick Butler. Pressure sales were apt to come from us,
from our company, and from four or five different other mining
companies.
Mr. Henderson. You say you did make some spot sales at less
than the published price.
Mr. Patrick Butler. Yes.
Mr. Henderson. In any of those years was it in advance of the
establishment of the season's price?
Mr. Patrick Butler. I don't believe it was. I am quite sure it
wasn't.
Mr. Feller. I should like to ask you, Mr. Butler, specifically with
reference to the sales made to Ford at less than the established market
price: Do you recall whether you made such a sale in the year 1929?
Mr. Patrick Butler. You have the record there. I think we sold
Ford in 1929. I believe that was made at the market price.
Mr. Feller. Do you remember whether you made a sale to Ford
below the market price in the year 1931?
Mr. Patrick Butler. I think we did in 1931. I am not sure,
I would have to check my records.
Mr. Feller. I should like first to show you a letter written by you
to your father, Mr. Emmett Butler, dated March 28, 1929. Will
you identify that, please?
Mr. Patrick Butler. Yes, I identify it.
10342 CONCENTRATION OF ECONOMIC POWER
Mr, Feller. I offer this for the record, Air. Chairman.
The Vice Chairman. It may be received.
(The letter referred to was marked "Exhibit No. 1370," and is
included in the appendix on p. 10441.)
Mr. Feller. The letter reads as follows:
I had a talk with Elton Hoyt yesterday afternoon and he talked me out of
quoting Ford on any of our grades at less than the full market price. He said
the market for standard ores is still a little shaky and that it would be dangerous
to quote Ford anything under the full price.
On the Hume quotation, there would be too much danger of the Corporation
learning that we were using any other basis for figuring other than that we submit
to them. And I'm afraid that our goose would be cooked if Shiras ever heard of it.
In light of the above I am submitting today quotations on Hume, Knicker-
bocker, Louise, Kevin and Butler silicious at the full season's prices.
To clarify a bit, Mr. Butler, the corporation is the United States
Steel Corporation?
Mr. Patrick. Butler. That is right. And Shiras was the ore
agent at that time for the Carnegie Steel Co.
Mr. Feller. I should like to ask you whether it is the custom for
you to consult with Mr. Hoyt or anyone else before quoting Ford.
Mr. Patrick Butler. I would say it was not the custom.
Mr. Feller. But you did in that year.
Mr. Patrick Butler. I did in 1929. Bear in mind we had a
contract with Mr. Hoyt's company, and the price of that, under our
contract, was based on the market price of ore. If I recall the con-
versation out of which this correspondence grew, I endeavored to find
out from Mr. Hoyt if any price we quoted Ford would have an effect
on the market price, and which would adversely affect the price we
would obtain from him.
Mr. Feller. That is the contract with reference to wliich you wrote
in a letter which is in the record that a certain clause in that contract
was made in order to keep you out of the market.
Mr. Patrick Butler. No; it was not in reference to that.
Mr. Feller. Not in reference to that contract?
Mr. Patrick Butler. It was in reference to that same contract;
yes.
Mr. Feller. Does it follow from your answer that because you
have this contract with Mr. Hoyt that you consult him regularly
with respect to any sales which you make which may affect the market
price?
Mr. Patrick Butler. No; that does not follow.
Mr. Feller. But you have done so occasionally.
Mr. Patrick Butler. I have; yes.
Mr. Feller. I show you a letter written by you to your father
dated August 4, 1931, taken from your files. Will you identify it,
please?
Mr. Patrick Butler. Yes; I identify it.
Mr. Feller. I offer this, Mr. Chairman.
The Vice Chairman. It may be received.
(The letter referred to was marked "Exhibit No. 1371," and is. in-
cluded in the appendix on p. 10441.)
CONCENTRATION OF ECONOMIC POWER 10343
EFFECT OF CUTTING THE MARKET. PRICE
Mr. Fei.ler. The letter is dated August 4, 1931. 1 shall read an
extract from it. [Reading:]
I believe it would be a dangerous thing to quote below this year's market,
whether it be for this year only or a term of years. For one reason I believe that
any price, no matter on what basis, quoted for this year would establish next year's
market price. The Ford business is the only open market business left and
if this is not maintained I do not know what would become of our long term con-
tracts that are based on a market price. Then also, if we took away the business
from Pickands, Mather on a price concession we would incur the wrath of Jim
and also give the old line companies an excuse to do likewise. Now that Quinn
is practically out of business I believe the ore market can be more closely con-
trolled.
We are the only people that can furnish them a tonnage of low phos., ore and I
am of the opinion that we can use this as a club to move our other grades in the
same way that Cleveland-Cliflfs uses their monopoly on open hearth ore.
That is the end of the quotation,
I should hke to continue reading. Tliis is important:
I appreciate your anxiety to land this business but I believe it would be a
dangerous thing to cut the price in any way whatsoever. We will, however, con-
sult with the Big Four beforehand to assure ourselves that they will not try any
such tricks.
There are a number of terms in this letter that I should Uke to have
clarified. First, who are the "Big Four?"
Mr. Patrick Butler. That is Pickands, Mather; Oglebay, Norton;
Cleveland-CHffs; and M. A. Hanna.
Mr. Feller. Reference is made to Jim.
Mr. Patrick Butler. That is James A. MacKilhken, representing
the fee interest in some of the properties we lease. I don't know
whether he was at that time or not, but he has from time to time
shipped ore on his own account.
Mr. Feller. Why should this gentleman be wrathful if you took
away business of Pickands, Mather?
Mr. Patrick Butler. At that time Pickands, Mather were sales
agents for liis ore.
Mr. Feller. May I also ask you who Quimi is?
Mr. Patrick Butler. He was Clement K. Quinn, who at that
time was an independent mine operator, or producer.
Mr. Feller. You say he is practically out of business, meaning
that he had ceased operations.
Mr. Patrick Butler. He had practically ceased operations at that
time.
Mr. Feller. Referring to this letter again, what did you mean by
saying "it would be a dangerous thing to quote below this year's
market?"
Mr. Patrick Butler. It was dangerous in this respect, that if it
became known that Ford obtained prices — this was in August —
below the market price, it would fix the price in the succeeding year.
Mr. Feller. Then you thought it best not to sell- Ford below the
market price then?
Mr. Patrick Butler. That's right.
10344 CONCENTRATION OF ECONOMIC POWER
Mr. Feller. I take it that that covers the two or three sentences
which follow, the sentence referring to the "dangerous" thing. You
go on to say [reading]:
Then also, if we took away the business from ?ickands, Mather on a price con-
cession we would incur the wrath of Jim and also give the old line companies an
excuse to do likewise.
Now, did you mean that if you cut the matket price, Pickands
Mather would take the opportunity to retahate upon you, or in any
way bring pressure upon you?
Mr. Patrick Butler. No.
Mr. Feller. Why were you afraid of the wrath, of Jim then?
Mr. Patrick Butler. No; Pickands, Mather would quote Mac-
KiUiken's ore to Ford. Now, if we went in and made a price conces-
sion to Ford wliich took the business away from MacKLilhken, then I
beheve MacKilhken might not feel very kindly toward us.
Mr. Feller. What would he do to you^
Mr. Patrick Butlep There are any number of ways in which a
fee owner might make it unpleasant for an operator.
Mr. Feller. He was the o «v^ner of the fee of some certain proper-
ties which you were operatirg? ^
Mr. Patrick Butler. He was representative of the company that
held the fee.
Mr. Feller, and as such representative it was in his interest to
see to it that the owners of the fees got royalties?
Mr. Patrick Butler. TJiat's right.
Mr. Fellel. Now, what you recommended doing in this case was
that you not sell ore to Ford. Didn't that result in cutting down
the royalties which the fee owners received?
Mr. Patrick Butler. If we made the sale to Ford
Mr. Feller (interposing). Your fee owners, represented by Mr.
MacKOliken, would then have received some royalties.
Mr. Patrick Butler. On that particular tonnage; yes.
Mr. Feller. Then you recommended — I have not yet established
whether you made the sale or not. By the way, did you make the
sale in that year?
Mr. Patrick Butler. I don't believe so, Mr. Feller. I would
have to look at our records to be sure.
Mr. Feller. We will take it, then, that you recommended
Mr. Patrick Butler (interposing). I recommended that we do
not make the sale below the market price.
Mr. Feller. Then is it not correct to say that your recommenda-
tion that no sale be made to Ford below the season price was made
because you were afraid of incurring the wrath of Pickands, Mather?
Mr. Patrick Butler. No.
Mr. Feller. Mr. MacKillikcn represented certain Pickands,
Mather interests; did he not?
Mr. Patrick Butler. 1 think Mr. MarKilliken represented the
-fee owners m properties operated by Pickands, Mather.
Mr. Feller. And you assumed that Mr. MacKillikcn, faced with
a choice of protecting the interests of the fee owners in properties
which you operated, and protecting the interests of fee owners in
properties operated by Pickands, Mather, would use the latter
alternative?
CONCENTRATION OF ECONOMIC POWER 10345
Mr. Patrick Butler. I don't follow you there, Mr. Feller. You
are asking me to say what choice MacKilliken had m the matter,
and 1 can't testify as to that.
Mr. Emmett Butler. I might say that the amount of royalty that
the fee owners whom Mr. MacKilliien represented got, depended on
our sales price of the ore.
Mr. Feller. That is certainly correct, but if you sold no ore to
Ford there would be less of a royalty than i*" you sold it at a cut price.
Isn't that correct?
Mr. Emmett Butler. I think that is correct, so it was a matter of
their decision of whether they would rather maintain a price, a rea-
sonable price, or forever establish a price that was unreasonably low.
Mr. Feller. Does it follow, Mr. Butler, that if a price, a sale,
were made at a particular price, that that would establish the price
for(»ver?
Mr. Emmett Butler. I don't know.
Mr. Feller. In other words, you are, or at that tune were, appre-
hensive that if this market price should go down, it might stay down?
Mr. Emmett Butler. Yes.
Mr. Feller. And consequently you made your efforts to see that
that price remained at that level?
Mr. Emmett Butler. Yes.
Mr. Feller. Mr. Patrick Butler, further on in that same para-
graph of the letter of August 4, 1931, occurs this statement [reading
from ''Exhibit No. 1371"]:
Now that Quinn is practically out of business I believe the ore market can be
more closely controlled.
Controlled by whom, did you mean?
Mr. Patrick Butler. In the sense that there would be less ore
offered on the market, in the case where there would be a lesser supply
of ore.
Mr. Feller. I understand that that is the reason why it could be
more closely controlled, but who would do the controlling?
Mr. Patrick Butler. I had nobody in mind that would do the
controlling.
Mr. Feller. Did you mean the Big Four?
Mr. Patrick Butler. No; I did not mean the Big Four.
Mr. Feller. I should also like to ask you, with respect to the
statement at the end of this letter [reading] :
We will, however, consult with the Big Four beforehand to assure ourselves
that they will not try any such risks.
Is that customary?
Mr. Patrick Butler. It was part of my job to find out what my
competitors were doing, if I could find out by visiting with them or
drawing deductions from anything I could learn about it was my job
to find out what they were going to do or what they had in mind so
far as price was concerned, and make my price accordingly.
Mr. Feller. Is it correct, then, that it is part of your job to consult
with your competitors before. you submit a bid to Mr. Ford?
Mr. Patrick Butler. "Consult" is not exactly the word. I like
to find out always what they are going to do.
10346 CONCENTRATION OF ECONOMIC POWER
Mr. Feller. In a letter which was introduced yesterday ^ the
statement occurred, as you may recall, "We mailed our bid to Ford
yesterday, as did the others." That letter was written in 1934. Did
you, at that time, find out, or did you at that time inquire, as to what
price the others were going to bid at?
Mr. Patrick Butler. I don't recall that specifically.
Mr. Feller. I should like you to identify this letter, Mr. Butler.
It is signed by you, addressed to Mr. Emmett Butler, dated March
25, 1931. The letter was taken from the files of your company.
Mr. Patrick Butler. Yes ; I identify it.
Mr. Feller. I offer it for the record.
The Vice Chairman. It may be received.
(The letter referred to was marked ''Exhibit No. 1372" and is
included in the appendix on p. 10442.)
Mr. Feller. I shall read this letter [reading]:
As I wired you this morning the 1930 prices will be submitted to Ford by the
Big Four and ourselves. Oglebay-Norton have been unable to keep Nelson &
Associates from making a cut on their product. This cut is supposed to be about
fifteen cents a ton. Oglebay-Norton will not quote on this grade and will refuse
to take a commission on the sale of it. It is the consensus of opinion that too
much is at stake to meet this competition and as usual I have agreed to stay
in line.
For the record may I say that the letter contains, in typewriting,
the words "Oglebay-Norton win not cut * * *." The word "cut"
is stricken out and the word "quote" is written over it in ink. I shall
read that again:
Oglebay-Norton will not quote on this grade and will refuse to take a com-
mission on the sale of it. It is the consensus of opinion that too much is at stak^
to meet this competition and as usual I have agreed to stay in line.
It is our opinion that Ford will not buy frpm any property that has not shipped
before, even at a reduction in price.
We expect action on Ford's bids the first ])art of the coming week. Copies of
our quotations will be sent as soon as I can get them back from Wj^man, who is
in Detroit at present.
Mr. Butler, in the month of March 1931, did you consult with the
Big Four as to the bids which they were going to make to Ford?
Mr. Patrick Butler. Evidently I did.
Mr. Feller. What was the consensus of opinion that was re-
ferred to?
Mr. Patrick Butler. Evidently in my talks with the Big Four I
gathered, as I said, that there was too much at stake to meet this
competition.
Mr. Feller. And as usual, you agreed not to cut the price. That
is what you mean by staying in line.
(The witness, Mr. Patrick Butler, nodded in the aflSrmative.)
The Vice Chairman. Was there an answer to that last question?
Mr. Henderson. The witness nodded.
Mr. Felleb.'^ using the words "as usual" is it correct to say that
you are indicating that it was a matter of custom or of standing prac-
tice that you would consult with the others, and would agree with
them not to cut prices?
Mr. Patrick Butl:^r. I have told others that I would quote a
certain price.
Mr. Feller. HaVe they asked you to stay in line?
» "Exiiibit No. 1369," appendix, p. 10441.
CONCENTRATION OF ECONOMIC POWER 10347
Mr. Patrick Butler. No; they have pointed out to me that if I
did quote below the market price it might affect the market price,
and hence affect the price that we would get under our contracts.
Mr. Feller. Well, Mr. Butler, as a man who has been in the ore
bushiess a long- time don't you think they assumed that you knew
that if you cut the market price it would affect the price?
Mr. Patrick Butler. Yes.
Mr. Feller. Why should they go to the trouble of pointing this
out to you?
May I make my question just a bit fuller?
Mr. Patrick Butler. I don't say that, they did go to the trouble.
It was part of the general discussion.
Mr. Feller. Now I should like to get a somewhat clearer picture
of these general discussions. In these general discussions, as I
understand from your testimony, someone would say to you, "If you
sell below the market price, it will affect the market price, or it will
affect the price that you get for your product," and you then said, "I
agree not to cut." Now as an ore man, wasn't it always obvious to
you that if you cut the price you would get less for your product?
Mr. Patrick Butler. Uiider certain conditions that is true.
Under other conditions 1 could assure myself that if I cut the price
in a certain instance, it would not affect- the market price, and I
testified before that I have made sales under the market price which
I felt reasonably confident when I made that quotation would not
affect the market price.
Mr. Feller. Then I take it in these discussions, what you sought
was instructions from the others as to what would be the effect on
the market price.
Mr. Patrick Butler. I wouldn't put it as instructions.
Mr. Feller. Exactly what would you say in these discussions?
Mr. Patrick Butler. In the discussions I had
Mr. Feller (interposing). May I just amend that to make it a
bit more specific. Let us take the situation which occurred at the
time this letter was written. Apparently there was consultation of
some kind with respect to the bids that would be submitted to Ford.
Now, did you at that time say to the Big Four, "I am going -to' quote
Ford at the following price?"
Mr. Patrick Butler. I may have. I don't recall.
Mr. Feller. Have you ever done that?
Mr. Patrick Butler. I can't say that I have or that I have not,
either way. I may have said, "I am going to quote last year's price."
Mr. Feller. Or you may say, "I don't think I will stay in line
this year."
Mr. Patrick Butler. I don't recall ever saying that.
Mr. Feller. How would this question come up as to whether yon
had agreed to stay in line or not?
Mr. Patrick Butler. I would say, I think I have said to them,
"I am going to quote last year's market price."
Mr. Feller. Is that what you mean by agree? I take it that the
word "agree" indicates that somebody made a proposition to you, or
made a statement to you, and tlmt you agreed with that statement.
Mr. Patrick Butler. In quoting from these letters, Mr. Feller, I
was not looking forward to the time I would be sitting here, and I
was not as choice in my language as I might Iravc been.
10348 CONCENTRATION OF ECONOMIC POWER
Mr. Henderson. I think what he is saying, Mr. Feller — we had a
great-to-do about semantics at one time. Semantics were intended to
clarify language, and what we have been running into is business
semantics, and what Mr. Patrick Butler termed business shorthand
for some things. For example, this imited front wouldn't mean the
same thing in connection with this industry as it would mean before
the Dies Committee.*
Mr. Feller. Mr. Ogh bay, this letter, which I have just been dis-
cussing with Mr. Patrick Butler, states [reading]:
Oglebay, Norton will not quote on this grade, and refused to take a commission
on the sale of that.
Do you recall that?
Mr. Oglebay. I do not recall that specifically, but it seems to me
that this brings a rather interesting question of enlightenment before
the committee. Mr. Nelson represented a property called the Green-
way property. He had got three or four leases together, and com-
bined that in the one property, and later we took the lease of that
property. It shows the difficulty in carrying on here in the last few
years. We put $750,000 in this Greenway properly. We didn't
movr a pound of ore from the property, and abandoned it and lost our
$750,000. That is our association with this Greenway lease, or the
association with Mr. Nrlson.
Mr. "Henderson. That is Ogh'bay, Norton monoy.
Mr. Oglebay. No; I meant the companies we operate in our office,
Montreal Mining Co., Columbia Steamship Co., and one or two of our
smaller com{)anies decided to form a corporation to take over the
lease of the Greenway mine and operate it. We stripped it, equipped
it, spent about $750,000 on it, and couldn't move sufficient ore to pay
its minimum charges, so we lost it.
At this time Mr. Nelson was negotiating with us for this lease.
This is sort of off the record. I doubt very much whether Mr. Nelson
had a mine that would be able, really, to meet the qualifications neces-
sary for Ford delivery, but that is just a sort of thought as I look back
on it. We never sold 1 pound of tliis ore to anybody, and lost in our
association three-quarters of a million dollars.
The Vice Chairman. To whom did you lose that mine?
Mr. Oglebay. It went back to the fee owners.
The Vice Chairman. Is anybody operating it now?
Mr. Oglebay. No. I would hke to just sort of put in the record,
too, that this "Big Four" and "United Front" — what we are, we
^.orate two mines, Oglebay, Norton. One of them is the Castile
mine, and that is owned, two-thirds of it, by the American Rolling
Mill Co. and the Wheeling Steel Corporation. They take all the ore
from that property. That property produces as its maximum about
400,000 tons. The second property we operate in our office is the
Montreal Mining Co., which at its maximum produces about a million
t is, averaging in the last few years anywhere from five hundred to
e^^ht hundred thousand tons, and that property is associated with
lour companies that take about 90 to 95 percent of its production,
liat is the Jones & Laughlin, Wheelhig Steel Corporation, American
Rolling Mill Co., and the Steel Co. of Canada. So we aren't very
prominent in this selling proposition, as you might call it.
J A Special Committee On Un-American Actfvlties, pursuant to H. Res. 282, 76th Cong., 1st sess., Rep-
fbiahtatlve Dies (Texas), chairman.
CONCENTRATION OF ECONOMIC POWER 10349
Now then, we also, during these intervals of the last 5 years, or 7
years, did operate two other properties, and from neitlier one of those
properties could we sell sufficient ore to meet the minimum require-
ments for operation, and we had to abandon them. I just wanted
to have a sort of a feeling on the part of the committee here to have a
realization of what I am when it comes to the Big Four in ore values,
and a few other things.
Mr. Feller. I take it then, you think the term "Big Four" should
be amended to be "Big Three"?
Mr. Oglebay. It certainly shouldn't include us.
Mr. Henderson. I take it that is what you were trying to do when
you sold two-thirds of your interest to Mr. Greene's people. You
\/ere trying to get into the Big Four class?
Mr. Oglebay. Trying to.
Mr. Henderson. Perfectly legitimate, I might say.
Mr. Feller. Mr. Oglebay. you told us Nelson & Associates were
Using money. Why did you want to induce them not to sell at cut
p 'ice?
Mr. Oglebay. I don't remember the details of this. As I said, I
dtn't believe that they were in a position to make very much of a
d( livery, because afterward we took over these properties in order to
prepare them to produce ore. We spent $750,000, so that this was in
the early negotiations, before the property was ready to produce, and
we ourselves never sold any ore or moved any ore from the property,
so I doubt very much whether Nelson was really in a position to make
deliveries to Ford, but I am not confident of that, and I don't remem-
ber it in sufficient detail to have the accurate facts,
Mr. Feller. Do you recollect conversations which you had with
Nelson & Associates to induce them not to sell ore at particular prices?
Mr. Oglebay. No; I do not. Nelson was rather an odd fellow,
and he was constantly coming into our office and visiting the people,
but he didn't have a mine that was able to produce in any quantity,
so it isn't of very much moment, as I see it.
The Vice Chairman. This mine that you surrendered, was the
surrender due to the quality of ore which could have been found by
sufficient exploration before you went to work on it, or due to market
conditions?
Mr. Oglebay. No, sir; it was a mine that the fee owners wanted
$75,000 a year minimum as rental to them. And as 1 remember, there
was about $40,000 a year in taxes, so that the property had a standby
expense of approximately $125,000 to $150,000 a year.
Now, in order to meet that, plus the cost of mining, plus the cost
of royalties, it was necessary for us to move quite a nice tonnage —
around three to four hundred thousand tons of ore a year, and we
couldn't sell that ore to anybody at that time in that tonnage that
would allow us to mine at a profit, so we had to just give up our lease.
The Vice Chairman. Then it was due to the market conditions.
Was it due to the quality of the ore, or the fact that the market
wouldn't absorb it?
Mr. Oglebay. My own personal experience here i i the last 7 or 8
years with these three properties that we all abandoned, is that
tbere was so little what might be called spot sales that it wasn't of
very much moment. That is, ore that was sold hke Ford ore, and then
we ti^ up with any associations like Jones & Laughhn and Wheeling
10350 CONCENTRATIO:' OF ECONOMIC POWER
Steel Corporation, in the last seven or eight companies have had, either
through ownership of their own properties or through obligations of
long-term contracts, more ore than they could nicely handle, so that
none of those companies was in a position to buy additional ore, no
matter how attractive a price might be made them.
The Vice Chairman. Let me ask this question. Was there such
a percentage of the purchase of ore tied up with contracts that you
couldn't attract to this property enough contracts, cither spot sales
or basic contracts, whatever you call it, to dispose of enough ore to
keep it going?
Mr. Oglebay. That is the answer, yes. We lost, through our in-
ability to do that, $750,000.
The Vice Chairman. It wasn't due to lack of preliminary explora-
tion, or to quality of the ore, but when you got your ore ready to sell
you found everybody else either tied up with contracts — well, tied up
with contracts.
Mr. Oglebay. Either contracts or through ownership. Every
steel corporation you go to today, I would say
The Vice Chairman (interposing). They weren't in the market.
Mr. Oglebay. Our experience is that you go to a corporation today
and they, through cither ownership of their own ores or obligations
they have, arc covered for about 75 percent of their ore requirements.
In the last 7 or 8 years their ore requirements haven't exceeded
40. percent, so they haven't a great problem of taking care of their
obligations or meeting the positive idleness which caused us to abandon
this Greenway property. If this Greenway property had been in the
hands of a large corporation they would have retained that property
and paid this hundred thousand dollars a year, but being a small
corporation like ourselves there were not the funds available to go along
and get this hundred thousand dollars for a couple years or 3 years.
limited market for ore sales
The Vice Chairman. What percentage of the consumers of ore now
produce their own ore; or rather, may I ask it this way — are dependent
upon production coming from mines that they themselves own and
control — would you say?
Mr, Og^^ebay. I would say it is approximately 85 to 90 percent.
Mr. Feller. In terms of tonnage.
Mr, Oglebay. In terms of tonnage.
The Vice Chairman. That is what I am talking about, too.
Mr. Oglebay. I would say this, as just a salesman trying to sell
his shoes, I don't know where you would go today to make a contract
with anybody, any of the large corporations, for the purchase of ore.
I think you would find every one of them with obligations, cither
through long-term contracts or through association ownerships, that
they have all the ore at the present time that they need. Now, if
business comes back and we have a few more years like '37 and the
latter half of '39, then that story will change. I am only speaking now
of the history of the ore business from '30 to '39.
The Vice Chairman. Do you believe that improved conditions
might make it possible for a mine situated as this ]nine was that you
had Lo close up to stay in business.
CONCENTRATION OF ECONOMIC POWER 10351
Mr. Oglebay. I don't think we would look forward to any new
corporation. I would say this, just as Mr. Humphrey has outlined
here
The Vice Chairman (interposing). If it has been outlined, I don't
want to go into it.
Mr. Oglebay. I mean tliis is true, I think
The Vice Chairman (interposing). You have answered my ques-
tion.
Mr. Oglebay. When the operations of the steel company exceed
80 percent, then I mean they would probably be in the market for
certain grades of ore, but I would say that until the steel companies
are operating somewhere approximating between 75 and 80 percent
there is little need for further ore.
The Vice 'Chairman. That explains it.
Mr. Henderson. When did you give up the Greenway property?
Mr. Oglebay. I would say about 4 or 5 years ago, but I don't
remember the actual date. It was in 1929.
Mr. Henderson. Is that since Cliffs bought into your group?
Mr. Oglebay. Yes.
Mr. Henderson. Did you have any negotiations with Chffs about
them taking it over?
Mr. Oglebay. No; I mean as Mr. Greene has outlined Cliffs were
also sort of lacking as to funds during these years.
Mr. Henderson. He might have sold some steel stocks.
Mr. Oglebay. They weren't very valuable, too.
Mr. Henderson. I am not trjmig to pin anything down by this.
I am just wondering whether or not the thing seemed so unattractive
even to the combined group, yourself and Cliffs, that it wasn't attrac-
tive enough to make an effort to keep it. That is the point I am
getting to.
Mr. Ogelbay. I think you might say this, Mr. Henderson, that it
is a great problem today with the ores that are owned by Cleveland-
Chffs Iron Co. and the ores that are owned in our office to sell at a
sufficiently attractive price to make these investments profitable.
You only have a few customers and if you lose one of them it is very
diflBcult to replace him because you have to find tliis fellow, this large
corporation, that is in need of additional ores, and as we have just
stated 85 or 90 percent of their requirements are taken care of by
ownerships of long-time contracts; it doesn't leave much of a chance
for new business.
Mr. Henderson. I think that is one of the most significant tlmigs
that has been brought out in the testimony of the last few days.
Mi. Feller. Mr. Patrick Butler, I should like to have you identify
two letters, one signed by you addressed to your father, dated March
27, 1929, and the other signed by Mr. C. L. Wyman, addressed to
Mr. Emmett Butler, dated April 16, 1935. Both of these letters were
taken from your files.
Mr. Patrick Butler. Yes; I identify them.
Mr. Feller. I offer these.
The Vice Chairman. AU right.
(The letters referred to were marked "Exliibits Nos. 1373 and 1374"
respectively, and are included in the appendix on pp. 10442 and
10443.)
124491—40 — pt. 18 10
10352 CONCENTRATION OF ECONOMIC POWER
PRICE DISCUSSIONS
Mr. Feller. I shall read one paragraph from each letter. The
letter dated March 27, 1929, and signed by you reads as follows
[reading from "Exhibit No. 1373"]:
I am seeing Hoyt this afternoon to find out what we shall quote on manganif-
erous ore and possibly to get his approval of our offering Hume as a straight iron
ore. Also, if we can't quote Kevin 10 cents to 15 cents ofiF without stepping on
Bennett's or his corns.
Is it your custom to seek Mr. Hoyt's approval as to the price at
which you are going to sell ore?
Mr. Patrick Butler. You will recall, Mr. Feller, that Mr. Hoyt
and Mr. Hoyt's company had an option on our surplus ores. That
was what I referred to.
Mr. Feller. Do you recall the date of that contract?
Mr. Patrick Butler. Negotiations took place throughout the
late summer and fall of 1928 and I think the date of the contract was
in January '29.
Mr. Feller. Do you conceive that by virtue of that contract you
have to seek Mr. Hoyt's approval as to the kind of ore that you
offer to others? If you will recall, this statement reads "to get his
approval of our offering Hume." I take it that is a grade of ore?
Mr. Patrick Butler. Yes.
Mr. Feller. "As a straight iron ore."
Mr. Patrick Butler. Hume grade is a manganiferous ore; it
contains about 5 percent of manganiferous. If it was considered as
an iron ore
Mr. Feller (interposing). As I recall it, as the record, I believe,
indicates, the contract gives Mr. Hoyt's company an option to pur-
chase surplus ore. Is there anything in the contract which provides
that Mr. Hoyt must approve the prices at which you sell to others?
Mr. Patrick Butler. No.
Mr. Feller. Have you so construed the contract?
Mr. Patrick Butler. No.
Mr. Feller. But you have adopted the practice of asking him
whether or not you can sell ore to somebody else at a particular price?
Mr. Patrick Butler. When I contemplated, selling ore from the
properties which I specified in the contract, selling ore to others, I
would tell Mr. Hoyt that I contemplated selling ore to others under
his option agreement and he could take that price or not as he saw fit.
Mr. Feller. I should also like to read a paragraph from the letter
dated April 16, 1935, signed by C. L. Wyman. Who is he?
Mr. Patrick Butler. Mr. Wyman is my assistant in Cleveland.
Mr. Feller. The paragraph that I refer to reads as follows [reading
from "ExhiDit No. 1374"]:
The Ford Motor Company Inquiries came in today calling for 120,000 tons of
b^sic with phosphorous under .10 and 60,000 tons of high phosphorous ore.
I checked up with Hanna's and Pickands, Mather today and find that there has
been no decision —
For the reporter, the word "decision" is written in in ink and under-
neath it the word "discussion" in type has been scratched out —
there has been no decision as to what this year's price will be, except that there
seems to be some difference of opinion as to whether or not the surcharge on
freight rates will be absorbed and the same market price named as existed over
the past several years.
CONCENTRATION OF ECONOMIC POWER 10353
Is it your understanding, Mr. Patrick Butler, that in April of 1935
there had been a discussion or consultation or meeting of some kind to
decide what the year's price would be?
Mr. Patrick Butler. I think that would refer, if I can interpret
Wyman's letter for him — he called up somebody in the Hanna Co.,
and somebody in the Pickands, Mather Co., and asked them if their
prices had been established for the year, if the prices they made to
their customers had been made — I mean if their negotiations with
their customers had been had. I imagine that is what happened.
Mr. Feller. Do you recall whether he asked them what prices
he was going to charge?
Mr. Patrick Butler. I suppose he asked them, "What is this
year's market price."
Mr. Feller. Wouldn't he know that by reading the trade journals?
Mr. Patrick Butler. This was evidently prior to the time that
the price for that year, 1935, was published.
Mr. Feller. If no sale had been made, how could anybody loiow
what the market price could be?
Mr. Patrick Butler. They don't know.
Mr. Feller. When is this price published, right after the first
sale?
Mr. Patrick Butler. Yes.
Mr. Feller. Then if there was no published price at that time,
can we not assume that there had been no sale; consequently no
market price under the custom of the industry?
Mr. Patrick Butler. That is right, if there had been no sale —
evidently at that late time, by April 16, there certainly had been
no negotiations leading up to an establishment of the market price.
Mr. Feller. What Mr. Wym^n would be doing, then, would be
asking Pickands, Mather and Hanna's, "What will be the market
price?"
Mr. Patrick Butler. Yes; I would imagine so.
Mr. Feller. How would either of them know which was going
to make the first sale?
Mr. Patrick Butler. I don't say that they would know who was
going to make the first sale. He was asking for information as to
what their best guess was as to what the market price would be.
Mr. Feller. You don't think that there was at that time any
concensus, any discussion, any consultation among other members
of the industry?
Mr. Patrick Butler. I imagine there was discussion among other
members of the industry, I don't know.
Mr. Feller. Mr. Hoyt, may I ask you whether it is customary
in this industry for your competitors to ask you at w^hat price they
should sell their product?
Mr. Hoyt. I say it is not.
Mr. Feller. There have been references in several of the letters
which have been introduced recently to consultations which Mr.
Patrick Butler has had with you. Is that an exception to the answer
you have just given?
Mr. Hoyt. I think it is perfectly evident by this correspondence
between Pat and his father that he was naturally interested in our
attitude on the long-term contract which we have mentioned several
times covering the large tonnage that we bought from certain of
10354 CONCENTRATION OF ECONOMIC POWER
his properties of which we had an option on additional ore, and
any change in the market price would obviously att'ect the result
under his contract.
Mr. Feller. Then your consultations with Mr. Butler would be
only because you have a contract with him?
Mr. HoYT. That is right.
Mr. Feller. In cases where you have no such contract, there
would be no such consultation?
Mr. 5oYT. I can't say that because manganiferous ore is a special
grade produced from, the Cuyuna Range, and I have often talked
with Mr. Butler as to the prices and basis for selling manganiferous
ore, which is not standard, which might be btained.
Mr. Feller. Mr. Greene, may I pass you this document? It is
signed by H. A. Raymond, addressed to you, dated April 23, 1935,
and is taken from your files. Will you identify it, please?
Mr. Greene. I do.
Mr. Feller. I offer this for the record.
The Vice Chairman. It may be admitted, and with reference to
the other two letters from which you read, I wonder if the writers
of those letters or the gentlemen present would like to have the whole
letter go in, or just the quotations from them.
Mr. Feller. I should like to have the whole letter go in.
The Vice Chairman. Then the three letters may be admitted for
the record.
(The letter referred to was marked "Exhibit No. 1375" and is in-
cluded in the appendix on p. 10444.)
Mr. Feller. Mr. Greene, do you have a contract with Mr. Hoyt's
company similar to the contract Air. Butler has with Mr. Hoyt's
ocmpany?
Mr. Greene. No, sir.
Mr. Feller. I should like to read this letter:
Mr. Hoyt called up today and after asking if Alex was in town, asked if I would
come up to speak with him a minute. He told me of his talk with you last night
and the agreement that he would see Mr. Girdler this morning. He said he had
just been talking with him for an hour and a half, asking Mr. Girdler if he did not
think it Avould be a good thing for tlie whole Industry if the emergency freight
charge be borne by the buyers of ore. He said that Mr. Girdler told him that if
he would get Mr. Block and Mr. Weir to agree that adding the emergency freight
to the ore price this year would be of psychological help in getting a better price
for steel in the third quarter, that he would be in favor of it.
Here may I pause to identify these gentlemen. Mr. Girdler is the
head of the Republic Steel Corporation, is he not?
Mr. Greene. Chairman of the board.
Mr. Feller. And Mr. Block?
Mr. Greene. Which Mr. Block? Mr. L. E. is chairman and then
P. D. is president of the Inland Steel.
Mr. Feller. In other words, it is either of the two Mr. Blocks?
Mr. Greene. One or the other.
Mr. Feller. And Mr. Weir?
Mr. Greene. Chairman of the board of the National Steel.
Mr. Feller. (Reading from "Exhibit No. 1375"):
He said that. of course Mr. Girdler and he both realized [regardless of the fact
that Mr. Wysor is in Bermuda] that he, Hoyt, could not get any such assurance.
Mr. Girdler felt that if this were not the case, the increase in freight rate should
not t? added to the price of ore. Mr. Hoyt then said he would go back and think
it over and ^r^ narting said to Mr. Girdler: "Well, then, if I announce in the papers
CONCENTRATION OF ECONOMIC POWER 10355
that the price of ore is the same as last year, with the ore companies absorbing the
increase in freight rate, I can consider that we have sold you a tonnage of ore at
last year's price." Mr. Girdlor's reply was: "Yes, we have made a deal."
Therefore, Mr. Hoyt said he wanted to announce in the papers this afternoon
that the ore price has been set at $4.50 for this season, and asked if that would
be alright for our company. I told him that I would have to call you on the
telephone, and that it might be that you would prefer to have another talk with
Mr. Girdler along the lines of if we are going to absorb this freight they ought to
give us an increase in tonnage. Mr. Hoyt felt strongly that this matter must be
completed today and that you would be in just as good a position to make such a
plea after the prices are fixed, with the argument that the ore industry has ab-
sorbed $2,500,000 of increased freight rate and ought to get some help. I told
him, of course, that is not correct, that nearly 90 percent of the ore is ownership
ore, which naturally has to bear the increase, but he said it is the ore-mining end
of the industry that is standing it and he thought that was a fair statement. I
told him that I felt that you would like to talk with Mr. Girdler before having the
price set but he said he thought it was important to get it done immediately. He
then went on to further say that if a lower price would bring more business he
would be in favor of making some lower price, but he thought we would have to
wait until there was a real prospect of getting the larger tonnage and he thought
that very likely ore prices will be lower, but that as this is a year when we are
mining merely to give employment, and with so little to gain, that it was a bad
time to make any change. He suggested that if he did not hear from me by
4 o'clock they would go ahead and announce the price and asked what I thought
you would think of that. I said that I felt that would not be the right thing —
that you surely should be advised and reiterated that I did not think the delay
of a day would make any diflference.
Do you recall this, Mr. Hoyt?
Mr. Hoyt. Recall the subject of that letter?
Mr. Feller. Recall this particular incident.
Mr. Hoyt. Yes, sir.
Mr. Feller. I take it that this letter correctly states the conver-
sation that you had with Mr. Raymond.
Mr. Hoyt. I can't testify as to that because that is quite a long
tune ago. As to the facts of my discussion with Mr. Girdler it is
perfectly correct.
Mr. Feller. Do you recall then discussing the matter with Mr.
Raymond?
Mr. Hoyt. I think unquestionably I do.
Mr. Feller. Do you recall discussing it with other members of
the iron-ore industry?
Mr. Hoyt. Now, Mr. Feller, you asked me a few moments ago
if it was the custonFof the industry for one to consult with the other
as to the place that they should sell their ore and I answered "no."
Mr. Greene and I both have a contract — when I say "we" I mean our
companies — with Republic. I said to Mr. Greene, "Now, can you
get a better deal with Mr. Girdler than I can?" and he said, "I don't
know."
"Well," I said, "I am going down there and see what I can do."
I went down and discussed with Mr. Gu'dler on that basis and it is
perfectly obvious the arrangement that Mr. Girdler and I worked
out affecting this long-time contract and having talked to Mr. Greene
in the first place I called him up and found him out of town and I
talked with Mr. Raymond and I told him just as it states there that
I was satisfied with that price and that I was going ahead and an-
noimce it unless he could give me some good reason why I shouldn't,
and that is what happened.
Mr. Feller. And that price would be the price not only to Republic
Steel Corporation but the market price for that year.
10356 CONCENTRATION OF ECONOMIC POWER
Mr, HoYT. It would be the market price based on our long dis-
cussions of yesterday,
Mr. Feller. Could you tell me why Mr. Greene should not want
to sell Republic at a different price from the price that you sold?
Mr, HoYT. Because he had a contract, as I understand it, which
was based on some allowance off the base price.
Mr. Feller. Then in effect he delegated to you the duty or power
of making the base price by your negotiation with Republic?
Mr. HoYT, He didn't delegate or give me the powjer or anything
else. I took it myself.
Mr. Feller. Didn't I understand you to say that Mr, Greene
asked you to go down to Republic?
Mr. HoYT. No; I didn't say that. I said to Mr. Greene, "Now,
who can get the best deal with Mr. Girdler?" I didn't say what the
result of that was. In any event I went down there,
Mr. Feller. Then you' thought it advisable to inform Mr. Greene
as to the deal that you had made.
Mr. HoYT. Absolutely.
Mr. Feller. In other words, you told him then
Mr. HoYT (interposing). I didn't tell him; I told Mr, Raymond.
Mr. Feller. You told an oflBcial of Mr. Greene's company.
Mr. HoYT. That is right,
Mr. Feller. Wliat would be the market price?
Mr, HoYT. I told him what my discussion was with Mr. Girdler
and that I was going to give it to the papers.
Mr. Feller. That was to be the market price?
Mr. HoYT. If it were pubUshed and recognized.
Mr. Feller. It would have been the market price in any event.
The statement in this letter indicates that that would be the market
price.
Mr. HoYT. The base price.
Mr. Feller. Don't you consider that a consultation with one of
your competitors with respect as to what the market price should be?
Mr. HoYT. That isn't the question. The question was on consul-
tation as to the price at which they should sell and to that I answered
no.
Mr, Feller. According to the custom in the industry, the sale
would be at the market price and the market price would be the price
at which you made this sale to Republic.
Mr. HoYT. That would be my market price, but it doesn't in any
way prevent Mr. Greene and the Cleveland-CUffs from making any
price they want.
Mr. Feller. You mean there isn't any legal compulsion?
Mr. HoYT. No ; there is no compulsion or arrangement of any kind.
Mr. Feller. But the custom in the industry is that the market
price is estabhshed by the first sale, and as has been testified here,
that is very generally followed.
Mr. HoYT. That may be true, but it doesn't in any way prevent
Mr. Greene from selling his ore at any price he wants if he is not
satisfied with the pubHshed market price and the base.
The Vice Chairman. May I ask you about how long this particular
line of interrogation will probably last? I do it because it is nearly
12:30 now.
Mr. Feller. I am almost finished.
CONCENTRATION OP ECONOMIC POWER 10357
The Vice Chairman. You have only 5 minutes.
Mr. Feller. I should like to try to conclude just as soon as
possible; if possible, early this afternoon.
The Vice Chairman. What I am trying to find out is, woidd you
as soon recess now until this afternoon? I am thinking of these
gentlemen. Sometimes you are just about ready to ask the question
you have been leading up to for about half an hour, and if that is the
case we will go on.
Mr. Feller. I think we might as well adjourn now.
May I make a request on behalf of the witnesses, Mr. Chairman,
that we attempt to conclude this testimony relatively early this
afternoon because I think all of these gentlemen would hke to get out
of town.
The Vice Chairman. I am sure they are ready to quit now, as
far as they are concerned. [Laughter.l
The committee will stand in recess until 2:15.
(Whereupon, at 12:30 noon, a recess was taken until 2:15 p. m. of
the same day.)
afternoon session
The hearing was resumed at 2:30 o'clock, upon the expiration of
the recess. Senator Joseph O'Mahoney, chairman of the committee,
presiding.
The Chairman. The committee will please come to order. Mr.
Feller, are you ready to proceed?
Mr. Feller. Yes, sir.
Mr. Humphrey, I should like to attempt to clear up a number of
points with respect to the question of the variations from the Lake
Erie base price which are contained in the long-term contracts. Are
there any published Usts of variations on account of differences in
physical specification or grade?
Mr. Humphrey. There are tables, I think, that are worked out for
differences in phosphorus.
Mr. Feller. Are those customarily used by the industry?
Mr. Humphrey. They are used whenever they come into play,
the very low phosphorus for which premiums are paid becoming less
and less used in the trade, but when they are used, premiums are paid
for very low phosphorus.
Mr. Feller. And those premiums, in the custom of the industry,
would be uniform on the basis of that table?
^ Mr. Humphrey. If the table was adopted as the basis of nego-
tiations.
Mr. Feller. If it were adopted in the contract.
Mr. Humphrey. It could or could not be, just as the contract
happened to provide.
Mr. Feller. For the record, may I state that the practice of the
United States Steel Corporation subsidiaries, that is, the Oliver Iron
Mining Co., in billing to the operating subsidiaries of the United
States Steel Corporation, the letter of Mr. Irvmg S. Olds to Mr.
Thurman Arnold dated August 31, 1939,' which has already been
referred to, states in part as follows [reading]:
On page 223 of Mining Directory of Minnesota, 1939, will be found Table 13,
entitled "Ore prices for varying iron content calculations of Lake Erie selling
> See p. 10329, supra.
10358 CONCENTRATION OF ECONOMIC POWER
values," which table explains in some detail the calculation of Lake Erie selling
values.
Mr, Henderson. Mr. Feller, I understand that letter was read into
the record before I came in this morning. Do I understand that
the practice of Oliver or the Steel Corporation is to bill their sub-
sidiaries on the basis of the Lake Erie price?
Mr. Feller. That is what this letter stated.
Mr. Henderson. So that when a price has been arrived at, that
becomes the billing price also for United States Steel, even though
they are not in the market competing with the rest of the trade.
Mr. Feller. That would appear to be correct.
Now, Mr. Humphi-ey, one other point. I should like to read for
the record the provisions of one of your contracts, those provisions
which have to do with the method of calculating the price under the
contract. In order to preserve the secrecy of business arrangements,
I shall omit the name of the company with which this contract was
made, that is to say, the name of the purchaser, and I shall also omit
reference to the number of cents of variation from the Lake Erie
base price. I shall indicate that by saying "blank cents."
This contract provides as follows [reading]:
The price per ton for standard Mesaba non-Bessemer ore delivered hereunder
shall be the average established market price per ton for ores of the same kipd
and grade sold for delivery at Lake Erie ports during the season of Lake naviga-
tion current at the time of shipping, as established for the then^ current single
season sale and delivery by large ore dealers of Cleveland, Ohio, including Hanna,
less blank cents per ton, and subject to analytical adjustment as hereinafter
provided.
The base unit value for ore to be delivered hereunder shall be determined by
dividing said established Lake Erie market price per ton less blank cents per ton
for an ore which averages 51.50 per cent iron in its natural condition," by 51.50.
The price of this ore is named and accepted on the expectation that it will average
51.50 per cent in metallic iron in its natural condition. Taking this as the
standard of quality, it is agreed that in each season any total average variation
therefrom in metallic iron in its natural condition shall be entitled to recognition
and adjustment by increase or by abatement in price as the case may be, at the
rates per unit per ton hereinafter specified; When the ore contains 50 per cent or
more of metallic iron, the value per uijit or fraction thereof shall be at the rate
known as the base unit value, when less than 50 percent but not less than 49 per
cent for such unit or fraction thereof of decrease only, the said base unit value
shall be increased at the rate of one-half thereof, and when less than 49 per cent
for each unit or fraction thereof of decrease only said base unit value shall be
increased at the rate of 100 per cent thereof.
That is the end of the quotation.
Mr. Humphrey, do I understand correctly that in the case of long-
term contracts which are related to the Lake Erie base price,_ the
parties agree on a formula at the time the contract is entered into;
they agree on a formula of variation from the Lake Erie base price
and that formula then establishes the standard variation from the
established price during the life of the contract? Is that correct?
Mr. Humphrey. Unless that is changed, if all of the terms are
provided for for the period of the contract, that would be true. If
some of the terms were less for annual adjustment, they would be
adjusted annually. You can have just as many forms of contract as
people can agree upon. There is no standard contract.
Mr. Feller. I refer back to the statement you made this morning
[reading]:
There are any number of allowances that are made, premiums and penalties
that are figured on the physical qualities of the ore and that are also figured on the
CONCENTRATION OF ECONOMIC POWER 10359
commercial conditions under which the ore is sold, whether it is for a long period
or a short period or for a large quantity or for a small quantity, or just the trade
concession; in other words, get the business competitive.
When making that statement you were referring, were you not, to
the terms which would be incorporated in the long-term contract?
Mr.- Humphrey. The basis upon which ore was sold. Those are
the things that are taken into consideration.
Mr. Feller. In making your contract.
Mr. Humphrey. ' In making the sale.
Mr. Feller. In making the long-term contract.
Mr. Humphrey. In making any sale.
Mr. Feller. Including a spot sale? ^ ,
Mr. Humphrey. One of the things you take into account is the
length of time over which the ore is to be delivered. If it is to be
delivered spot, that is one kind of a sale. If it is to be delivered over
another period that is another kind of a sale.
Mr. Feller. If to be delivered over another period, it is a long-term
contract.
Mr. Humphrey. And it can be in varying lengths of time.
Mr. Feller. What tjipes of variations in time could there be in a
spot sale?
Mr. Humphrey. I don't know what variations you mean.
Mr. Feller. There are any number of allowances that are made,
premiums and penalties that are figured on the physical qualities of
ore. Those would of course also be true in the case of spot sales.
Mr. Humphrey. All those would be true in spot sale.
Mr. Feller. And that arc .also figured based on the commercial
conditions under which the ore is sold, whether for a long period or
short period or for a large quantity or small quantity, or just a trade
concession in order to.get the business competitively. In the case of a
spot sale, is the custom in the industry to take into consideration what
you refer to here as commercial conditions under which the ore is sold?
Mr. Humphrey. Commercial conditions can be taken into consid-
eration. The length of time is entirely out of a spot sale because a
spot sale is for a single season's delivery. But there is no reason
why other conditions can't be taken into account.
Mr. Feller. Quantity, would that be a condition which is cus-
tomarily taken into account in a spot sale?
Mr. Humphrey. It can be a very different thing to seH a big
tonnage or a little tonnage.
Mr. Feller. Is it in fact?
Mr. Humphrey. I think each instance is ditlerent irom the other.
I don't think there is any definite rule. When you have spot sales in
any quantity you have a very strong market, and as a rule, under the
conditions prevailing in a strong market, you can get the fuU price
with no concessions of any kind, and obviously when conditions will
permit getting the full price, you get it.
Mr. Feller. Let me ask you this: The market today is strong, is
it not?
'Mr. Humphrey. Well, 1 wouldn't say so; no.
Mr. Feller. Is it not true that at the present time the largest
tonnage of ore which has ever moved on the Great Lakes is now
moving?
Mr. Humphrey. Oh, no.
10360 CONCENTRATION OF ECONOMIC POWER
Mr. Feller. It is very large, is it not?
Mr. Humphrey. What is happening is that here at the end of the
season people are trying to hurry down ore to carry them through a
winter of larger operations than had been anticipated. That doesn't
mean that more ore has been sold. That means there have been more
specifications on orders; there is no activity to the ore market. If you
are talking about moving more tonnage on present specifications or
enlarging specifications, yes; they have been; uut there have been no
sales that I know of.
Mr. Feller. I ask you then this, a* d it is of necessity, then, a
hypothetical question: If today a steel company came to you and said,
"We would like to buy 10,000 tons of ore on spot sale," and another
company came to you and said, "We would like to buy 20,000 tons of
ore on spot sale," would there be a difference in price because of the
difference in quantity?
Mr. Humphrey. Today, we could get the top price from both of
them if we had the facilities to make delivery before it freezes up.
Mr. Feller. Do you recall any instances in which you gave con-
cessions on the basis of quantity in the case of a spot sale?
Mr. Humphrey. Well, I can't right now, but I wouldn't want to
say it without checking up.
SIGNIFICANCE OF ^'ORE PRICES TO INTEGRATED AND NON-INTEGRATED
STEEL PRODUCERS
Mr. Feller. Now, Mr. Humphrey, as you have testified, you are
not only in the iron-ore business, you are also connected with the steel
business and with one of the very large units in that business. I should
like to direct your attention to the difference in the situation of a large
integrated steel company possessing its own mines, and the small steel
company which does not possess its own iron ore mines but must buv
the ore from one of the companies represented here or one of the small
companies that have been mentioned earlier.
If an increase were made in the Lake Erie base price of ore, is it
not true that the large integrated company producing its own ore
would receive a substantial competitive advantage over the small
company which had to buy its ore in the open market?
Mr. Humphrey. In what respect, Mr. Feller?
Mr. Feller. The large integrated company would be mining its
own ore and would not have to pay the Lake Erie base price. Isn't
that correct?
Mr. Humphrey. That is correct.
Mr. Feller. The Lake Erie base price has been increased. The
small company would now have to pay that increased price.
Mr. Humphrey. That's right.
Mr. Feller. And unless this increased price were commensurate
with an increased cost of mining in the mine of the large company
there would be a competitive advantage in favor of the large company.
Mr. Humphrey. I don't know whether there would be a competitive
advantage or not. The large steel company has a very large invest-
ment and very heavy fixed charges on the facilities that it has to own
and maintain to ship its own iron ore. Now, if in times that are good,
that end of the business is a profitable business, the company that
owns iron ore has a profitable end to its business. In times such as
CONCENTRATION OF ECONOMIC POWER 10361
we have been goin^ through in a number of the past years, the com-
pany that bought its iron ore had a competitive advantage over the
one that owned it, because it wasn't laden down with fixed charges on
small volume and it didn't have a lot of money in assets that weren't
earning an adequate return.
Mr. Feller. I think there is a good deal to what you say, but
isn't this true, that the large integrated steel company would prefer
to see the Lake Erie base price at a relatively high level if it were
considering the competitive advantage which it might have over the
small producer?
Mr. Humphrey. Mr. Feller, if you have your money invested in
any business it is to the advantage of that business to get as high a
price for your product as you can, up to the point where your price
is injurious to your business, and it isn't a bit different whether you
own iron ore and a steel company owns it, or whether you own it
independently, or whether you are in the grocery business. You are
motivated by exactly the same thing.
Mr. Feller. We are not talking, now, about the price at which
the steel itself is finally sold. Assuming the sale price of steel as
between the large integrated company and the small company not
having ore mines, the higher, under any conditions, the Lake Erie
base price, the more disadvantageous becomes the situation of the
small steel producer as against the large steel producer. Isn't that
correct?
Mr. Humphrey. Only if the iron ore end of the business is a profit-
able end of the business. ~ You can w^ell conceive, and there have
been many years, several years just past, wdiere owning your iron ore
your cost of your iron ore was in excess of the price that others were
paying for it.
Mr. Feller. Again I will agree with you there. What it comes
down to, then, is this, that in times when the Lake Erie base price is
less than the cost of mining iron ore, the large company is at a disad-
vantage— the large company owning its ore. In limes when the Lake
Erie base price exceeds the cost of mining iron ore, in other words in
times when Xhe iron ore business is profitable, then the small company,
is at a disadvantage.
Mr. Humphrey. Then the steel company that has an interest in
iron ore is in a profitable business which the other fellow isn't in.
Mr. Feller. How about a steel company which is not selling the
iron ore, but which is using it in its own plants?
Mr. Humphrey. That same thing is true whether he is selling it as
finished product or as a raw material. He is in a profitable business
that the other fellow isn't in.
Mr. Feller. In other words you agree with the statement I have
made, that the relative advantages depend upon the amount of profit
margin in the iron^ore field.
Mr. Humphrey. In a business, and if I am in a profitable business
and you are not, then I have an advantage over you.
Mr. Feller. I should like to ask you, Mr. Humphrey, to identify
this letter taken from your files. It is signed "Ernest." The di-
rectory, I believe, shows Ernest is Mr. Ernest T. Weir, of the Na-
tional Steel Co. It is dated January 18, 1930.
Mr. Humphrb'^ Yes; I recognize this.
Mr. Feller. I offer this to be printed, Mr. Chairman.
10362 CONCENTRATION OF ECONOMIC POWER
The Chairman. The letter may be received.
(The letter referred to was marked "Exhibit No. 1376," and is in-
cluded in the appendix on p. 10444.)
Mr. Feller. The second paragraph of this letter reads as follows
[reading]:
Don't you think in view of the very keen interest in the ore situation, and the
fact that everybody is after even the smallest properties, that it ought to be a
good time to get the price of ore up 25 cents a ton? Even if pig iron and other
conditions are not just as good, it seems to me the move should be made, indicat-
ing that ore is in a strong position and able to start out on a basis of higher prices
That letter was written by Mr, Weir.
Mr. Humphrey. To me.
Mr. Feller. Yes, to vou.
Mr. Humphrey. We have wished many times we could get the
price up; that conditions would justify it.
Mr. Feller. I beheve joii have already explained for the record
why Mr. Weir, whose busmess is chiefly that of producing steel from
iron ore, is interested in raising the price of iron ore. Could you
repeat that again?
Mr. Humphrey. We are in the iron-ore business, and we want just
as high a price for our iron ore as we think the business and conditions
will justify.
Mr. Feller. By "we," you mean
Mr. Humphrey (interposing). Ernest Weir and myself.
Mr. Feller. Do you consider Mr. Weir to be in the business of
selling iron ore?
Mr. Humphrey. W^e are partners in the same business.
Mr. Henderson. In the same ore business?
Mr. Humphrey. Most of the iron ore, as I testified at the very
beginning, which is handled by the Hanna Co., is owned by the
National Steel Corporation, and we are stockholders m the National
Steel Corporation, with Ernest Weir. We are partners in the business
which owns tliis iron ore. W^e are together in the same business.
Senator King. Then if you increased the price of ore, you would
diminish the prices of the finished product.
Mr. Humphrey. I don't think. Senator, that the price of the raw
material has much effect on the price of the finished product. They
are separate commodities, and their prices in detail at least are fixed
by competitive conditions on those respective commodities.
Senator King. Was Mr. Weir or liis company buying ore?
Mr. Humphrey. No; Mr. Weir and I are in the same company.
This is a letter between the two of us in the same company which
owns iron ore.
Senator King. Are any of the companies, interested in buying ore,
or are they merely in the production and selhng?
Mr. Humphrey. We produce iron ore, most of which we use and
our surplus we sell, or some additional ore we sell.
The Chairman. When you say that Mr. Weir is a partner with
you in the ore business, do you mean Mr. Weir personally or the
National Steel?
Mr. Humphrey. The National Steel owns the ore business and the
steel business, and Mr. Weir and ourselves are stockholders in the
joint enterprise.
The Chairman. What about the Hanna Co.?
CONCENTRATION OF ECONOMIC POWER 10363
Mr. Humphrey. The Hanna Co., as I explained — perhaps you have
forgotten — when the Hanna Co. properties went into the National
Steel Co. we took stock for them and the management of the operation
of those companies was retained in the same people, in the Hanna Co.
that acts as an agent for the operation of the ore and raw-material end
of the National Steel Co.'s business.
The Chairman. So that any profit that might accrue from an
increased price of crude would be reflected in the profits of the steel
company.
Mr. Humphrey. That is correct.
The Chairman. And one would tend to oft'set the other; is that
what you mean to indicate?
Mr. Humphrey. No. We would hope to make money from both
ends of the business. We hope to make money from the iron ore
end of the business and we also hope to make money from the steel
end of the business.
The Chairman. Yes, but if the steel company were paying a higher
price for ore, that would be reflected, other things being equal, in a
smaller profit for the steel company.
Mr. Humphrey. What he has in mind here I think was getting up
the price of the ore on the product which we are selling. As between
the two companies, so far as the National Steel Co. is concerned, the
change in the ore price wpuld ultimately make no difference in the
final profit. Do you see what I mean? But it would make a differ-
ence in the total profit if we made more profit on the ore we sold
to others.
The Chairman. It wouldn't make much difference to the steel
company whether the price was up or down, since it was taking the
ore for its own purposes.
Mr. Humphrey. That is correct.
The Chairman. But it would be advantageous to the steel company
if the price were up on those quantities of ore which were sold to
others than the National Steel Co.
Mr. Humphrey. That is correct, because that end of our business
would thereby become more profitable.
Mr. Feller. You testified in answer to the Senator's question
that it would make no difference to National Steel Corporation in the
final selling price of the product what the price of the ore was, but if
the price of the ore was increased wouldn't a company competing
with the National Steel Corporation bidding to buy its ore on the
open market, competing with National Steel Corporation in the sale
of finished steel products— wouldn't such a corporation find that its
profit margin had been reduced by the amount of the increased
price of ore?
Mr. Humphrey. If its finished product price remained the same,
yes. If anybody, Mr. Feller, has to pay more for their raw materials
and there is no change in their finished product price, why they don't
make as much money as they did before.
The Chairman. By and large I suppose it is an advantage to a steel
company to have its own ore supply.
Mr. Humphrey. Senator, we think that is so. Now over the past
few years there have been times when we weren't quite so sure of it,
when we were laden down with extremely heavy charges. We are
interested in one mine, for instance — and mind you we are small
10364 CONCENTRATION OF ECONOMIC POWER
people in this business — where the taxes are about $1,800,000 a year.
Now if our production in that mine is cut down from 3,000,000 tons
to 500,000 tons, we aren't so happy about being in the iron ore business.
On the other hand, if we can get a good volume and the iron ore
business is strong and profitable, and is profitable on its own merits,
then we are glad we are in that business.
The Chairman. Then the other picture is also true, I assume, that
a steel company which does not own its own ore supply is at a dis-
advantage if the price of ore is kept up, so far as its competition is
concerned, with a steel company which has captive mines.
Mr. Humphrey. It is just as I explained to Mr. Feller, if you are
not in the ore business and I am in the ore business, if the ore busi-
ness is unprofitable you have an advantage; if the ore business is
profitable, I have an advantage, because I am in a profitable business
that you aren't in.
The Chairman. Naturally, if the ore business is unprofitable, that
changes the whole picture.
Mr. Humphrey. Then the other fellow is better off.
Senator King. May I interrupt? I am interested in your state-
ment about the high taxes. Was that tax paid to the State?
Mr. Humphrey. Yes, sir.
Senator King. On just one property?
Mr. Humphrey. One mine.
Senator King. Is that in Minnesota?
Mr Humphrey. Yes, sir.
Senator King. A-million how many thousand?
Mr. Humphrey. Eight hundred thousand.
Senator King. Nearly $2,000,000 taxes. Was that for 1 year?
Mr. Humphrey. Yes, sir.
Senator King. Would it be the same every year?
Mr. Humphrey. Yes, sir. Well, it varies somewhat. Theoreti-
cally as the ore diminishes the taxes are reduced; practically your
tax rate sometimes goes up as last as your ore goes out.
Senator King. Is it a tax upon production or upon the property?
Mr. Humphrey. It is a property tax.
Senator King. How do they reach the value?
Mr. Humphrey. That is a long and involved formula that the
States have to go into and they have engineers that examine the
properties and it is a very complicated procedure that is gone through
and fixed finally by the State tax commissions.
Senator King. Even though you lose money in the production and
sale of your ore, you would have to pay the tax.
Mr. Humphrey. Absolutely.
Senator King. And you have to pay a Federal tax as well as a
State tax?
Mr. Humphrey. Federal tax if we make any profits.
Senator King. And an income tax upon the individual.
Mr. Humphrey. That is correct.
Senator King. A corporate tax in the past.
Mr. Humphrey. And a lot more others.
Senator King. Undistributed profits tax.
Mr. Humphrey. Yes, sir.
Senator King. Social security tax.
Mr. Humphrey. Yes, sir; many that you have forgotten.
CONCENTRATION OF ECONOMIC POWER 10365
Senator King. No, I haven't forgotten them. I don't want to
enumerate them because you might claim too many credits now.
Mr. Feller, Mr. Greene, I should like to have you identify this
letter dated April 18, 1935. It is signed by Mr. H. A, Raymond and
addressed to you. Incidentally, Mr. Greene, I have forgotten whether
or not the record identifies Mr. Raymond. Could you stiate again
who he is?
Mr. Greene. Mr. H. A. Raymond is our manager of ore sales.
Senator King. May I ask a question, Mr. Feller? Mr. Humphrey,
would it be possible for the producers of ore to furnish us in a dia-
grammatic form the number of ore producers and their names, the
number of tons of ore produced by them or shipped by them during
the past 8 or 10 years, to whom shipped, the owners of the companies
that buy and sell the ore and the percentage of ownership in the buying
and in the selling organizations? I would like to know just the
relation between all of these factors, all of these organizations and
parties that produce ore and that sell ore. I want to know the
names of the sellers and the amount sold by each corporation, each
company, to whom sold, and then the proportion of ownership in the
selling company and the proportion of ownership in the buying
company, because in a number of these companies the sellers are
buyers and the buyers are sellers. I would like to have a diagram,
if I could have one, showing the relation of all those engaged in the
mining and selling of ore, those who are purchasing ore, where partner-
ships and corporations exist in the buying and the selling and have
that diagram show that fact.
Mr. Humphrey. I don't know whether Mr. Feller has all the data
necessary to make that in the detail in which you express it, but I
should think from the data he has he could develop pretty much
what you are after.
Mr. Feller. May I say here. Senator, that we do have a good deal
of that information; however. Senator, the exact identity of all the
customers and how much is sold to each of the customers is one of the
most preciously guarded business secrets, and unless there were some
compelling reason for putting it into the record, I think that there
would be some objection on the part of the members of the industry
who have already asked us to keep confidential a good deal of that
sort of information. For that reason when I read the provision from
a contract recently I omitted the name of a customer and also certain
figures as to price.
Senator King. I wasn't asking about prices. For instance, the
gentlemen to whom I just addressed this question is both a buyer and
a seller; that is, the company which uses part of the ore is also a
producer of the ore. I should like to know just who the buyers were
and who the sellers were of that organization with which he is
affiliated.
Mr. Humphrey. You are asking a very difiBcult question, not of us
because it is easy as far as we are concerned because at the present
time we produce all of the ore that we use except such as we might
need for some special purpose which is insignificant, but in many of
the cases how much they buy and how much they produce for their
own consumption varies from year to year, depending on the pricer. at
which they can buy and the desirability of the ore that is available
for them and how much they want to run their own n ines and that
10^66 CONCENTRATION OF ECONOMIC POWER
sort of thing, so there are a lot of compHcations in the question which
you a^e asking. It would be much easier for 1 year. That is a lot of
information vou are asking for. You might do it for 1 year.
Mr. Heni>ebson. The Senator would be interested in the statement
which you and others have supplied as to how much of this goes to
the companies that own the ore. Your estimate was about 85 percent.
I think, wasn't it?
Mr. Humphrey. That is on the average. Now, in a lean year I
think you would find that a higher figure.
Mr. Henderson. Mr. Hoyt estimated over 90 percent.
Mr. Humphrey. In a big year I think you would find it a lower
figure, but in a lean year when volume is down and naturally people
in that year take as much as possible from their own properties to keep
these big charges down, I think you would find that perhaps over
90 percent in a lean year moved back and forth between owning
companies.
Mr. Henderson. You would be interested in the testimony of
Mr. Oglebay tliis morning which is in the record to the effect that thej^
attempted to develop a mine which would seek new outlets and spent
upward of three-quarters of a million dollars, and then abandoned
it because of the difficulty of finding steel producers that did not have
existing arrangements of some kind.
Senator King. Perhaps the testimony that has already been
adduced will meet with the views I have expressed in the question,
I am sorry I wasn't here this morning, but the committee loiows that
Senator O'Mahoney and jnyself were compelled to be absent to attend
a funeral.
Mr. Feller. Senator, we have here a tabulation which was made
by one of the companies of sliipments in the year 1938, The tabula-
tion was made by the Clevelajid-ClifFs Iron Co. and my recollection
is that it was not given to us under the seal of confidence but under an
agreement that it might be introduced into the record. This table
contains the names of various ore companies and it gives the names of
various customers who are steel companies or iron companies, and it
tells how much of the ore which was sold by each of the ore companies
to each of these customers was ownership ore, ore sold under term
contract, and ore sold on the open market. The department can not
vouch for these figures and I don't know whether the Cleveland-Cliffs
Iron Co. could vouch for these figures.
Mr. Greene. I would like to say we cannot. Those are just
estimates.
The Chairman. Wlio made the estimates?
Mr. Greene. I presume our ore sales department, and it is; made
from intimate knowledge only of their own company. They are
guessing about the rest.
Mr. Feller. Would you care to have this in the record?
Senator King. If it throws any light on this subject, but if it is a
mere guess I don't think it would be appropriate.
Mr. Hoyt. I would say definitely as far as our business is concerned
it would be merely a guess without any knowledge at all, I would
think that it might be harmful in arriving at the facts you
are considering.
Senator King. What I was more interested in was in trying to
ascertain how much of the ore that is mined is mined b"^ and sold to
CONCENTRATION OP ECONOMIC POWER 10367
and used by companies which produce steel. That has been stated
and that is more important. If I have definite information as to
those matters, that would answer the point I made a moment ago.
Mr. Greene. Mr. Chairman, I would feel very strongly that that
ought not to go in the record unless it went in the record with the
statement that it is the personal opinion only of a salesman who has
gathered that.
The Chairman. That is all right, Mr. Greene. It is not going in,
inasmuch as it has been described as not a very rehable bit of informa-
tion. It would appear from all that has been said that a substantial
amount of the ore which is mined, is mined on properties owned by
steel companies. Is that correct?
Mr. Humphrey. Eighty to ninety percent.
The Chairman. That, I think, is what Senator King is driving at.
Now let me go one step further. \^Tiat part do the steel companies
owning these resources of ore-^Dlay in fixing the price or in determining
the price? I don't want to use that word, which may have an adverse
connotation. Would you care to answer that?
Mr. Humphrey. I can answer for ourselves. Insofar as ourselves
are concerned, the- officers of the ore company are also officers of the
steel company, and we fix the price on the ore that we offer for sale.
We decide whether we will take the price that we can get for it and
sell it, or whether we won't.
The Chairman. Do you fix that price by and large — of course I
know you can't lay down a definite rule which would apply in all cases,
but by and large do your officers fix that price from the point of view
of the steel company or from the point of view of the ore company?
Mr. Humphrey. We do it from the point of view of the ore com-
pany, because we are in the ore business and if we can't make money
in the ore business we don't do business.
The Chairman. So that so far as you are concerned, the steel com-
pany does not attempt to influence the price of ore for the purposes of
its supply, but it is content to take its profit, if there is to be a profit,
from the profits derived by the ore company.
Mr. Humphrey. That is correct.
The Chairman. How about your opinion?
Mr. Greene. Well, we are not in the same position. We are
merely merchant sellers of ore.
The Chairman. I realize that, but I am asking for your opinion so
far as the knowledge, your knowledge, goes of how the factor works.
Mr. Greene. I would only hke to make this comment, that inas-
much as all the steel companies own some portion of their ore, they
have an excellent guide as to the purchases they make outside, and
we as ore sellers know that is the fact and we know our price has to be
in line with their costs.
The Chairman. Is it advantageous to the merchant producer of
ore to have this situation in which the steel companies, the fabricators,
own so large a proportion of the supply? Is that disadvantageous
to you?
Mr. Greene. I don't think we ever thought of it because it has
existed so long we have just accepted that as a condition. We know
our figures are going to be carefully checked by any steel c )mpany.
If we offer them ore, our price has to be in line with tlieir costs,
because they are in tho same business. They are mining oto; I mean
not for sale, but they are doing that very thmg.
10368 CONCENTRATION OF ECONOMIC POWER
The Chairman. They know from their own experience what the
costs ought to be and what you ought to charge?
Mr. Greene. Exactly. If our price is unreasonable they don't
buy any ore from us.
The Chairman. Is there any pressure, not necessarily active pres-
sure but is there any natural pressure, arising from this condition
which you have described, to keep the price of ore down for the mer-
chant producer?
Mr. Greene. No more than there is always pressure by the buyer
to buy as well and as cheaply as he can, and the part of the seller to
realize the best. It is just normal, only we know we have to be in
hne with their costs.
The Chairman, Would you care to say whether or not the steel
companies as a whole exert any active influence in fixing or deter-
mining the price of ore?
Mr. Greene. If you say exert any individual effort I would say
no. They exercise an influence as a whole because we recognize this
situation and we know what we have got to do to get their business.
The Chairman. Then your testimony, as I understand you, is
that the influence of the steel companies is merely that of a normal
purchaser.
Mr. Greene. That's right.
The Chairman. And that there is no effort upon their part to
influence unduly the price that is paid for ore.
Mr. Greene. That is correct.
The Chairman. Well, does it make any difference, in your opinion,
to the steel company, whether this base price of which we have been
speaking is up or down?
Mr. Greene. I think it has got to be within reason. I think like
all competitive business, the steel company wants to feel that the
costs for any material is on a line with their competitors.
The Chairman. Is this price fixed by the merchant producers of
ore? I don't Uke to use the word "fixed," I am constantly using it,
but I don't mean it in the common sense — is this price determined
by the merchant producers of ore without regard to the opinion of
the operators of the ore mines which are owned by the steel companies?
Mr. Greene. That couldn't be the case, because iu every contract
it is a result of long-time negotiations between that particular com-
pany and you, so that in all times they have got the upper hand, and
what you are trying to do is to get as much as you can for your product,
with a well-informed buyer.
The Chairman. So that viewed from all sides, you want the com-
mittee to understand that the steel companies, either as fabricators
or producers, do not attempt to influence the price of ore except as
normal purchasers.
Mr. Greene. That is right.
The Chairman. Mr, Butler, what is your opinion about it?
Mr. Patrick Butler. I don't know anything about what the steel
companies have in mind, but I think the statement of Mr. Greene,
and your interpretation of his statement, is correct.
The Chairman. 1 wasn't trying to interpret it except in the sense
of trying to understand it.
Mr. Patrick Butler. I am in general agreement with your dis-
cussion with Mr. Greene.
CONCENTRATION OF ECONOMIC POWER 10369
The Chairman. If there were no captive mines, what would the
effect be on the price of ore?
Mr. Patrick Butler. I don't believe, I don't know, but I don't
believe there would be much difference from the condition that
exists now.
The Chairman. Can you sell your ore for the price that you think
it is worth?
Mr. Patrick Butler. Not always — in fact, very seldom.
Senator King. May I ask one question of either one? I will ask
the gentleman over here: Have you discovered in these negotiations
between the steel companies and the producers of ore any disposition
to favor the steel company at the expense of the ore-producing com-
pany, or to increase the profits or protect the profits of the ore pro-
ducers at the expense of the steel companies?
Mr. Humphrey. No; I have not. I agree with Mr. Greene that
this business stands on its own bottom, and as to the ore that is sold,
that is a strictly competitive situation between well-informed buyers
and sellers who are trying to get together and who do get together for
the sale of their product.
Now, the only difl'erences, as I see it, between this and any other
situation is that in this case you have a good many buyers who don't
have to buy, who can mine their own stuff unless they can buy at
what they think is an attractive basis.
Mr. Feller. Mr. Chairman, a few moments ago Mr. Greene
identified a letter written by Mr. Raymond to him.^ I should like
to read just one paragraph.
The Chairman. Will you give us the date of the letter now?
Mr. Feller. It is dated April 23, 1935, written by Mr. H. A.
Raymond, addressed to Mr. Greene.
The paragraph I have in mind reads as follows:
There are two distinct methods of handling the Republic situation. The first
one would be to support present prices and urge them that for the reasons Ernest
Weir outlines, present prices- should be supported, and that if we are going to
help support them, they must do their part, not only by agreeing to take their ore
at those prices and stop the Wysor "chiseling," but they also ought to give us a
larger tonnage.
Mr. Greene, do you recall what the reasons were that were outUned
by Mr. Weir?
Mr. Greene. Yes, sir; I can tell you very clearly, I think, why we
said that was chiseling. It is a very complicated situation. In
'35 I spent most of my time in New York as we refinanced $25,000,000
of short-time loans into a long-time bond issue, and I was trying to
accomplish that, so I can't give you all the details. You will recall
that Republic Steel was formed in April of 1930, and it was a com-
bination- of four companies. Those four companies had themselves
had some enlargements, so that there was a very complicated situation
in their ore contracts which we had.
Now, in some plants we had all their business, in others we had a
half. They anticipated the normal operations of these plants. After
Republic got going, they naturally wanted to centralize their opera-
tions where their costs were cheapest, and they began to shift around,
and the question arose, and rather a contentious one, between our-
selves and Republic, as to carrying out, in the fairest spirit, where they
should manufacture and who should get that ore.
> "Exhibit No. 1375," appendix, p. 10444.
10370 CONCENTRATION OF ECONOMIC POWER
And what Mr. Raymond felt there was that Mr. Wysor who was
the president of Repubhc, was shifting the business away from us and
contrary to the spirit and maybe the letter of those contracts, and he
was bitterly complaining about it, that they ought not to be.
Now some of the matters could be interpreted two ways. You
could say it was clearly our business, or you could say that it was about
60-40. They wanted a reduction in price to assume this and that,
and if the whole letter was read — it is a long letter, it has a lot of figures
in it, but it is all on this matter — it all indicates that Raymond felt
that they were asking for something that wasn't quite fair when they
said "Take off 25 percent, and so, so and so." That is what he is
referring to.
It is resulting from a series of ore contracts, some small and some
large, finally resting in the hands of new Republic, who desired to
change the operations, and wisely so from their standpoint, of those
plants. . Do I make that plain. Senator?
The Chairman. I think I understand what you are saying
Mr. Feller. I don't quite recollect now whether you answered
the specific question as to whether you recall what Mr. Weir's reasons
were for supporting the price.
Mr. Greene. I think the same question came up in the testimony
somewhere else. I think Mr. Weir had expressed the reason which
was in line with what Mr. Humphrey testified, that when he had an
overage in a lean year to sell, he would like to see ore prices main-
tained. I think it was just an expression of opinion as to the policy
of selling ore.
Mr. Feller, ivlr. Chairman, I have just a few more documents to
introduce and then, as far as I am concerned, I shall be through with
this part of the hearing.
Mr. Greene, I have here a copy of a letter signed by Mr. Brown,
who is in your organization, is he not — Alex C. Brown?
Mr. Greene. Yes, sir; vice president.
Mr. Feller. Addressed, "Dear Ed." That would be you?
Mr. Greene. That is probably myself.
Mr. Feller. Dated February 28, 1937. Would you please iden-
tify this?
Mr. Greene. I identify it.
Mr. Feller. I offer this for the record, Mr. Chairman.
The Chairman. The letter may be received.
(The letter referred to was marked "Exhibit No. 1377" and is
included in the appendix on p. 10445.)
Mr. Feli.er. ^ shall read this one paragraph:
The question uf lo...' market price of ore will surely come to a head shortly.
This should be settled before there is any chance of Ford buying ore because it is
becoming more and more likely that the large order placed by Ford each year at
cut prices may become the accepted market price. Our interest in the market
price is, of course, very much less than it used to be but this year it is of particular
importance because of our Wheeling and Otis negotiations.
Could you tell us, Mr. Gr6ene, what you meant by "This should be
settled before there is any chance of Ford buying ore"? How would
that be settled?
Mr. Greene. I think it is pretty obvious that we were anxious to
get as much for our ore as possible, and that if we thought that a
uyer and seller could arrive at a reasonable price, lq accordance with
CONCENTRATION OF ECONOMIC POWER 10371
the testimony here, very many times, a rate wa<? established that might
be helpful in view of some pending negotiations we had.
Mr. Feller. How would the market price be settled?
Mr. Greene. I don't know; it isn't settled; I think that is not the
corrp.ot way to put it. When a sale takes place in the early part of
the season on a substantial amount of ore. and becomes knov^n, why
that establishes the market price.
Mr. Feller. Mr. Pa.trick Butler, I have here a letter that appears
to have been written by you — no; it does not. The letter was taken
from your files and is written to you. You are the addressee. It is
dated March 28, 1934. The salutation is "Dear Pat" and the signa-
ture is "Affectionately," and then there is a blank. There are typed
initials on the copy wliich we have but they are obscured. Can
you identify it and perhaps tell us who the writer was?
Mr. Patrick Butler. Yes ; this is Emmett Butler's letter, addressed
to me. Those initials in the left-hand corner are "EB" I think.
Mr. Feller. I offer this for the record.
The Chairman. The letter may be received.
(The letter referred to was marked "Exhibit No. 1378" and is in-
cluded in the appendix on p. 10446.)
Mr. Feller. Mr. Emmett Butler, I should like to read one para-
graph from this letter.
Senator King. That is a letter to his son, is it?
Mr. Feller. Yes. [Reading:]
I think possibly this would be a good time to say to our customers, particu-
larly—
I suppose it should be M. A. Hanna & Co., those initials are rather
obscure; no —
particularly P. M. and Hanna Co., "What are you going to do with this year's
business, and what price are you going to put on ore?" They wUl, no doubt,
answer to that that they do not know because they have not had their ore meet-
ing, and stall beyond the date that Ford has fixed to close the bidding and prob-
ably slip in a bid in the meantime. Why not tell them that we want to move
tonnage and that we are either going after the Ford business in our own way
or they are going to guarantee us an additional tonnage over their minimum
equal to that of Ford's inquiries?
Can you elucidate that paragraph?
Mr. Emmett Butler. Yes; I want to make a general statement
about all of the letters that have been introduced here between my
son and myself. In some cases they may mean nothing, simply a ;
discussion between a father and a son, perhaps as to the poUcy of
the company. In this particular letter, the reason for thai para-
graph was this: In the year of '32 we had a contract for the delivery
of a substantial tonnage of ore. That tonnage was cut because of
the steel company's inabiUty to use as much tonnage as they had
contracted with us to buy. In the year of '33 it was determined and
agreed on between Mr. Hoyt and Mr. Humphrey and Butler Bros.
that- the price would be reduced, the market price so far as we were
concerned would be reduced 50 cents a ton. Coming into the season
of '34, I was naturally anxious to know whether they were going to
take a volume tonnage, specified in the contract, and whether they
were going again to ask us to reduce the price.
I may state that the reason for the reduction of price, and the
reason that the adjustment was made, was to be helpful to me, as
10372 CONCENTRATION OF ECONOMIC POWER
well as themselves. They did not need the ore. Does that answer
your question?
Mr. Feller. Yes.
Senator King. The contracts then were varied from time to time
depending upon whether the steel company had demands for its pro-
duction capacity.
Mr. Emmett Butler, As you know, Senator, the years of '32 and
'33 were very poor years, not only in the ore business but in every
other business. People were pretty well keyed up as to whether
their contracts were going to be effective at all or not. That is the
reason for these discussions.
Senator King. And were contracts from time to time during that
year or succeeding years or preceding years modified between the
ore companies and steel companies?
Mr. Emmett Butler. I think that has always been true of every
contract.
Senator King. Departures from that apparently stable line above
and below, depending upon conditions?
Mr. Emmett Butler. That is right.
lake freight rates on iron ore
Mr. Feller. Mr. Chairman, I have just a few questions left with
the matter of freight rates. I call the committee's attention to the
chart entitled, "Lake freight rates on iron ore." ^ Mr. Hoyt, your
company manages a fleet of boats on the Great Lakes that carries
iron ore.
Mr. HoTT. That is correct.
Mr. Feller. Mr. Greene, your company does, too, does it not?
You own a fleet?
Mr. Greene. We own a fleet and we manage smaller fleets.
Mr. Feller. And you, Mr. Humpjirey?
Mr. Humphrey. Yes, sir.
Mr. Feller. You alsp manage a fleet?
Mr. Oglebay. Yes.
Mr. Feller. Mr. Hoyt, is it not cori?ect to s^y that the Lake Erie
base price includes a freight rate?
Mr. Hoyt. The base price includes — delivery to Lake Erie includes
the freight rate.
Mr. Feller. It is a delivered price. The record already contains
the fact that the Lake freight rate on iron ore as published in the
standard sources was 83 cents in each of the years from 1925 to 1936,
and then 93 cents in 1937 and 1938 and 1939.. Can you explain, Mr.
Hoyt, the similaritj of that rate in each of that series of years?
Mr. Hoyt. I thmk I stated yesterday or the day before that the
freight rate was arrived at as between a buyer and a seller, one who
has ore to haul, no tonnage, another who has tonnage and no ore to
haul, the same general principle, you might say, of the base ore price.
Mr. Feller. In other words, the factors which explain the behavior
of the ore price would explain the behavior of the freight rate.
Mr. Hoyt. That is a pretty general question. I don't know quite
what you mean by factors. There are a great many different condi-
tions. It is a matter of negotiation as between the fleet and someone
who wants to ^ip ore.
« "Exhibit No. 1368," appendix, p. 10440.
CONCENTRATION OF ECONOMIC POWER 10373
Mr. Feller. The fact, however, remains, does it not, that the
freight rate was the same over a period of 1 1 years?
Mr. HoYT. That is true. It is also true that the raUroads' rates
have been the same.
Mr. Feller. Are these freight rates on the Great Lakes on iron ore
regulated by any governmental agency?
Mr. HoYT. No; they aren't.
Mr. Henderson. Is there a new rate negotiated each year?
Mr. HoYT. Yes, sir.
Mr. Henderson. Is it on the same basis as the first substantial
contract for the movement of ore?
Mr. HoYT. It would be published on the same basis.
Mr. Henderson. And if you happened to have the first one, that
would become the published rate?
Mr. HoYT. It would be if we had any tonnage that was not tied
up under contract. In other words, the Interlake steamship that we
operate has a contract for carrying ore. It couldn't establish a
freight rate on that contract. It would have to be on some outside
open negotiations with someone who wanted to have us carry ore
and we wanted to carry it for them.
Mr. Henderson. In most cases it would be negotiated with a com-
pany which was likely to own the ore also, as has been testified, is
that it?
Mr. HoYT. Own the ore, but not the boat.
Mr. Henderson. Not the boat, that is right.
Mr. HoYT. It might own the ore but it wouldn't own the boat.
In other words, it would be the ore on one side and the boat on the
other, coming to an agreement as to the rate.
Mr. Henderson. That is what I mean. Do you know in how
many of those years you were the first to negotiate the contract?
Mr. HoYT. No; I don't.
Mr. Henderson. Were you in any of them?
Mr. HoYT. I think we probably were.
Mr. Henderson. Mr. Oglebay, do you recall whether yours was
the leading rate in any years?
Mr. Oglebay. We never have been.
Mr. Henderson. How about you, Mr. Greene?
Mr. Greene. I don't think so, because we have both ore and boats.
Mr. Henderson. Mr. Humphrey?
Mr. Humphrey. We are sometimes seller of vessel capacity and
sometimes buyer, depending upon the season.
Mr. Henderson. I mean in these years covered by the charts.
Mr. Humphrey. In a year when we would be a buyer of vessel
capacity we might well make the rate.
Mr. Henderson. Maybe you haven't understood me. Do you
recall being the leader in any of these years?
Mr. Humphrey. I am quite sure we were in some years and I can't
tell you in which ones.
Mr. Henderson. Were you in 1939?
Mr. Humphrey. I would have to look it up.
Mr. Henderson. Mr. Hoyt, do you know who was in 1939?..
Mr. HoYT. No; I don't, Mr, Henderson.
10374 CONCENTRATION OF ECONOMIC POWER
Senator King. When you were the buyer of space for shipments
did you bargain to get a cheaper rate or did you accept a standard
rate which had been initiated at the beginning of the shipping season?
Mr. Humphrey. Very much the same reasons appUed to that as
apphed to the rest of the business. ■ When we would be buyers, we
would accept the season's rate because we would be buyers in a big
year._ In other words, we have boats for a substantial part of our ore,
and in years when there is a bigger movement than we can carry in
our own boats then we have to buy some vessel capacity and in those
years the rates would be strong and we would be in a position where
we would make the best deal we could with the vessel owner.
Senator King. Do you recall whether or not at an earlier date than
those we have been speaking about there were shipments of ores from
this ore field by rail to the steel mills?
Mr. Humphrey. There was very little of that because the difference
between the rail and the vessel, the all-rail rates and the vessel rates
is quite a wide difference.
Senator King. That is the rail rates were much greater than the
water rates.
Mr. Humphrey. To most destinations.
Senator King. Would that be the case from the ore deposits of
which we have been speaking to the steel companies along Lake
Michigan?
Mr. Humphrey. Practically all of them.
Mr. Henderson. Mr. Hoyt, is the matter of what the rate is of
importance to you?
Mr. Hoyt. It is to anybody interested in vesseling business, Mr.
Henderson.
Mr. Henderson. Then is there any of the six of you who can re-
member who estabhshed the rate this year?
Mr. Hoyt. I am sorry, I haven't that.
Mr. Henderson. It just strikes me a little peculiar that here is
something which aflfects every ton of iron ore is moved by your com-
pany, in which you have a specific interest in what the return is on
your steamships and nobody can tell who was the bellwether in the
instant year, let alone any other year.
Mr. Humphrey. I don't think it was any of us.
Mr. Hoyt. There is a lot of coal moved on which this rate might be
based.
Mr. Henderson. On which this rate might be based?
Mr. Hoyt. There are differentials as between different ports.
Mr. Henderson. Is there any one of those years in which the
rate on something other than ore served as the basis for establishing
the season rate?
Mr. Hoyt. I think there have been instances when a large volume
of coal was covered and rather automatically the ore rate went into
effect along with it.
Mr. Henderson. At the same rate?
Mr. Hoyt. No, sir; but on a differential which is long established
in the trade.
Mr. Henderson. Do you have the same practice that at the begin-
ning of the year when you negotiate a contract for Lake freight rates
you annoimce it to the trade?
Mr. Hoyt. That has been the practice.
CONCENTRATION OF ECONOMIC POWER 10375
Mr. Henderson. And that is how it gets estg-blished?
Mr. HoYT. Yes, sir.
Mr. Henderson. As I understand you, that gets to be the accepted
rate base?
Mr. Humphrey. Yes; but we aren't the only people who buy vessel
capacity, you understand that?
Mr. Henderson. Oh, yes.
Mr. Humphrey. There are others except just us who are here.
Mr. Henderson. But you accept that rate when you are out buy-
ing space, that was your testimony.
Mr. Humphrey. That is correct.
Mr. Henderson. And, Mr. Butler, that is the rate applied to what
you move also, is it not?
Mr. Patrick Butler. Part of it. Some of our ore is sold at the
mine, some at upper lake ports. A good part of it is sold at the mine,
and another good fraction is sold at upper lake ports, and a small per-
centage of it is sold at lower lake ports and that tonnage, the smaller
tonnage we move at lower lake ports, the freight rate would have an
effect on the price we receive.
Mr. Henderson. Mr. Oglebay, this rate applies to what you move
for your managed company, does it not?
Mr. Oglebay. Yes; our boats move our own ore.
Mr. Henderson. You move it entirely?
Mr. Oglebay. Yes.
Mr. Henderson. And this is the rate, however. I understood jour
testimony was you never have established the rate.
Mr. Oglebay. We have accepted the rate.
Mr. Henderson. Do you know who established the rate this year?
Mr. Oglebay. No; I don't.
Mr. Henderson. You read it in the trade paper and that was the
rate that was applied?
Mr. Oglebay. I don't know whether I read it in the paper. We
all started doing business, the coal people and the ore people.
Mr. Henderson. Do you happen to know how the rate got raised
in 1937? There is something which was a change from a period of
10 years, and do you laiow who was the leader in that year?
Mr. Oglebay. No; I don't.
Mr. Henderson. I guess we are not going to get any information,
Mr. Feller.
Mr. Feller. Mr. Hoyt, your fleet also carries grain, does it not?
Mr. Hoyt. Yes.
Mr. Feller. Are you familiar with the course of freight rates on
grain on the Great Lakes?
Mr. Hoyt. They vary, depending on the amount of grain that is to
be moved and the scarcity of ore tonnage that is moving that year.
Mr. Feller. The rates on grain vary tremendously in accordance
with the amount of grain to be moved, but the rates on iron ore do
not vary at all.
Mr. Hoyt. I wouldn't say they do not vary at all. They went up
in '37, and the reason for it was that the costs on the ships had gone
up materially, and there was a large tonnage of ore holdings when the-
season started in '37. I imagine there might have been 70,000,000
tons of ore that were going to be moved.
.Mr. Henderson. Who negotiated the new contract?
10376 CONCENTRATION OF ECONOMIC POWER
Mr. HoYT. There is no new contract ; there is no contract about it.
It would be a question of my saying "Will you take this rate?" and my
customer saying he would, or anybody else that had it.
Mr. Henderson. But you don't recall who it was?
Mr. HoYT. I am honestly not trying not to answer your question.
Mr. Henderson. I am honest too in being bewildered that nobody
seems to pay attention to a thing of such importance as this. The
same rate seems to come into being almost automatically every year
without any mortal guidance at all.
Mr. HoYT. Now, Mr. Henderson, there are only two or three people
here and there are a great many people on the inland lakes shipping
business. We are just in the ore business here. We have vessel
connections. I can't tell you the details of who made the arrangement.
Mr. Henderson. You are saying you don't know, and I am saying
I am honest in being bewildered about it. I think we can drop it
there, tince there is no evidence in the record to show, as is the case
in the development of the lake business, as to how some of those get
estabUshed.
Senator King. How many persons or companies employ boats upon
the Groat Lakes in shipping tonnage of all kinds — coal and ore and
manufactured commodities, and grain and so on?
Mr. HoYT. I think there are three hundred and eighty-odd bulk
freighters that would be engaged in the ore and coal and limestone
trade.
Senator King. What proportion of the 380 would be engaged in
the hauling of ore exclusively from these mines of which we have been
speaking?
Mr, HoYT. I think most of the boats; I can't speak for the Pitts-
burgh Steamship Co., which is owned by the Steel Corporation, but
most of the vessel fleets carry ore and coal. In other words, they
want the coal on the return trip to lower the cost.
Senator King. Some of the steel companies own their own boats?
Mr. HoYT. Yes, they do.
Senator King. And carry their own ore?
Mr. HoYT. Yes, sir.
Senator King. Do they attempt to fix the prices, or do they fix
prices, and your company, for instance, falls in with the minimums
which are established by the steel companies' boats?
'Mr. HoYT. I don't Imow of any effort on their part, Senator. As
I tried to explain, it is the custom in the trade that is built up over a
period of years where someone who has boats and wants tonnage
makes an arrangement with the man who has tonnage and hasn't the
boats.
Senator King. Have you any information as to whether the rates
between given ports are the same which are impressed upon the com-
modities by the steel companies' boats and by the boats with which
you are connected?
Mr. HoYT. The steel companies' boats, pure and simple, would not
be interested in the rate except as it gave them a credit on that part
of their business.
Senator King. That is what I am trying to get at. Do you know
whether they established a credit which was comparable in its results
with the credit which would follow from the operation of your boats?
Mr. HoYT. No, sir; I don't.
CONCENTRATION OF ECONOMIC POWER 10377
Senator King. Have you ever tried to find out whether their costs
in transportation were the same as yours, or greater or less?
Mr. HoYT. I don't believe there is very much variation, Senator,
except for the difference in management, which is difficult to deter-
mine. You have so many men on the boats and it takes so much fuel
to run them back and forth, and so on and so forth.
Senator King. Have you made any inquiry to ascertain whether
the costs, the charges which are made by the boats of the companies
whose representatives are here, compared with the cost of other boats?
You said there were several hundred that are upon the Great Lakes.
Mr. HoYT. I haven't made any investigation. Senator, but I would
assume that the costs couldn't vary very much on the same sized
boat.
Senator King. Then you think that the cost for hauling coal, as
an illustration, by other boats than those represented by those
gentlemen who are present, would be substantially the same as the
costs which your boats would charge for hauling ore?
Mr. HoYT. Not charge; I understood you said "costs."
Senator King. Cost, yes.
Mr. HoYT. I understand they would be about the same.
Mr. Henderson. When Oliver accepts the base rate it is accepting
also the lake freight rate which is a component of the Lake Erie base,
is it not?
Mr. HoYT. You will have to ask Mr. Olds,^ Mr. Henderson. I don't
know how they would handle that.
Mr. Henderson. I am not asking about the account. Let's put
it this way
Mr. HoYT (interposing). That-is what it would be.
Mr. Henderson. The Lake Erie base has as one of its components
the lake freight rate, does it not, and the testimony from a letter
written by Mr. Olds is that the corporation uses that rate as a basis
for its charge to subsidiaries. Was that not correct?
Mr. Feller. Yes.
Mr. HoYT. But that might mean after deducting the lake freight,
the unloading charges and the rail freight to bring the ore back to an
f. o. b. mine price. That isn't inconsistent with that price.
Mr. Henderson. Let me ask you the first question: That freight
rate, the lake freight rate, in that year when 69,000,000 tons ijioyed,
is likely to have been a component of the price exclusive of Oliver.
Take any that you moved for your company, that freight rate was
a component of the Lake Erie base, which was the basis for your own
contract?
Mr. HoYT. I don't quite understand what you mean by a com-
ponent. The rate paid to the Interlake Steamship for carrying the
ore in that year was the published lake rate.
Mr. Henderson. But this rate for the iron-ore price includes that,
does it not?
Mr. HoYT. Mr. Henderson, that is a base as if all the ore were being
delivered at Lake Erie; as such it includes a lake rate, but it does not
mean that ore is not sold at a great many different spots at the mine by
deducting that rate and making your contract on an f. o. b. mine
basis or r. o. b. vessel basis.
The Chairman. Would you let me interrupt?
Irving S. Olds, counsel, TJ. S. SteeljGorp.
10378 CONCENTRATION OF ECONOMIC POWER
Mr. Henderson. If I can get this one thing I will have at least
something. But if a steel company bought it f. o. b. and then bought
space to deliver it at Lake Erie terminals, it would pay that rate,
would it not, because that is the going rate?
Mr. HoYT. It would depend on the deal that they made with the
man that was going to float the ore for them. So far as we are con-
cerned, if they wanted us to float it in the Interlake steamships, they
would pay that rate.
Mr. Henderson. You have about 45 boats, is that it?
Mr. HoYT. Yes, sir.
Mr. Henderson. Cleveland-Cliffs has 24? How many do you
have, Mr. Oglebay?
Mr. Oglebay. We have 17.
Mr. Henderson. How many do you have, Mr. Humphrey?
Mr. Humphrey. Eleven.
Mr. Greene. We have 23; that is an error.
Mr. Henderson. There are upwards of a hundred boats, and what
they get for the transportation charge is included in that Lake Erie
base, isn't that correct?
Mr. HoYT. Well, the base is set up as if it did include it, Mr.
Henderson, but it does not mean necessarily that they pay that rate
unless they have come to that settlement with the fleet that is going
to carry the ores. It is the established rate generally recognized.
Mr, Henderson. Yes, I think I understand that.
The Chairman. Mr. Hoyt, in order to clarify my own mind, may
I call your attention to the two charts which have been introduced in
the record and which are standing on the easels. One of these is
entitled "Iron Ore Prices" ^ and the other "Lake Freight Rates On
Iron Ore," ^ and the graph shows a very stable condition of each line.
That is to say, the ore price changed only twice in a period of 14 or
15 years, while the freight rate changed once in that same period.
The base price for iron ore, the Lake Erie base price, includes the
freight rate.
Mr. Hoyt. On a delivered basis at Lake Erie.
The Chairman. That's right, so that when this base price is fixed
for any particular year, it contains the freight rate.
Mr. Hoyt. That wouldn't be generally so, sir. The lake freight
might have been established before the Lake Erie price or afterward.
The Chairman. Well, it is unimportant when it was established,
but that base price includes freight?
Mr. Hoyt. Yes, sir.
The Chairman. So that when you are undertaking to determine
what the base price is, or when circumstances determine it, the.
freight rate is known.
Mr. Hoyt. No, sir; I just said it might not be known.
The Chairman. Then are we to understand that the Lake Erie
base price may be altered after it has been anonunced by reason of a
discovery of a change in the freight rate?
Mr. Hoyt. No, su-; but if I have agreed with my customer that I
will deliver him ore at lower lake ports at a certain price, I have
committed myself to do that, whether the lake rate is established or
not.
« "Exhibit No. 1367," appendix, p. 10439.
> "Exhibit No. 1368," appendix, p. 10440.
CONCENTRATION OF ECONOMIC POWER 10379
The Chairman. Of course, if these charts are correct and we assume
they are, having been taken from authoritative journals of the trade,
it is clear that there wasn't any such variation as you describe in the
base price. There may have been variations in the prices which you
received but those variations are depending upon premiums or con-
cessions, premiums, or penalties. We are not concerned with that
now. I am concerned only in trying to get it clear in my own mind
as to how the iron-ore price which includes the freight rate price
can be determined from year to year without knowledge of what the
freight rate is. In other words, is it possible for those who reach a
conclusion as to what the base price is going to be for a particular
season to reach that conclusion without knowing what the freight
rate is going to be.
Mr. HoYT. Just as I have said, sir, I made a commitment to my
customer that I will deliver him that ore. Now if the lake freight
had not as yet been determined, I might be gambling on whether it
was going up from the j ear before or down.
The Chairman. But obviously when you make that commitment,
it is followed by everybody else. Now that is the testimony here
and the indication of the chart, because you have said that the Lakfe
Erie base price is that price which represents the first substantial
transaction for the year.
Mr. HoYT. That is correct.
The Chairman. So when that first substantial transaction is made,
it must of necessity, it seems to me, include the freight rate, or am
I utterly incapable of understanding.
Mr. HoYT. No, sir; very far from it, but the fact remains as I
have said before, Senator, keep in mind that we are talking about
this base Lake Erie price. All right, now that is $4.50. I say to^y
customer, "I will deliver ore to you at $4.50." Now the lake freight
in that particular year might have been established prior to that time,
and I know it was going to be; on the other hand, it might not have
been established and if I didn't know, I was gambling — I was taking
the chance if it were up I would have to pay the excess and not the
customer, and if it were down we would get the benefit.
The Chairman. What sort of a gamble were you undertaking,
Mr. Hoyt, when the testimony is here that every other ore seller was
using the same base price that you established?
Mr. Hoyt. The same base price.
The Chairman. Yes.
Mr. Hoyt. Delivered at Lake Erie port.
The Chairman. Including the freight rate.
Mr. Hoyt. Yes; but it is delivered at Lake Erie ports.
Mr. Henderson. There was some testimony this morning, Mr.
Chairman, in connection with a specific price that probably established
the Lake Erie base, and a few questions to Mr. Hoyt might clear this
matter up.
The Chairman. I wasn't here to hear that testimony.
Mr. Henderson. Tliis morning, if you recall, we had a letter from
Mr. Raymond to Mr. Greene relative to the conversation you had with
Mr. Girdler.
Air. Hoyt. Correct.
10380 CONCENTRATION OF ECONOMIC POWER
Mr. Henderson. Now you were anxious to have that firm coirmiit-
ment you had from Mr. Girdler made the basis for the Lake Erie
base that year.
Mr. HoYT. Correct.
Mr. Henderson. And you couldn't wait a day or so on that until
Mr. RajTuond or you had talked directly with Mr. Greene.
(Mr. Hoyt nodded his head in the affirmative.)
Mr. Henderson. You wanted to announce $4.50 as the rate.
Now in that year, 1935, were you the leader and did the announcement
of that rate which you had negotiated with Mr. Girdler become the
rate?
Mr. Hoyt. That is absolutely so.
Mr. Henderson; In that year did you. know that the freight rate
would be the same as it had been the year before?
Mr. Hoyt. That I can't tell you, Mr. Henderson, but it might
easily have been that. I did not know it.
Ml . Henderson. But you had at that time in 1935 a record running
back to 1925 at least that the rate had never been other than the same.
Mr. Hoyt. That is correct.
Mr. Henderson. So that you knew pretty well that when you
were getting $4.50 at Lake Erie terminals that included the rate
for the Lake Erie freight.
Mr. Hoyt. That was my hope, certainly, sir.
Mr. Henderson. I don't want to destroy that smooth line of the
Lake Erie rate, but you were trying to get Mr. Girdler to take the
emergency freight rate and bear it himself?
Mr. Hoyt. Yes, sir.
Mr. Henderson. And you were not successful.
Mr. Hoyt. In other words, whit I wanted to do was to have him
agree to pay me a higher price that year than he had the year before
by the extent of the emergency freight rate.
Mr. Henderson. Was that about 11 cents?
Mr. Hoyt. Something like that; yes, sir. It may be a little more.
Mr. Greene. That is right.
Mr. Henderson. Then so far as the Lake Erie base is concerned
that year, it ought to be 11 cents lower, should it not?
Mr. Hoyt. No, sir; as he would not agree to that as has been
testified. It meant that the ore people that year absorbed that
extra freight charge.
Mr. HeiJderson. Just as they absorbed in that year also the 83-
cent rate?
Mr. Hoyt. Yes, sir.
Mr. Henderson. So that when you negotiated that contract you
knew pretty well that that $4.50 was going to include the 11 cents
emergency and very probably the rate which had been in effect for
quite a long time?
Mr. Hoyt. Well, I hoped it would; yes, sir.
Mr. Henderson. But before when you had negotiated a contract
which became the Lake Erie base, you had confidence, did you not,
that that would continue?
Mr. Hoyt. You naean the lake freight?
Mr. Henderson. Yes.
Mr. Hoyt. I can't say I had it as a matter of confidence. I tried to
explain that.
CONCENTRATION OF ECONOMIC POWER 10381
Mr. Henderson. Let me ask just one more question on that.
When you were talking to Mr, Girdler the letter states he told you to
get Mr. Block — whom I understand is from Inland — and Mr. Weir
from National — to agree that adding the emergency freight to the ore
price this year would be of psychological help in getting a better
price for steel in the third quarter and that he would be in favor of it.
Is that correct?
Mr. HoYT. That is what Mr. Girdler stated. You might read the
balance of it, though, Mr. Henderson. I replied I couldn't do that —
I think, something to that effect. In other words, that was a joking
way of telling me if I could go out and do the impossible, he would
pay it to me.
Mr. Henderson. But there was a recognition on both your parts
that an increase in this price, this 11 cents, or any increase in the ore
price was likely to be used as a basis for an increase in steel prices or
a justification for it.
Mr. HoYT. No, sir.
Mr. Henderson. How did he interpret that psychological help?
Mr. HoYT. He put this up to me:
If you can go and persuade these steel people that by raising the price of ore
you will raise the price of steel, I will raise the price of ore, but if you can't —
Which he obviously knew I couldn't, jiot being in the steel
business, he said:
I will pay you what I paid you last year.
That meant that already my cost to the mine had gone up by 11
cents.
The Chairman. Let me interrupt, please. I want you to know the
committee feels very much indebted to you for the manner in which
you responded to our questions. I should like to ask each of you
if you have the opportunity for you to state to the committee what
function you think competitors ought to be free to perform in con-
sulting with one another with respect to matters of price. I am always
conscious of the fact — I think all of our members are conscious of it —
that in these inquiries there is a feeling upon the part of those who are
called before us that the committee is endeavoring to find out some
wrongdoing. That isn't the case at all. Our interest in all of the
phases of the various industries that come before us is prompted by a
desire to learn what, if anything, can be done to bring about a greater
degree of prosperity for business as well as for the rank and file of the
people of the United States. That is the purpose of all these inquiries,
particularly the purpose with respect to the manner and form of the
determination of prices. Perhaps Mr. Henderson and other members
of the committee may pursue this matter while I am gone. My
imderstanding is that the committee at the conclusion of this hearing
will recess until Monday morning. Would you care to state who the
witnesses will be?
Mr. Feller. The witnesses next Monday will be, first. Professor
de Chazeau, an authoritative steel economist who will testify with
respect to steel prices in the war situation. He will be followed by
witnesses of the United States Steel Corporation.
I may also say at this point. Senator, that I have no more testimony
to elicit on this phase of the hearing.
10382 CONCENTRATION OF ECONOMIC POWER
QUESTION OF MODIFICATION OF EXISTING LAWS TO ALLOW MORE
FREEDOM FOR BUSINESSMEN
The Chairman. May I say, Mr. Hoyt, that I have glanced over
these various letters this morning. On the letters presented this
morning your name appears frequently. It would appear that
various members of the industry have at least consulted you occasion-
ally or frequently with respect to what the price should or should
not be. Perhaps you might by reason of that experience be well
qualified to suggest to the committee what businessmen ought to
be free to do without fear of violatmg the antitrust laws.^
Mr. Hoyt. You mean you would lil^e me to answer that question,
sir?
The Chairman. I think it might be illuminating if some expression
of that kind were to be made, but I am sorry that I can't stay here
at the moment for it. If these questions proceed I might be back,
if you will have tne patience to stay.
(Mr. Henderson assumed the Chair.)
Mr. AviLDSEN. Mr. Hoyt, I would like to suggest if you would
like to take a little time to think about that and submit a written
statement to the Committee of your opinion on that subject, you
might prefer to do that.
Mr. Hoyt. I think I would like to do that.
Mr. AviLDSEN. I realize it is a very serious question and we would
like your considered judgment, not just an offhand opinion.
Mr. Hoyt. I think I would rather do it.
Mr. AviLDSEN. How do you feel about it, Mr. Henderson?
Acting Chairman Henderson. I didn't hear the statement.
Mr. AviLDSEN. I say that is a pretty big order to ask a man to
express an opinion on how far a businessman should go. I said
we would like to get Mr. Hoyt's opinion and if he would like to take
a little time and submit a written statement to the Committee, it
might be of more value to the Committee to have his considered
judgment.
Acting Chairman Henderson. I am anxious to get it, but I want
to check on what the Senator has said. Perhaps we would be able to
get both, Mr. Avildsen, because when you get a statement, you
don't have the advantage of the competent witnesses before you for
exchange of views andinterrogation.
Mr. Avildsen. Except that Mr. Hoyt would be glad to come
back to the committee, I am sure.
.Mr. O'Connell. I think it is entirely a question of what Mr. Hoyt
is willing to do. If you feci in a position to make any comment in
answer to Senator O'Mahoney's question, I think we would be very
much interested in hearing it.^
Mr. Hoyt. I am frank to say I have been in the iron ore business,
as you know, for the last nearly 30 years, and I have considered
myself from that standpoint as trying to do the best I can to make the
business interests in which I have a connection, and in which other
people have an interest, as profitable as possible.
Now I don't know as I have thought it out from the standpoint of
economics. I don't consider myself an economist, and 1 would
hesitate to make an extemporaneous speech on a subject as big as
» See footnote 1, p. 10386, Infra.
CONCENTRATION OF ECONOMIC POWER 10383
that right offhand this afternoon. I would much prefer to think it
over and give you a statement on it.
Acting Chairman Hendersotst. Maybe if I indicate some of the
things that I am interested in personally, and in wliich I think other
members of the committee are also interested, it might serve as
something of a basis for your comment. I am not going to try to
summarize this hearing. I think, however, Mr. Hoyt and other
members of the industry, that the suggestion wliich Mr. Reynders
put forward as to the depleting nature of the product which you
deliver, may put your commodity and your business transactions into
a different frame of reference from a manufactured product. Cer-
tainly in the development of legislation relating to coal, for example,
which is a disappearing resource, and so far as the conservation and
disposition of oil are concerned as our previous hearing showed,
different considerations have entered. You not only have a different
type of cost, as Mr. Humphrey indicated, but you have a question
also as to whether or not you will dispose of that resource at what the
price happens to be. And then there is another consideration which
was mentioned in the letter to Mr. Greene by Mr. Raymond which I
think perhaps makes your industry have a somewhat different status.
I refer to that portion of the letter in which he says [reading]:^
* * * * this is a year when we are mining merely to give employment, and
with so little to gain, that it was a bad time to make any change.
I think those of us who were familiar with the working conditions
and what the demand for employment was in the Upper Peninsula
and the Minnesota regions are somewhat cognizant of the effort
made by the mining companies to give employment and in that way
suffered a considerable outlay of their assets.
I think it is clear from the testimony and the evidence that has been
introduced that there are discussions constantly going on in your
industry as to the conditions of the exchange of your product, and
that the question of what is the base price is of large importance
since all your contracts are tied to it. It would be decidedly fatuous
for anybody to assume, it seems to me, that a normal and sometimes
an extraordinary amount of effort would not be exerted by responsible
executives in the industry toward getting and maintaining a continued
price which let them make their adjustments in terms of tonnage, and
the like.
I would like to comment also that of course what is introduced
here is very fragmentary. We might as well face it that it is just
what the investigators happened to get, and some of it may have a
meaning which when read in public has a different shorthand inter-
pretation to others. But taken by and large, the job of an investigat-
ing group is at best a matching of wits. Because of the circumstances
under which business is operated and the laws to which the Senator
has referred, there is a matching of wits as to what evidence can be
adduced, but it is certainly clear to me that there are price consulta-
tions and a certain amount of leadership in the selling of ore.
Another thing which might affect considerations as to what public
policy should be toward conversations affecting pricing policies, is
the fact that within a small number of companies, nearly all of the
important outlets are combined. As Mr. Oglebay testified, the
» "Exhibit No. 1375", appendix, p. 10444.
124491— 40— pt. 18 12
10384 CONCENTRATION OF ECONOMIC POWER
opportunity for getting a large outlet for the development of an
independent mine is relatively small, and that means that each one of
you producers, as I see it, is pecuHarly aware of the effect of what you
do on the business of others — I think it was said there are 10 in
this industry. You can't escape that what you happen to do about a
contract, particularly in the way of price posting, is going to be of
serious import to your competitor, and if the Ford contract in any one
year, due to the known bargaining abihty of large, able companies,
did result in a rate wliich you could not accept, you would either have
to abandon the existing method of determining the base rate or alter
the way in which you compete. I think that that is very evident
from the testimony.
I tliink another thing that needs to be taken into account in any
statement you would submit to the committee is the relationship
that exists between the ore companies and the steel companies. The
testimony has shown very definitely that the joint ownership of ore
and steel companies is a factor, and I think while the evidence before
us doesn't establish it to any great verity and exactness, there is no
doubt but that a producing steel company does have as part of its
cost at least some of the cost of its ore company. Therefore there is
an influence, maybe psychological as Mr. Girdler put it, but certainly
an influence upon the steel price, and whether the price is low or high
is of decided interest, because of the relationship that exists between
the ore companies and the steel companies. A low price would be
decidedly disadvantageous, not only from the standpoint of the realiza-
tion on the ore itself, but also on the price of the finished product,
because a steel company does not collect for its ore until it has collected
for that finished product. That is where it collects.
I think if the representatives of companies that do not have relations
with steel companies want to comment they might very well indicate
to the committee some of the problems that they encounter in trying
to get business as against the companies that do have those relation-
ships. One of the things that impressed me, running through Mr.
Patrick Butler's letters as they were presented here, was the situation
with wliich that company evidently was confronted. Butler Bros,
had to make a decision from time to time whether they would go
along, whether it was the better part of expediency in the continuance
of a long-established company to go along, or whether or not the time
hadn't come, as Mr. Emmett Butler said, to make their own price
rather than let somebody else make it for them. That is always the
problem of a small unit competing against either a larger unit or a
unit that has decided outlet advantages.
This is merely a running characterization, entirely impromptu, of
some of the tilings which I see have been brought forward in this
hearing. If Mr. Humphrey or Mr. Greene, Mr. Butler, or Mr.
Oglebay or yourself want to comment on any of those, I would be
glad to have them now, or have you submit them later.
Mr. HoYT. I would like to make just one comment, Mr. Henderson,
and being an iron-ore peddler I would hesitate to make any general
statement after the statement that you have so ably made. I do feel
this one thing that I would like to leave very definitely with you and
the committee. Mr. Feller and his associates have in their files copies
of actual contracts covering deliveries of ore and prices received as
between u customer and seller. Tlicy have been very courteous in
OONCENl'KATtON OFlSCONOMtC POWEU 10385
saying that was, you might say, a trade secret of the individual com-
panies in the industry, and it woiild be a very unkind tiling to lay
them out as a matter of pubhc record, so that 1 would know what my
competitors have done with people I have tried to sell ore to over a
period of time. I assure you, however, that from my general Imowl-
edge of the industry that those contracts are about as varying in
amount, varying in tonnage and price and all of the other qualifica-
tions as could be found in any absolutely competitive industry.
Now any further statement, I feel that I would rather submit at
some other time.^ I will come down again if you would like me to,
but I did want to just leave that word with you as a distinction be-
tween what has been testified to to such a great extent and where the
confusion has grown up in the minds of the committee as to the differ-
ence between a base, which has been a trade custom over a period of a
great many years, and the dollars and cents actually received from a
customer by a seller.
Mr. Patrick Butler. Mr. Henderson, maybe it might clarify some
questions in the minds of the committee if I made this statement: It
seems that my correspondence seems to be the entering wedge for
most of this testimony. In some of my letters I referred to consulting
Hoyt or Humphrey as to price. I hope the committee will bear in
mind whenever I discussed price, iron-ore prices or market prices, with
either Mr. Hoyt or Mr. Humphrey, I was in the position of a seller
talldng to a customer. They both bought ore from us.
Acting Chairman Henderson. Comment on that would open up a
large area which would lead into the Ford business and what the eft'ect
of that Ford business is on the rest of the industry.
Mr, Patrick Butler. The Ford business might be a factor
Acting Chairman Henderson (interposing). You weren't talking
to them, Mr. Butler, when you were talking about the Ford contract,
of selling them the Ford contract, were you?
Mr. Patrick Butler. No; I was taMng about
Acting Chairman Henderson (interposing). So you were not talk-
ing to them as a seller in that case?
Mr. Patrick Butler. Indeed I was.
Acting Chairman Henderson. Seller to them?
Mr. Patrick Butler. Selling to them, because what I quoted Ford
might have an eft'ect on the price they would pay me, because my price
to them was based on the market price.
Acting Chairman Henderson. Certainly; I think that was very
clear.
Mr. Patrick Butler. I didn't know whether it was or not. I
wanted to make it clear.
Mr. Avildson. Mr. Feller, could you tell the committee anything
about the prices in these contracts to which Mr. Hoyt referred. Are
you familiar with them?' Would you substantiate the statement he
made that there is a substantial variation in the prices?
Mr. Feller. It is perfectly correct to say that these long-term con-
tracts contain prices which result in a different cost to the various pur-
chasers of ore. If there has been any misunderstanding about that,
I am sorry. We attempted to make it clear there were variations in
those contracts. The point to which we were directing our attention
1 In a letter dated Nov. 9, 1939, addressed to Senator O'Malioney, Mr. Hoyt submit tci his response to tJie
question. The letter is included in the apjx'ndix on p. 10463.
10386 CONCENTRATION OF ECONOMIC POWER
was that in most of these contracts — let me amend that to say in many
of these contracts — the Lake Erie base price was the standard. Con-
sequently we were not saying anything with respect to the uniformity
of the price charged to the various producers.
What we were directing our attention to was the movement of price
over a period of years, and for that reason we concentrated our atten-
tion on the standard of the industry, which is the Lake Erie base price.
There has been no testimony given here that I can recall to the effect
that the prices were uniform to all buyers. They are not.
Mr, AviLDSEN. You mean the Lake Erie base price is something
like a catalog price and there are various discounts given to people
from the catalog price. Is that it? I really don't understand.
Mr. Feller. There is a good deal of evidence in the record which
could be consulted in answer to this question. As has been pointed
out in the case of many of these long-term contracts, the buyer and
seller of ore sit down together and negotiate a contract, negotiate cer-
tain terms. In many cases it is a term of the contract that, "We will
sell you so much ore per year at a price which will be so many cents
below the Lake Erie base price," and there are other provisions in
metallic content and for other physical characteristics.
Now, in the following year if the Lake Erie base price were to go
up the contract price would follow accordiugly. If the Lake Erie
price were to go down, the contract price would follow accordingly.
Mr. Greene. Mr, Henderson, I would like to make a little addi-
tion, not of a general nature. There was a certain reference in a
letter to one of our principal customers, and both Mr. Raymond in
his letter, and I, expressed some rather strong terms, the contentious
difficulties we had had over that contract. I should have added that
we both recognized that the contract based on the operation of those
individual units was almost impossible, and shortly after that that
contract was replaced by a general contract, and those difficidt and
contentious matters were removed.
Acting Chairman Henderson. So far as the Republic is concerned,
they do have a dual consideration as to the treatment of the price
they pay for ore. Is that not so? That is the language that was
read. If they have a high price for the ore they have a good realiza-
tion on that so far as their mines are concerned; however, when it
gets into the basis for their pricing of finished products, it does tend
to make the price higher. If they have a low cost for ore they would
have a lower base for the ore cost in their price, and they would have
a wider margin, and therefore the steel company would pick it up.
Is that not correct?
Mr. Greene. If I understand you correctly, I think it is.
Acting Chairman Henderson. Mr. Humphrey, do you desire to
make any comment or observation?
Mr. Humphrey. I think, Mr. Henderson, that all the facts that I
can give you have been brought out, that I have in mind ; and as to a
recommendation that might be made to the committee, I would much
prefer to think that over. I think, guided by the remarks you have
made which are very interesting, we might be able to make some sug-
gestions, but I would like to think about it and study it over.
CONCENTRATION OF ECONOMIC POWER 10387
IRON ORE RESERVES
Mr. AviLDSEN. Mr. Feller, has there been any evidence introduced
here as to the known reserves of iron ore, how many years' reserves
there are in sight, and so forth?
Mr. Feller. No; and as a matter of fact I should like to answer
that in a somewhat carefully prepared statement that I have, as I
anticipated that question somewhat earher. I should lil^e this for the
record [reading]:
The Department of Justice made inquiries into the problems pertaining to the
total amount of available iron ore reserves and the ownership thereof. Upon
the department's request, all the major ore companies submitted figures showing
their estimated reserves. These figures were for the most part the same ones
which the companies had previously submitted to the States of Minnesota,
Michigan, and Wisconsin for taxation purposes.
According to the Minnesota Mining Directory for 1939, the total reserves for
the whole area were about 1,400,000,000 tons of merchantable ore. This total
represents ores which are mined in open pits, and therefore can be fairly well
estimated, and also ores which are mined underground, and are more difficult
to estimate.
This, along with other diflSculties inherent in the nature of the problem, has
prompted the department, with the iron ore industry's approval, to use figures of
ore shipments rather than ore reserves in order to show the relative importance
of the component parts of the industry.
I should Uke to add to that, that it is my imderstanding that the
Federal Trade Commission is about to release a report shortly which
will cover the question of available iron ore reserves. I should also
like to add to that, that I understand that there are varjdng estimates
of the length of time that it would lake to exhaust the available ore
deposits. The Lake Superior Iron Ore Association directory states,
on page 12 [reading]:
The Lake Superior region is expected to supph' most of the iron ore requirements
of the United States for an almost unlimited time.
That is the end of the quotation. I may say that other sources
are much less optimistic about the length of time which this supply
would take us to exhaust.
Acting Chairman Henderson. Mr. Emmett Butler, do you desire
to make any statement now, or do you wish to avail yourself of the
opportunity of submitting something later?
Mr. Emmett Butler. I may avail myself of the opportunity later.
Acting Chairman Henderson. Mr. Oglebay?
Mr. Oglebay. I rather think I would, later.
Mr. Avildsen. I think it would be interesting to get the opinion
of these men as to the amount of known reserves of iron ore. You
say there is a difference of opinion, Mr. Feller. Would you mind
asking these gentlemen their opinion? I could. Would you tell us,
Mr. Hoyt, what your opinion is as to the known reserves?
Mr. Hoyt. I think in the opening statement that I made I indi-
cated that there had been shipments from the Lake Superior district of
about 1,700,000,000, and it was estimated generally that there was
about 1,400,000,000 of known reserves. Of that amount about
1,245,000,000, according to the recognized figures, are in the State of
Minnesota, and about 150,000,000, or somewhere in that neighborhood
are listed in Michigan, and 5,000,000 or so in Wisconsin. That is, of
known ore of commercial grade,
10388 COr^CENTRATION OF ECONOMIC POWER
I also added in that statement that there were unknown quantities
of low-grade ore which would not now be commercial, but that as the
processes of beneficiation which the whole industry has been working
upon for many years improve, and the high-^rade ore supply is less,
this low-grade ore being made conamercial wdl have taken its place,
and that is the reason for the statement that Mr, Feller made, that
this ore up here in the Lake Superior district would take care of the
requirements of the steel industry for an unknown period.
Mr. AviLDSEN. That is your opinion, too?
Mr. HoYT. That is my opinion.
Mr. AviLDSEN. You don't believe we have a problem of a con-
servation of a natural resource?
Mr. HoYT. I don't believe we have.
Mr. AviLDSEN. Is that the opinion of the rest of the gentlemen?
Is there any comment otherwise?
Mr. Humphrey. I think the only opinion to be added to that is
that the farther you go in the treatment of lower grade ores, the higher
the cost becomes. There is a cost factor that naturally the higher
grade ores of today are cheaper than ores probably will be as benefi-
ciated, although they have made great strides in beneficiation in
reducing cost, and there may be developments in that field that will
offset it.
Mr. O'CoNNELL. I might address a rather collateral question to
IVlr. Hoyt. My thought was occasioned by a reference in one of Mr.
Raymond's letters to the fact that during this year the industry was
mining merely to .give employment, and it occurred to me that you
might have some general information as to the results of technological
change in the production of ore and its effect on employment levels in
the industry. Do you see what I have in mind?
Mr. Hoyt, Well, back in '32', the period of '32-3-4, there was no
question that operations were carried on, particularly in '32 and '33
and every effort was made by the mining companies to continue some
sort of operation to keep their employees alive and fed and clothed.
As I have stated before, so far as the open pit mining is concerned,
development and all such work was carried on to a maximum amount
up to resources available which did not lead to the production of ore,
which could not be shipped down the lakes.
Mr. O'CoNNELL. My particular inquiry was intended to be a little
broader than that. I wondered if you had any general or specific
infoiTnation as to the effect^ of technological change in the production
of ore on emplojTnent in the industry, in the iron ore production
industry generally, over^a period of years. Has the result of tech-
nological change been to substantially decrease the number that can
be reasonably employed in the iron ore industry?
Mr. Hoyt. I haven't any figures. Of course there have been a
great many improvements in ore mining as there have been in all
other industries, better methods of mining, using underground tuggers
and things of that sort as against the pick and shovel, and larger units
in the open pit mines in the way of shovels and so forth. I haven't
any information available in my mind as to how that has affected the
general number of employees.
Mr, O'CoNNELL, I had heard it said that as in other industries,
technological developments in the iron ore industry had proceeded to
such an extent that the necessary employment to produce a given
CONCENTRATION OF ECONOMIC POWER 10389
quantity of ore was very substantially less than it was in recent years,
than it was a few years ago, let us say, or 10 years ago.
Mr. HoYT. Offhand, so far as our company is concerned, taking the
same mines we were operating 10 years ago on a full basis of produc-
tion, and comparing those same mines with, say, the operation in '37,
I think there was a difference of just a few hundred men out of, say,
3,500.
Mr. O'CoNNELL. I have no other questions.
Acting Chairman Henderson. If there are no other questions I
think we can recess now until Monday morning at 10:15.
Mr. Feller. Yes, sir.
Acting Chairman Henderson. Thank you, gentlemen.
The committee will stand in recess until Monday morning at 10:15.
(Whereupon, at 4:40 p. m;, Friday, November 3, 1939, the com-
mittee stood in recess until 10:15 a. m. Monday, November 6, 1939.)
(Testimony on the Iron and Steel Industry is resumed in Hearings,
Part 19.)
APPENDIX
Exhibit No. 1349
MAJOR CHARACTERISTICS OF THE IRON AND STEEL INDUSTRY
(This pamphlet has been prepared primarily for the convenience of the members
of the Temporary National Economic Committee. It obviously does not con-
stitute a complete description of the industry. In its preparation the most
authoritative and accessible secondary sources have been utilized.)
Major characteristics of the iron and steel industry, which it is well to bear in
mind during the course of the hearings, are the character of the productive process,
the relative importance of the industry, the great variety of products manufac-
tured, the geographic concentration of production facilities, the domination of a
few important companies, the cost structure of the industry, and the method of
pricing steel products. Each of these subjects is discussed briefly in the following
sections of this pamphlet. A final section on the performance record of thp
industry completes this presentation.
1. The Manufacture of Iron and Steel Products
FLOW OF materials
The production of steel begins at the blast furnace, where iron ore and other
materials are melted to emerge as raw iron, commonly known as pig iron. Pig
iron is further purified in Bessemer or open-hearth furnaces together with scrap
iron and scrap steel to produce molten steel of specified chemical composition.
The latter is solidified in moulds to form ingots, which are then subjected to
rolling, pressing, drawing, and other operations at controlled temperatures.
The finished rolled products may then be further finished by coating (e. g., with
tin or zinc) or by further fabrication into a multitude of products adapted to
particular uses.
This flow of materials through successive stages of production to finished rolled
steel products is illustrated in Diagram I prepared by the National Resources
Board. Quantities of materials consumed and products manufactured in 1937
were used in the construction of the diagram and are indicated in millions of gross
tons. In addition to depicting the various raw materials used in production of pig
iron, the diagram indicates the output of by-products, the importance of scrap in
the manufacture of steel, the dominant use" of pig iron and ferro-alloys for steel
making and of steel ingots for finished products, the role of exports and 'mpbrts,
the more important rolling mill products and the major consuming industries.
integration of processes
The production process analyzed in Diagram I may be carried out completely
in the various departments of a single plant or in various plants of a single com-
pany. Such plant or companies with pig iron, steel making and rolling facilities
are known as "integrated." On the other hand, some plants or companies begin
with the production of steel (using purchased pig iron and steel scrap) and roll
steel products. These are "semi-integrated." Finally there are plants or com-
panies which either produce pig iron exclusively for sale (merchant furnaces) or
manufacture further rolled or finished products from purchased rolled steel entirely.
These are "non-integrated."
definition of the industry
Broadly speaking, the iron and steel industry comprehends the manufacture of
crude iron and steel and the rolling of finished steel products, beginning with the
blast furnace and ending with the finished hot-rolled product. In an economic
10391
10392
CONCENTRATION OF ECONOMIC POWER
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UNITED STATES STEEL CORPORATION -1937
STRUCTURE AND ORGANIZATION BY FUNCTION
TOTAL ASSETS $1,918,729,28900
_Oll^a NATURAL GAS
1614 ACTIVE GAS WELLS
264 ACTIVE OIL WELLS
1561 MILES PIPELINES
9,611,321,000 CU FT OF GAS
97 324 BBLS. CRUDE OIL
614,313 GALS. OF GASOLINE
PRODUCTION IN 1937
GYPSUM a FLUORSPAR
gypsum capacity 200,000
tons per year
fluorspar capacity 15,000
ton; per year
LIMESTONE, DOLOMITE,
CEMENT ROCK, CLAY
38 QUARIES, MINES 6 PITS
CAPACITY 20,000,000 TONS
PER YEAR
IRON ORE
89 DEVELOPED MINES
30,286,632 GROSS TONS
PRODUCTION IN 1937
k___^ . , ,
79 MINES OPERATED
24,503,805 NET TONS
PRODUCTION IN 1937
MANGANESE ORE
MINE IN BRAZIL
CAN SUPPLY 'a OF CORPORA-
TION'S REQUIREMENTS FOR
10 YEARS
ZINC ORE
2 MINES
SUPPLY APPROXIMATELY 17%
OF CORPORATION'S
REQUIREMEMENTS
FIRE BRICK PLANTS
BY-PRODUCTS
214,853 NET TONS-SULPHATE OF
AMMONIA
197,447 NET TONS-BENZOL PRO-
— < J
COKING PLANTS
1865 BEE-HIVE OVENS
3633 BY-PRODUCT OVENS
14,189,725 NET TONS PROD
WATER SUPPLY
12 RESERVOIRS
4 FILTRATION PLANTS
6 PUMPING STATIONS
95 MILE PIPE LINE
I, ♦
OWNED TRANSPORTATION FACILITIES
iail;
1070 MILES OF MAIN ime TRACK
(OWNtp OR LEASED)
26l6MlllES0F2NDa3RD TRACKIOWNEO OR
LEASED),TRACKS OPERATED UNDER TRACK-
AGE RIGHTS. YARD TRACKS AND SIDINGS
1050 STEAM OR DIESEL LOCOMOTIVES
50,947 FREIGHT TRAIN CARS
42 PASSENGER CARS
1554 UNITS OF WORK EQUIPMENT
MARINE:
27 STEAMERS IN OVERSEAS TRADE
75 GREAT LAKES STEAMERS
IS RIVER STEAMERS
484 BARGES
13 TUGS
30 SERVICE CRAFT 8i EQUIPMENT
DOCKS AT LAKEPORTS
-i—<-
I
i
i
f
i
it-
CEMENT PLANTS
SLAG
CEMENT, R R BALLAST, ROOFING,
ROAD BUILDI NO a CONCRETE WORK
PIG IRON
14,193,133 CROSS TONS PROOUCEO. 20,470.000
CROSS TONS CAPACITY OF PIC IRON AND
FERRO MANGANESE
<> ►._.
^
J..
SLAG
STEEL INGOTS S CASTINGS
STEEL SCRAP
FERTILIZER
18,532,278 GROSS TONS PRODUCED
25,790,000 GROSS TONS CAPACITY
(36% OF INDUSTRY)
PURCHASED a PROOUCEO
MANUFACTURED FOR SALE
AS SEMI -FINISHED
1.977294 GROSS TONS PROOUCEO
15 5% OF TOTAL CORPORATION
TONNAGE
SEMI-FINISHED STEEL
3,678,753 TONS PRODUCED
28.8% OF TOTAL CORPORATION TON-
NAGE
RAILS^PLATES, SHAPES^ AXLES, CAR
WHEELS, FINISHED STRUCTURAL
WORK
7.106,220 TONS PRODUCED
55.7% OF TOTAL CORPORATION
TONNAGE
MERCHANT BARS, HOOPS, SHEETS,
STRIF! WIRE 6i WIRE PRODUCTS,
TUBULAR GOODS, TIN PLATE, SPIKES,
NUTS, BOLTS, RIVETS, NAILS, ETC.
FABRICATION & ERECTION
t-rF
DOMESTIC SALES
91% OF GROSS SALES IN 1937
EXPORT SALES
WTJL S4L£S IN I93T-$I,V86,76Z,4?7 EXCLUSIVE OF INTERCOMPANY SALES
WEMREO PBIMARILT FROM THE REGISTRATION STATEMENT OF THE CORPORATION FILED WITH THE SECURITIES S EXCHANGE COMMISSION k
124491 — 40— pt. 18 (Face p. 10393) No. 1
1.1938 AND FROM THE CORPORATION'S 1937 ANNUAL REPORT.
CONCENTRATION OF ECONOMIC POWER 10393
analysis of price and distribution characteristics, hqwever, this definition is
inadequate, for it comprehends a wide range of products which differ funda-
mentally from each other in value per unit (and, therefore, in economic mobility),
in scale and technique of production, in the geographical dispersion of consuming
areas with relation to centers of production, in size and geographic concentration
of customers, in the availability of potential substitutes for a given use, and in
methods of distribution employed. Although most steel is "tailor made" to
exact specifications within narrow limits of tolerance — and, therefore, is almost
completely homogeneous for any given specification irrespective of source —
multiplicity of product characteristics requires a breakdown of the "iron and
steel industry" into almost as many "industries" as there are products. For cer-
tain broad purposes, however, iron and steel may be classified in five general
categories; pig iron, semi-finished steel, tonnage steel, alloy and tool steel, and
further fini^ed steel. Broad differences in the economic characteristics of these
classes of products are described in the section entitled "Products."
On another account restriction of the definition of the industry to blast furnaces,
steel works and roUmg mills is unsatisfactory. In actual practice few if any
integrated producers restrict their activities to these stages in the productive
process. Ownership and control extend back through the manufacture of coke
to raw materials such as iron ore, coal and limestone quarries. Through by-
products of the coke oven and the blast furnace, steel companies become important
producers of gas, ammonium sulphate, coal-tar derivatives, and, partially as an
outlet for slag, of cement. Vertical integration has led them into transportation
where some are important owners of railroad and water transportation facilities
(both ocean and inland waterway). Outlets for steel are assured by entrance
into construction and manufacturing (including shipbuilding, bridge and other
structual fabrication and erection, and the manufacture of culverts, office equip-
ment, and other steel commodities) as well as the further finishing of rolled steel
products (such as the manufacture of wire and wire products — nails, staples, and
fencing, pipes and tubes, tin plate, formed-roofing products, etc). Distribution
is provided for by the acquisition of chains of iron and steel warehouses.
Throughout the history of the industry the trend has been toward greater
rather than less integration of this type. Although this conception of the industry
violates the boundaries of many other industries, it is one that must be employed
for many purposes. Available pubhshed data on investment, capitalization and
earnings are given on a company basis which will not permit a functional break-
down. Illustrative of the complexity of the operations of such integrated iron and
steel companies are the two charts (I and II) showing the approximate organiza-
tion of the two largest steel companies — the United States Steel Corporation, a
holding company, and the Bethlehem Steel Company, an operating company.
2, The Relative Importance of the Iron and Steel Industry
Among the major industries in the United States, the iron and steel industry
is one of the most important in value of product, value added by manufacture and
number of wage earners employed. In 1937, it was ranked first according to each
of these criteria by the Census of Manufactures. (See Table I. It should be
noted, moreover, that the census classification substantially understates £he rela-
tive importance of the industry as it is customarily defined.)'
In terms of total invested capital (as shown in Table II), the iron and steel
industry ranks third among the most important American manufacturing indus-
tries. Me&sured by output of pig iron and crude steel, the United States has long
been the most important producer in the world. In 1937 this country accounted
for roughly 37% of world pig iron production and 38% of the output of crude steel,
almost 2J4 times the production of its nearest rival, Germany. (See Table III.)
3. Products
A diagrammatic picture of major products and types of mills at various stages
in the manufacture of steel is given in Chart III. More detailed than the flow
chart shown in Diagram I, it may be advantageously compared with the latter.
Attention is directed particularly to the enumeration of some of the by-products
of steel manufacture in the blast furnace and the steel works.
> In the census tabulations blast furnace departments are separately classified and are excluded from the
figures shown. Data are confined to steel works and rolling mill products and, although this includes
further finished iron and steel products (pipe, wire, tinplate^etc.) when produced In departments of estab-
lishments which roll iron and steel, it excludes such operations when carried on independently of a rolling
mill even though under the same ownership.
10394
CONCENTRATION OF ECONOMIC POWER
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CONCENTRATION OF ECONOMIC POWER 10395
Table I.- — Relative Importance of Leading Industries in the United States, 1-9S7
Wage Earners
Value of Product
Value Added by
Manufacture '
Industry
Average
No. for
the Year
Rank
Amount
(Thousands
of Dollars)
Rank
Amount
(Thousands
of Dollars)
Rank
Steel Works and Rolling Mill Products
Cotton Woven Goods (over 12 inches wide)..
479, 342
336, 104
323,928
284,814
257,660
1
2
3
4
5
$3,330,491
1
$1, 496, 747
1
Lumber and Timber Products (not elsewhere
classified) .
Motor Vehicle Bodies and Parts
2,080,018
5
804,945
979, 232
701,949
4
Electrical Machinery, Apparatus and Sup-
3
Motor Vehicles, Not Including Motorcycles..
3,096,219
2, 787, 358
2, 546, 746
2
3
4
6
Meat Packing, Wholesale..
Petroleum Refining
Printing, Publishing, Newspaper and Peri-
1,003,010
2
1 Calculated by subtracting cost of material, containers, fuel, purchased electric energy, and cost of
contract work from value of product.
Source: Census of Manufactures, 1937.
Table II.-
-Capital Investment ' in the Seven Most Important Manujacturing
Industries, 19S6
1. Iron and Steel Industry. ,^ $4,153,672,051
2. Petroleum 5,554,722,000
3. Food (manufacturing) 4,535,678,000
4. Chemical and Allied Products 3,424, 186,000
5. Textiles 2,903,287,000
6. Motor Vehicles, complete or parts 2,461,969,000
7. Tobacco 897,458,000
1 Bonded debt plus capital stock plus surplus.
Sources: Figure for Iron and Steel taken from Annual Statistical Report of the Iron and Steel Institute
for 1937, Other figin-es taken from the Bureau of Internal Revenue's report, Statistical Income (Vol. II)
for 1936.
Table ]
11. — World Production of Iron Ore, Pig Iron,
and Steel
Producing Country
Percent of World Production
1936 Iron
Ore
1937 Pig
Iron
1937 Crude
Steel
United States.
28.8
3.8
16.3
7.6
19.3
»2.8
21.6
36.7
15.4
14.2
8.4
7.6
6.0
11.8
37 9
Germany
14 7
Soviet Union.. .
13 1
United Kingdom
9 8
France . .
6 9
Belgium-Luxemberg '
4 8
Other
13 8
1 Belgium and Luxemberg are considered a unit.
' Statistics not available for Belgium 1936.
Source: Compiled from the Annual Statistical Report of the American Iron and Steel Institute.
No list of iron and steel products is adequate to show the variety of products
actually manufactured. Pig iron is produced in various grades, and steel ingots
to specified chemical composition. But more important, each rolled product is
manufactured to detailed specifications of gauge, width, length and finish.
In a previous section it was noted that iron and steel products for some purposes
may be classified broadly in five categories: pig-iron, semi-finished steel, tonnage
steel, fuither- finished steel, and alloy and tool steel. Generally speaking this
classification parallels the base values for these classes of products m Table IV.
Two things are notable in this table: (a) the spread in values between the classes
themselves ranging from a low of $20.50 per gross ton of basic pig iron to a high
10396
CONCENTRATION OF ECONOMIC POWER
of over $1500 per gross ton for high speed steels; (b) the difference between the
high and low values in each class which increases as the more finished stage is
approached, although the high price of high speed tool steels is in a large part due
to the cost of the various alloying material used. Obviously pig iron is more
homogeneous than finished rolled products; further finished products are still
further differentiated.
PIG IRON
Although approximately 90% of all pig iron manufactured is produced by inte-
grated firms, most of the pig iron entering the open market is manufactured by
nonintegrated merchant furnaces. Production of pig iron in 1937 by grades is
shown in Table V together with the proportion of each grade manufactured for
sale. Basic and Bessemer and low phosphorus, the grades used in the manufac-
ture of steel, constituted 86% of the total output and 93% of these grades were
consumed in the same works, mostly in molten state. Foundry, malleable and
forge irons by reason of their low value and large bulk are characteristically dis-
tributed from small merchant furnaces in relatively local markets.
SEMIFINISHED STEEL
Carbon steel ^ ingots are sold in the open market only in ngeligible quantities.
The production of ingots by type of process together with the proportion of alloy
steel in each class is also shown in Table V. Semi-finished steel (blooms, billets,
and slabs and sheet bars), although primarily used by the producing company in
the manufacture of finished rolled products, is sold to non-integrated companies
on long term contracts. In 1937, out of 3,784,978 gross tons produced for sale,
2,164,981 tons were shipped to members of the industry for conversion into
further finished products. This figure includes an indeterminate amount of inter-
plant transfers among plants of the same or subsidiary companies.
Table IV. — Range in Base Value of Product
[Prices September 8, 1938 per gross ton]
Low
High
Pig Iron
Basic Pig • .. ..
$20.50
39.00
58.24
62.72
Low Phosphorus
Black Plate 3
$25 50
Tonnage Steel
Rerolled Light Rails'
70.56
Further Finished Products*
Bright Wire'
E.xtra Special Transfoimer Sheets'
High speed tool steel '
171 36
Finished Alloy Steel
Open hearth grade alloy bars '
1,500.80
1 Price at Birdsboro, Pa., quoted per gross ton.
' Price F. O. B. milles quoted per gross ton.
' Base price at Pittsburgh quoted $3.15 per 100 lbs.
• The range on further finished products has been calculated from the following products: Cold rolled
sheets, galvanized sheets, electrical sheets, long ternes, tin plate, special coated mfp. ternes, cold rolled strip
commodity cold rolled strip, cold rolled spring steel, bright wire, galvanzed wire, spring wire and staples.
» Base price at Pittsburgh quoted as $2.60 per 100 lbs.
• Electrical sheets f. o. b. Pittsburgh quoted $7.65 per 100 lbs.
' Base price at Pittsburgh quoted at $2.80 per 100 lbs.
• Price F. O. B. Pittsburgh quoted at $0.67 per lb.
Note. — Prices quoted are base prices only. The actual range in price is much wider because of the uFe,
of extras in pricing for such specifications as extra quality, width, close tolerance, chemical requirements
etc.
Source: The Iron Age.
' Carbon steel is the standard product of the industry and is differentiated from alloy and tool steel by
the range of nickel, chromium copper and other alloying elements specified In its chemical composition.
CONCENTRATION OF ECONOMIC POWER 10397
Table V. — Production of Pig Iron and Steel Ingots by Grades and Classes, 19S7
PIG IRON PRODUCTION
Grade
Total
Basic
Bessemer & low phosphorus. .
Foundry
Malleable
Forge
All other (incl. direct castings)
Production
in gross tons
36,129,596
24, 780, 789
6, 315, 382
2,826,238
2, 151, 106
22,399
69, 682
Percent of
total pro-
duction
100.0%
68.6
17.6
7.8
6.9
0.1
0.2
Percent for
sale by grade
18.0%
6.8
7.6
86.9
86.3
97.9
63.2
STEEL INGOT PRODUCTION
Class
Production
in gross tons
(including
aUoy)
Percent of
total pro-
duction
Alloy pro-
duction in
gross tons
Percent
alloy by
classes
Total -.--
50, 318, 151
46,052,980
■ (46,719,607)
(333, 473)
3,499,927
934
814, 310
100.0%
91.6
(90.9)
(0.7)
6.8
0)
1.6
2,975,598
2, 382, 053
(2,281,365)
(100, 688)
6.9%
6.2
Open hearth
Basic - -.
(5.0)
(30. 2)
Acid - --
Bessemer
Crucible
241
693, 304
25.8
Electric
72 9
J Less than 0.05%.
Source: Annual Statistics Report of the American Iron and Steel Institute.
TONNAGE STEEL
This class of products comprehends carbon steel commodities such as plates,
shapes, rails, sheet piling, bars, sheets and strip. Table VI shows the output
pf the more important hot rolled steel products in 1937 together with the per-
centage of alloy output. The outstanding feature of the table is the high per-
centage of light steel products manufactured, especially sheets, strip, black plate
(for tinning), and that of merchant bars. These products reflect the importance
of the automobile industry and the container industry as consumers in recent
years as contrasted with the relative quiescence of demand from the railroads and
steel construction. Among the products listed skelp and wire rods occupy a
unique position. Because they are the semi-finished stage in the manufacture of
pipe and wire respectively, operations which are usually considered within the
steel industry, they are sometimes classed as semifinished products. With few
exceptions these hot rolled carbon products are produced predominantly in
large integrated plants and are sold in large volume to a relatively few important
customers. Thus, of 124 companies having capacity to produce these products,
18 integrated companies accounted for 85% of all hot rolled finished products.
FURTHER FINISHED STEEL PRODUCTS
The production of the major categories of further finished iron and steel prod-
ucts in 1937 is shown in Table VII.
This class of products is characterized generally by a large participation of
semi- and non-integrated producers, a larger number of sellers, a wider market
(especially for wire and wire products, tinplate and pipe), and a much greater
participation of jobbers in their distribution. In general, the distribution of steel
is direct from producer to user when the unit value of the product is relatively
low, when the requirements of the buyer are large or specialized, or when the
consuming plant is affiliated with the producer. The middleman is often im-
portant when a product is standardized, or when its value is high in proportion to
its weight, or when it is used over a wide geographic area in small quantities.
Thus tonnage steel distribution except for fill-in business is handled almost
entirely by the mill, while the jobber is a much more important factor in the die-
tribution of further finished steel.
10398
CONCENTRATION OF ECONOMIC POWER
Table VI. — Production of Hot Rolled Iron and Steel Products and Production of
Alloy Products in Gross Tons, 1937
Product
Total Hot Rolled Products
Plates
Hot Rolled Sheets
Hot Rolled Strip -.
Hoops, Cotton Ties and Baling Bands
Black Plate.
Merchant Bars .-
Concrete Bars ,
Heavy Shapes.
Light Shapes
Skelp
Wire Rods."
Rails...
Sheet Piling...
Rolled Billets for Forging...
All Other Hot Rolled
Total Hot
Rolled Pro-
duction
766, 389
243, 248
839, 506
895. 561
165, 447
954, 086
186, 704
844, 657
546, 582
730, 264
279, 862
009, 290
445, 739
116,418
667, 342
841, 783
Percent
Hot
Rolled
Produc-
tion by
product
100.0
8.8
21.4
7.9
0.4
8.0
14.1
2.3
7.0
2.0
6.2
8.2
3.9
0.3
1.8
7.7
Alloy
Produc-
tion
59, 486
224, 695
72, 343
933, 743
2,344
147, 533
47, 340
757
133,986
51,551
Alloy Pro-
duction as
percent of
hot rolled
by product
1.83
2.87
2.40
18.00
0.32
6.47
1.57
0.05
20.08
1.81
Source: Annual Statistical Report of the American Iron and Steel Institute.
Table VII. — Production of further finished iron and steel products, 1937
[In gross tons]
Product
Production
Percent
Cold rolled sheets .
2,408,066
1,434,806
775, 160
2, 687, 128
2, 327, 705
986, 277
3, 823. 736
889, 571
15.7
Galvanized sheets .. . - . .... . .
9.4
Cold rolled strip . . .
5.1
Tin and Terne Plate
17.6
Plain Wire
15.2
Other wire and wire products .....-.-.
6.4
Pipe and tubes (black) ' .. . . . . ......
24.9
Other pipe and pipe fittings ' - , - -
6.8
Total of above items
15, 332, 449
100.0
> Includes butt-weld, lap, electric weld and seamless.
> Includes cast iron.
Source: Annual Statistical Report American Iron and Steel Institute.
ALLOT AND TOOL STEEL
Until recent years, special alloy and tool steels were produced on a relatively
small scale, largely by semi-integrated companies. The trend, however, has
been in the direction of larger scale output (at least of alloy as distinct from tool
steel) by integrated producers. High value relative to bulk gives these products
a very high degree of mobility while brands and special processes differentiate
sources of supply. The ratio of alloy to hot rolled carbon steel production in
1937 is shown in Table VI. Although the ratio is small, the field for alloy prod-
ucts is increasing.
CONCENTRATION OF ECONOMIC POWER 10399
4. Geographical Concentration of Production Facilities
blast furnaces
The location of blast furnaces has been primarily determined by the location
of the essential raw materials — iron ore, limestone, and good coking coal.^ Of
the three, limestone is so widely distributed that it is hardly a factor. Generally
speaking, iron ore moves to coal even though slightly more ore (1.718 tons) is
usedthan coal (1.272 tons) per ton of pig iron. Determining considerations may
be listed briefly.
(i) Ore is more compact and more easily handled than coal.
(ii) The most desitable ore fields are much further removed from consumption
areas for iron and steel than good coking-coal fields.
(iii) The freight rate structure is generally more favorable to the movement of
ore than to the transportation of coal.
(iv) Coal is relatively more important to iron and steel mills than the ratio of
coal to ore consumption in the production of pig iron would indicate because it
is a source of power as well as heat throughout the entire production process.
Outstanding exceptions to the generalization that ore moves to coal are found
in the Birmingham area, where coking coal and self-fluxing iron ore are contiguous,
and in Southeastern Pennsylvania where the Bethlehem works obtains at least
part of its ore requirements locally. Map I shows the locations of blast furnaces
in the United States with relation to coal and ore deposits. The bulk of the iron
ore used by steel producers comes from the Lake Superior fields— Northern Wis-
consin, Minnesota and Michigan. In 1937 these three states produced 85.6% of
the American output. Minnesota alone accounted for 67.2%. Alabama was
the third most important source of domestic ore (8.7%) followed by Pennsylvania
(including New York) with 3.6% of total output. Substantial quantities of ore
are imported, primarily from Chile. In 1937, out of 2,443,000 tons imported,
58.9% came from Chile. . Most of this ore entered this country through Sparrows
Point, Md., which port accounted for 80.3% of total ore imports. Blast furnaces
located at Sparrows Point and in Eastern Penn. are probably supplied primarily
from foreign sources. (See Table VIII following.)
Table VIII. — Production of iron ore by States, 1937
[Gross tons]
[Compiled by the Bureau of Mines, Department of Interior]
Minnesota-- 48,416,985 67.2%
Michigan.... 12,085,048 16.8
Alabama __. 6,307,581 8.7
Pennsylvania - 2,625,044 3.6
Wisconsin 1,155,602 1.6
New Jersey... 520,133 .7
New York (')
Other States .., 983,155 1.4
Total 72,093,548 100.0%
I Included in Pennsylvania.
Source: Annual Statistical Report of the American Iron & Steel Institute.
' Total amount of materials used per ton of pig iron produced Is remarkably stable from year to year
Excluding charcoal, which is of minor importance and is reported in bushels rather than tons (i. e., char-
coal pig iron is usually less than 1% of the total output), an average of 3.161 long tons of materials were con-
sumed per long ton of pig iron produced in 1937. This was the high for the period, the low being 3.092 tons
in 1933.
Of the average of 3.161 tons of materials used in 1937, 1.897 tons were ore, scrap and cinder, 0.361 tons were
limestone (flux) and 0.903 tons were coke. Since coke is bulky relative to its weight and value as well as
friable, transportation is both costly and deleterious. Except for bee-hive coke, therefore, which has be-
come relatively unimportant (e. g., in the 7 years ending 1938, by-product coke varied from 94% to over
97% of total coke production while in 1935 bee-hive coke accounted for less than 3% of the steel industry's
consumption of bituminous coal), it is the assembly of coal rather than coke which is characteristic in the
steel industry. Using the ratio of coal to coke as shown in Diagram I for 1937, the yield of coke is about
71%. This means that 0.903 tons of coke are equivalent roughly to 1.272 tons of coal and the total ma-
terials used in that year are increased from 3.161 to 3.530 tons- per ton of pig.
We may say roughly then that 3^4 tons of raw materials must be assembled for every ton of pig iron pro-
duced. This figure understates the importance of the assembly of raw materials per ton of steel manu-
factured because of losses through oxidization and waste in the steel furnace. Although some of this waste
is recovered in the form of mill cinder, scale, etc., and returned to the furnace, the net loss approximates
10%.
124491— 40— pt. 18 13
10400
CONCENTRATION OF ECONOMIC POWER
1 1 . . . J
PENNSYLVANIA
OHIO
ALABAMA
NEW YORK
ILLINOIS
ALL OTHER
CONOENTRATIO>i OP ECONOMIC POWER
Table IX. — Production of coal by States, 1937
10401
states
Thou-
sands of
net tons
Percent
States
Thou-
sands of
net tons
Percent
All .
493, 370
12, 400
3,200
7,153
51, 240
17, 270
3,690
7,044
47, 053
1,570
561
(')
3,075
1,795
100.0
2.5
0.7
1.5
10.4
3.5
0.8
1.4
9.5
0.3
0.1
0)
0.6
0.4
North Dakota.....
2,105
24,500
110, 160
50, 915
5,292
879
3,750
18,-558-
2,010
118,050
5,930
170
0.4
Alabama . .
Ohio
5 0
Arkansas
Oklahoma
22 3
Colorado
Pa. Bituminous
Illinois ,..
Pa. Anthracite
10.3
Indiana
Tennessee --.
1.1
Iowa . ..
Texas
0.2
Utah
0.8
Kentucky
Virginia
' ""^.7
Maryland
Washineton
0 4
Michigan
West Virginia . . ..
23.9
Missouri .
Wyoming
1.2
Montana
Other States, Alaska
(»)
New Mexico
' Included with Kansas.
2 Included with Arkansas.
3 Less than 0.05%.
Source: Annual Statistical Report of the American Iron and Steel Institute, 1937.
The high concentration of blast furnaces in the western Pennsylvania and
eastern Ohio region with minor concentrations around the lower tip of Lake
Michigan and around Birmingham is well illustrated in Map I. Actual produc-
tion figures by states in 1937 give a very rough indication of this concentration.
(See table below.)
Table X. — Production of pig iron by States
[Gross tons]
Pennsylvania 11,371,238 31.5
Ohio 7,903,944 22.0
Indiana, Mich 4,722,316 13.1
Alabama _ 2,580,674 7.1
Md., Va., W. Va., Ky., Tenn 2,531,457 7.0
Illinois 3,426,116 9.5
Mas.s., New York 2,843,286 7.9
Minn., Iowa, Col., Utah 750,565 2.1
Total.... - 38,129,596 100.0-
Source: Annual Statistical Report of the .iVmerican Iron and Steel Institute.
STEEL WORKS
Most of the pig iron produced i.s used in the manufacture of steel. For ex-
ample, in 1937, 31 million out of a total of 36 million tons of 86% of all pig iron
produced was of basic and Bessemer grade, the types used for steel production.
Foundry, malleable and forge grades sre generally produced for sale primarily by
small merchant furnaces. Thus in 1937, whereas only 6.8% and 7.5% of basic
and Bessemer pig iron respectively were produced for sale, 86.9% of foundry,
86.3% of malleable and 97.9% of forge pig iron were produced for this purpose.
Although 82% of all pig iron was produced for makers use, of the total output of
pig iron of steel making grade 93% was produced for the makers' own use.
Economies in the conservation of heat indicate the desirability of using iron for
steel making purposes in the molten state. Thus, of the total output of pig iron
and ferro-alloys, the Census of Manufactures reports that 72% was used in the
molten state in 1933 and 1935 and 71% in 1937. If pig iron for sale and ferro-
alloys be subtracted from 1937 output, this would indicate that about 88% of all
pig iron produced for makers use in 1937 was used in the molten state.
Economies of heat conservation and the use of by-product blast furnace gas
together with the relatively high cost of transporting pig iron compared to its
value have resulted in a concentration of steel works in the vicinity of blast fur-
naces even if not under the same ownership. Of 52 companies having capacity
for the production of pig iron in 1938, 18 integrated companies owned 89% of the
total while the remainder was divided among 34 non-integrated merchant pro-
ducers. These same integrated companies accounted for 90% of all capacity
10402 CONCENTRATION OF ECONOMIC POWER
for ingots and steel for castings, 76 semi-integrated companies dividing the
remainder among them.
Table XI below shows the distribution of production of ingots and steel for cast-
ings among the most important states. It will be noted that Pennsylvania and
Ohio produced almost 53% of total output in 1937; Indiana and Illinois almost
21%. The distribution of output is roughly comparable to that of pig iron.
The geographical dispersion of steel works, however, is considerably greater
than that of blast furnaces (especially blast furnaces for steel-making iron) as is
indicated generally in Map I, p. 10400. Theavailability of steel scrap makes loca-
tion nearer the consuming market economically practicable and desirable. Steel
works along the West Coast and in the vicinity of St. Louis are prominent ex-
amples. Some furnaces may be operated almost exclusively on scrap. The im-
portance of this material is indicated by the fact that the average charge of open-
hearth furnaces producing 91.5% of all steel made in the United States in 1937
was approximately 54% scrap and 46% pig iron. A declining ratio of pig iron
output to steel ingot production over a long period of years is evidence of the
growing importance of scrap.
Table XI. — Production of ingots and steel for castings by States, 1937
[Gross tons]
Mass., R. I., Conn 276,021 0.5
New York, New Jersey 2,865,883 5.7
Pennsylvania 1 15,615, 164 30.9
Delaware, Md.. D. C, Va 2,324, 586 4.6
West Virginia. Kentucky 2, 138,677 4.2
Georgia, Ala., Texas.. 1,903,257 3.8
Ohio 11,074,914 22.0
Indiana 6,141,480 12.1
niinois __ 4,429,676 8.8
Michigan, Minn., Mo 2,457,337 4.9
Oklahoma, Colo., "Wash 741,991 1.5
California _ 599,715 1.2
Total 50,568,701 " 100.0%
Source: Annual Statistical Report of the .American Iron and Steel Institute.
ROLLING MILLS
As steel approaches its rolled form equipment becomes more specialized.
Almost completely undiflFerentiated in the blast furnace stage, many rolled prod-
ucts require distinctive rolling equipment. On the other hand the operating
characteristics of blast furnaces and steel furnaces especially (and to some extent
of rolling mills as well) require production approximating rated capacity during
the period the furnace or mill is in use. Flexibility is attained by varying the
number of units in use or the time during which they are used rather than the
rate of use. To provide effective use of undifferentiated furnace capacity, there-
fore, in the face of shifts in demand for finished rolled products for which more
specialized rolling equipment is necessary, a multiplication of rolling mill facilities
may be required to balance installed iron-making and' steel-making capacity.
Economies in transportation and handling costs of scrap produced as well as
those associated with common power faciUties, the use of by-product gas and tar,
and heat conservation may dictate a location of such rolling mills contiguous to or
in the vicinity of furnaces. Since roughly only 70% of the weight of the ingot
on the average is finally produced in the form of hot rolled steel products, the
first item mentioned may be substantial. Out of a total of 28,515,000 gross tons
of scrap consumed in 1937 by the steel industry, 57.5% was produced in the
companies' own works. These considerations weigh the more when the market
for the rolled product is <iispersed.
INTEGRATION
In the production of rolled products, there is both a wider geographic dispersion
of mills and a greater number of producers. This increase in the number of
companies producing total finished hot rolled products as contrasted with steel
ingots and pig iron is shown in Table XII and on Chart IV. It is characteristic
that the integrated companies produce a wide variety of products while the
degree of specialization increases for semi-integrated and even more for non-
integrated companies. Many of the latter manufacture only a single product.
CONCENTRATION OF ECONOMIC POWEIl
10403
10404
CONCENTRATION OF ECONOMIC POWER
Table XII. — Capacity in the United States, by degree of company integration, 1938
Pia IRON
Annual
Capacity
in gross
tons
Per Cent
No. of
Compa-
nies
Total..-.
Integrated
Non-integrated
51, 401. 480
100
45, 953, 380
5, 448, 100
INGOTS AND STEEL FOR CASTINGS
Total
Integrated
Semi-integrated
Annual
Capacity
in gross
tons
73, 047, 892
65, 951, 300
7, 096, 592
Per Cent
No. of
Compa-
nies
74
TOTAL FINISHED HOT ROLLED PRODUCTS
Annual
Capacity
in gross
tons
Per Cent
No. of
Compa-
nies
Total
Integrated
Semi-integrated
Non-integrated.
57, 818, 900
100
124
49, 025, 900
5, 508. 250
3,284,750
Source: Compiled from the Iron anc^ Steel Works Directory of the United States and Canada — 1938
Because of the characteristics of production and the market, the importance
of such semi- and non-integrated companies varies widely among products.
Although production data on this basis are not available, the relative importance
of each class of companies for each of a selected group of products in terms of
relative capacity installed in 1938 is indicated in Table XIII. In the case of hot
rolled products, integrated producers are generally more important sources for
heavy steel products than for light while semi-integrated and non-integrated com-
panies are more important producers of flat-rolled steel products, especially of
light steel such as strip and black plate for tinning. More marked is the relative
importance of this latter group of companies in the manufacture of further
finished steels, especially cold-rolled strip in which they accounted for almost two-
.thirds of the total capacity.
GEOGRAPHICAL CONCENTRATION OF PRODUCTION WITH RELATION TO CONSUMPTION
Data are not available to demonstrate adequately the relation between geo-
graphical concentration of production and of consumption. The problem is one
which requires analysis by products. This analysis has been undertaken by the
Department of Justice in the present investigation and the results will be made
available at a later date.
CONSUMPTION BY INDUSTRY AND AREA
The distribution of finished steel among major consuming industries in 1937, as
estimated by the Iron Age, is shown in Chart V. The automotive industry to-
gether with railroads, containers and the building industry, in the order named,
accounted for approximately 47% of finished steel sold in that year. Although
the relative order of their importance has altered, these four industries have con-
stituted the four most important outlets for steel in each of the last six years
(1932-38, excluding 1933 for which .data are not available). The automobile
CONCENTRATION OF ECONOMIC POWER
10405
industry was first in every year (varying from 15.5% to 24.8%) but railroads were
third in three years and fourth in two while the building industry occupied second
rank in every year except 1937. Containers were fourth in three years and
third in three others. Combined, these four industries accounted for from 46.2%
of total estimated consumption in 1938 to 56.5% in 1932.
CHART V
CONSUMPTION OF FINISHED STEEL PRODUCTS
BY PRINCIPAL CONSUMING INDUSTRIES
1937
PER CENT
BUILDING
RAILROAD
AUTOMOTIVE
OIL. GAS. ETC.
CONTAINERS
AGRICULTURE
MACHINERY
MISCELLANEOUS
EXPORTS
PER CENT
SOURCE "THE IRON AGE'
I I I
PREPARED BY THE DEPARTMENT OF JUSTICE
Table XIII. — Capacity for Selected Produced by Degree of Company Integration
[Gross Tons; 000 omitted]
Product
Rolled Billets (or Forging.
Shapes, Heavy Structural
Plates
H. R. Sheets
H. R. Strip
Heavy Rails
Wire Rods
Black Plate for Tinning. .
Merchant Bars
Indus
try
Capac-'
ity
1,107
3,667
6,505
10,954
4,286
2,650
2,358
2,135
9,173
Indus-
try
Per-
cent-
age
100
100
100
100
100
100
100
100
100
Integrated
MiUs
Tons
836
3,617
4,464
9,366
2,979
2,650
3,435
1,706
8,146
Per-
cent of
Total
75.5
95.9
80.9
86.5
69.5
100.0
78.8
79.9
Semi-Inte-
grated Mills
Tons
262
160
1,028
1,090
660
804
96
589
Per-
cent of
Total
23.7
04.1
18.7
10.0
15.4
18.4
04.6
06.4
Non-Inte-
grated Mills
Tons
23
498
647
119
333
438
FURTHER FINISHED STEEL
C. R. Sheets
C. R. Strip
Plain Wire
Tin and Teme Plate
Pipe and Tubes '
Wire Products -.
5,143
1,437
4. 495
3,651
7,288
3.674
100
100
100
100
100
100
4,694
491
3,291
3,078
5.359
2,778
89.3
34.2
73 2
84.3
73.5
76.6
244
236
803
115
281
727
04.8
16.4
17.9
03.1
03.9
19.8
306
710
401
468
1,648
Per-
cent Of
Total
0.8
0.4
04.6
15.1
02.8
15.6
04.8
06.9
49.4
08.9
12.6
22.6
04.6
1 Includes Butt-Weld, Lapweld, Electricweld and Seamless.
Source: CompUed from the Iron and Steel Works Directory of the United States and Canada, 1938.
10406
OONCENTRATION OF ECONOMIC POWER
It is apparent that, with the exception of the automotive industry, steel require-
ments of these industries would be widely dispersed geographically. Readily
available data for consumption of domestic finished steel by major States are
shown in Table XIV. Over 60% of finished steel was distributed in eight con-
tiguous states — New York, New Jersey, Pennsylvania, Ohio, Indiana, Illinois,
Michigan and Wisconsin — in 1935. The Pacific area accounted for only 5%.
while roughly one-third of the total consumption was distributed to the 37 remain-
ing states in six other geographic areas. Among the states, Michigan — the home
of the* automobile industry — was by far the largest buyer, accounting for 21%
of total consumption. Ohio and Pennsylvania which in 1937 produced 53.5%
of total pig iron and 52.9% of ingots and steel for castings accounted for only
15% of total consumption. Indiana and Illinois, which in the same year pro-
duced 20.9% of the steel, consumed only 10% of it. Although production and
consumption here compared are for different years, the percentage of output by
states has been fairly stable over the period. Fairly heavy concentration of
consumption for all finished steel products in the industrial states of the Middle
Atlantic and the East North Central areas, however, is consistent with a very
wide dispersion for particular products, especially further finished steel, such as
tinplate and pipe. Space and readily available data will not permit statistical
presentation.
Table XIV, — Consumption by Principal States of Domestic Finished Steel, 1935
Principal Consuming States
Middle Atlantic Area
New York
New Jersey
Pennsylvania
East North Central Area
Ohio--
Indiana
Illinois
Michigan
Wisconsin
Pacific Area
Washington ,
Oregon
California
All Other States
Consumption
in gross tons
4,120,000
20
2,472,000
412,000
1,236,000
12
2
6
8,652,000
42
1,854,000'
412,000
1,648,000
4,326,000
412,000
9
2
8
21
2
1,030.000
6,798,000
Percent of
Consump-
tion by
States
Source: Derived from U. S. Tariff Commission Report No. 128, p. 375.
CONCENTRATION OF CAPACITY BY MAJOR PRODTJCING REGIONS
Since state boundaries fail to coincide with industrial regions and there is an
absence of available production data by such regions, the actual degree of con-
centration in the iron and steel industry may be approximated from capacity
data. Using capacity by mills in 1938 as reported in the Iron and Steel Directory,
Table XV has been prepared to show the relative capacity for the production of
pig iron, steel ingots, finished hot rolled, and further finished steel products in the
three most important producing regions — Pittsburgh, Chicago and Birmingham.
Each region was defined as an area within a 100 mile air line radius of the city
named. For some purposes this radius is too large but nevertheless these figures
are of interest.
CONCENTRATION OF ECONOMIC POWER 10407
Table XV. — Concentration of capacity in major ■producing areas,^ 19S8
Pig IroTi and Fcrro
AUoys
Steel Ingots &
Castings
Finished Hot Rolled
Steel Products 2
Further Finished
Steel Products 3
Prortucing Area
Capacity
in gross
tons
Percent
of
total
Capacity
In gross
tons
Percent
of
total
Capacity
in gross
tons
Percent
of
total
Capacity
in gross
tons
Percent
of
total •
Total U. S. Capacity..
Pittsburgh
Chicago
51, 401, 480
21, 356, 800
10, 635, 800
3, 200, 850
35, 193, 450
100
41.5
20.7
6.2
68.5
73, 047, 892
30, 282, 010
13, 828, 000
2. 329, 000
46,439,010
100
41.5
18.9
3.2
63.6
54, 927, 800
* 22, 970, 800
9, 434, 500
1, 840, 000
34, 245, 300
100
41.8
17.2
3.3
62.3
26, 726, 923
12,774,898
3, 668, 230
878, 200
17,291,328
100
47.8
13.7
Birmingham
3.3
Total of above »
(C4..7)
> Producing area comprises territory within 100 mi. air line of points listed.
» Includes the following products only:
Heavy shapes, plates, sheet piling, heavy rails, rolled blooms and billets for forging, new billot steel rein-
forcing bars, rerolled steel reinforcing bars, hot rolled bars other than concrete reinforcing, splice bars and
tie plates, blanks and pierced billets for seamless tubes, skelp, hot rolled sheets, hot rolled strip, hoop, cotton
ties and baling bands, hot rolled black plate, wire rods, strip for cold reduced black plate and tin plate.
' Includes the following products only:
Cold finished bars, seamless tubes, butt-weld steel pipe, lap weld steel pipe, electric weld steel pipe, cold
rolled sheets, galvanized sheets, cold rolled strip, tin and terne plate, plain wire, wire nails and staples.
< For some products the Carnegie-Illinois Steel Corp. report in the Directory did not show separately
capacity located at each plant by product.' Therefore, in arriving at area capacities in which plants were
not reported separately estimates had to be made of actual plant capacity for particular products. In this
connection the following estimates were required.
Bars other than concrete reinforcing: Pencoyd, Pa., estimated capacity. 39,000 O. T.
Heavy Structural Shapes: Pencoyd, Pa., estimated capacity 70,000 G. T.
Skelp: Youngstown and McDonald, Ohio plants, estimated capacity 265,000 0. T.
Source: Compiled from Iron and Steel Works Directory of the United States and Canada.
Pittsburgh, of course, is by far the most important regioo/, accounting for
around 41% of iron, steel ingots and hot rolled steel, and almost half of the
further finished steel. The degree of concentration in each region tends to decline
as one passes from pig iron to steel ingots and approaches the more finished form
of the steel product. Over two-thirds of all pig iron capacity is located in these
three areas; over 63% of ingot capacity and over 62% of finished hot rolled
capacity are also there. According to the sample of further finished products
employed, 65% of further finished capacity was so concentrated. A comparison
of these data with the sketchy consumption figures shown in Table XIV will give
a rough idea of the relative concentration of the industry.
5. Size of Company
According to the Iron and Steel Works Directory of the American Iron & Steel
Institute, there were 124 companies in 1938 which had capacity for the production
of finished hot rolled products. Including 34 non-integrated (non-integrated with
respect to steel making capacity only) manufacturers of pig iron and ferro-alloys,
this makes a total of 158 companies. With operating subsidiaries included, the
figure is raised to 164 operating companies. This number is substantially fess than
the total number of companies in the industry since it does not include companies
with further finishing capacity only and companies wihch have no rolling capacity
but engage exclusively in the manufacture of products like wire and pipe. Al-
though the total number of companies varies considerably from product to product,
an outstanding characteristic of this industry is the concentration of capacity in
the hands of a few sellers. Two indications of relative size may be noted.
In Table XVI- the total invested capital of each of the first ten companies in
the industry is contrasted with that reported for the industry as a whole in 1937.
These ten largest companies accounted for 88% of the entire investment of more
than four and one quarter billion dollars. The assets of United States Steel Cor-
poration alone were 40% of the total, well over 2J^ times the figure for its nearest
rival, Bethlehem Steel Corporation, which in turn was practically twice as large
as its nearest competitor. Republic Steel Corporation. 55% of the total industry
investment is accounted for by two corporations, over two-thirds by four. Even
the second largest company in the industry had an investment substantially
larger than the aggregate of all companies other than the first nine.
10408 CONCENTRATION OF ECONOMIC POWER
Table XVI. — Invested Capital of the Ten Largest Companies,^ 1937
CompEiny
Invested
Capital in
Millions of
Dollars
Percent
Total Invested Capital for the Industry >...
1. United States Steel Corporation--
2. Bethlehem Steel Corporation
3. Republic Steel Corporation
4. Jones & Laughlin Steel Corporation
6. Youngstown Sheet and Tube Company
6. National Steel Corporation..
7. Inland Steel Company
8. American Rolling Mills Company
9. Wheeling Steel Corporation
10. Crucible Steel Company of America
Totals for the Ten Companies
All Others
4, 281. 26
100%
1,717.02
656.68
329.50
198. 61
199. 34
179. 69
143. 36
132. 62
110. 37
103. 59
40%.
16%
8%
6%
5%
3^
3%
3%
2%
3. 771. (
509.68
12%
> Average of total invested capital at the beginning and at the end of the year for each individual company
listed as reported by Poors for 1937.
' Total invested capital as reported by the Annual Statistical report of the American Iron and Steel Insti-
tute for 1937.
Sources: Poors Annual; Statistical Report of American Iron and Steel Institute.
A second measure of relative size is employed in Table XVII; the percentage of
the total U. S. capacity in 1938 of pig iron, steel ingots, total hot rolled products
and certain selected hot rolled and further finished products of each of the ten
largest companies in each classification respectively. In the construction of this
table, proportionate capacities for companies which were not among the leading
ten for any given product are not recorded. It will be observed that the ten
largest companies measured by investment are likewise the ten largest in total
finished hot rolled capacity, with the exception of the Crucible Steel Company of
America. This company is primarily a manufacturer of high-speed and tool
steels, alloys and stainless steels, and has relatively little capacity in ordinary hot-
rolled products. It will be observed, further, that National Steel Corporation
with a considerably smaller total investment than Jones & Laughlin Steel Cor-
poration, has much larger finishing capacity than the latter although smaller pig
iron and ingot capacity. Similarly, Youngstown Sheet & Tube Company, with
a much greater investment than Inland Steel Company, has approximately the
same hot rolled finishing capacity but a much larger pig iron and ingot capacity.
It will be noted that there is a wide disparity in the relative importance of
particular companies for particular products.
Even the giant United States Steel Corporation, although first in all the
products shown except cold rolled sheets, in which it is third to National Steel
Corporation, is practically matched by other much smaller companies in par-
ticular products. In general, its dominance is more pronounced in hot-rolled
products, especially the heavier hot-rolled products, than in further finished
products Exceptions are wire and hot reduced tin and terne plate. In cold
rolled sheets, strip and tin and terne plate, its lead is small or non-existent.
Finally, to list the ten largest producers in some product's, it is necessary to include
some semi- and non-int«grated producers.
CONCENTRATION OF ECONOMIC POWER
10409
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10410
COxNTCENTKATION OF ECONOMIC POWKK
Ten companies or less accounted for the entire capacity in the United States
in three of the products listed, heavy shapes, heavy rails, and cold reduced tin
and terne plate. In some other products, not listed, the concentration is even
greater. For example, only three companies produce sheet piling. Although
the concentration of capacity for particular products varied from 66.2% to 100%
for the ten largest companies, it is noteworthy that with the exception of cold-
rolled strip, the range is not much wider if only the first five companies be aggre-
gated (i. e., 58% to 100%). Since this table includes all of the most important
rolled and further finished steel products (measured in tonnage produced) with
the exception of black plate for tinning, and pipe and tubes, it may be considered
typical of the concentration of capacity in the industry and of the leading posi-
tion of one or a few sellers. Strictly, of course, these data understate the impor-
tance of size, since size is a relative term and must be measured with respect to
the market for the product in question.
Perspective may be restored by one striking comparison. The manufacturing
capacity of United States Steel Corporation alone is approximately that of all
German producers combined. It is almost twice that of the entire British steel
industry and more than twice that of all French mills combined.
COST STRUCTURE OF THE INDUSTRY
Data are not available which permit anything like an adequate picture of the
cost structure in the iron and steel industry. Nevertheless, it is important to
bear in mind the bulk of overhead costs in tiie production of steel. Although we
have seen that the iron and steel industry occupied no better than third place in
total capital investment, it will be observed in Table XVIII that it has the slowest
capital turnover (i. e., the ratio of capital investment to estimated values of sales)
of the leading manufacturing industries. Thus steel capital investment was
equalled by gross income at the rate of once every 1.6 years in 1936 as compared
with 1.4 years in the petroleum industry and about every five months in food
manufacturing. As shown in the same table, the average capital turnover in the
steel industry from 1909 through 1938 was 2.1 years, ranging from 1.3 years in
1918 to 5.5 years in 1932. In other words, at its worst the ratio of investment to
gross income in steel approximates that in the public utilities, the traditional
examples of heavy capital use.
Table XVIII. — Capital turnover in the steel industry ' and in six other leading
manufacturing industries - in 1936
Year
Industry-
Stock.
Bonded Debt
and Surplus
(000 Omitted)
Estimated
Value of
Sales (000
Omitted)
Rate
1909-1938 A verage
Iron and Steel . .
4, 453, 248
4,887,112
4, 962, 261
4, 125, 654
5, 554, 722
4, 535, 678
3, 424, 186
2, 903, 287
2, 461, 969
2,120,095
3,811,431
895, 781
2, 572, 933
4, 044, 089
9, 945, 168
3, 614, 106
4, 290, 749
4.640.931
Yeart
2.1
1918
Iron and Steel
1.3
1932 . .. .
Iron and Steel .
5.5
1936
Iron and Steel
1.6
Petroleum . . . ..
1.4
Food (Manufacturing;) _
0.4
Chem. <5r Allied Products
0.9
Textiles
0.7
Motor Vehicles -
0.5
Tobaoco
897, 458 1. 188. 954
0.7
• Source: American Iron and Steel Institute.
» Bureau of Internal Revenue Report, Statistics of Income (Vol. II) for 1936.
Much capital investment is tied up in ore and coal reserves by integrated com-
panies, one of the reasons for the disproportionate investment of these companies
as contrasted with semi- and nonintegrated firms. But the major cause is un-
doubtedly discovered in the enormous cost and capacity of efficient units of capital
equipment required in the large-scale manufacture of iron and steel products.
Thus, the cost of a modern blast furnace approximates five million dollars, open
hearth furnaces may require an investment of upwards of six hundred thousand
dollars, while a continuous strip or sheet mill will aggregate upwards of ten
million dollars to almost double that sum. In part because of reduced operating
cost for output equivalent to their normal capacity and in part becau.se of the
CONCENTIIATION OF ECONOMIC POWEH
10411
quality of the product which was required b}'^ the automobile industry, the out-
standing change in iron and steel equipment during the last decade has been the
installation of continuous mills for finished hot rolled products. The record of
such installations to Jai.uary 1938 is shown in Table XIX. The large annual
capacity and the great width of most of the latter mills is especially notable. To
continuous hot mills in recent years have been added continuous cold reduction
mills, especially for strip and black plate.
Overhead costs in the steel industry, then, may be considered in two categories.
First, there are the usual financial overheads which are associated with the total
investment of the entire corporation. Second, and perhaps more significant, are
the technical overheads associated with the operation of individual furnaces or
mills. Since the production process is continuous and the size of individual units
is very large, a considerable amount of overhead is invested in the process once
it is started and interruptions to that process become excessively costly.. The
exorbitant cost of roll change, for example, on a continuous mill, may render it
profitable to serve a relatively wide and variable distribution area, even at
increased freight absorption, if by so doing it is possible to accumulate a more
economical tonnage of a given specification.
These considerations weigh larger with the integrated than with the non-
integrated producers, not merely because of the larger investment of the former
but also because the size of the latter's units of equipment is a mere fraction of
that of the integrated firm. The average nonintegrated firm must put up with a
hand rolling mill or some other compromise with the continuous unit. Its costs,
therefore, are more flexible although they are likely to be larger at any rate of oper-
ations favorable to the continuous unit. The dominating influence of the rate of
operations on net profits in the industry even in the absence of price change is too
obvious to be stressed. It is evidence of the weight of overhead costs.
Table XIX. — Continuous Sheet and Wide Strip Mills Installed or Under
Construction in the United States With ApTproximate Capacities, January 19S8
Name of Company and Location of Mill
Year
Started
Size, In.
Annual
Capacity
Gross Tons
American Rolling Mill Co., Ashland, Ky._ -
American RoUina- Mill Co., Butler Pa..
Republic Steel Corp., Warren, Ohio
Weirton Steel Co., Weirton, W. Va.....
Carnegie-Illinois Steel Corp., Gary, Ind
American Rolling Mill Co., Middletown, Ohio..
Wheeling Steel Corp., Steubenvilie, Ohio _.
Carnegie-niinois Steel Corp.,' South Chicago, 111
Great Lakes Steel Corp., Ecorse, Mich
Otis Steel Co., Cleveland
Inland Steel Co., Indiana Harbor, Ind.._
Allef;heny Steel Co., Brackenridge, Pa
Youngsto^-n Sheet & Tub? Co.,' Indiana Harbor, Ind.
Youngstown Sheet & Tube Co., Campbell, Ohio
Carnegie-Dlinois Steel Co., Gary, Ind
Ford Moto- Co., Detroit
Carnegie-niinois Steel Corp., MacDonald, Ohio
Bethlehem Steel Co., Lackawanna, N. Y
Carnegie-niinois Steel Corp., Gary, Ind...
Great Lakes Steel Corp., Ecorse, Mich _
Granite City Steel Co., Granite City, 111
Carnegie-Illinois Steel Corp.,' Ilomestcnd, Pa
Jones & Laughlin Steel Corp., Pittsburgh
Bethlehem Steel Corp., Sparrows Poii.*. Md
Tennessee Coal, Iron & Railroad Co., Biimingham
Republic Steel Corp., Cleveland -.
Carnegie-Illinois Steel Corp., Pittsburgh, Irvin Wks...
1926
1926
1927
1927
1928
1929
1929
1931
1930
1932
1932
1932
1934
1935
1935
1935
1935
1936
1936
1936
1936
1936
1936
1937
1937
1937
1937
58
48
36
54
42
80
60
96
38
72
79
38
72
79
38
56
43
79
80
96
90
100
96
56
48
98
80
432, 000
315, 000
302, 000
420, 000
400, 000
372,-OOiO
540, 000
720, 000
400, 000
375, 000
600, 000
275, 000
214, 000
600, 000
270, 000
500, 000
300. 000
600, 000
720, 000
720, 000
375. 000
729, 000
720, 000
600, 000
300, 000
720, 000
600, 000
13,119,000
1 These mills are continuous and semi-continuous plate mills, but are capable of rolling heavier gage sheets.
Source: The Iron Age, January 6, 1938, p. 388.
6. Pricing op Iron and Steel
The Basing Point System of Pricing.— Characteristically, iron and steel prod-
ucts today are priced on a multiple basing-point system.'' It is beyond the scope
of this pamphlet to explain the origin, describe the development, analyze the effects
< There are exceptions, the most important being rails and other steel products sold to railroads for their
own use. These are oriced f. o. b. the mill or the nearest freight station on the Ime of the purchaser. * or
some products in some areas, arbitrary dehvered prices are established. Detroit is an outstanding example.
10412 CONCENTRATION OF ECONOMIC POWER
of or state the problems associated with the basing-point method of pricing. As
a method, it is not unique to the steel industry. Suffice it here to describe suc-
cinctly its operation and the recent changes which have been made in it.
Essentially a basing-point system of pricing is a simplified method of quoting
a delivered price at any potential destination. That is, the destination price is
the aggregate of the basing-point price and the freight from basing-point irre-
spective of source of supply. So long as the same basing-point, the same basing-
point price, and the same freight rates from basing point to destination are em-
ployed, ignoring "extras" ^ and terms of sale, the price at any given destination
will be identical irrespective of the location of the mill or the actual transportation
cost. If, then, there are a limited number of basing points for any given product,
known prices at those points, and a book of freight rates from such points to
various destinations available, the computation of the deliered price at any given
point is within the powers erf any office boy. Whether such a simplification of
pricing procedure, together with the publication by a central body of a freight-
rate book for the use of the industry significantly affects "competition" is not a
matter to be considered in. this descriptive statement.
From the point of view of the ease in price quoting and from that of the effects
of the system, the number of basing points is extremely important. For example,
if a mill" is not located at a basing point, it is apparent that the freight from basing
point to customer location (the amount of the addition to base price which deter-
mines the delivered price) will generally differ from the freight from mill to cus-
tomer location (the actual freight which is either prepaid or allowed to the cus-
tomer). Therefore, the net receipts at the mill (the "mill-net") will vary on each
sale in accordance with the location of the destination relative to that of the mill
and the basing point. These nets will be at a maximum for destinations in the
immediate vicinity of the mill and freight-wise away from both the mill and the
basing point (with qualifications for cheap alternative methods of transport and
the vagaries of the freight-rate structure). As the number of basing points in-
creases, however, especially when identical prices are quoted at all bases, the area
within which maximum mill-nets ace enjoyed is reduced. On the other hand, that
within which there is a reduction in the mill-net, by reason of an excess of actual
freight charges from mill to destination over the freight from the governing base,*"
is increased.
Number of Basing Points. — The trend in the industry has been toward an in-
crease in the number of basing points. This may be attributed to the growth
of new centers of production, to the bargaining power of important consumers
and consuming industries, or to pressure of opinion emanating from the decision
of the Federal Trade Commission in 1924 condemning the old "Pittsburgh Plus" —
single basing-point-system. In view of the multiplicity of products in the industry
and the fact that a given basing point may be a base for only one product (and
even for only one grade of a product) while another is a base for twenty or thirty,
there is little significance in the total number of basing points at any given time.
In other words, one is concerned in the steel industry not with one basing-point
Bystem but with a series of systems, the adequacy and the significance of any one
of which must be analyzed with relation to the characteristics of production and
of the market for tn^t product. For example, it would be fallacious to judge the
adequacy of the number of basing points for pig iron without first distinguishing
between capacity for sale (primarily the merchant furnace) and capacity for mak-
er's own use; and clearly, this problem has little to do with the effect of basing
points for steel pipe.
Until June 1938 the basing-point system in the steel industry retained substan-
tially all the characteristics with which it had emerged from the period under the
Code. A few changes had been made — the most important being the recognition
of Granite City, Illinois as a base for hot and cold rolled sheets, black plate and
tin plate when the Granite City Steel Company initiated quotations for such prod-
ucts based on this point during the second quarter of 1937. But the arbitrary
differentials, applicable to areas such as Detroit for certain products, were retained
along with the traditional scheme of price differentials over Pittsburgh at other
basing points. On June 24, 1938, following exceptional weakness in the prices of
many steel products, the United States Steel Corporation initiated a fundamental
• The "extras" comprise additions to or subtractions from the base price for specification (gauge, width,
length, chefhical composition, etc.) or quantities other than those for which the base price is quoted.
Schedules are issued by the steel companies from time to time. Although the published extras tend tp be
uniform for all companies, they are a fertile source of price conce'"5ions.
6 The "governing base" is that from which the aggregate a' ase price plus freight to destination is
lowest.
CONCENTRATION OP ECONOMIC POWER
10413
change by announcing not only a substantial price reduction at Pittsburgh, but
also identical prices at Chicago and Birmingham, In the price confusion which
followed this elimination of the customary inter-basing point price differentials,
many companies began the quotation of base prices, especially for flat-rolled prod-
ucts like sheet, strip and plates, at their own mills. Th|e net result was a sub-
stantial increase in the number of basing points and of base prices which are
identical with those quoted at Pittsburgh.
The net change since the Code period in the number of basing points for the
more important commbdities is shown in Table XX. With the changes as indi-
cated in the Iron Age, existing basing points as listed by an important steel com-
pany are also compared. Discrepancies between the Iron Age and the steel com-
pany report, while it may reflect no more than partial coverage by one or the other
source, suggests that what is and what is not a basing point is largely a matter
of managerial sales policy. While the number of. basing points, where changed
at all, has usually been increased, this is not always the case. In the case of plain
wire, for example, there has been from time to time a substantial reduction in the
number of bases.
Since new basing points were established at the same time that price differentials
were abandoned in June 1938, the amount of the price reductions for the third
quart.er of that year differed substantially in various sections of the country.
This resulted from the pre-existing differentials in the case of old basing points,
the location of the newly established bases relative to pre-existing basing points
for particular products and the amount of the differential over Pittsburgh prices
actually retained. This change in price relationships is indicated in Table XXI
for an extended list of products. In general, the net reduction of price was lowest
at Pittsburgh although it was equalled at those basing points which retained the
pre-existing relation with Pittsburgh. Exceptions to this generalization were
found in plates, sheet piling and soft steel bars; in these instances a smaller net
change occurred at Pacific Coast Ports, thereby augmenting the traditional differ-
ential over Pittsburgh. In those products for which they were basing points,
differentials were retained at Pacific Ports, Gulf Ports, Granite City, Worcester,
and Duluth. In addition, Chicago continued a differential on cold rolled strip.
Differentials were unaffected for basic pig iron, the price reduction being equal
at all bases.
Table XX. — Number of Basing Points for Selected Steel Products, 1935 and 1939
Product
Sheet and tin-plate bars
Plates .
Heavy structural shapes
Hot rolled sheets
Hot rolled strip _ _ _
Cold rolled sheets
Cold rolled strip
Wire rods
Plain wire
Tin-plate
Tin mill black plate
Merchant bars
Skelp
Pipe-std., line, and oil country
Pig iron
May 1939
No. of bas-
No. of bas-
ing points
ing points
listed by
listed by
a major
"Iron Age"
steel
producer
7
7
10
10
7
7
10
10
16
7
8
8
5
h
'6
9
34
7
13
4
4
4
8
»8
«5
6
3
3
'18
21
During
N. R. A.,
No. of bas-
ing points
1 Pacific Ports not included in "Iron Age."
' Duluth, Galveston and Youngstown not included in "Iron Age."
3 Duluth, Pacific Ports and Worcester not included in "Iron Age." , » , ^. , t j
< Includes 6 separate Oulf Ports. Four bases (Anderson, Ind., Mobile, Ala., Lake Charles, La., and
Corpus Christi, Texas) are for merchant wire only.
' Listed by this company as bars and small shapes.
' Buffalo not included in "Iron Age."
' Hamilton, O., Jackson, O., and Sharpsville, Pa., not included in "Iron Age.
Note.— Chicago and Gary, though sometimes listed separately are here counted as 1 b^ing point.
Gulf and Pacific Ports are counted as 1 basing point each except for plain wire durmg N. K. A. (bee
note 4 above.)
10414
CONCENTRATION OF ECONOMIC POWER
Table XXI. — Base Prices of Selected Steel Products
[ Dollars per 100 lbs.)
Item
Price
May,
1938
Plates:
Pittsburgh
Chicago --
Gary
Birmingham
Sparrows Point
Coatesville
Youngstown.
Cleveland
Claymont '. .
Gulf ports. _..
Pacific ports _.
Hot Rolled Sheets:
Pittsburgh..
Gary
Birmingham
Pacific ports
Buffalo
Sparrows Point
Cleveland
Youngstown .
Middle! own
Granite City
Cold Rolled Sheets, 20 ga.:
Pittsburgh
Chicago-Gary
Birmingham .". . .
Buffalo
Youngstown
Cleveland
Middleto wn
Granite Cjty...
Pacific ports
Galvanized Sheets:
Pittsburgh.
Chicaeo-Gary
Sparrows Point
Buffalo
Middletown
Youngstown
Birmingham
Granite City
Pacific ports _
Sheet Piling:
Pittsburgh..
Cbicaeo
Buitalo
Gulf ports.
Pacific ports...
Hot Rolled Strip:
Pittsburgh.
Chicago
Cleveland
Middletown
Youngstown
Birmingham
Granite City
Cold Rolled Strip:
Pittsburgh
Youngstown
Cleveland
Worcester
Chicago..
Special Coated Mfg. Terne:
Pittsburgh
Gary
Granite City
Wire Rods:
Pittsburgh...
Chicago
Youngstown.^
Cleveland
Birmingham...
Worcester..
San Francisco
Anderson.^
" Calculated delivered price.
2.25
2.30
2.30
2.40
2.35
2.35
1 2. 3725
' 2.45
1 2. 50
2.65
2.80
2.40
2.50
2.55
2.95
12.66
' 2,70
12.60
1 2. 5223
12.68
2.60
3.45
3.55
3.60
1 3.71
1 3. 5725
13.65
13.73
3.65
4.00
3.80
3.90
14.10
1 4.06
1 4. (18
3. 9225
3.95
4.00
4.40
3.60
2.70
2.70
3. 05
3.05
2.40
2.50
' 2. 60
> 2.68
1 2. 5225
2.55
2.60
3.20
1 3. 3225
3.20
3.40
3.49
4.65
4.75
4.85
2.10
2.14
2.14
2.10
2.23
2.19
2.50
2.14
Price
July,
1938
Differ-
ence
2.10
.15
2.10
.20
2.10
.20
2.10
.30
2.10
.25
2.10
.25
2.10
.2725
2.10
.35
2.10
.40
2.45
.20
2.70
.10
2.15
.25
2.15
.35
2.15
.40
2.75
.20
2.15
.51
2.15
.55
2.15
.45
•2. 15
.S725
2.15
.53
2.25
.35
3.20
.25
3.20
.35
3.20
.40
3.20
.51
3.20
.3725
3.20
.45
3.20
.53
3.30
.35 ■
3.80
.20
3.50
.30
3.50
.40
.3.50
.60
3.50
.56
3.50
.58
3.50
.4225
3.50
.45
3.60
.40
4.10
.30
2.40
.20
2.40
.30
2.40
.30
2.85
.20
2.90
.15
2.15
.25
2.16
.35
2.15
.45
2.15
.53
2.15
.3725
2.15
. «0
2.25
.35
2.95
.25
2.95
.3725
2.95
.25
3.15
. 25
3.05
.44
4.65
.00
4.65
.10
4.85
.00
1.92
.18
1.92
.22
1.92
.22
1.92
.18
1.92
.31
2.01
.18
2.32
.18
12.14
.00
Difl. asa
Percent
of May
price
-6.66%
-8.70
-8.70
-12.50
-10.64
-10.64
-11.49
-14.29
-16.00
-7.54
-3.57
-10.42
-14.00
-15.69
-6.78
-19. 17
-20.37
-17.31
-14.77
-19.78
-13.46
-7.25
-9. 86
-11.11
-13.75
-10.43
-12.33
-14.21
-9. 59
-6.00
-7.89
-10.20
-14.63
-13.79
-14.22
-10.77
-11.39
-10.00
-6.82
-7.69
-11.11
-11.11
-6. 56
-4.92
-10.42
-14.00
-17.31
-19. 78
-14.77
-15.69
-13.46
-7.81
-11.21
-7.81
-7.35
-12.61
.00
-2.064
0.0
-8.57
-10. 28
-10. 28
-8.57
-13.90
-8.22
-7.20
.00
CONCENTRATION OF ECONOMIC POWER
10415
Table XXI. — Base Prices of Selected Steel Products — Continued
[Dollars per 100 lbs.]
Ttpm
Billets, Blooms & Slabs:
Pittsburgh. _
Chicago-Gary.
Cleveland.
Youngstown
Buffalo
Birmingham
Sparrows Point
Skelp:
Pittsburgh
C hi cago
Youngstown
Buffalo
Coatesville
Sparrows Point
Soft Steel Bars:
Pittsburgh
Chicago-Gary
Youngstown
Cleveland
Duluth
Buffalo
Birmingham
Gulf ports
Pacific ports .'
Sheet Bars:
Pittsburgh
Chicago..
Cleveland _ . .
Youngstown
Buffalo ...
Canton
Sparrows Point
Rail Steel Re-enforcing Bars:
Pittsburgh .
Chicago-G ary
Buffalo
Sparrows Point _
Cleveland ._
Youngstown
Birmingham
Gulf ports
Pacific ports
Billet Steel Reinforcing Bars:
Pittsburgh
Chicago-Gary
Birmingham.
Buffalo ..
Youngstown .■
Cleveland
Sparrows Point.
Gulf ports •.
Pacific ports..
Structural Shapes:
Pittsburgh
Chicago..
Buffalo
Bethlehem _-. . .
Birmingham
Gulf ports.
Pacific ports
Bright Wire to Mfg. Trade:
Pittsburgh
Chicago..
Cleveland
Birmingham
Mobile
New Orleans
Lake Charles
Barbed Wire, Galvanized to Trade:
Pittsburgh.
Chicago.
Cleveland ...
Birmingham
Mobile
New Orleans
Lake Charles
Price
May,
1938
Price
July.
1938
Differ-
ence
Dlff.asa
Percent
of May
price
1.65
1.52
.13
-7.88%
1.65
1.52
.13
-7.88
1.65
1.52
.13
-7.88
1.65
1.52
.13
-7.88
1.65
1.52
.13
-7.88
1.65
1.52
.13
-7.88
1.95
1.52
.43
-22.05
2.10
1.90
.20
-9. 52
2.10
1.90
.20
-9.52
2.10
1.90
.20
-9. 52
2.10
1.90
.20
-9. 52
2.10
1.90
.20
-9. 52
2.10
1.90
.20
-9.52
2.45
2.25
.20
■ -8.16
2.50
2.25
.25
-10.00
2.50
2.25
.25
-10.00
2.50
2:25
.25
-10.00
2.60
2.35
.25
-9.62
2.55
2.25
.30
-11.76
2.60
2.25
.35
-13 46
2.85
2.60
.25
-8.77
3.00
2.85
.15
-5.00
1.65
1.52
.13
-7.88
1.65
1.52
.13
-7.88
1.65
1.52
.13
-7.88
1.65
1.52
.13
. -7. 88
1.65
1.52
.13
-7.88.
1.65
1.52
.13
-7.88
1.65
1.52
.13
-7.88
2.30
1.90
.40
-17.39
2.35
1.90
.45
-19.15
2.35.
1.90
.45
-19.15
12.60
1.90
.70
-26. 92
2.35
1.90
.45
-19.15
2.35
1.90
.45
-19.15
■ 2.35
1.90
.45
-19. 15
2,70
2.25
.45
-16.67
2.80
2.35
.45
-16.07
2.45
2.05
.40
-16.33
2.50
2.05
.45
-18.00
2.50
2.05
.45
-18.00
2.50
2.05
.45
-18.00
2.50
2.05
.45
-18.00
2.50
2.05
.45
-18.00
1 2.75
2.05
.70
-25. 45
2.85
2.40
.45
-15.79
2.95
2.50
.45
-15.25
2.25
2.10
.15
-6.66
2.30
2.10
.20
-8.69
2.35
2.10
.25
-10.64
2.35
2.10
.25
-10.64
2.40
2.10
.30
-12.5
2.65
2.45
.20
-7. 55
2.80
2.70
.10
-3.57
2.90
2.60
.30
-10.31
2.95
2.60
.35
-11.86
2.90
2.60
.30
-10.34
3.05
2.60
.45
-14.75
"3.36
2.80
.56
-16. 67
13.42
2.85
.57
-16.67
s 3.50
2.90
.60
-17. 14
3.40
3.20
.20
-5.88
3.45
3.20
.25
-7.23
3.40
3.20
.20
-5.88
3.55
3.20
.35
-9. 86
3.70
3.40
.30
-8.11
3.70
3.45
.25
-6. 76
3.70
3.50
.20
—V 41
1 Calculated delivered Price.
« Rail- Water via Pittsbureh.'f
124491 — 40 — pt. 18-
10416
CONCENTRATION OF ECONOMIC POWER
Table XXI. — Base Prices of Selected Steel Products — Continued
[Dollars per 100 lbs.]
Item
Price
May,
1938
Price
July,
1938
Differ-
enc
Diff. as a
Percent
of May
price
Galvanized Fence Wire to Trade
Pittsburgh-
Chicago
Cleveland
Birmingham
Mobile
New Orleans
Lake Charles..
Standard Wire Nails to Trade:
Pittsburgh.
Chicago.
Cleveland...
Birmingham..
Mobile
New Orleans..
Lake Charles
Galvanized Wire to Mfg. Trade:
Pittsburgh
Chicago
Cleveland
Birmingham
Mobile ,
New Orleans
Lake Charles
Single Loop Bale Ties:
PittsbufgbcT^
Chicago.-,.
Cleveland-
Birmingham
Mobile
New prleans
Lake Charles
Basic Pig Iron:
Bethlehem
Birdsboro-
Swedeland
Steelton
Sparrows Point
Everett
Buffalo
Neville Island _..
Erie--
To'edo
Chicago
Youngstown
Birmingham
3.55
3.60
3.55
3.70
14.01
14.07
»4. 15
2.75
2.80
2.75
2.90
3.05
3.05
3.05
2.95
3.00
2.95
3.10
'3.41
'3.47
H3.55
.63
.68
.63
.78
«.87
1.93
1 » 1.16
1.049
1.049
1.049
1.049
1.049
1.127
1.027
1.049
1.049
1.049
1.049
1.049
0.848
3.35
3.35
3.35
3.35
3.60
3.65
3.70
2.45
2.45
2.45
2.45
2.65
2.70
2.75
3.15
3.15
3.15
3.15
3.35
3.40
3.45
.56
.56
.56
.56
.76
.81
0.915
0.915
0.915
0.915
0.915
0.949
0.848
0.871
0.871
0.871
0.871
0.871
0.670
.2»-
.25
.20
.35
.41
.42
.45
.30
.35
.30
.45
.40
.35
.30
.20
.15
.20
.05
.06
.07
.10
.07
.12
.07
.22
.11
.12
.30
.13
.13
.13
.13
.13
.18
.18
.18
.18
.18
.18
.18
.18
-5.63%
-6.94
-5.63
-9.46
-10.22
-10.32
-10.84
-10.91
-12.5
-10.91
-15.52
-13.11
-11.48
-9.84
6.77
5.00
6.78
1.61
-1.76
-2.02
-2.82
-11.11
-17.65
-11.11
-28.21
-12.64
-12.90
-25. 86
-12.39
-12.39
-12.39
-12.39
-12.39
-15.97
-17. 53
-17. 16
-17.16
-17.16
-17.16
--17.16
-21.22
' Calculated delivered price.
2 Rail- Water via Pittsburh.
Source: The Iron Age.
Although the basic method of pricing remained unchanged after June 1938, it is
apparent that the relative mill-net prices received by steel companies as well as
the relative competitive position of consuming industries was profoundly altered.
An examination of these effects is beyond the scope of this pamphlet.
7. Performance Record
That the productive activity of the steel industry is subject to considerably
larger cyclical fluctuation than is business as a whole is demonstrated by Chart
VI. The fact that much of the iron and steel produced finds its way into the
heavy capital goods industries accentuates this tendency. During periods of
depression when little new capital is invested there is small demand for the heavy
tonnage steels. On the other hand, some few steel products, such as tin plate,
which are used in consumption goods industries of a more stable nature are not
affected as severely. The rate of utilization of steel-making capacity since 1929,
shown in the table below, indicates this wide variation.
CONCENTRATION OF ECONOMIC POWER
10417
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10418
CONCENTKATJON OF KCOxNOMIG POWER
Along with the wide fluctuations in production it is not surprising to find laree
variations in the number of workers employed. The latter, however, are not as
great as the former. This is to be expected. Continuous rolling mills and other
automatic rolling equipment now indispensable to the large producer of steel
require little additional labor to operate at increasing rates of production The
older type of hand-operated machinery, involving a much smaller investment, on
the other hand, makes necessary a considerably more flexible labor supply The
average number of employees in blast furnaces, steel works and rolling mills in
the United States for tne last ten years, as reported by the Bureau of Labor
statistics, is shovrn below:
Table XXII.— Steel Ingot Production as a Percent of Capacity, 1929-19S8
Year "
1929
1930
1931
1932.
1933-
Steel Ingot
Production
as a Percent
of Capacity
Percent
88.5
62.5
37.6
19.5
33.1
Year
1934
1935
1936
1937
19.38
Steel Ingot
Production
as a Perqent
of Capacity
Percent
37.4
48.7
68.4
72.5
39.6
Source: Statistical Report of the American Iron and Steel Institute.
Table XXIII.-
' Average Number cf Employees in Blast Furnaces, Steel Works and
Rolling Mills, 1928-1938
Year
Average
Number of
employees
(Average
Mid-Month
Count)
Year
Average
Number of
employees
CAverape
Mid-Month
Count)
1929 .
19;i0._
19.S1....
419,360
3G7, 098
278, 079
234. 899
288, 510
1934....
1935 .. "■
1936
350, 114
374, 125
428,481
487, 714
356,311
1933 "-------.m^^^ii^i^^ii;^
1937
1938...
Source: Bureauof Labor Statistics.
Chart VII shows the indexes of production, employment and payroll by months
rom January, 1923 to date. It will be noted that the production and payroll
indexes correspond somewhat more closely than do those of production and
f,!?^ I^^^'JLo or^.^°^ P°^"* ^^ i"Sot production for the period was in July 1932
cf. !^ ^^}?^^~^^ '''^^'' reached 23. In March of 1937 this production index
Til noo J , employment index using the same base was 54 at its lowest in
July iyci2 and reached the highest point thereafter in May of 1937 at 127. Whereas
tne number of persons employed fluctuates over a smaller range than changes in
production, employees' earnings correspond much more closely in magnitude df
nuctuation. W hen business conditions are depressed money wage reduction may
De accompanied by shortened hours and staggered work schedules. Average
w-eekly earnings, average hours worked per week and average hourly earnings are
Shown below by years from 1932 to date in blast furnaces, steel works and rolling
OONCENTltATION OF ECONOMIC POWEFl
10419
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2
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IE
>-
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S
LxJ
10420
CONCENTRATION OF ECONOMIC POWER
Table XXIV. — Average weekly earnings, average hours worked per week, and average
hourly earnings in blast furnaces, steel works, and rolling mills, 1932-1938
Year
Average
Weekly
Earnings
Average
hours
worked
per week
Average
hourly
earnings
1932
13.91
17.27
19.25
23.12
27.37
31.46
23.78
26.1
32.5
30.5
34.9
40.9
38.7
28.7
52 7
1933
53 1
1934
63 2
1935...
66 4
1936
67 1
1937
81 8
1938
83 5
Source: U. S. Bureau of Labor Statistics.
CHART VIII
FINISHED STEEL COMPOSITE PRICE INDEX
BY MONTHS. 1926-1939 INCLUSIVE
IIU
1
"
'
\
L
y\^
r
V
^^
V
AX
\
n
J
V
i\_.
\S
j
80
""^
lT^
^/
J
V
70
1926
1927
1928
1929
1930
1931
1932
1933
1934
1935
1936
1937
1938
1939
SOURCE. •
THE IRON
AGE"
PR
EPAREO 61
THE OEP
ARTMENT C
F JUSTICE
PRICES
In contrast to production, employment and payrolls, the prices of steel products
are relatively rigid. They exhibit only small declines in periods of depression.
The composite pi ice index of finished steel products (1926—100) shown in Chart
VIII indicates that the level of prices was only some 15% lower in 1932 than it
was in 1929. In the table below yearly average wholesale price indexes of "all
commodities," "semi-finished manufactured articles," and "finished products" as
classified by the Bureau of Labor Statistics are compared with the "finished steel
composite" as defined by the Iron Age.^ Unlike the other indexes, the steel com-
posite is an unweighted average of published prices at Pittsburgh. It is therefore
less satisfactory as an indication of actual price changes. Changes in the relative
importance of the constituent items are not reflected in the index; actual price
concessions from nominal base prices are not revealed; and fundamental changes
in the cost of steel such as the elimination of inter-basing point price difi"erentials
and the increase in the number of basing points in the summer of 1938 are not
shown.
' Of the items in the "finished steel composite," bars, plates, black sheets, and hot rolled strip are classified
by the Bureau of Labor Statistics as "semi-flnisbed manufactured articles" because, although they are a
finished product of steel rollinc mills, they are further fabricated by other industries. Shapes, plain wire,
black plate, and open hearth rails, being used in that state, are classified as "finished" by the Bureau of Labor
Statistics.
CONCENTRATION OF ECONOMIC POWER
Table XXV. — Yearly average price indices
10421
Price Index 1926=100
All Com-
modities >
Semi-
Finished
Mfg.
Articles '
Finished
Products '
Finished
Steel
Composite *
1926
100.0
96.3
64.8
66.9
80.8
86.3
78.6
100.0
93.9
59.3
65.4
75.9
85.3
75.4
100.0
94.5
70.3
70.6
82.0
87.2
82.2
100 0
1929
95 4
1932....
82 1
1933
81 2
1938 1
89 7
1937 .•
106 4
1938
103 4
' Source: Bureau of Labor Statistics.
• Source: Compiled from "Iron Age."
EARNINGS •
An industry such as the steel industry, with huge sums invested in capital equip-
ment, must depend upon mass output to operate profitably. 'Consequently one
would expect to find a rather high correlation between earnings and rate of output.
The highest yearly rate of utilization of ingot capacity in the steel industry in the
period since 1910 was 93.4% of capacity in 1916. Net income before dividends
and earnings as a per cent of total capital were also highest during this year at
16.5% This, of course, reflected war time demand and prices. Similarly, in 1932,
when the rate of utilization was at its lowest ebb, losses in the industry were
greatest.
Table XXVI compares rate of earnings and rate of utilization of ingot capacity
from 1909 to 1938. Obviously many other factors than the utilization rate play
an important part in determining the profitability of steel operations. At no time
in the past thirty years, however, has the earning rate for the industry as a whole
been as high as 4 per cent when the rate of utilization has been below 60% and
the only years during which the rate of earnings has exceeded 10 per cent have
been those when the rate of utilization was over 90 percent. The average rate
of earnings of the industry by years since 1909 is pictured in Chart IX.
In interpreting the data presented in Table XXVI and Chart IX, three im-
portant qualifications should be borne in mind. First, the basic figures used are
aggregates reported by the American Iron and Steel Institute. Second, net earn-
ings may be grossly understated because, as reported, they are net after all taxes,
including federal income taxes, and taxes were not reported separately. Third,
capital investment, as presented herein, is less than total investment as reported
by the Institute because the latter included reserves in total investment. It is
possible, of course, that reserves might be in the nature of "surplus reserves" and
properly a part of investment. But as accrued liabilities not yet paid they are
no part of capital investment. Since the latter is the more probable character of
reserves, they have been excluded.
» Earnings rate which is discussed here is the ratio of net Income before interest and dividends to capital
stock, bonded debt and surplus.
10422
CONCENTKATION OF ECONOMIC POWER
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CONCENTRATION OF ECONOMIC POWER
1042:
Table XXVI. — Rate of Earnings Compared to Utilization of Steel Ingot Capacity
by Years, 1909-1938
Year
Net income
before interest
and dividends
as a per cent of
capital stock,
bonded debt
and surplus
Ingot produc-
tion as a per
cent of
capacity
Year
Net income,
before interesl
and dividends
as a per cent of
capital stock,
bonded debt
and surplus
Ingot produc-
tion as a per
cent of
capacity
1909
6.0
6.7
S.0
6.1
6.9
3.3
6.9
16.5
13.9
9.0
5.7
7.2
1.6
3.0
6.5
70.6
74.1
65.8
82.2
80.3
59.2
77.9
93.4
90.8
84.6
63.6
75.7
34.5
60.9
76.6
1924
5.0
5.6
6.8
5.3
6.4
9.4
4.5
0.3
-2.9
-0.5
0.5
2.3
4.6
6.3
0.5
63.8
1910
1926
74.2
1911
1926
83.5
1912
1927
74^9
1913
1928
83.9
1914 .
1929
88.5
1915
1930
62.6
1916
1931
37.6
1917
1932 -
19.5
1918
1933
33. 1
1919 .
1934
37.4
1920
1935
48,7
1921
1936.
68.4
1922
1937
72.5
1923
1938 .
39.6
Source— Compiled from Iron and Steel Institute Data.
The only check on the accuracy of the data as presented here is provided by the
study of the Federal Trade Commission, War-Time Profits and Cost of the Steel
Industry, for the years 1915 through 1918. A comparison of the Commission's
findings with the information supplied by the Institute in those years is shown in
Table XXVII. It will be observed that in every year investment as compiled
from Institute figures exceeded that reported by the Federal Trade Commission
by substantial sums varying from 1,096 million dollars in 1916 to 797 millions in
1918. True the latter reported on only 112 companies in 1915, 124 in 1916 and
131 in each of the other two years but the explanation that the difference is
accounted for by variations in coverage is qualified by the fact that earnings, even
adjusted to eliminate federal income and excess profits taxes, as reported by the
Commission, exceed those reported by the Institute by amounts varying from
3.361 millions of dollars in 1917 to 57.698 millions in 1916. It is apparent that the
Institute figures cannot be assumed to be accurate in any given year and must
be regarded as indicative rather of the trend of earnings than of their magnitude.
Federal income and excess profits taxes were especially heavy during the
highly profitable period of the war. A comparison of the rate of earnings reported
by the Federal Trade Commission for these years with that on the adjusted
basis indicates the relative importance of this item which is excluded from the
Institute figures. With the qualification, then, that the data probably under-
states the rate of earnings, information available indicate that the Iron and Steel
Industry earned an average return of 5.20% on capital investment during the
entire period 1909 through 1938 or an average of only 5.47% in the pre-war years
through 1914, 11.69% during the war boom, 5.73% in the post war period 1919
through 1929, and only 1.65% during the years since the 1929 slump.' This
exceptionally small return was earned despite an almost continuous reduction in
total capital investment from a peak for. the entire 30 year period of approximately
5.322 billion dollars in 1929 to 4.024 billions in 1938.
• If reserves were included in capital investment, these ratios vrould be slightly lowered by amounts less
than 3-10th,of 1%. That is, the respective ratios in the order given above would become 5.02, 5.40, 11.35,
5.47 and 1.60 per cent.
10424
CONCENTRATION OF ECONOMIC POWER
Table XXVII. — Annual Capital Investment, Net Earnings, and Ratio of Earnings
to Capital Investment in the Iron and Steel Industry, 1915-1918 Inclusive
[Investment and Earnings in thousands of dollars]
Capital investment >
Earnings
Rate of Earnings
Year
Amer. Iron
and Steel
Inst.
Fed. Tr.
Commis.
Amer.
Iron » and
Steel Inst.
Fed. Tr.
Commis.
(Adjust-
ed) a
Fed. Tr.
Commis.
(Report-
ed)'
Amer. Iron
and Steel
Inst.
Fed. Tr.
Commis.
(Adjust-
ed)*
Fed. Tr.
Commis.
(Report-
ed) «
1916...
1916...
IMtr:-..
1918...
3,668,012
4,076,762
4,635,271
4,887,112
2,760,008
2, 979, 661
3, 610, 208
4,089,884
246,329
673, 856
646,273
ill, 302
200,344
616, 158
642, 912
406,821
203, 154
634, 403
1,034,892
819, 635
6.9
16.5
13.9
9.0
7.3
20.7
17.8
9.9
7.4
21.3
28.7
20.0
> Includes Common and Preferred Stock, Bonded Debt and Surplus.
' Ket earnings before bond interest and dividends.
» Net earnings before bond interest and dividends and Federal Income and excess profits Taxes.
< Rate calculated on the basis of earnings as described in note No. 2 above.
• Rate calculated on the basis of earnings as described in note No, 3 above.
Sources: CompQed from American Iron and Steel Institute data. War Time Profits and Cost in the Steel
Industry, Federal Trade Commission.
CONCENTRATION OF ECONOMIC POWER
10425
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1 0426 cOmcentration of economic power
Exhibit No. 1352
Relative industry position major iron ore companies, 19S7
Company
Shipments in
Industry
Gross Tons
Percentage
63,110,000
100.0
26, 648, 159
42.2
•13,816,332
21.9
5, 733, 879
9.1
2, 239. 442
3.5
1,817,779
2.9
1, 636, 677
2.6
1,816,291
2.9
8,401,641
14.0
Total industry.
Oliver Iron Mining Company
Piekands Mather & Company >
Tho Cleveland-Clifis Iron Company »
The M. A. Hanna Company
Butler Brothers -
Oglebay, Norton & Company
Other ore companies (7)
Steel Companies *
> Tonnages shipped from properties managed by Piekands Mather * Company.
» Includes 181,998 tons sold and shipped from non-managed mines.
' Tonnages shipped from properties operated, managed or leased to others by the Cleveland-C lifts Iron
Company.
* Tonnages shipped from mines owned and operated by steol companies other than U. S. Steel Corporation.
Source: Lake Superior Iron Ore Association. Data submitted to the Department of Justice by tho above
companies in answer to the Department's questionnaire.
CONCENTRATION OF ECONOMIC POWER
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10428 CONCENTRATION OF ECONOMIC POWER
"Exhibit No. 1354," introduced on p. 10235, supra, is included in Hearings,
Part 16, appendix, p. 9929.
Exhibit No. 1355
Fkbruary 17, 1930.
Mr. E, B. Greene,
Mill Pond Plantation,
Thomasville, Georgia.
Dear Mr. Greene: To bring you down to date on negotiations with The
Cleveland Cliffs Iron Company, beg to advise that Mr. Livingstone Mather has
sent a letter here requesting copies of all our contracts, in order that they may
be studied by him before the return of Mr. W. G. Mather, who is expected about
February 24th. In this same letter Mr. Livingstone Mather suggests that all of
the details of the proposed transaction be ironed out, and in pursuance of this,
Messrs. Wm. Wisner White and W. B. Belden have had several conferences during
the past week and have developed for approval of the principals a general outline
of the various steps.which they advise in the way of consummating the transaction
with maximum advantage to both parties.
We have not yet submitted any contracts, as requested by Mr. Mather, think-
ing it advisable to determine, with respect to the contracts to be renewed, just
what the terms are to be in order to avoid any misunderstandings. To that ena
we have made a thorough study of the Montreal contract, and this afternoon we
have had a long conference with Mr. G. '^. Wade, taking up all the points serially
and coming to an agreement with him co.iCerning them^ Mr. Wade suggested
that we write you a memorandum of this conference and send with it a copy of the
present contract, which we all think should be renewed for a period of five years
without any chan^, as will appear below:
(a) The first point discussed this afternoon referred to possible diti'^rimination
against the sale of Montreal ore. This, as you know, is a rather delic He question
and one which we all agree cannot be handled in a contract. As a practical
matter, the Cleveland Cliffs Iron Comp ny could not discriminate against the
sale of Montreal ore even should they have ^hat desire, because the contract with
Ogleba>, Norton & Company reserves speo^xcally to The Montreal Mining Com-
pany full control of the policy and complete direction with respect to sales,
including tonnages and prices. Under that contract, The Cleveland Cliffs Iron
Company or Oglebay, Norton & Company can in no sense dictate terms to The
Montreal Mining Company. On the other hand, the agent is specifically required
to execute the directions of the principal. There wiU, of course, be no change in
the directors of The Montreal Mining Company, except such as are desired by
the stockholders, and it is assumed that those now representing stockholders on
the Board wiU continue to govern the affairs of the Company and, as such stock-
holders and representatives of stockholders, wiU continue to have the same interest
in the affairs of the Company that they now have and will function in the future
precisely as they have in the past.
Moreover, The Cleveland Cliffs Iron Company will itself have a lively interest
in the disposal of Montreal ores at fair prices, because they will need to protect
their own values, and any Montreal ore not covered by term contracts, and
available for sale from year to year, will have their active interest as well as
our own, to the end that such ores be moved at the highest practical price.
Finally, of the ores produced by the Montreal mine, about one-third is and
will continue to be manganiferous, a grade which Cleveland Cliffs does not
produce or sell. Our association with Cleveland Cliffs will presumably strengthen
our market position with respect to the manganiferous grades, known as Ontario
and Quebec, because it will give us a favorable standing with steel companies
associated with Cleveland Cliffs operations. As to the other grades, namely,
Bessemer and Basic, it so happens that we have none on the market at the present
time. We assunae, of course, that our contract with Wheeling will be renewed,
which we think is a foregone conclusion. We have made a ten-year contract
with American Rolling Mills Company, and have a contract with Jones &:
Laughlin, which runs through 1932 for Bessemer and 1933 for Basic, total 500,000
tons, as well as a contract with Weirton Steel Company having six years to rur.
Wtj jvill, of course, want to renew the Jones k Laughlin contract upon more
favorable terms, and we think that the proposed association with Cleveland
Cliffs will aid us materially in getting better terms, for one reason, among others,
CONCENTRATION OF ECONOMIC POWER 10429
because Cleveland Clififs is now selling Jones & Laughlin as much ore as we think
Cleveland Cliflfs desires to sell them. So far as our Basic and Bessemer ores are
concerned, we would not need new association in order to dispose of our tonnage,
but in the renewal of present contracts with these same associates, our chances
for better values will be much increased by the proposed alliance.
We all agree, then, in thinking that The Cleveland Cliflfs Iron Company,
under our contract, copy enclosed, not only has no power to discriminating against
Montreal ores, but has a very practical incentive to see that these ores are mar-
keted at highest practical value.
(b) We discussed the matter of overhead charges. Here again The Montreal
Mining Company is protected in its contract, for these charges can be made only
with its approval. If The Clevelanrj Cliffs Iron Company should attempt to
increase overhead charges to The Montreal Mining Company, the directors of
this company could inquire into the proposed increase, and unless it were deemed
fair and the JJtoposed charges were representative of increased services rendered
of the kind desired by The Montreal Mining Company, the increases could not
be charged against the company. Furthermore, it is our present understanding
that should the proposed trant .ction be consummated, Oglebay, Norton &
Company will continue, as at present constituted, until such time as a major
adjustment of some kind is made involving a consolidation of the two offices.
When that occurs, if at all. The Montreal Mining Company can rest secure in
its contract with Oglebay, Norton & Company, and successfully challenge any
increase in overhead charges which may be proposed if such increase is regarded
by the Montreal directors as excessive. In this connection, it should not be
overlooked^that an amalgftmation of the offices may, and as we see it should,
work toward lower overhead charges for all of the mines, both Cleveland Cliffs
and our own.
(c) Mr. Wade advanced for consideration in the conference whether it would
not be fair and proper, in case of a sale of the mine during the life of the proposed
contract, that is, five years, to limit the commission with respect to ore then
sold but undelivered, to say 5^ per ton. This idea is based on the thought that
the actual cost of selling and delivering is say 6^ per ton. It was concluded
that this idea should not be brought into the contract for the following reasons:
The right to the full commission for ore sold but undelivered is looked upon
as part of the assets of Oglebay, Norton & Company. It has been customary
for many years past in our office, and also in the trade in general, to pay the
full commissions in circumstances such as these, and it was thought that no
exception should now be made in the case of The Montreal Mining Company,
particularly because, among other reasons, it would be challenged in all prob-
ability by The Cleveland Cliffs Iron Company, which would expect the Montreal
Company to deal with it on the same basis, that it has heretofore dealt with
Oglebay, Norton & Company, and which, as said above, is the common practice
of the trade in other offices such as ours. In this Connection, Mr. Wade also
generously recognized the long association of Oglebay, Norton & Company
with The Montreal Mining Company and the part which our older management
had in making advantageous purchases and leases of the properties, creating the
basis of the asset which the Montreal mine now represents; and Mr. Wade also
recognized the services of our younger management, which, inheriting the fruits
of the activities of the older management, developed the property from a rela-
tively small producer to one of the greatest mines in the Lake Superior regions.
As a practical matter, the difference between 10^ and 6^ on ore sold but un-
delivered at any time is not a large amount of money. On the average it probably
would not at any time exceed $125,000.00, because it is h:-d to conceive that
ore sold but remaining undelivered at any time would be in excess of 2,500,000
tons, or 2)4 years' production, which is one-half the production covered by the
proposed contract. In this connection, it may be remarked too that the agent,
in this case Oglebay, Norton & Company, would be of material assistance to
The Montreal Mining Company in effecting a favorable sale of the mine. If
the property were sold, it would doubtless command as much as $10,000,000.00
or more.
(d) Mr. Wade brought forward for discussion a possible new forrn of contract
under which the agent would be paid say 5<i per ton, and, in addition, a per-
centage of the annual net profits of the company. We believe that such a contract
is not in the interest of The Montreal Mining Company. So far as increasing
the value of the ore itself is concerned, we may say that although the agent
plays a^art, the course of values is not under i+.8 control. The value of ore is
determined by so many factors not under the control of the agent, or even
10430 CONCENTRATION OF ECONOMIC POWER
susceptible of influence by him, that he is not fairly entitled to an increased
commission on rising ore values. The proposed transaction is in itself in the
direction of bringing about better values. The Montreal Mining Company has
now some contracts at rather low values which will undoubtedly be renewed at
better values, and any commission based on percentage of present profits of The
Montreal Mining Company would become unduly lairge, as the profits of the
company are increased by better ore values.
As to mine costs, we would call your attention to the fact that the contract
expressly provides that the agent in managing the mine is at all times subject to
the direction and control of the Montreal Board of Directors. While in the past,
by reason of close relationships, considerable latitude has been permitted to Ogle-
bay, Norton & Company as such agent, nevertheless under the terms of the con-
tract that management is at all times subject to such control and direction.
Undoubtedly the Board will continue to be composed of the same individuals as at
present for years to come, so that the same knowledge of proper mine operation
will be at all times at the Board table. It is our view that if the officers and
Board of Directors haw the same interest and give the same attention to the
property in the future as in the past, the management of the mine will continue
to be as efficient as it has ever been, for that management must at all times follow
the directions of the Board. Moreover, it must not be overlooked that it is a part
of the plan that Oglebay, Norton & Company, with its present personnel, shall
continue to function as a separate organization for some time to come, and as such
separate organization wiU function just as it has heretofore, and it is only if and
when some major change occurs that we need to consider this question of mine
costs, from which time the control lodged in the Board of Directors will in our
judgment take care of this matter.
Since this proposed transaction several months ago became a possibility, the
undersigned and others associated with him have been giving it very careful
study, having in mind the interest of all the properties which we represent. We
have all come to the conclusion that the consummation of the proposal will bring
these' properties into contact with new and strong associations, will undoubtedly
increase the value of the ores to be mined and marketed in future years, and will
introduce us and the owners of the properties to a much closer contact with and
knowledge of developments broadly in the steel business, which, of itself, wiU work
to the ultimate advantage of the properties.
We are authorized to say that Mr. Wade has read this letter and approves of the
recommendations herein made, which are all embodied in the proposal to renew
the Montreal contract for a period of five years without change. We may add that
Mr. Russel also approves, and that the Bristol Mming Company is agreeable to
making a similar contract.
If you approve of our conclusions, will you not kindly notify us by wire or
telephone? We would like your early attention to this matter for the reason that
Mr. Livingstone Mather wants to have everything in shape to present to Mr.
William G. Mather on his return here February 24th. If you do not approve, and
desire further discussion, I will be very glad to get on the train and go down to
Thomasville to talk with you. We here feel, as does Livingstone Mather, that this
transaction should be consummated, if at all, before Mr. William G. Mather's
departure for Europe, about March 15th. If the deal is made b}' that time, we
will, of course, approach this year's business from that point of view, and we
think it 'will be very advantageous to have the cooperation of the two groups
established for the benefit of this year's sales.
With kindest regards, J am
Sincerely yours,
Oglebay, •Norton & Company,
By , Presi ent.
Exhibit No. 1356
Oglebay, Norton Arrangement.
May S9, 1930.
Mr. S. R. Elliott,
Manager, Ishpeming, Mich.
Dear Sir: You will have seen by the papers that The Cleveland-ClifFs Iron
Company has made an aflSliation with the Oglebay, Norton Co. The statements
that have appeared in the Cleveland papers are worded unfortunately, in that
they have connected the deal with Mr. Eaton's activities. This is not true,
because Mr. Eaton had no connection with the negotiations, but simply voted
for it as a Director of The Cleveland-Cliffs Iron Co.
CONCENTRATION OF ECONOMIC POWER 10431
The Daily Metal Trade of May 29th has a statement of the transaction which
was practically prepared by this office, although it is somewhat shortened from
the statement that I approved.
The Oglebay, Norton people will continue to run their business as heretofore.
The advantages that will accrue to us are that we share in their net profits to an
appreciable extent, and that we are placed in a position of greatly minimizing, if
not entirely preventing, tendencies which have prevented iron ore producers from
getting a reasonable price for their product. We are on friendly and social terms
with the Oglebay, Norton people, and the principal mines for which they act as
agents are controlled by the Wade Estate, representatives of which, Mr. Garretson
Wade and Mr. E. B. Greene, are Directors of The Cleveland-Cliffs Iron Co.
I think it is an excellent move and will have a stabilizing effect on the conduct
of the iron ore industry, but you can see that it is a relationship which we do not
want to talk about, as such publicity might result in opposition on the part of
the public or the consumers to a move which they may construe as tending towards
an undue control of prices.
Since my return I have been giving some attention to the affairs of Corrigan,
McKinney & Co., of which we now own 62)^ per cent., but owing to pressure of
other affairs my study of the situation has not been as yet very thorough. I shall
want you to arrange, as soon as you can conveniently, to have the mines of Corri-
gan, McKinney & Co. examined from the standpoint of geology and operation
and plant, so that I can get the opinion of your organization upon their value
without undue delay. The manufacturing plants of the company are now being
reported upon by Mr. Brassert, the eminent engineer, but the iron mines I shaU
want reported upon by your department.
As may be convenient and desirable by you, you can arrange, of course, now
that we have this affiliation with Oglebay, Norton & Co., to look into the opera-
tions of the mines which they manage, and whose ores they sell at any time that
you may wish, and I am in hopes that this exchange of opinion between your
operations and Corrigan's operations and our own operations, may be productive
of exchanges of experience which may be helpful to all three of us.
I wish to add a word of caution to the way in which you and your lieutenants
may comment upon these important moves of our company. The Oglebay,
Norton Company occupies a very sound and honorable position in the trade, and
I would not like to have any opinions come from any of our officers, either here
or up above, which would indicate that we intended to exercise any control over
their operating men. They have had an independent position as operators and
feel that they have been doing excellent work and would, I imagine, dislike to
have the idea spread that we, the older and stronger company, were going to
take any position of criticism or control over their mining operations.
With respect to the operations of Corrigan, McKinney & Co. they also, for the
time being at least, will be run as heretofore. In time, however, after we have
thoroughly familiarized ourselves with the situation, we may take a different
position to the extent of exercising supervision.
Yours truly,
, President.
WGM:F.
(In ink:) Certified true copy
E. H. Jaynes,
Secretary The C. C. I. Co.
Exhibit No. 1357
The Cleveland-Cliffs Iron Co.
Offices 14th Floor Union Trust Building
Wm. G. Mather, President
S. L. Mather, Vice President
C. G. Heer, Treasurer
V. P. Geffine, Secretary
E. H. Jaynes, Ass't Sec'y
Cleveland, Ohio, January 27, 19S0.
Mr. Crispin Oglebay,
clo P. W. Harvey,
Pebble Hill Plantation, Thomasville, Ga.
My Dear Chris: Livingston and I had a talk today with Messrs. Allen and
Norton, and I felt obliged to say that I could not give sissurancos tliat the deal
between us could be carried out at the present time.
124491— 40— pt. IS 1.5
10432 CONCENTRATION OF ECONOMIC POWER
I feel that the amount which has been mentioned up to this time for us to pay is
very large, considering that the cash returns upon it which are dependent upon the
continuance of the profitable contracts which j^ou now enjoy, are not assured for
an-a definite length of time. There are, to be sure, advantages which will accrue
to the owners of the fees and to those interests which are more or less associated
with us, who have in mind the desirability of enlarging the mergers of steel com-
panies which ^e now in progress. For that reason, I am sympathetic with the
idea in principle, but, as said above, the amount we have discussed, and the im-
portance of the deal so great, that I cannot commit myself to an approval of
it until I have had a consultation with practically all of our directors. It will not
be possible to have such a meeting and consultation before my return from the
West Indies trip, which will be the latter part of February. I hope that this will
not break oflF the negotiations which have been carried on and that they can be
resumed on my return, and in the meanwhile our people can be considering care-
fully the details which we consider important for the success, looking at it from
both sides of the proposed deal.
Yours truly,
(Signed) Wm. G. Mather,
President.
Copy to Mr. E. B. Greene.
(In ink: W G M expects to return 2/23. leaves again 3/15.
Exhibit No. 1358
[Copy of telegram]
TnOMASViLliE, Ga., January 36, 10:17 P. M.
W. W. White,
Union Trust Building., Cleveland, Ohio.
I have talked with Wade and Green and they approve of general plan and ask
the following telegram be sent as representing their thoughts. I think their
recommendation for specific considerations are entirely proper and have advised
them in my opinion they would be so recognized stop As individuals we are
heartily in favor of Cleveland-Clififs company acquiring Oglebay, Norton & Com-
pany under the proposed plan believing that this merger tends to stablize the
market value of ore. As directors of the Montreal Mining Company we would
not favor entering into a contract longer than five years or even for that period
unless such contract insured first the same high standard of management and
individual attention to the affairs of the Montreal Mining Company which it has
enjoyed in the past second that a plan be devised so that the Montreal Mining
Company can be assured that its ore will be sold in such manner that there shall
be no discrimination against its ore in favor of ore from mines owned by The
Cleveland-Cliffs Company, third that the amount of overhead expenses charged
in the future against the Montreal Mining Company shall not exceed the amount
of such overhead expenses charged to the Montreal Minirig Company in the year
1929 computed on the same basis and should the Directors of the Montreal Min-
ing Company desire to do so that compensation involving a smaller fee per ton
plus a percentage of net earnings might be substituted for the present compensa-
tion in some manner so that the net earnings of the Montreal Mining Company
would directly effect the total compensation received by the Cleveland-Cliflfs
Company. Fourth, that the same relations between The Oglebay, Norton and
Company as Agents and the Montreal Mining Company as mine owners be con-
tinued the Board of Directors of the Montreal Mining Company continuing to
pass on all matters of General Policy such as annual production, sales contracts,
etc.
Crispin Oglebay.
(In ink :) Certified true copy.
E. H. Jaynes,
Secretary, The C. C. I. Co.
"Exhibit No. 1359", introduced on^p. 10259, is on file with the Commit+"e-
CONCENTRATION OF ECONOMIC POWER 10433
Exhibit No. 1860
8-2-34
STATEMENT OF WM. G. MATHER TO THE BOARD OF DIRECTORS OF OTIS
STEEL COMPANY
Mr. President and Members of the Board:
I desire, in behalf of myself and the other Board members who are also Direc-
tors of The Cleveland-Cliffs Iron Company, or officials of that Company, to state
our position with reference to the proposed negotiations with Republic Steel
Corporation and The Corrigan, McKinney Steel Company. We feel, and are
advised by counsel, that in view of the large ownership of The Cleveland-Cliffs
Iron Company in the stock of Corrigan, McKinney and its substantial ownership
of Republic stock, as well as its ownership of shares in Otis Steel Company, it
would not be proper for us to vote upon or participate in any corporate action
involving the sale of the assets and business of Otis Steel Company to, or its
consolidation with, Republic, and in case the time arrives when such questions
are presented to this Board for determination, we will withdraw, leaving the
other members of the Board free to act in such manner as they shall deem for the
best interests of the Company.
We are, however, advised by counsel that it is not only our privilege, but it is our
duty, to express to the other members of the Board our general views as to the
desirability of giving consideration to this subject so that you may have the
benefit of such general information regarding the industry as we possess and be
advised as to how the large stock interest which we more particularly represent
regards it.
While no one appreciates more than we the excellent record made by the manage-
ment of Otis Steel Company, especially during the first half of 1934, we think,
nevertheless, that it would be for the best interests of the Company to bring
about the consolidation on some fair and proper basis of Otis Steel Company
with Republic and Corrigan.
We are not assuming to suggest to this Board the basis on which it would be
advisable to enter into such a merger. We do, however, feel that in view of the
present condition of the steel industry it would be for the best interests of this
Company to have the question of such a consolidation carefully investigated and
considered by a strong committee of disinterested members of this Board of which
conamittee, we request, Mr. President, that you should be a member. I hope
3"ou will receive this suggestion in the open minded spirit in which it is presented
and that the Botird may have the benefit of such an investigation and report as
I have indicated.
I am a'iv^ised by counsel that my associates and I may properly vote for the
appointment of such a committee but we would not, of course, expect to vote upon
anv recommendations it may make.
(In ink:) Certified true copy.
E. H. Jaynes,
Secretary, The C. C. I. Co.
Exhibit No. 1301
Inter-oflBce letter '
The Cleveland-Cliffs Iron Co..
Cleveland, Ohio, April U, 1936.
Subject: Republic Steel.
Reference:
Memorandum:
In connection with our business with Republic Steel Corporation covering iron
ore floatage by boat and railroad freight, also coal floatage, and mine leases, the
writer, during his illness, has had the following contacts directly with Republic.
In February when we held our directois meeting in New York the writer had an
hour's conference with Mr. Girdler in his office at which Mr. Girdler himself
agreed that he desired to work in closest harmony with^ Cleveland Cliffs Iron
Company, and he felt the best way to bring about those results was to have
Messrs. Brov/n and Raymond and possibly one or two others meet with Messrs.
Wysor, Ilgenfritz, and Gosewisch, and if they could come to terms then it would
be unnecessary for either Mr. Girdler or +v^ -^^--cirrr^oH fo erive the matter any
10434 CONCENTRATION OF ECONOMIC POWER
time, but if they could not agree then the matter was to be referred to Mr, Girdler
and the undersigned, and Mr. Girdler promised at that time that he would bear
in mind his assurances as to friendly relations just recited. Mr. Girdler went on
to say that he expected his associates to represent Republic to the best of their
abiUty and that he knew Cleveland Cliffs did not want anything that was not fair,
but it was his desire to have RepubUc do as much business as possible in justice
to Republic's own welfare with Cleveland CliflFs. The writer expressed his entire
approval of Mr. Girdler's assurances and we then went on to discuss the question
of a common general counsel, this matter having come up because of the death of
Mr. Belden. At the close of the interview, in order that there should be no
misunderstanding^ the writer recapitulated the agreement using Mr. Girdler's
own words as nearly as possible. Mr. Girdler agreeing to this recapitulation.
Following Mr. Brown's and Mr. Geffine's visit to Thomasville at which we
discussed, among other things, the Republic matter, at the suggestion of Mr.
Brown the writer wrote to Mr. Girdler reminding him of this matter, telling him
when I would be back in Cleveland, and assuming that his ideas had not changed.
Following long distance conversations from the o Tice about the middle of March
the writer wrote Mr. Girdler again telling him that his return had been somewhat
delayed owing to iUness and asking Mr. Girdler's forebearance in waiting for his
return to Cleveland. Upon the writer's return to Cleveland March 30th he
went immediately to the hospital. Meanwhile the negotiations were coming to
a crisis. Accordingly I wrote Girdler on April 7th suggesting an appointment at
soon as the writer was well enough. He suggested an appointment Friday the
10th which had to be postponed on account of the writer's health. On the 13th
I wrote him again suggesting the possibility of an appointment with him in
New York on the 16th. Upon receiving somewhat pessimistic views regarding
the progress of the negotiations, and even more Mr. Girdler's remarks that he
might question Mr. Brown's assurances that the writer was still sick, the writer
disobeyed the doctor's instructions both to leave the city and to take no part in
business negotiations and called at Mr. Girdler's office today, having nearly an
hour's conference with him.
The writer explained to Mr. Girdler that he was leaving town to avoid being
drawn into business matters, but that he could fully understand that Mr. Girdler
might be puzzled that I could see him in New York and not in Cleveland and
might think that I was purposely delaying the matter. I explained my physical
condition and Mr. Girdler said he thoroughly understood the matter and hoped
that the writer had not misunderstood him.
The writer then said that he wanted to discuss with Mr. Girdler three things:
first, the big general policy which looked into the future of both companies, then
going back into the original plan of a midwest steel company and Cleveland
Cliffs' relation to it, and calling attention to the very large holding in CliflFs Cor-
poration and the possibility that matters of investment in steel companies might
be arranged to further the growth and prosperity of Republic as well as Cleveland
Cliffs. Second, the writer wanted to discuss with him the negotiations now being
carried on which possibly Mr. Girdler felt were not proceeding as fast as possible.
Mr. Girdler interrupted to state that he had kept out until recently but was now
in quite deeply and Mr. Wysor said that he was now as fiilly acquainted with the
details as he Wysor was.
Outside of very minor matters his criticisms were that Cleveland Cliffs stated
that opening up the Jackson Mine on 50^ royalty was of no advantage, and
second, that we were not giving them allowance enough for other advantages such
as profit on float, etc. He stated that opening up the Jackson Mine on a 50(i
royalty basis, and taking into consideration other matters, was certainly of great
advantage to us and he did not like us to deny it. Also he felt that we were not
crediting them sufficiently with the advantage we receive from floatage and
freight, and said that these should be as fully considered as the price of ore. He
then went on to tell me that he had several offers to transport ore at not quite 15<i
but nearly that figure less than the market. He then went on to recite how one
man had tried to threaten him through his railroad interest unless he got a big
chunk of floatage and how he had straightened the matter out by telling"him they
were not receiving enough steel business to cover the present freight the railroads
were receiving. He advised the man to go back and find out where he stood in
the railroad end, and later he was advised by the railroad man tliat he had gotten
oflF on the wrong foot. He said he wanted to give Cleveland Clift's the floatage for
ten years and then be able to tell the otheis he was out of it, and that he was
sincere in wanting to do business with Cleveland Cliffs but that it must be on a
basis fair to Republic.
The writer kept the conversation on generalities and it never was a matter of
getting down to detail. The writer concluded the conversation by sayine that
CONCENTRATION OF ECONOMIC POWER 10435
whatever gap there was he felt might be entirely closed by the meeting set for
tomorrow morning at nine o'clock and he hoped that such was the case, but that
he had remained over not only to see Mr. Girdler today but with the hopes of
seeing him again tomorrow should the meeting not conclude the negotiations.
The matter closed in the friendliest way, Mr. Girdler saying he would follow the
program closely and would call at the writer's house if it was more convenient and
would save my coming downtown.
After this matter was disposed of Mr. Girdler then discussed the question of
directors, but concluded by stating that that whole subject could be discussed
upon my return and that it could well wait without disadvantage. He said
he would be pleased to have me on the board, giving his reasons, and also that he
would be pleased to have Mr. Mather on the board, also giving his reasons, but
that he had advised Mr. Brown that he could not put either of us on the board
until the New York Central and Otis Steel situations were changed. The writer
agreed with him that this matter could well rest until his return, and we concluded
with a discussion of purely personal matters.
EBG JS E. B. Greene, President.
(In ink:) Certified true copy.
E. H. Jatnes,
Secretary, The C.C.I. Co.
Exhibit No. 1362
[Inter-Department Correspondence]
Butler Brothers
AND
Manganiperous Iron Company
Unioi>>Trust Building, Cleveland, O.
September 4, 1928.
Dear Dad: I talked with,Hoyt this afternoon relative to our counter pro-
posal.
The minimums and maximums as you suggested are agreeable to him. How-
ever, he wants first call on any additional tonnage our present properties might
show up. This is to keep us out of the market as' much as possible. This first
call means that should we feel we ought to produce more, or that we are in a
position to take on additional contracts, that we should offer the ore to them
before we do so to anyone else.
He said our proposal worked out better for us than our present contracts, not-
withstanding the fact that P. M., were putting up two million dollars.
The first million tons in his estimation should be priced at $3.50 per ton, with
full Non- Bessemer premiums for iron only. Hoyt wanted to know whether we
would share in a decrease if the market price of ore went down. This i6 in
answer to your sentence stating "that in case of increase in market, Butler
Brothers are to receive 50% of such increase."
He suggested as a price after the first million tons have been" delivered of
$3.80 minimum for 53.00% natural iron and .035 phosphorus, plus 50% of the
difference between $3.80 and the full market price. This makes his price on
this year's market of $4,216 as against your proposal of $4,379. For variations
from the above analysis full unit values are to be taken. ■
He wants to float all the tonnage saying that Bethlehem would insist on it.
He has agreed to split 75-25 if the purchase price of stock is less than two
million doUars.
I will telephone you this evening. Hoyt wants to go east Sunday night so I
should have your ideas on or before Saturday. He says that he needs only our
assurance that we can get together on about this lineup to go ahead with Bethle-
hem, and that we need not commit ourselves definitely.
Yours,
(Signed) Pat.
PB:K.
(Stamped:) Certified true copy from files.
Butler Brothers,
By (Signed) F. J. McArthur,
Treasttre .
10436 CONCENTRATION OF ECONOMIC POWER
Exhibit No. 1363
September 19, 1934.
Mr. G. M. Humphrey,
1300 Leader Bldg., Cleveland, Ohio.
Dear George: Many thanks for your note regarding Alec. I am very much
pleased to find that such men as yourself, Leonard, Elton, and others have been
pleased by the appointment and so sincerely welcome Alec into our "union".
I am glad that the iron ore business is so largely in the hands of a small group
of men who aU work on a close and friendly basis.
Sincerely yours,
, President.
EBG JS.
(In ink :) Certified true copy.
E. H. Jaynes,
Secretary, The C. C. I. Co.
"Exhibit No. 1364," introduced on p. 10296, is on file with the Committee.
Exhibit No. 1364-A
Personal.
October 17, 1936.
Mr. S. R. Elliott,
Mgr., Ishpeming, Mich.
Dear Sir: This will confirm our conversation over the long distance phone
last evening. Yesterday morning Mr. Elton Hoyt called the writer asking for
an appointment with him and Mr. Brown, saying he had an important matter
to discuss with us.
At the ensuing conference he stated that he had been north for a couple of
weeks and had had a long conversation with you in which you mentioned a change
in working hours. He was somewhat disturbed by this as there has been an under-
standing for several years, originating, I imagine, at the time of the first discussions
over the N. R. A., -that any changes in pay, hours, working conditions, etc. would
be discussed among the big employers before action was taken so that the industry
might present a united front. He further stated that in view of the numerous con-
nections our two companies had, that he was surprised that we should have made
this change without explaining the matter to him. Both Mr. Brown and the
writer told him frankly of the conference which you had had with Mr. Brown
when you were in Cleveland on September 22nd, and with the writer on our boat
going north, and that at both these conferences we had inquired particularly as
to whether the new regulation was the same as that in force at the mines of our
competitors. Both of us assured him that our new arrangement was complying
with their condition, and that we had been the only one of the big ore companies
who brought our men to the surface for lunch, and we saw no reason to advise the
others when we were simply getting in line with them.
Mr. Hoyt then went on to say that we had not gotten in Une with them but in
his opinion, and in the opinion of Mr. Salsich, we had given the equivalent of a
raise in pay inasmuch as we were paying for eight hours and not receiving that
amount of labor. Mr. Brown then went into it in some detail with Mr. Hoyt
but Mr. Hoyt insisted that either we were misinformed or that the situation in
our own mines was not as we stated.
He left our oflBce, not satisfied that we were correct, but greatly pleased to find
out that we had not knowingly changed working conditions without notification
to them. Mr. Hoyt called the writer later in the afternoon saying that he had
investigated the matter carefuUy by telephone, and I think he had talked with
both his own men and the Oliver Mining men, and stated that the facts of the
matter were these: that their men reached their working places at 8:00 and left
the working places at 4:30, and that they were allowed 30 minutes for lunch; that
our men arrived at the working places at 8:00, left them at 4j00 and therefore
ate their lunch out of the 8 hours time, our men reaching the surface half an
hour earlier than either the Pickands Mather or Oliver Mining men. He then
asked us if we were willing to have you meet with either Mr. Chisholm or Mr.
CONCENTRATION OP ECONOMIC POWER 10437
Chinn, and Mr. Salsich or whoever he nominated, and discuss this matter. He
said it might not be possible to change our position, but he felt that at least we
ought to be willing to talk it over. The writer agreed that his request was
reasonable, and put in a call for you. As you were down in one of the mines we
could not reach you until after I had reached my home.
It seems obvious to the writer that in our own case the men are eating their
lunch on the company's time, while in the case of Pickands Mather and the
others to whom Mr. Hoyt refers, (assuming they take no more than 30 minutes)
they are eating on their own time and giving the company the full 8 hours of
service. It is fair to assume that the eating time of the miners is approximately
the same whether employed by us or by the other companies. The writer concurs
in your views that there are certain employees whose work is intermittent and
who could undoubtedly eat their lunch in between times in such a way that the
company would not be the loser by their eating their lunch on the company's
time. It is also true that to the extent that our mines are now or will work on a
three-shift basis, that it is necessary for the men to follow the system which we
have installed. Therefore Mr. Hoyt's objection apphes only to the mines which
are not working on a three-shift basis, and further, that the company is not a
loser by having men whose work is intermittent take their lunch on the company's
time. Unquestionably however, our system differs from theirs, and in accord-
ance with the understanding, it would have been better had we either consulted
Mr. Hoyt or at least advised him of our change.
You may possibly think that Mr. Brown, and especially the writer, are giving
more consideration to a partner of one of our competitors than is justified, and I
would be sorry if you have this impression. I would hke to remind you that it
was largely through Mr. Hoyt's hearty cooperation that we were able to get the
Bethlehem Steel Company to operate the Negaunee Mine as we desired for the
past several years. Mr. Hoyt's cooperation with this company, both in matters
pertaining to partners' attitude as weU as during our financing was helpful in an
outstanding way, and I am explaining this only because I think you feel that we
are magnifying the importance of cooperating with him. I am sorry to have you
go to the trouble of meeting with these men as it takes you away from your work
at this busy time, and also because I think you prefer not to do it, but it seems
to us that it is in our best interests to comply with Mr. Hoyt's request. I am
sorry that in your discussions with Mr. Brown and also with me that we did not
fully understand that future working conditions would be different from those of
our competitors. Undoubtedly we would have felt a perfect right to do as we
have done, but also undoubtedly we would have avoided their criticism by
advising them of our intention.
Very truly yours,
, President.
EBG JS.
(In ink:) Certified true copy.
E. H. Jatnes,
Secretary, The C. C. I. Co.
Exhibit No. 1365
[Copy of Western Union telegram]
(52)
Received at The Waldorf Astoria New York, N. Y. 19S7 May 8 PM S 52
NS 127 127 DL Cleveland Ohio 8 322P
E. B. Greene,
Waldorf Astoria Hotel:
Very important meeting Tuesday morning Pickands Mathers office Same
personnel previous meeting and in addition Butler representatives will be present
Elliott cannot attend account of meeting on Mesaba but will send Jackson Be-
lieve important you should be here Stop After discussing with Veach I tele-
phoned Elliott compromise suggestion I made you by telephone today which he
says helps situation but still is not convinced though entirely willing to do his very
best Stop Schneider advises he wired you Waldorf yesterday regarding White
He tells me thinks he is all right but not had whole lot of experience and is pretty
10438 CONCENTRATION OF ECONOMIC POWER
green White wishes to discuss with Bob and Chris and will advise Schneider
Monday Schneider told him any definite arrangement would have to be consid-
ered after your return.
A. C. Brown
(In ink :) Certified true copy.
E. H. Jaynes,
Secretary, The C. C. I. Co.
Exhibit No. 1366
May 24, 1938.
Curtailment.
Personal.
Mr. S. R. Elliott, Mgr.,
Ishpeming, Mich.
Dear Sir: I have read with interest your letter of the 19th inst. to Mr. Brown,
to which was attached the minutes of the Superintendents meeting held May 17th.
It would seem that this work is progressing satisfactorily.
As time goes on I see nothing in the future that would make us feel that these
reductions are unnecessary. In fact, each week brings additional reductions in
the schedules of the steel companies. I am afraid when the automobile industry
shuts down this summer for inventory and preparations for the new models that
the situation is going to be even worse. I doubt if the situation in 1932 or 1933
was any worse than at present, the only difference being that people are used to it
and are taking it more philosophically.
In connection with the curtailment of personnel I want to confirm my talk with
you in Cleveland. Namely, that Fayette Brown Jr. was taken on as a matter of
policy and due to the insistent request of Mr. Elton Hoyt. As you know, Mr.
Dalton's health is far from good and the responsibility for handling the affairs of
that firm rests, in very large measure, on Mr. Hoyt's shoulders. Even though it
may cause you some embarrassment I think there is no way out of it but to con-
tinue his employment, and I think it wise that he should have more experience at
the mines before bringing him to Cleveland. If it would in any way help your
situation, you might transfer him to the Athens Mine in which Pickands Mather
are practically half owners, and you could explain his continued employment on
the basis that he was representing Pickands Mather's ownership.
Ag Mr. Mather has placed his step-son, the writer a nephew, and Mr. Brown
and Mr. Geffine each a son in other lines of business, I think you may accept at
face value the statement that Fayette Brown Jr. was not employed on account
of his relationship to any ofl^cer of this company, but was employed because we
value very highly the co-operation which we are getting from Pickands Mather.
I want you to know that in our dealings with the Bethlehem Steel Company re-
garding Negaunee Mine afiFairs, Mr. Hoyt personally has been of tremendous help.
Our relationship now is on a basis which possibly does not make his intervention
at all necessary, but our relationship with Bethlehem would not be what it is if it
had not been founded on his efforts in our behalf. During the troublesome times
which started with, say, the N. R. A., right up to the present time, the interests
of Pickands Mather and ourselves have been working in the closest harmony, and
the combined efforts of these two interests have brought about a united front in
the ore industry. I am speaking from absolute personal knowledge of these
matters.
I am going to all this trouble because I want you to understand why I am so in-
sistent about this matter. I feel certain that if Fayette Brown Jr. were dropped,
Mr. Hoyt would interpret it as a personal reflection on him, which, of course,
would not be in your mind or mine, but in view of this peculiarity I have no alter-
native but to request you to continue him up north in whatever line you find
suitable.
Very truly yours,
, President.
EBG JS
(In ink:) Certified true copy.
E. H. Jaynes,
Secretary, The C. C. I. Co.
CONCENTRATION OF KCONr.MIC P0V7E11
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CONCENTRATION OF ECONOMIC POWER
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CONCENTRATION OF ECONOMIC POWER 10441
Exhibit No. 1369
Butler Brothers,
Cleveland, Ohio, April 10, 1934.
To Mr. Emmett Butler
Subject:
Dear Dad: I saw Hoyt yesterday at which time he told me the ore magnates
had decided to retain last year's market price. This price will be held regardless
of what Ford does. We mailed our bid to Ford yesterday as did the others.
Hoyt says Pickands- Mather hope to take their minimum from us of 200,000
tons plus all the stockpile which we figure to be 117,000 tons.
Archibald is to be in Detroit the last part of this week and I am holding myself
in readiness to meet him there.
Yours very truly,
(Signed) Pat.
CC: Mr. R. O. Hocking.
Mr. Hazen E. Butler.
(In ink:) E. B. 4/12.
(Stamped:) Certified true copy from files.
Butler Brothers,
(Signed) F. J. McArthur,
Treasurer.
Exhibit No. 1370
Inter-Department Correspondence
Butler Brothers
AND
Manganiferous Iron Company
Union .Trust Building, Cleveland, O.
March 28, 1929,
Mr. Emmett Butler,
c/o Butler Brothers,
Hamm Building, St. Paul, Minnesota.
Dear Dad: I had a talk with Elton Hoyt yesterday afternoon and he talked
me out of quoting Ford on any of our grades at less than the full market price.
He said the market for standard ores is still a little shaky and that it would be
dangerous to quote Ford anything under the full price.
On the Hume quotation, there would be too much danger of the Corporation
learning that we were using any other basis for figuring other than that we submit
to them. And I'm afraid that our goose would be cooked if Shiras ever heard of it.
In light of the above I am submitting today quotations on Hume, Knicker-
bocker, Louise, Kevin and Butler silicious at the full season's prices.
Yours affectionately.
PB: A.
Copy to H. E. Butler.
(Stamped:) Certified true copy from files.
(Signed) Pat.
Butler Brothers,
(signed) F. J. McArthur,
Treasurer.
Exhibit No. 1371
BuTLEE Brothers,
Cleveland, Ohio, August 4, 1931.
To Mr. Emmett Butler.
Subject:
I have your letter relative to 1 . "^ Stack's letter to mo.
I stopped in Detroit j'^esterday and called on Ahrens and Newkirk. They did
not mention long term sales nor did I. They are interested in a basic ore similar
to the one they are now getting from Pickands- Mather, also, a low phos., ore-,
specifications of which they have not as yet decided.
10442 CONCENTRATION OF ECONOMIC POWER
I believe it would be a dangerous thing to quote below this years market
whether it be for this year only or a term of years. For one reason I believe that,
any price, no matter on what basis, quoted for this year would establish next
year's market price. The Ford business is the only open market business left and
if this is not maintained I do not know what would become of our long term
contracts that are based on a market price. Then also, if we took away the busi-
ness from Pickands-Mather on a price concession we would incur the wrath of
Jim and also giv^e the old line companies an excuse to do likewise. Now that
Quinn is practically out of business I believe the ore market can be more closely
controlled.
We are the only people that can furnish them a tonnage of low phos., ore and
I am of the opinion that we can use this as a club to move our other grades in the
same way that Cleveland-Cliffs uses their monopoly on open hearth ore.
I appreciate your anxiety to land this business but I believe it would be a
dangerous thing to cut the price in any way whatsoever. We will, however,
consult with the Big Four beforehand to assure ourselves that they will not try
any such tricks.
Yours very truly,
(Signed) Pat.
(Stamped:) Certified true copy from files.
Butler Brothers,
(Signed) F. J. McArthur,
Treasurer.
Exhibit No. 1372
Butler Brothers,
Cleveland, Ohio, March 26, 1931.
To: Mr. Emm.ett Butler.
Subject:
As I wired you this morning the 1930 prices will be submitted to Ford by the
Big Four and ourselves. Oglebay-Norton have been unable to keep Nelson &
Associates from making a cut on their product. This cut is supposed to be about
quote
fifteen cents a ton. Oglebay-Norton will not e«* on this grade and will refuse to
take a commission on the sale of it. It is the consensus of opinion that too much
is at stake to meet this competition and as usual I have agreed to stay in line.
It is our opinion that Ford will not buy from any property that has not shipped
before, even at a reduction in price.
We expect action on Ford's bids the first part of the coming week. Copies of
our quotations will be sent as soon as I can get them back from Wyman, who is
in Detroit at present.
Yours very truly,
(Signed) Pat B.
PB:A
CC: H. E. B., R. O. H.
(Stamped:) Certified true copy from files.
Butler Brothers,
By (Signed) F. J. McArthur,
Treasurer.
1
Exhibit No. 1373
Inter-Department Correspondence
Butler Brothers
AND
Manganiferous Iron Company
Union Trust Building, Cleveland, O.
March 27th, 1929.
Mr. Emmett Butler,
Butler Brothers,
639 Hamm Building, St. Paul, Minn.
Dear Dad: I ofl^ered Wheeling 100,000 to 150,000 tons of Kevin grade ore at
10)4 off the market. I also told them I would dispose of 60,000 tons of their
I
CONCENTRATION OF ECONOMIC POWER 10443
Wacootah, taking that in at the market price. WheeHng has already traded
200,000 tons of their ore for 200,000 tons of Cleveland- Cliffs ore — so they are not
as interested as they might be. There ie a hope that if Wheeling does not want to
trade, that the only place Donner can get high alumina is from us on the Cuyuna.
That being the case, I am not pressing Wheeling as hard as I might but have to
go through motions for Donner's benifit.
Wheeling will be taking offers for long term sales on basic ore sometime before
summer. Let me know if you thin), we want to quote them, what tonnage, what
years and what grade.
I think we have lost out at the Rolling Mill. They do not like the high silica.
I am seeing Hoyt this afternoon to find out what we shall quote on mangani-
ferous ore and possibly to get his approval of our offering Hume as a straight iron
ore. Also, if we can't quote Kevin 100 to 15j5 off without stepping on Bennett's
or his corns.
Wired you this afternoon about the manganese in Kevin, having in mind that
possibly the Margaret shipments might bring up the manganese in Kevin. The
more free manganese the more attractive this ore will be to Ford. I intend going
to Detroit on Friday and I think we should hear on the letting by the middle of
next week.
Harry Shick will be in the office Tuesday and at that time we should find out
about Merritt.
Henry Raymond insists that the silicious market remain the same this year as
it did last. That is— $2.25 for 38.50% natural iron.
Yours,
PB:K
Copy to H. E. Butler.
(Stamped:) Certified true copy from files.
(Signed) Pat.
Butler Brothers,
By (Signed) F. J. McArthur,
Treasurer.
Exhibit No. 1374
Butler Brothers,
Cleveland, Ohio, April 16, 1935.
To Mr. Emmett Butler,
Subject: Ford Motor Company.
Dear Emmett: The Ford Motor Company Inquiries came in today calling for
120,000 tons of basic with phosphorous under .10, and 60,000 tons of high phos-
phorous ore.
I checked up with Hanna's and Pickands- Mather today and firid that there has
decision
been no diocuoQion as to what this year's price will be, except that there seems to
be some difference of opinion as to whether or not the surcharge on freight rates
will be absorbed and the same market price named as existed over the past several
years. •
As discussed with you yesterday, we are getting together a form of contract to
submit to the Ford Company covering a period of years on an ore similar to tb,©
Hocking Grade, in which we will be protected with regard to variations in labor,
supplies and fuel. It is my understanding from our conversation that we can
afford to put in a base price of $2.25 on a 50% natural iron in the event that we can
arrange a term contract of five years or more. We will proceed with the working
up of the general outline of such a proposal and try to get it before Sorenson.
Very truly yours,
(Signed) C. L. Wtman.
CC R. O. Hocking.
Hazen E. Butler.
(In ink:)
E. B. 4/19.
G. J. H. 4/18/35.
(Stamped:) Certified true copy from files.
Butler Brothers,
(Signed) F. J. McArthur,
Treasurer.
10444 CONCENTRATION OF ECONOMIC POWER
Exhibit No. 1375
Aprii, 23, 1935.
Ore pricfes.
(In ink:) Prices 1935.
Mr. E. B. Greene, President,
Office.
Dear Sir: Mr. Hoyt called up to-day and after asking if Alex was in town,
asked if I would come up to speak with him a minute. He told me of his talk with
you last night and the agreement that he would see Mr. Girdler this morning.
He said he had just been talking with him for an hour and a half, asking Mr.
Girdler if he did not think it would be a good thing for the whole Industry if the
emergency freight charge be borne by the buyers of ore. He said that Mr.
Girdler told him that if he would get Mr. Block and Mr. Weir to agree that adding
the emergency freight to the ore price this year would be of psychological help in
getting a better price for steel in the third quarter, that he would be in favor of it.
He said that of course Mr. Girdler and he both realized (regardless of the fact that
Mr. Wysor is in Bermuda) that he, Hoyt, could not get any such assurance. Mr.
Girdler felt that if this were not the case, the increase in freight rate should not be
added to the price of ore. Mr. Hoyt then said he would go back and think it over
and on parting said to Mr. Girdler: "Well, then, if I announce in the papers that the
price of ore is the same as last year, with the ore companies absorbing the increase
in freight rate, I can consider that we have sold you a tonnage of ore at last year's
price." Mr. Girdler's reply was: "Yes, we have made a deal."
Therefore, Mr. Hoyt said he wanted to announce in the papers this afternoon
that the ore price has been set at $4.50 for this season, and asked if that would be
alright for our company. I told him that I would have to call you on the tele-
phone, and that it might be that you would prefer to have another talk with Mr.
Girdler along the lines of if we are going to absorb this freight they ought to give us
an increase in tonnage. Mr. Hoyt felt strongly that this matter must be com-
pleted to-day and that you would be in just as good a position to make such a
plea after the prices are fixed, with the argument that the ore industry has ab-
sorbed $2,500,000 of increased freight rate and ought to get some help. I told
him, of course, that is not correct, that nearly 90% of the ore is ownership ore,
which naturally has to bear the increase, but he said it is the ore mining end of
the industry that is standing it and he thought that was a fair statement. I told
him that I felt that you would like to talk with Mr. Girdler before having the
price set but he said he thought it was important to get it done immediately. He
then went on to further say that if a lower price would bring more business he
would be 'in favor of making some lower price, but he thought we would have to
wait until there was a real prospect of getting the larger tonnage and he thought
thai very likely ore prices will be I^ower, but that as this is a year when we are
mining merely to give employment, and with so little to gain, that it was a bad
time to make any change. He suggested that if he did not hear from me by
4 o'clock they would go ahead and announce the price arid asked what I thought
you would think of that. I said that I felt that would not be the right thing-
that you surely should be advised and reiterated that I did not think the delay of
a day would make any difference.
HAR:ADP H. A. Raymond.
Exhibit No. 1376
National Steel Corporation,
Grant Building, Pittsburgh,, Pa., January 18, 19S0.
Mr. George M. Humphrey,
The M. A. Hanna Company,
1300 Leader Building, Cleveland, Ohio.
My Dear George: I return herewith the letters from Earl Hunner, and which
are interesting.
Don't you think in view of the very keen interest in the ore situation, and the
fact that everybody is after even the smallest properties, that it ought to be a
«ood time to get the price of ore up 25 cents a ton. Even if pig iron and other
conditions are not just as good, it seems to me the move should be made, indi-
CONCENTRATION OF ECONOMIC POWER 10445
eating that ore is in a strong position and able to start out on a basis of higher
prices.
Very truly yours,
(Signed) Ebnbst.
(Pencilled note:)
Letter from E. E. Hunner — January 15, 1930
See "Ore Lands" Mesabi Iron Co.
Letter from E. E. Hunner — January 15, 1930
See Virginia O. M. Co.
Exhibit No. 1377
[Copy]
Gasparilla Inn,
Boca Grande, Fla., Feb. 28, 19S7.
Dear Ed: There are three things that are somewhat on my mind which I hope
you can go over with Henry and the others while I am away for they all require
your decision as to policy before we could do very much about them in following
them up after yoa go away.
1. The proposed new Wheeling Steel ore contract about which I have already
talked with you.
2. The Otis Steel ore contract. I feel that unless this is worked out before we
agree with Wheeling we will be at a disadvantage with Otis. Our present situa-
tion is that we have sold no ore in 1937 below market price. Our Republic con-
tract reads as a sale of ore completed in 1936 for the whole ten year period with
deliveries to be made during that period on this 1936 sale. This is the same in-
terpretation that has always bepn given to our J & L sale of ore.
If we negotiate with Otis before completing Wheeling, the concession we make
will be from the 1937 market price, whereas if Wheeling is completed first we
will be obligated under our present Otis contract to give Otis the amount of the
Wheeling concession for Otis' 1937 ore at least, and lose this amount of bargaining
advantage.
3. The question of 1937 market price of ore will surely come to a head shortly.
This should be settled before there is any chance of Ford buying ore because it is
becoming more and more likely that the large order placed by Ford each year at
cut prices may become the accepted market price. Our interest in the market
price is, of course, very much less than it used to be but this year it is of particular
importance because of our Wheeling and Otis negotiations.
An increase in the market price is certainly expected. It is true that a higher
market price will increase taxes particularly on the Mesaba range. On the other
hand, if the market price is not raised I think that, in Minnesota at least, taxes
will be raised anyway and possibly will be related to pig iron prices, instead of ore
prices, to our disadvantage. I think a study of this tax feature as it relates to
market price should be made.
An increase in the market price would make Republic aU the better satisfied
with our present contract, in spite of the increases that have to be made for labor
costs etc. ; also our increase would make our proposed Wheeling and Otis contracts
easier to accoinplish.
My idea at present is that the increase should probably not be naore than 40^
nor less than 25^. In this connection the tax feature is, of course, important.
25^ is a little less than a 10% increase on the f. o. b. mine market price for
Mesaba non-bessemer and 40(4 is a little less than 15% increase, I believe.
I think on the present basis of wages and freight and providng there are no
further wage or freight increases, our addition to the Republic base price for 1937
will be about 6^ to 170. If social security increases are included for Wheeling
and Otis, this addition to last years market price would be greater.
I believe it would be wise to have the increase in market price for 1937 substan-
tially more than we figure the probable increase in the base price to both Republic
and J. & L. due to labor and freight changes after allowing for another expected
increase in wages this year.
I am sorry this letter is so long but wanted you to know my ideas m the hope
they may be helpful to you.
10446 CONCENTRATION OF ECONOMIC POWER
Everything is delightful here. We made no mistake in our choice. As you
know, unless needed sooner, I expect to be back at the office Tuesday March 16th.
Sincerely yours,
Alex. C. Brown.
(In ink:) Certified True Copy.
E. H. Jaynes,
Secretary, The C. C. I. Co.
Exhibit No. 1378
March 28th, 1934.
Mr. Patrick Butler,
308 Euclid Avenue, Cleveland, Ohio.
Dear Pat: I have before me Cliff Wyman's letter of the 26th which states,
among other things, that Ford's inquiry for 50,000 tons of ore is out. Now the
question arises whether to wait for the other big ore merchants to quote Ford
before making our quotation or to attempt to arrange some trade with Ralph
Archibald and get the business without the formality of quoting a price. I do not
know, of course, whether or not this can be done.
My feeling about the matter is that these 30,000 tons of ore will only add to our
expense this year about $40,000. It sometimes occurs to me that it would be
better for Butler Brothers to start fixing the market price of ore instead of having
our prices fixed so far as we are concerned and then another price fixed so far
as they are concerned, as they did in 1933. This whole matter, I think, deserves
a great deal of consideration.
Cliff seems to think that Ford would be pleased to get the highest natural com-
bined iron and manganese content that he can. I do not think that we can
arrive at the figure of 52.81% that Chfif has set up for the reason that 17% of
Hillcrest ore would probably be lost in the mix and the manganese would not
show up in the proper proportions in the analysis. I do think we could make a
51%, and possibly a 51.50% natural combined.
Our competition on this business will be Perry Harrison and h s Cuyuna
Range ore and ore that may be purchased from most any of our Mesuba Range
frienos to mix with it. For that rep son I believe that if any trade arrangement
can be worked out so as to cinch this btislness it would be well to do it.
I think, possibly, this would be a good time to say to our customers, particularly
M. M. and Hanna Co., "What are you going to do with this year's business, and
what price are you going to put on ore?" They will, no doubt, answer to that that
they do not know because they have not had their ore meeting, and stall beyond
the date that Ford has fixed to close the bidding, and probably slip in a bid in the
meantime. Why not tell them that we want to move tonnage and that we are
either going after the Ford business in our own way or they are going to guarantee
us an additional tonnage over their minimum equal to that of Ford's inquiries?
You will notice by a statement of our costs that our fixed charges, if we include
royalty which we must to a certain extent because of our minimum, is about one
half of the total cost of ore to us, that is about 92j5 a ton for production cost,
overhead, depreciation and taxes and about the same amount for labor and supply
costs.
I am enclosing herewith a forecast of our operations for this year based on the
minimum tonnage.
Affectionately,
EB .
SUPPLEMENTAL PATA
The following is the narration delivered by Mr. Edwin C. Hill
during the showing of the sound, Technicolor moving picture, "Steel,
The Servant of Man", before the Temporary National Economic
Committee on November 1, 1939.
CONCENTRATION OF ECONOMIC POWER 10447
Narration Accompanying United States Steel Corporation's Four-Reel
Technicolor Film "Steel — The Servant of Man"
(1) From the good red earth comes iron ore — the basic element of steel. Can
you imagine what would happen if a great magnet — suddenly wrenched all steel
from our daily life? What would happen to our skyscrapers? What would
happen to our homes? What would become of our great bridges? How could
we travel? How could we farm? How could we even communicate with one
another? What would become of all industry? What, indeed, would become of
all of us?
(2) Only in a nightmare could such a calamity occur — and so we begin the
story of steel, with huge shovels ripping the raw, red iron ore from its ancient
beds.
(3) 17 tons at a gulp is the capacity of this hungry giant eatii'.g into the bank
of ore — a 34,000 pound load made possible by the strength and boundless ca-
pacity of steel. This is called the age of electricity. Is it not also the Age of
Steel? It's an age of remendous locomotive strength made possible and pressed
into usefulness bj' steel — light weight, stronger railroad cars rolling over ribbons
of' steel.
(4) Open pit mining is restricted to months when frost is out of the ground.
But the year round we find the men of the underground mines, like gnomes
wresting from nature, ore lying far beneath the earth's surface — ^contributing to
the steady* stream of loaded ore cars flowing between the iron ranges of the
Northwest and the northern harbors of the Great Lakes.
(5) Puffing impatiently, the ore boats of the Great Lakes' fleet await their
loads under ore bins at the docks.
(6) They must go!. We must get this good red ore to the mills. So down come
the loading chutes, like the mouths of a huge prehistoric monster, to pour the ore
into the bellj^ of the waiting ore boat.
(7) Up goes the gate and out pours the brown-red stream cf the earth which
makes steel. Few things have less valcie than this raw iron ore as we see it now.
Yet there are few things of greater value and benefit to our modern civilization
when the labor and intelligence of man is applied.
(8) These carriers must work fast during late soring, summer and early fall. -
While the ice is out, scores of ships in this large lake fjcet are constantly on the go.
The loading completed, they start in an endless stream for the southern lake
ports to feed the hungrj'^ blast furnaces of the steel mills to the south.
(9) Three days later, it's the end of the line, and all hands on deck — there's no
rest for an ore transport. Two or three hours in port and that's all — as men
drive huge grab buckets like iron dragons which snatch great bites of the ore
stored in mountains of red earth ready of the blast furnaces.
(10) Riding the cab of a clam-shell bucket along an ore bridge as high as a 6
story building we see the ore picked up from a trough behind the unloaders by
another clam-shell and carried across the storage yards, traveling along a giant
ore bridge just like the one we're on. Thousands upon thousands of tons of
catalogued, registered and practically pedigreed ore pass beneath us. The ant
has nothing on the steel business for enough ore must be stored in summer to last
through the winter when lake carriers are icebcand. Steel's skyline looms before
us — a skyline made up of blast furnaces — tall sentinels of the steel plant — which
change the ore into molten iron.
(11) And here the cycle of steelmaking re.ally begins — with the first step in the
making of iron^an 8-ton skip-hoist dumps into the blast furnace a rich mineral
stew of ore, limestone and coke.
*^12) We're getting up speed now — Down below on the casting-floor the stage
is set. At intervals of six hours the charge smelted down under intense heat is
withdrawn and here comes the signal to tap.
(13) Ready for their end of the job — these fellows stab an oxygen torch through
the hole, piercing a plug of clay — and here it comes — a writhing stream of molten
iron — 2600 degrees hot.
(14) Between 1.50 and 250 tons are tapped in a cast — a hundred tons or so
stream down runways of sand and graphite into the first of two huge ladles.
Then — the gate is raised and the molten stream flows to a second ladle.
(15) Outside lies the ladle, a Thermos bottle as big as a tank car, lined with
brick ;;apable of holding molten iron at the highest possible temperature.
124491 — 40— pt. 155 ^16
10448 CONCENTRATION OF ECONOMIC POWER
(16) A lot goes on in the twenty minutes that it takes to make a cast — not so
much in the six hours between casts. Then there's time to relax. But now
antrther sample must be taken from the golden stream — a test specimen which
will tell the steelmaker the quality of his work. It takes skilled men to nurse
these monsters — men who know the whims of iron — men who have been feeling
the pulse and taking the temperature of liquid metal for a good many years.
It's positively uncanny the way these fellows with a single glance at their samples
recognize the calibre of the whole batch. And they seem pretty happy with
this one.
(17) Now we have molten iron, the first step in the production of steel. This
liquid iron goes for a while into huge storage tanks called mixers. We'll come
back to this iron soup a little later. But first, the open hearth furnaces of steel.
(18) By far the greatest amount of steel produced in the United States is made
in open hearth furnaces such as these.
(19) The ravenous open hearth is never on a diet. It devours good scrap
metal — odds and ends of antique flivvers — chunks of old rails — axles that may
yet roll again — even chicken wire.
(20) And up on the charging machine, you see the operator handle the huge
piece of machinery, so agile that it picks up an eight thousand-pound charging
box of scrap, thrusts it into the furnace, twists and turns and rams and charges
at the touch of a hand upon a switch.
(21) And now back to that iron soup we left in the storage mixer a moment
ago. As the work goes on this molten metal is combined with the melted scrap.
(22) Perched high above, the craneman watches the ladle fill, then guides
giant hooks in to carry the ladle down the line to the furnace.
(23) Meanwhile, an old hand at the game waits by the open hearth for the
hot metal coming up from the mixer — ready to direct the craneman's pouring of
the fiery charge into the blazing furnace. About 50 tons of liquid iron are now
added to the melted scrap. And the sheer beauty of this scene never fails to grip
the thousands who visit these plants.
(24) Years ago the making of steel was the experienced guesswork of smart
old-timers. But today their experience is backed up by the most accurate of
scientific instruments.
(25) This is steel in the making.
(26) Throughout every stage of steel's vivid evolution repeated tests are
taken. The helper dips his test spoon — spoon, mind you — into the soup — and
to the steelmaker it is just that— soup. And this sample, poured into a test
mould goes to the laboratory for analysis.
(27) These are the craftsmen of steel — these and hundreds of thousands like
them — men born and raised to the companionship of hot metal — young men learning
their trade — old men grown gray in the university of steel itself — men who know
all the moods and fancies and quips and quirks of molten metal — who know how
to tame and temper this flaming monster to the service of mankind.
By their watches and their blue filter glasses shall ye know them. A golden
glow on their faces, they peer into the open hearth to read the future of this steel
as a gypsy reads your future in the tea leaves.
(28) Even as a great chef expertly adds just the right seasoning to his famous
dishes, so these expert chefs of the open hearth add the condiments that season
steel — in this case, a helping of ferro-manganese. These boys certainly can handle
their shovels — they swing and follow through with all the power and grace of a
cliampion golfer. They must hit a certain spot inside that furnace and that,
believe me, is quite an art.
(29) On the ranch or in a lumber camp, this means "come and get it or we'll
throw it away". — It means Grub! — But in these mills it means: "Pour Steel!"
Here are the cindersnappers, jacks of all trades. With rammingrod ready, they
wait, while men on the other side prepare the furnace for tapping. -Another pinch
of this and that from the bins and boxes according to the sure recipes of steel's
cookbook. Meanwhile the helper with an oxygen torch bums through the clay
which plugs the tapping hole. They're raring to go, these cindersnapper lads,
but it takes time to uncork this flask. Just a moment now — only a few more
ashes to get out of the way and then the "Go ahead!" will come. It's a welcome
signal because the smash of ramming through a heat- of steel is always a high light
in their da,y's work. Altogetlicr- there she goes! It's steel— backbone of the
CONCENTRATION OF ECONOMIC POWER 10449
worlci — steel for axles, springs, girders; steel for bridges, wire, slilps, automobiles
magic and marvels from the earth -from the labor and brains of men who serve
their fellowmen.
(30) It takes about 15 minutes to fill this ladle. Slag, tJie scum or flux of
limestone, floats on top of the steel, finally overflowing into the slag pot.
(31) Bathed in a red glare, the craneman handles with ease his heavy load of
glowing metal — this gigantic ladle, like a huge soup bowl — 150 tons of liquid steel.
Flames lick through the scum of its surface, a blood-red touch from the seething
cauldron.
(32) Stately as a ship, the ladle moves to its position at the pouring platform,
ready at the mere touch of the hand to discharge into the waiting ingot moulds.
(33) Skillfully the craneman maneuvers the heavy load to rest, centering tlie
nozzle above the first of the moulds. The stopper is released and out gushes the
steel to fill them one by one.
(34) Every little movement has a meaning of its own in steel. Tests for quality
such as these are very important. They go to make steel one of the most scientifi-
cally-controUed operations in all industry.
Meanwhile, the fascinating work of pouring goes on. Here's a young apprentice
in steelmaking, taking a lesson from the older heads of the pouring platform as
with an optical pyrometer he measures the temperature of the molten steel — and
we are seeing just what he sees through the pyrometer — steel at 2800 degrees hot.
Slowly cooling — beautiful to look upon — the ingots sparkle and eflfervesce in their
moulds. When cooled enough, they will be stripped of their most unfashionable
jackets.
(35) Another day without an accident. It is now common for months to go by
without a single man being injured, so highly developed is modern safety practice.
(36) One of the most thrilling operations in the whole dramatic story of steel-
making is the production of alloy steel in the electric furnace. Inside this hottest
of all furnaces, huge electrodes, suspended over the mass of selected scrap slowly
creep downward. An electric arc leaps from electrodes to scrap and produces one
of the most spectacular sights ever filmed. — Here is inferno.
(37) After three hours under this man-made lightning, the scrap is melted and
the electrodes purr over the molten steel now ready for the addition of alloys.
(38) Finally the precious soup is cooked, and out of the cauldron pours another
heat of stainless steel. Steel for kitchens, for architectural trim, for fine instru-
ments and for laboratories and hospitals, for use wherever a glossy acid and rust-
resisting surface contributes to modern industry and to modern living.
(39) Rising before you like a harvest moon is the hungry maw of a Bessemer
converter — chief actor in one of the great shows in steel. Closely watching this
rising monster are the men who run the show — looking at life and steel from behind
shatter-proof glass, thirty feet away from the trio of Bessemer converters mounted
on a high platform.
(40) The operator's whistle was the signal which brought the hot iron from the
mixer apd started it pouring into the mouth of the Bessemer converter. This
iron whale, if really hungry, could swallow a score of Jonahs at a gulp, or could
find room in its red-hot gullet for a good-sized motor boat. Every night is Fourth
of July when the Bessemers go into action — and here's your action, Roman
candles lancing the blackness of the night.
(41) The girders of a railroad bridge march past, silhouetted by the licking
flames of these beacons of steel. As many of you have often seen, these huge
torches flare up in the dark as symbols of steel working for man.
(42) You are seeing it as the steelmaker sees it in gauging the carbon content
by the color of the flame. When the flame displays the telltale characteristics, the
conversion is complete and the Bessemers are ready to pour the magic metal
w*^ ch first we saw as plain ore, then soft as molten iron, and now transformed to
£ 1 for aU the needs of man.
(43) Here in the stripping yard is the row of jacketed ingots we left sparkling a
moment ago and now cool enough to shed their moulds. Reaching down, the
human-like fingers of this martian giant grasp and pry the moulds from ingots
weighing between twenty and forty thousand pounds — an impressive sight as
the rich, crimson velvety glow emerges from beneath the rising moulds. Steel
has no competitor in modern life — no possible substitute. Wherever you look,
you encounter examples of its service to man.
(44) The nation's parade of glowing ingots is a barometer of economic con-
ditions and is watched by many who seek to gauge business actiyity. For, as the
ingots go, so goes industrial America.
10450 CONCENTRATION OF ECONOMIC POWER
REEL III
(45) The golden pillars of fire go next to soaking pits for reheating, where they
literally soak in a bath of flame which evenly restores their temperature.
(46) That was the signal to send one of these glowing ingots from the soaking
pit. It is 2200 degrees hot as you see it now. And we begin to get an idea of the
innumerable processes required to make fine steel, and how amazingly economical
the finished product is after all this labor and effort. For, after all, this is a hair-
pin, a thumbtack, a monkey wrench, a rail or a beam in infancy.
(47) Through a mirror directly in front of him, the operator sees the ingot
bumping along the conveyor rollers, like a car on a corduroy road — unaware of
the punishment to come, as it will be squeezed, pounded and pressed into or_e of the
thousand shapes which meet the demands of industry, ine big idea here is to
crack off the scale which has formed and to prepare the ingot for the real rough
stuff to come.
The ingot is manipulated from a pulpit protected by heavy screening and
shatterproof glass, supported by the post partially hiding the ingot.
(48) The roller-man glances at the dials and brings the rolls down — it's a
squeez^T-play an inch or more at a time until the huge ingot is flattened to a slab
about 5 inches thick, ready to be cut like cheese into shorter lengths for further
rolling.
(49) In the continuous rolling mill, skilled workers, in pulpits set high up across
the floor from each set of roUs, chart the course the slab must follow as they phone
dimensions and adjustments from stand to stand. These continuous mills cover
so much ground that the traffic lights of a mill are as important as the red and
green stop and go lights of a small town.
(50) All clear. The rolls are set and ready. And here it comes. A white hot
slab of steel, sliding swiftly and smoothly toward the all-poAverful rolls.
(51) The first pass takes off the scale. Then a quarter turn on the turntable
sends the slab sideways into the spreader to increase its width. An extra push
is needed here to force it through the rolls.
(52) That's only the first step. Farther down the long line the width is checked
and then the rapidly transforming slab of steel races on beneath showers of water
and steam, to enter the reversing mill, and back' and forth and back and forth
again it must pass. And this reducing process we don't recommend to the ladies.
(53) It's hard going forthe slab. But it's just another dial-setting and a turning
of a switch to the man at the levers. He sits at a control board like the keyboard
of an organ, and casually watches the huge rolls do their work. Getting longer
and longer, the plate races on to run the gauntlet of the finishing stands, four
giant stands in tandem, each one squeezing the plate thinner and thinner.
(54) From the beginning of this pictorial drama of steel, we have seen how
machines have been called to the aid of the men who make steel.
(55) These machines of the steel mills are genii more powerful, more incredible
than Aladdin ever summoned by rubbing his wonderful lamp. Watch this
servant work for Man, his master, machines obedient to the merest touch; some
as delicate as the flutter of a butterfly's wing — some as powerful as an avalanche.
These same machiijes, while producing amazingly low-cost steel, have created
many new commodities, many new markets — thus providing for countless workers
occupations which never existed before.
(56) One of the most interesting of recent inventions, the rocking shear, was
suggested by an ordinary rocking chair, perfected in a wooden model which
sheared chewing gum instead of steel.
(57) And now watch the result — rocking power — high pressure shear, cutting
cold steel plate with incredible ease and accuracy.
(58) Such is the story of steel today — steel plate for use in railroad cars, Steam-
ships, bridges, and buildings.
(59) Well, boys, you're doing a swell job and we're getting a real thrill watching
you. Before going on let's have a bottle of pop together — Drink hearty!
(60) Moving on in the production of steel we come to the manufacture of sheet
steel. Hot-rolled like steel plate, sheet steel is merely rolled thinner and thinner.
Then cleaned with acids, it is cold-rolled in coils to even lesser gauges, emerging
on the other side of this machine as'cold-roUed sheet, for use in automobile fenders,
bodies, stoves, refrigerators and the many products of pressed steel.
Further reduced and tin coated, cold-rolled steel has thousands of uses as tin
plate.
(61) Here's where the girls come in — as inspectors of the finislied plate. These
shining surfaces must tempt the vanity of any daughter of Eve. But surely iiot
CUNCENTllATION OF ECONOMIC TOWER 10451
this girl's. Oh-Oh! Well, to err is human. It must have been the oversized
mirror that did it.
(62) With that little touch of feminine vanity satisfied, she goes back to her
work — an artist at her job.
(63) These girls are mighty useful employees in a tin plate mill and their sched-
ule is arranged accordingly — an hour on and 15 minutes off for colTcc, tea and rest.
(64) Here we are back again with hot steel, and there's a red-hot rail coming
through the first pass taking on its first big impression. Like everything else in
steel, this rail was rolled down from an ingot. The rail bar takes more definite
shape with each new pass through the rolls. After the first pass, it moves down
to the end of the line — across the conveyor table and up on the high line in the
middle to an intermediate pass and then across another conveyor table, and down
the line at the right to the finishing rolls for its final impression. The finished
rail over which the wheels of your train may some day click.
(65) Steel cuts steel — the cold biting tlirough the hot, sawing a rail bar of more
than a hundred feet long into standard lengths.
(66) Then these rail-lengths are heat-treated, or Brunorized, as they call it in
the steel business, strengthening the rails to withstand drastic changes in tempera-
ture, and the pounding of heavy trains. In heating, these rails bend, but in cooling
they will straighten out.
(67) We go along now to still another most interesting episode in the fascinat-
ing drama of steel production — to still another pictorial chapter in the saga of
steel — rolling giant beams. How many people would ever guess that from this
6-foot ingot, a 36-inch I-beam, almost as long as a City block, could be rolled!
Hot rolls steam and sizzle, but an operator skillfully trips the switches controlling
a pressure of many thousands of pounds. Back and forth under the dripping rolls
the ingot passes until it takes on a faint shape — the semblance of an I-beam —
suggestion of a girder that may support a bridge or a skyscraper. It's all as
easy as falling off a log. Or so it seems as this young man of steel handles the
controls, passing the huge form backward and forward, reducing the gauge, shap-
ing the rough beam into an almost finished product, and sending it along down the
line on its way to the finishing stands.
(68) There comes the I-beam out of the finishing stand — and we have actually
seen how one hundred and fifty feet of strong, sturdy steel can be rolled from a
six-foot ingot. The columns and girders with which America builds its future!
(69) The beam slides down the rollers coming to a stop at the saw to be trimmed
and cut to length.
(70) They're mighty particular to get things right, these steel men Here
they are taking a sample from the hot beam — a test piece — which will go on to the
laboratory. But right now they have another use for it — the hot beam sample
performs a dual role, serving also as a fireless cooker de luxe for Mike's private
coffee pot.
(71) It's too good a thing to keep to himself. So big-hearted Mike calls
Powerful Pat to have a sip of the old Java with him. "I accept with thanks,"
says he — "but don't ever let the wife know you're this good, or she'll be after
pinning an apron on you."
REEL IV
(72) Now let's stroll over to the axle forge where immense hammers are pound-
ing like pile-drivers. This machine does the heavy work but man's hand shapes
the railroad axle. Packing an awful wallop, this hammer slams down on the help-
less round, beating it into shape.
(73) Two crews alternate at the hammer, as each axle is turned. Now the
axle is forged from the other end as the giant hammer shapes the collar. See
between the hammer blows, the alert intense faces of these men. While the axle
is getting its finishing touches, railroad wheels are being turned out in another
impressive operation of the modern steel plant. The first thing which will catch
your eye will be a red-hot wheel block, as the steel men call it, about to take its
place between the two halves of a wheel mould. And then as men and machinery
take advantage of the precise moment, the glowing hot block is formed under
20,000,000 pounds of pressure — slowly — very slowly — pressed and flattened
and shaped into a blank— something close to a railroad wheel, but not yet the real
article, and then with scarce an instant's pause the blank is lifted from mould No.
1, while Mould No. 2 slides slowly and easily to the left and relentlessly grips the
victim between its powerful jaws. And then comes the final shaping in the finish-
ing mould, under further terrific pressure. If you thought the first one was a
squeezer, watch No. 2.
10452 gONOENTRATION OP ECONOMIC POWER
(74) The throttle of Casey Jones never controlled as much power as these
levers which now release the rough wheel and send it on to the caliper man. Only
perfection gets by this chap. Then upon emerging, the wheel is ready for finish-
ing— perhaps to convey you, some day, possibly soon, on a journey of your heart's
desire.
(75) Here's another chapter in the tale of steel. Coming out of a reheating
furnace is a pair of billets — 30 ft. lengths of steel about 2 inches square. They,
too, were rolled down from an ingot — rolled in a billet mill much like a rail mill.
The billets run the gamut of 16 sets of reducing rolls. Each roll reduces the diam-
eter and hastens the rod with ever-increasing speed toward its final reduction.
In a moment you'll see it begin to step out, the snail turning into a scared rabbit.
Its rate of speed through the rolls is from four to 45 miles an hour, better than a
race horse, as its length increases from 30 ft. to almost three quarters of a mile.
(76) These close shots show exactly what takes place, slow at the start — then
faster in this intermediate pass — and still its speed increases. If you watch
closely, you can see it dart through these rolls.
(77) And at last there it comes — whistling into the coiler — to be tamed into a
shapely coil of finished rod.
(78) These marvelous machines of steel pull their own taffy — heavy wire from
rod as we see here in these big dies.
(79) But we're not through yet with this metallic candy-pulling. Now the
rapidly thinning wire goes to a huge drum which is a real taffy-puller — and our
wire gets tenuous and more tenuous.
(80) The operator most accurately measures the gauge, for a thousandth of an
inch counts in the kind of accuracy that is standard in wire drawing.
(81) The rest of the story of wire making is one reduction after another, a
hundredth or a thousandth of an '■'-oh «t 3 time-. -Finer and finer the tough steel
wire is drawn.
(82) On the wire goes darting, twisting, weaving to and fro, through as many
as 11 dies, until finally it comes out, all bright and silvery, almost as fine as silken
thread.
(83) And so wire is made for countless demands, for bed springs, nails, fence,
telephone and telegraph lines, more than 90,000 uses represented in our modern
civilization.
(84) Production of pipe and tubes is another important phase of steel produc-
tion. The finest kind of tube is seamless. Starting as a hot round, a reheated
cj^linder of solid steel is hustled along and rammed into the seamless piercing mill.
By means of great pressure, created by whirling cone-shaped rolls forcing the
malleable steel forward over a piercL-g point, the round emerges on the other side
as a seamless tube — a hollow pipe of hot-rolled steel.
(85) It's remarkable how perfectly this round of golden hot steel is pierced,
expanded and finished to meet specifications — one of the most interesting opera-
tions to be found in any of these great steel mills.
(86) And so, mile after mile of seamless tube finds its place in the pipe lines
which serve us for heat, fviel, water and the other necessaries of modern life.
(87) Let's turn from the colorful, dramatic sight of the mill to the quiet of the
laboratories, and to the scientist. Much of what you have seen would not have
been possible without the research man, constantly working into the future of
Steel and devising new ways for it to serve its master, man. Here we see Steel's
anatomy photographed and studied.
(88) Here's a piece of Cor-ten sted getting the tensile test. That dark colored
piece the metallurgist has just placed in the machine is being subjected to the
severest possible tension. See how remarkably a piece of steel can be stretched —
almost like rubber. Fifty, sixty, seventy thousand pounds of pull per square inch
and more to find the breaking point. It's amazing that steel can stand such
punishment. Finally, it does break under much greater strain than ever will be
exacted in its actual use.
(89) With little furnaces such as these, the scientist worked with patient study
and experiment to aevelop stainless steel — whose shining surface reflects the re-
search and the effort devoted to its production.
(90) This is the fascinating world of steel. Many are those who walk its paths.
The miner, the engineer, the craneman, the melter, the roller, tne scientist —
hundreds of thousands among the men of steel. More than 500,000 men are
engaged in making steel, over half of them in the companies of United States
Steel alone. Men who are confident and competent in their work, men who can
return to their homes and firesides proud and happy in the knowledge of their
contribution to society.
CONCENTRATION OF ECONOMIC POWER 10453
(91) Beyond the door of a furnace we see nothing but hot gases and bubbling
metal. But the man who makes steel sees there streamlined trains streaking
smoothly across the continent, great ships carrying the products of the farm and
factory to the four corners of the earth — saiUng the seven seas with the promise of
world peace through world trade, with commerce and profit to all.
(92) He sees concrete roads made from the slag of blast furnaces, busy with cars
and trucks of steel.
(93) He sees beyond that bubbhng steel, the wire lines of modern telephone
and telegraphic communication, and the high towers carrying electric power to
home and industry.
(94) He sees modern farming made possible by steel machinery and fencing.
(95) Countless oil derricks stretching their structures to the heavens — gaunt
frameworks of steel — landmarks of another of America's great industries. Big
and little things, he sees — the big little conveniences of modern cookery, stainless
steel utensils and kitchen sinks.
(96) Hammers and little nails that play a big .part — or the melodious vibration
of a finely drawn steel piano string — he sees acid resisting cans for food preserva-
tion of a fine steel watch spring set in a steel chassis.
(97) And he sees tall buildings of steel rearing their proud heads almost above
the clouds.
(98) Great bridges spanning rivers and harbors, bringing commerce and its
people closer and closer together.
(99) All these and more the man of steel sees — New eras — New standards of
living — as the world moves forward with the men who make steel.
The following letter is included at this point in connection with
testimony on p. 10382 et seq., supra.
PiCKANDS Mather & Company,
November 9, 19S9.
Hon. Jos. C. O'Mahonet,
Chairman, Temporary National Economic Committee,
Congress of the United States, Washington, D. C.
Dear Senator: At the close of the hearing on Friday last, November 3rd, you
made the suggestion that I might be able to recommend to the Committee what
business men ought to be free to do without fear of violating the anti-trust laws
for the purpose, as you stated at the hearing, of perhaps aiding the Committee in
its desire to promote a greater degree of prosperity for business as weU as for the
rank and file of the people of the United States.
Frankly, my experience gained for the most part in the iron ore business does not
qualify me to answer these broad economic questions, particularly as far as the
many industries outside of our own are concerned. However, I hope you will
believe that I have given very careful consideration to your request as it affects
the iron ore industry in the hope that I might be able to answer your question
with some practical business suggestions. Several of the investigators of the
Department of Justice have spent many weeks in the various offices concerned and
have had at their disposal for study all of the contracts and agreements under
which these businesses have been conducted, and in addition, a group of the
industry has spent three days on the witness stand in an efi'ort to convey to your
Committee a practical and general understanding of the iron ore business and
how it functions. The trade practices of the iron ore industry are the results of
many factors and considerations which have grown up over many years and which
the producers and consumers of iron ore have taken for granted in the running
of their respective businesses. I, personally, have no fault to find with the
results accomplished, believing as I do absolutely, that there has existed for many
years and now exists the free and keen competition which I believe to be necessary
in the long run for promoting the prosperity which your Committee is endeavoring
to secure. Therefore, I have come to the conclusion from my knowledge of the
iron ore industry that I am unable to suggest, in answer to your direct question,
a more specific definition of what "business men ought to be free to do — "
than is now contemplated in the basic purposes of the so-called anti-trust laws.
Respectfully yours,
(Signed) Elton Hott 2nd.
INDEX
Page
Acme Steel Co 10469
Allegheny Ludlum Steel Co 10409
Allegheny Steel Co 10411
American Iron and Steel Institute 10410, 10418, 10421-10422, 10424
Annual statistical report of 10395, 10397-10399, 10401-10402, 10408
American RoUing Mill Co 10240, 10242, 10348, 10408-10410, 10428
Archibald, Ralph 10446
Arnold, Thurman 10329, 10357
Athens mine 10296-10297, 10304-10305, 10438
Barnum, WUUam H 10236
Base prices 10305- 1 0350
Determination of 10305-10337, 10367-10372
Uniformity of 10311-10328
Variations from 10337-10348
Belden, W. B 10428, 10454
Bennett Mining Co 10228, 10233-10234, 10352, 10443
Bessemer range -- 10306
Bethlehem Steel Corp 10219, 10226, 10229,
10231-10234, 10256, 10274, 10296-10297, 10304, 1031 L 1032),
10393, Facing 10393, 10399, 10407-10409, 10411, 10437-10438
Block, L. E 10354, 10381. 10444
Block, P. D 10354
Bool, Samuel 10227
Bourne-Fuller Co., Ino 10257
Brayton, Henry F --. 10236
Bristol Mining Co 10430
Brown, Alex. C 10295,10297-10.300
10302-10303, 10354, 10370, 10433, 10436, 10438, 10444, 10446
Brown, Fayette, Jr 10438
Butler Bros 10224-10225, 10286-10288, 10290, 10301, 10311, 10329,
10334, 10342, 10371, 10425-10426, 10435, 10441-10443, 10446
Ore contracts 10291-10294
Butler, Emmett 10290, 10294, 10.329, 10441-10443
Butler, Hazen E 10443
Butler, Patrick 10291, 10294, 10329, 10435, 10441-10443, 10446
Carnegie-Illinois Steel Corp 10226, 10407, 10411
Carnegie Steel Co 10342
Census of Manufactures 10393, 10395, 10400-10401
Chamberlain, Selah 10236
Chicago & Northwestern Railway Co 10220
Clark, E. M -- 10236
Clayton Act 10253-10254
Cleveland'Cliflfs Iron Co 10220,
10224, 10235, 10237-10239, 10241, 10244-10245, 10247-102.58,
10260-10265, 10267-10271, 10273-10274, 10276, 10278, 10280,
10294, 10297, 10329, 10343, 10351, 10356, 10425-10438, 10442-
10443, 10446.
Acquisition by of stock in Oglebav, Norton & Co 10237-10256
Reasons for -' - 10238-10255
History and corporate structure of - 10235-1023G, 10255
Ore contracts of 1027.8-10279
Cleveland Iron Mining Co 10220, 1023.5-102.36
Cleveland Trust Co -- 10427
II INDEX
Page
Cliffs Corp -- 10235,10255-10257,10276
Formation of. '* 10255-10257
Cold Metal Process Co 10409
Colorado Fuel & Iron Co 10219, 10409
Competition:
Maintenance of advocated 10280-10281
Question of degree of in the industry 10272, 10276-10277, 10280-10281
Competitive advantage enjoyed by integrated steel producers 10360-10364
Congress of the United States 10215
Continental Can Co 10409
Continental Steel Corp 10409
Contract sales, iron ore 10307-10320, 10331-10332, 10359
Contracts, iron ore:
Butler Bros 10291-10294
Cleveland-Cliffs Iron Co 10278-10279
Pickands, Mather & Co 10291-10294
Corrigan. McKinney Steel Co... 10259-10262, 10265, 10273, 10276, 10431, 10433
Coulby Mine 10220, 10227
Croxton, D. T 10260
Crucible Steel Co. of America 10408-10409
Cuvuna Range : 10221, 10287, 10354
Daily Metal Trade . 10431
Dalton, Henry G 10229-10231, 10296, 10438
Dalton Ore Co 10227, 10230-10234, 10311
Detroit Steel Co 10409
Dies, Representative Martin 10348
Donner Steel Co., Tnc 10257, 10443
Duluth & Iron Range Railroad Co 10220
Duluth. Missabi & Northern Railway Co 10221-10222
Eaton, Cyrus S 10256, 10259, 10263, 10267, 10272, 10275, 10430
Project for midwestern steel merger ' 10256-10279
Reasons for 10267-10278
Elliott, S. R 10238, 10243, 10255,
10295, 10297, 10300, 10302-10303, 10430, 10436, 10438
Federal Reserve Board 10417
Federal Trade Commission 10387, 10412, 10423-10424
Fink, George.. _^ 10284-10285
Follansbee Bros.'C6 10409
Ford Motor Co 10321, 10331,
10333-10334-10336, 10341-10344, 10346, 10348, 10352,10370-
10371, 10385, 10409, 10411, 10441-10442-10443, 10445-10446
Foreign and Domestic Commerce, U. S. Bureau of Facing p. 10424
Freight rates. Lake Erie 10372-10381
Geffine, V. P 10431, 10434, 10438
Girdler, Thomas 10257-10259,
10263, 10273, 10354-10356, 10379-10381, 10433-10435, 10444
Gogebic Range 10220, 10227, 10238
Granite Citv Steel Co . 10409, 10412
Great Lnkes di.strict Ll 10219. 10221
Great Lakes Steel Corp. 10285, 10411
Greene, E. B . 10235, 10241, 10250, 10259, 10267, 10294-
1029.5, 10329, 10369, 10428, 10431-10432, 104r^7, 10444-10445
Greenwav property . 10348-10351
Hanna, Leonard 10295, 10352-10353, 10436
Hanna, M. A., Co 10224, 10283-10285, 10294, 10329, 10343, 10353, 10358,
10362-10363. 10371, 10425-10427, 10443-10444, 10446
Stockliolding of, in National Steel Corp 10284
Harrison, Perrv- _ . 10446
Heer, C. G_-.' 10431
Hewitt, Isaac L . . 10236
Hewitt, Morgan J; . .. . 10236
Hill, Edw-n C 10217, 10446
Hilton, H. G . 10330, 10331
Hocking, R. O 10441, 10443
INDEX HI
Page
Hoyt, Elton, II 10218-
10220, 10223, 10282, 10292, 10294-10300, 10305, 10308, 10316,
10329, 10331, 10334, 10342, 10352, 10354, 10371, 10435-10438,
10441, 10443-10444, 10453,
Humphrey, George M 10283,
10293-1295, 10329, 10334, 10351, 10371, 10436, 10444
Hunner, Earl 10444-10445
Hutchinson fleet 10236
Inland Steel Co 10225-10226, 10256,
10264-10265, 10275, 10279-10280, 10408-10409, 10411, 10427
Integration, question of added efficiency through 10272-10278
Interlake Iron Corp 10229, 10230-10231, 10409
Interlake Steamship Co 10218, 10229, 10231-10232, 10236, 10373, 10377
Internal Revenue, Bureau of, Report on Statistics of Income 10395, 10410
International Harvester Co 10226, 10409
Iron Age._ 10396, 10404-10405, 10411, 10413, 10416, 10420-10421
Iron and Steel Works Directorv of the American Iron & Steel Institute 10407
Iron and Steel Works Directory of the United States and Canada 10403,
10407, 10409
Iron CliflFs Mining Co, 10235-10236
Iron Mountain 102 19
Iron ore:
Base prices of:
See Base prices.
Contracts:
See Contracts, iron ore.
Contract sales . 10307-10320, 10331-10332, 10359
Industry:
History of 10220-10224
Taxes in 10364
"United front" policy in 10295-10305
Prices :
See Prices, iron ore.
Pricing, method used by U. S. Steel Corp. subsidiaries 10329-10330,
10357-10358
Producers, major - 10224-10225
Financial connections between, and steel companies.. 10225-10234
Reserves 10387-10389
Sources 10219
Spot sales of 10310-10315, 10339, 10359
Jackson Mine 10434
Jaynes, E. H 10431-10433, 10435-10436, 10438, 10446
Jones, Casey 1 0452
Jones & Laughlin Steel Corp . 10270,
10408-10409,10411,10428-10429,10432, 10445
Justice, U. S. Department of 10310, 10314, 10425-10427, 10439-10440, 10453
Kevin grade ore 10342,10352,10441,10443
Keystone Steel & Wire Co 104U9
Kulas, E. J --- 10262
Labor Statistics, U. S. Bureau of 10418-10421
Lackawanna Steel Co 10229
Lake Erie base price, determination of 10305-10310
Lake Superior Consolidated Iron Mines 10222
Lake Superior district 10219-10220, 10222-10224, 10227, 10387-10388
Lake Superior Iron Ore Association 10310,
10387, Facing 10424, .0425-10426, 10439-10440
Lake Superior & Ishpeming Railroad Co 10237
Lake Superior region 1 0269
Lukens Steel Co . 10409
MacKilliken, James A 10343-10345, 10442
Manganiferous Iron Co 10435, 10441-10442
Marquette Iron Co 10220
Marquette Range - .. 10220,10237,10280,10297
Mather Iron Co . . . ....10218,10227-10228,10231,10233,10235
Mather, Livingstone 10428, 10430
Mather, Samuel 10226-10227,10236,10431
IV INDEX
Page
Mather, William G 10236, 10238.
10243-10245, 10247, 10251, 10253-10255, 10257^10260, 10267,
10273, 10278, 10428, 10430, 10433, 10435', 10438.
McArthur, F. J .. 10435, 10441-10443
McGraw-Hill Book Co., Inc 10394
McKeesport Tin Plate Corp 10409
Menominee Range 10220, 10280, 10308
Merger, steel, Cyrus S. Eaton project for 10256-10279
Reasons for 10267-10278
Merritt, Alfred 10222, 10443
Merritt, Leonidas .,. 10308
Mesaba Bessemer . 10308
Mesaba non-Bessemer 10306, 10358
Mesabi Range 10220-10222, 10280, 10300, 10306, 10358, 10445
"Metallurgy of Iron and Steel, The" 10394
Midwestern Steel Co 10256, 10258
Mines, U. S. Bureau of 10399, Facing 10424
Mining Directory of Minnesota 10357, 10387
Minnesota Iron Co 10220-10221
Modification of existing laws, question of 10382-10386
Montreal Mining Co ■. 10241-10243,
10249, 10251, 10348, 10428-10429, 10432, 10446
Morse, James C - 10226
Movmtain Iron Biwabik mines 10221
National City Bank of Cleveland 10231, 10427
National Resources Board . 10391
National Resources Committee 10400
National Steel Corp 10225, 10283-10284,
10289, 10354, 10361-10363, 10381, 10408-10409, 10427, 10444
Formation of _• 10284r-10285
Stock in, held by M. A. Hanna Co 10284
Negaunee mine 1029&-10297, 10304, 10437-10438
Nelson & Associates 10346, 10349
New York Central R. R. Co 10435
Non-Bessemer range 10306
Norton, Laurence Harper 10431
Northwestern Steel & Wire Co 10409
N. R. A 10297-10299, 10301-10302, 10304, 10413, 10436, 10438
Ogden, WiUiain B 10236
Oglebay, Crispin 10237, 10239, 10244, 10294, 10329, 10431-10432
Oglebay, Norton & Co 10224, 10237-
10240, 10244-10245, 10247-10248, 10250-10255, 10257, 10272,
10278, 10294, 10329, 10343, 10348, 10425, 10428-10432, 10442.
Acquisition of stock of by Cleveland-Cliffs Iron Co 10237-10256
Reasons for 10238-10255
Olds, Irving S 10224, 10329, 10330, 10357, 10377
Oliver Iron Mining Co 10221-10224, 10249, 10284, 10298,
10329-10330, 10357-10358, 10377, 10425-10426, 10436
O'Mahoney, Senator Joseph C 10453
Ore contracts:
See Contracts, iron ore.
Ore prices, iron 10305-103.50
Otis Steel Co 10225, 10260-10262, 10264-10265, 10273,
10275, 10279, 10370, 10409, 10411, 10427, 10433, 10435, 10445
Outhwaite, John 1 10236
Petroleum Retailers Association 10302
Phoenix Iron Co 10409
Piekands, Col. James 10226-10227
Pickands, Mather & Co 10218,
10224, 10228, 10230-10234, 10236, 10249, 10291-10294, 10296-
10298, 10300, 10304-10305, 10308, 10314, 10321, 10329, 10344,
10352-10353, 10371, 10425-10426-10427, 10436-10438, 10441-
10443, 10452-10453.
Ore contracts 10291-10294
Pittsburgh Steamship Co 10236, 10376
Pittsburgh Steel Co 10226,10376,10409
liNDEX V
Pace
Plymouth mities 10228
Poor's Annual 10408
President of the United States 10215, 10301
Prices, iron ore 10315-16350, 10367-10372
Determination of 10305-10337, 10367-10372
Discussions about 10352-10357
Efifect of cutting 10343-10350
Rigidity of 10311-10328
Pricing, iron ore, method used by U. S. Steel Corp. subsidiaries... 10329-10330,
10357-10358
Producers, major iron ore, connections with steel companies 10225-10234
Quinn, Clement K 10343, 10345, 10442
Raymond, H. A 10260, 10354-10356,
10365, 10369-10370, 10379, 10383, 10388, 10433, 10443-10444
Republic Steel Corp 10225-10226,
10232, 10235, 10246, 10256-10258, 10260-10265, 10267, 10273,
10275-10276, 1027&-10280, 10354^10355, 10369-10370, 10407-
10409, 10411, 10427, 10433-10434, 10445.
Reserves, iron ore 10387-10389
Rockefeller, John D 10222
Roebbling's, J. A., Sons 10409
Rowe mine 10286-10290, 10293
Description of 10286, lf)288-10290
Development of, question of ... 10286-10290
Season, iron ore shipping 10327"-! 0328
Securities & Exchange Commission Facing 10393
Sharon Steel Corp 10409
Sharon Steel Hoop Co 10226
Shick, Harry 10443
Shiras, 10342, 10441
Spot sales, iron ore 10310-10315, 10339, 10359
Stabilization 10271-10278
Stacks, Pat 10441
Stambaugh, A. A 10235
Stanley committee report (H. R. No. 1127) Sixty-second Congress 10222
Stanley Works, The 10409
Steel Co. of Canada, Ltd 10226, 10230-10232, 10330, 10331, 10348
"Steel, The Servant of Man" 10217, 10446-10447
Showing of moving picture before T. N. E. C 10217
Superior Steel Corp 10409
Supreme Court, U. S 10302
Tariff Commission, U. S 10394
Report No. 128 1040G
Taxes in iron ore industry 103G4
Temporary National Economic Committee 10391, 10453
Tennessee Coal, Iron & Railroad Co 1041 1
Tilden, SamuelJ 10236
Timken Roller Bearing Co. 10409
Tonawanda Iron Corp 1022(;
"Topsy"..; - 10228
Trumbull-Cliflfs Furnace Co 10265, 10270
Trumbull Steel Co 10246, 10256, 10277
Uniformity, price 1031 [-10328
"United front" policy in iron ore industry 10295 10305
United States Steel Corp 10217, 10222-10224, 10236, 10274,
10284, 10300, 10329-10330, 10342, 10357, 10358, 10381, 10393.
Facing 10393, 10407-10410, 10412, 10425-10426, 10447, 10452.
Vermillion Range 10220-10221
Virginia Ore Mining Co 10445
Wade Estate _ _ _ _ - - - - - 10431
Wade, G. G. 10235,10241,' 10245,' 10250, 10251, 10428-10430, 10432
Wade, Garretson '0431
Waldorf-Astoria Hotel 10299-10300. 10302,10437
Washington Tin Plate Co , - 10409
VI INDEX
Page
Weir, Ernest T 10285-10289, 10354, 10361-10362, 10369, 10381, 10444-10445
Weirton Steel Co 10285, 10411, 10428
Wheeling Steel Corp 10225,
10240, 10242, 10256, 10264-10265, 10275, 10279-10280, 10348,
10349, 10370, 10408-10409, 10411, 10427, 10442-10443, 10445.
White, W. W 10241, 10250, 10300, 10303, 10428, 10432, 10437-10438
Wickwire-Spencer Steel Co 10409
World War I 10245, 10247
Worth Steel Co 10409
Wyman, C. L 10346, 10353, 10442-10443, 10446
Wysor, R. J 10354, 10369-10370, 10433-10434, 10444
Youngstown Sheet & Tube Co 10225,
10228-10229, 10231-10232, 10234, 10256, 10264-10265, 10275,
10279-10280, 10335, 10408-10409, 10411, 10427.
X
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