The Changing Steel Industry of the European Common Market

Clark University

The Changing Steel Industry of the European Common MarketAuthor(s): Kenneth WarrenSource: Economic Geography, Vol. 43, No. 4 (Oct., 1967), pp. 314-332Published by: Clark UniversityStable URL: http://www.jstor.org/stable/143252 .

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THE CHANGING STEEL INDUSTRY OF THE EUROPEAN COMMON MARKET

Kenneth Warren

Dr. Warren, lecturer in economic geography, the University of New- castle upon Tyne, England, has specialized in the geography of iron and steel.

T HE treaty establishing the Euro- pean Coal and Steel Commu- nity was signed in July, 1952,

and in February, 1953, the Community came into being as the first, sector, approach to a European Economic Community. Since then, not surpris- ingly, there has been a host of changes in the iron and steel industry of western Europe, and in the process the geography of the output and consumption of raw materials and of finished products has been altered too. Substantial elements of the old pattern remain, but the lineaments of new ones are already beginning to emerge.

Expansion has been the outstanding characteristic. In 1952 the six, still- unlinked steel industries made 41.7 million tons of steel, just 60 per cent more than Britain but only 44.7 per cent as much as the United States. In 1965, at 85.9 million tons, output was well over three times the British level and 65.4 per cent as much as the United States production of that year.' In their share of this total there has been a shift between the Community members, the older producers declining relative to the Netherlands and especially as com-

pared with Italy, 80 per cent of whose

capacity was said to be less than 14

years old by 1964 (Table I). Although the Ruhr region and its fringes produced

1 World output in millions of net tons, 232.7 for 1952, 501.4 for 1965.

almost 27 million tons steel in 1964, or 70 per cent more than in 1938, and the output of Lorraine too has increased, there has been a shift away from both home ore fields and coal fields coastwards, both north and south of the Alps. In 1938 there was no major coastal integrated works anywhere in western Europe; by 1965 seven plants of over 1 million tons steel capacity each were at work on tidewater, three of them at locations which had no steel capacity at all as late as the second half of the 1950s. Even so, this coastward trend, depending on an increased use of imported raw materials, has been smaller than seemed likely only eight years or so ago. Another change, stemming to a large extent from the rising standard of living, has been a switch of emphasis from heavy steel lines to lighter ones and especially to flat rolled products. In 1952 production of hot and cold rolled sheet under 3 mm. thick represented 13.7 per cent of the mill output of the six; in 1964, 23.4 per cent. This change has involved the reconstruction of old plants, and has given an oppor- tunity to build completely new ones.

PRE-COMMUNITY LOCATION PATTERNS FOR STEEL, M'ATERIAL SUPPLIES

AND MIARKETING

Certain broad types of locational orientation can be recognized in western Europe. The Ruhr, the largest steel




TABLE I

CRUDE STEEL PRODUCTION OF E.C.S C. COUNTRIES AND OTHERS AS PERCENTAGES OF WORLD TOTAL-1952, 1965

E.C.S.C.......................... West Germany................. France........................... Italy .......................... Belgium ....................... Luxem bourg..................... N etherlands .....................

1952

19.6 8.7 5.1 1.6 2.4 1.4 0.3

1965

19.3 8.3 4.4 2.8 2.1 1 0 C.7

Other Countries United Kingdom ............... United States ................... Japan ........................ Soviet Union...................

Source: Iron and Steel, March, 1966 p. 120; American Iron and Steel Institute. Annual Statistical Report 1957, 1965.

district, is based on the biggest coal producing area of the Continent, and, like the Nord, Belgian, and Saar areas, obtained its ore either from outside western Europe-though largely from other parts of the Continent-or from the Jurassic ore fields to the southwest. In Lorraine, in Luxembourg and the extreme south of Belgium, this ore field had its own integrated industry, as also, on a much smaller scale, had the ore districts of Ilsede, Salzgitter, and Bavaria. On the coal fields edging the Central Massif were a number of generally small, and, in order to improve their competitive position, increasingly specialized plants. In the Alpine region of France, and above all in the Italian foothill zone of the Alps, was a steel industry very largely unintegrated with ironmaking but using scrap and electrical processes. At two points near the French coast, Le Boucau in the southwest and Mondeville in Normandy, were small integrated works built to use imported Bessemer ores but also supplied from local sources. Two small integrated works had been built on the Tyrrhenian coast of Italy-at Piom- bino, Tuscany, opposite the Elba ore fields, and at Bagnoli, just to the west of Naples.

World War II had cut off a strong coastward movement which was becoming noticeable at the end of the 1930s.

Ijmuiden had first made pig iron in 1924, and, after a very lean time in the depression, built steel furnaces in 1938 and rolling mills in 1939. In 1938 it was decided to build an integrated works at Cornigliano, to the west of Genoa, to supply semi-finished steels to the very large number of rerolling mills in Pied- mont and Lombardy. By this time Arbed of Luxembourg had reserved a 740-acre plot of land on the eastern bank of the Gent-Terneuzen ship canal, to be developed as a fully integrated works using Brazilian iron ore at some future date, when the Luxembourg ores began to fail. After the dislocations and dismantlings of the war period, Ijmuiden and Cornigliano were completed.

Before 1952 there was already a significant degree of interdependence in raw material between the various steel producing countries of western Europe.2 Lorraine, though making progress in coke production from its own coal, was still heavily dependent on fuel from the Ruhr, and to a lesser extent the Ruhr used minette ore. Lorraine ore and Ruhr coke were major elements in the industry of Belgium and Luxem- bourg, and Ruhr coal, as well as that from outside the six, flowed in large

2 A useful general survey, well provided with statistics, may be found in: The Interdepend- ence of the European Coal and Steel Industries, British Iron and Steel Federation, Monthly Statistical Bulletin, 25, No. 5, May, 1950.

1952

7.8 41.1

3.3 16.1

1965

6.2 27.4

9.2 20.5

315



ECONOMIC GEOGRAPHY

tonnages into Italy and to the Nether- lands.3 Already large tonnages of finished steel were being marketed across frontiers, but these movements increased transport costs and to a considerable degree this insulated each nation's works from those of its neighbors. Because of the obstacles to free trade, freight rates, raw material prices, and wage rates differed considerably. The freight policies of German railways penalized Lorraine pig iron makers. Furthermore, at the end of 1952, just before the common market came into

being, Lorraine ore was selling for 854 francs on the home market but 1225 francs beyond. At this time scrap was

$22.50 a ton in the Netherlands, but in Italy, where so much of production depended on it, the price ranged up to

$55 a ton.4 Although there were some

complications, the Treaty of Rome provided a common market in minerals, labor, and openly declared and fair

freight rates. This provided a unique setting for the technical changes and

general expansion of production which

Europe was to share with the rest of the metallurgical world.

E.C.S.C. AND THE PROBLEMS OF

RAW MATERIAL ASSEMBLY,

PRICING, AND M\ARKETING

Transport has proved a difficult section of the business of the community to rationalize and to make fully public. As late as 1957 it was reckoned that, as a result of discriminating policies by German Federal Railways, freight rates on Ruhr coke to Lorraine were 200 francs more per ton than was charged to

3 Full, authoritative surveys are to be found in N. J. G. Pounds: Lorraine and the Ruhr, Econ. Geog., Vol. 33, 1957, pp. 149-162; and J. E. Martin: Location Factors in the Lorraine Iron and Steel Industry, Institute of British Geographers, Transactions and Papers, Vol. 23, 1957, pp. 191-212.

4 E. Manuelli (Chairman of Finsider): Situa- tion and Prospects of the Italian Steel Industry, Banco di Roma, Review, November, 1958, p. 571.

Bavarian works 128 miles farther away.5 Only very much more recently have Dutch railways been induced to publish their rail freight charges in full, and

obviously full publication of road charges is virtually impossible. Even so, within a few years large savings in transport charges across frontiers could be claimed

(Fig. 1). But significant discrepancies in raw material prices remain. Scrap provides a good example of this, the Italian price continuing to be high, and the differential being much wider than over comparable distances between met-

allurgical centers in the northeastern United States (Table II).

TABLE II

SCRAP IRON AND STEEL PRICES, 1961 AND 1965-1966

(Dollars per ton)

January, 1961 January, 1965-1966*

Germany....... Paris area....... Italy .......... Pittsburgh ...... Chicago ....... St. Louis........ Buffalo .........

39 39 44 36.5 35.5 31.5 27.5

29 29 47 32.5 37.5 33.5 25.5

*1965 for E.C.S.C., 1966 for U.S.A. Source: O.E.E.C. The Iron and Steel Industry in 1964

and Trends in 1965, p. 42. Iron Age, January 1961, Jan- uary 1966.

For steel marketing the community adopted a basing point system. All companies declare a basing point price for their steel products, and in marketing add the full cost-for whatever form of transport is used-of carriage to the point of delivery. In order to compete for a particular order for which he is not otherwise favorably placed a steel producer may "align" down to meet the delivered price of the ruling basing point, that is the works whose mill price plus transport are the lowest. This system of basing point prices, open freight rates, and alignment was de-

5 M. Ferry of La Chambre Syndicale de la Siderurgie Francaise in Financial Times (supplement, Iron and Steel) August 19, 1957, p. 48.

316




FIG. 1.

signed to promote competition but to

prevent it from becoming cut-throat. There are in practice numerous anomalies. A firm may choose to make its works a basing point, but alternatively may choose a quite arbitrary one. At one extreme there is a large number of

basing points in Italy, whereas in Ger-

many, apart from the Saar, there is

usually only one, either Oberhausen or

Essen, depending on the product. Under this system a Nurnberg consumer buying from Maximilian Hutte at Sulzbach-

Rosenberg, to the east, will pay, on

products for which a German basing point is the ruling one, Ruhr mill prices plus transport charges from the Ruhr. The same situation applies to purchases

317



ECONOMIC GEOGRAPHY

E.C.S.C. BASING POINTS WITH LOWEST DELIVERED PRICES IN STUTTGART AND MUNICH JANUARY I st. 1964

u. a) Flem'olle :harleroi F

Marcinelle

Montmedy e o 0 Thionville AA&^ Sorrebrucken

+ Stuttgart

Munich Munich

Stuttqart-Munich O * R A A

O I V

0 0

* S

e s

0 Milan

teinforcinq rods lerchant bars Sections Vire rods loops and strips lasic Bessemer plate )pen Hearth plate ;hip plate . P.O. sheet

S. P.O. sheet

0 Miles 200 I . I

Source: E.C.S.C. General Report 1963-1964

FIG. 2.

from the Bremen works for local consumption. By all accounts this is ac- cepted in good grace, the local consumer regarding the improved service obtained from a local works as compensation for the lack of price advantage. In France there are many more basing points, but

their different prices have apparently been fixed with an eye to the large Paris industrial area market, so that mill price plus transport will enable plants in different sections to compete there on fairly equal terms.

Not only are distances and freight

,MON

318




rates important influences upon com-

petition, but so also are mill prices, and these vary considerably, depending not

only on the costs of production, but also on whether or not a company is

prepared to undertake a great deal of

alignment, or is willing to alter its prices frequently according to the conditions of the trade. In Belgium, for instance, the big Cockerill-Ougree group is re-

ported to be conservative in its price policy, while the much smaller Forges de

Clabecq, though less advantageously located on the Charleroi-Brussels canal, changes its quotations frequently and is generally a price leader. It, therefore,

appears as the ruling basing point for much of what might appear to be within the market area of other mills (Fig. 2). Rather than align down to meet the

prices of such an "outsider" the bigger firms can, at least in times of buoyant demand, choose to ignore it and take their share of the remaining market. Under adverse trade conditions they may be more willing to follow its prices. In addition to these anomalies, trade between the various districts and countries is still hindered by national prefer- ences. Reportedly, Ruhr firms, able to

give good service to local consumers, and often also closely connected to them

through the regional power distribution

network, and as purchasers of scrap, have, in the past, tended to regard competition fromi outsiders with an

apparent cost advantage as a relatively small threat.

Even so, intra-conmmunity trade, "in-

terpenetration" as it is called, has increased. Before the formation of the E.C.S.C. trade between its present members represented only 11 to 12 per cent of their total output, but in the keen competitive conditions of 1963, 23.4 per cent. Lorraine, for example, has been able to take greater command of

its natural market advantage in southern Germany (Table III).

TABLE III

CARRIAGE OF ROLLED STEEL PRODUCTS. FRANCE AND LORRAINE TO SOUTHERN GERMANY 1956, 1961

(Thousands of metric tons)

1956

From France .................. 75.4 of which Lorraine ............ 43.5

1961

300.7 210.0

Note: road shipments excluded. Based on E.C.S.C. Annual Reports.

TECHNICAL CHANGE WITHIN THE

STEEL INDUSTRY TO 1960

Within the E.C.S.C. the steel industry has adapted itself to the widely differing raw material endowment of various districts. With ample ore and access to coal the Luxembourg, Belgian, and Lorraine industries have a very much

higher pig iron/steel ratio than Italy, the lack of large scrap yielding industries

emphasizing this, especially in Lorraine and Luxembourg. The dearth of scrap favored the Bessemer process rather than the open hearth, and, furthermore, the basic Bessemer process was an adjust- ment to the chemical composition of minette ore. The Northern coal field with more scrap-using industries and

increasing use of foreign ore6 had a

larger open hearth steel industry, and the Ruhr exemplified these conditions to a much greater degree. Wholly new since the 1952 treaty, oxygen steel

making has now become an important and very rapidly growing technique (Fig. 3). Giving high yields for a smaller

capital investment, yet producing good quality steel, it seemed likely to favor low-cost pig iron producing areas against those with large scrap yielding markets, and to be well suited to the establish-

6 By 1960 at Denain, Usinor used 60 per cent minette ore, 20 per cent western French ore, and 20 per cent Swedish ore. Iron and Steel Engineer, October, 1960, p. 102.

319



ECONOMIC GEOGRAPHY

FIG. 3.

ment of production in new locations (Table IV). In fact, until the late 1950s, minette ores were unsuitable for the L.D. converter. Then, as a result of experiments made mainly in Belgian

7 The L.D. process is the European name for the oxygen converter. The initials stand for Linz and Donawitz, the two Austrian works where it was first developed. It was unsuitable for use with high-phosphorus irons until pro-

and Luxembourg works using this ore, the modified process known as L.D.A.C. was introduced.7 Oxygen processes have been most rapidly adopted in Germany, the Netherlands, and Italy (Table V). vision was made to add powdered lime to the oxygen jet. The initials A.C. are the first letters of the names of the two chief centers of research for the process.

320




TABLE IV

E.C.S.C. SCRAP CONSUMPTION BY STEELMAKING

PROCESSES, 1964

(Kg. per metric ton)

T hom as ... .. ... .. ....................... 98 Siemens-M artin .......................... 673 Electrical........... ......... ........... 982 O ther . .................................. 219

Source: E.C.S.C. Rapport GSniral No. 13, 1965, p. 150.

In steel rolling the most significant development was the introduction of large scale new mill units, and especially continuous hot wide strip mills. Before 1940 there was only one such mill in western Europe, at Dinslaken on the northwestern edge of the Ruhr, and this was dismantled after the war. By the end of the forties, construction of hot strip mills commenced, and by early 1953 seven continuous or semi-continuous mills had been built, with four more either under construction or planned. An important effect of this program was to make mergers necessary in order to create firms big enough to finance the development. In the case of France, this led to the creation of

the new firm, Usinor (Union Siderur- gique du Nord), to build the first strip mill in the Northern coal field at Denain, and the mill built at Seremange (Mo- selle) involved the formation of Sollac (Societe Lorraine de Laminage Continu). All the early strip mills were at existing centers of the industry-though this included Cornigliano and Ijmuiden- but changes in ironmaking conditions were already beginning to alter the context of expansion (Fig. 4).8

CHANGES IN IRONMAKING AND IN

THE CONDITIONS OF ASSEMBLING

IRONMAKING RAW MATERIALS

With bigger blast furnaces, but above all as a result of better ore preparation, coke consumption per ton of pig iron fell. This was nothing new, and indeed was not particularly rapid until after the mid 1950s, so that as late as 1957 the German coke rate per ton of pig iron was 941 kg. or only 38 kg. below

8Strip mills built or building by 1953 were: Liege, Jemeppe, Denain, Seremange, Henne- bont, Duisburg, Dortmund, Dusseldorf, Ijmui- den, Cornigliano, and Dudelange.

TABLE V

E.C.S.C. AND MEMBER COUNTRIES STEEL PRODUCTION BY PROCESS 1954 AND 1964

(Percentage of total)

1954

West Germany................................. France. ............... .. ...................... Italy ................................ ............ Belgium ..........................................

E C.S.C ................... .....................

964

West Germany.................................... France ............ .... .... .... ................ Italy . .................. ........................ Belgium ..........................................

E.C.S.C ........................................

Thomas

44.0 59.5

7.3 86.2

51.5

32.8 53.6

4.6 82.6

41.9

Siemens-Martin

51.8 32.0 51.0 10.0

39.6

45.1 26.2 49.9 5.2

33.7

Source: E.C.S.C.. and O.E.E.C., The Iron and Steel Industry in 1964 and Trends in 1965.

Electric

3.6 7.8

41.6 3.3

8.4

8.0 8.5

43.1 4.7

11.6

Other

0.1 0.0 ....

....

0.0

14.0 11.3

2.4 7.3

12.6

321



ECONOMIC GEOGRAPHY

Based on . _ ^ .. For consuming trades (incomplete) Marconis Internationol Register, 1964, G. B. Commart, 1963

For strip mills Steel Review 29, January 1963 (projected 1965 capacities)

MAJOR E.E.C. STEEL SHEET USING INDUSTRIES AND WIDE STRIP MILLS 1964-1965

FIG. 4.

the 1936 figure. But already there were exceptional cases, apparently owing a great deal to the initiative of the individual firm and its willingness to sub- stitute investment in ore preparation plant for higher fuel bills. Before 1959, Huttenwerk Salzgitter, a firm with obvious incentive in this direction because of its low-quality ores and distance from the Ruhr, had cut its coke rate down to as little as 814 kg. per ton by using 63 per cent sinter, yet Phoenix Rheinrohr at Ruhrort, with 61 per cent sinter, was using as little as 630 kg. on open hearth pig iron (Table VI).9 Gen- erally, however, there was little sign

9 U.N. Long Term Trends and Problems of the European Steel Industry, 1959, p. 91.

TABLE VI

COKE CONSUMPTION PER TON OF PIG IRON 1956 TO 1972-1975

(Kg. per metric ton)

Projected 1956 1958 1960 1965 1972-1975

Germany.... 956 907 834 685 650 France ...... 1,036 1,022 980 774 700 Italy....... 787 752 680 636 640 E.C.S.C...... 969 949 883 707 680

Sources: 1. 1958 and 1972-1975 based on United Nations, Long Terma Trends and Problems of the European Steel Industry, 1959, p. 162.

2. Other figures calculated from various E.C S.C. annual statistics.

of the great acceleration which was to follow. New delivery conditions, such as the lower freights on German coal to its E.C.S.C. partners, and advances

322




in coke technology, notably the introduction of processes which enabled Lorraine coal to be used in larger tonnages without being mixed with Ruhr coal, helped to lessen the locational attraction of the older coal fields.10 By the mid-fifties large tonnages of Amer- ican coal, at highly competitive prices, were arriving at European ports. Cheap at the pithead,11 it was also possible to obtain long-term transatlantic charter rates at low figures-by September, 1960, as low as $4.00 per long ton Hampton Roads to Europe.

Paralleling this, foreign ore, mined at low cost, much richer at the open pit, and more and more often concentrated before being shipped in larger and larger boats, became increasingly attractive to the blast furnace operator.12 These conditions, when considered with the export of steel, made coastal iron and steelmaking an increasingly attractive proposition. By using foreign ore of about 66 per cent iron content, a plant on the north European coast could save, theoretically, $1.40 over a Ruhr plant using the same ore, and could already obtain its coal at a slightly more favorable price (Table VII).

On the other hand, the exorbitant cost of new plant checked any whole- sale movement coastwards. A wholly new or "greenfield" plant would cost

10 Even so, in 1954 a group of French steel companies bought the large Harpener coal properties around Dortmund, and in 1956 secured a guarantee of deliveries of coking coal from the Saar.

11 E. Kemna (of Demag) reckoned that at the pit Ruhr coal cost $15 a ton as compared with $6 in the United States. The deep German pits meant high capital and haulage costs. Output per man shift was less than one-fifth the United States figure. Iron and Steel Engineer, December, 1960, pp. 97-102.

12 In the case of Germany 21.7 per cent iron ore consumption on a Fe basis was home produced in 1936, 51.8 per cent in 1950 but only 22.5 per cent by 1960. Before the war 85 per cent of the foreign ore came from Europe, mostly from Sweden or France, but by 1960 over 30 per cent of the imported ore was from outside Europe.

TABLE VII

IRON ORE FREIGHT RATES TO RUHR PLANTS 1960-1961

(Dollars per ton)

Source of ore

E.C.S.C. ore: Lorraine (by rail) ................... Salzgitter (by rail)................... Salzgitter (by water).................

Foreign ore: Rotterdam .........................

Freight charge

$2.88 1.27 0.95

0.93

Source: Canadian Mineral Resources Division, Iron Ore Trade-Canada and the World, 1962. Figures listed on this map of World Ore Trade.

at least twice as much as the expansion of existing works by an equal capacity, so that interest and depreciation charges could well amount to over 15 dollars a ton more on a new works than on an extension to an old one. Only if there was a favorable market prospect in the coastal belt could a new plant be

easily justified. In 1955, Klockner, of

Hagen and Osnabruck, began to build a new works at a large site on the Weser, near Bremen, part of which had been

previously occupied by the now-wrecked ironworks of the Norddeutsche Com-

pany. Scrap, limestone, and natural gas were locally available, and, in addition to coal and ore imports, home sources of coal could be tapped via the canal network. Bremen and Hamburg provided a large local market for the works' steel sheet and plate, and the system of basing prices on the Ruhr provided "phantom freight." Already considerable because of the Salzgitter works, capacity in this district continued to

grow more rapidly than in the country as a whole.13 At the end of the fifties work was begun on another coastal works, also for plate and strip mill

products, at Dunkirk. This plant is 13 Lower Saxony-Bremen crude steel output

was in 1938 only 6.2 per cent that of North Rhine Westphalia. 1955, 13.2 per cent; 1960, 16.2 per cent, 1964, 17.9 per cent. British Iron and Steel Federation Overseas Statistics, 1965.

323



ECONOMIC GEOGRAPHY

as well placed in relation to the Paris market as the nearest Lorraine works and is also in a favorable position for foreign trade. However, other plants projected for Marseilles and the Bor- deaux area were not built. At this time there were already tentative plans for a big steel complex on the new dock system of the Rotterdam area, and the United States Steel Corporation was frequently associated with the rumors, but here, too, though the area has been recently surveyed again, no building has yet occurred. The position of Italy with respect to tidewater developments is perhaps especially interesting.

THE ITALIAN STEEL INDUSTRY

IN THE FIFTIES

For a time it was believed that Italy was the weak link in the E.C.S.C. group, and although the growth of the first decade proved this wrong, her industry did operate under very special conditions. The trade was divided between a host of private firms many of them very small, operating works which were often no more than rerolling mills, concentrated in the northern interior, and Italsider, the steel branch of the government economic development agency, I.R.I. (Institutio per la Reconstruzione Industriale). Italsider's works at Piom- bino, Bagnoli, and Cornigliano were the only big, integrated operations.14 From the early post-war days it was realized that Italy needed more hot metal operations, yet some of the biggest private firms, such as Lombarde Falck of Milan or Fiat of Turin, had only a very small electric furnace pig iron capacity and had to buy large quantities of iron, or, to a very large extent, to operate on high- priced scrap. This was compensated for in part by a concentration on quality

14 In 1966 Italsider controlled 55 per cent Italian steel capacity, but 83 per cent of that for pig iron. Times Review of Industry and Tech- nology (London), April 1966, p. 24.

steel, much of it made in electrical

furnaces,5 but, by 1958, Fiat and Falck were planning, for a time with Republic Steel Corporation of the United States, to build an integrated works at Vado

harbor, near Savona, to produce steel blooms and billets to be finished in their other plants, 75 and 90 miles inland.16 A coastal raw material as-

sembly location for iron would thus be combined with a market location for

rolling, a pattern to be followed else- where a few years later. In fact, the recession in European steel caused the scheme to be shelved, and both firms remain remarkably unbalanced, Fiat

buying ingots on a large scale, and Falck steel coil. By 1962 the latter had gone so far as to acquire a small

holding in a new Belgian strip mill

(Table VIII).17

THE MOSELLE CANAL AND THE

POSITION OF LORRAINE

The project for the canalization of the Moselle was agreed in principle in

1952, but not until 1956, as a condition of agreeing to the return of the Saar to Germany, was France able to obtain a German undertaking to build. Canal- ization seemed to be a way not only to remove the burden of high rail freights on Ruhr coal and coke carried by Ger- man Federal Railways, but also to

15 In 1955 and 1961 electrical steel production was as follows:

Germany: 1955 1.2 million tons 1961 2.6

France: 1955 1.1 " 1961 1.8

Italy: 1955 2.1 1961 3.8

Source: E.C.S.C. Investment in the Corn- munity Coalmining and Iron and Steel Indus- tries, 1963, p. 78.

16 Designed to produce 900,000 tons pig iron, 700,000 tons steel.

17 In 1961 Fiat converted into steel products the equLivalent of 1.4 million tons ingots. Fiat Annual Report, 1962, as summarized in the British press. Guardian, May 17, 1963.

324




TABLE VIII

PIG IRON AND STEEL INGOT PRODUCTION BY FIAT AND LOMBARDE FALCK

1960

(Thousands of tons)

Fiat Falck

Pig iron ................... Steel ......................

38 200* 714 800

*Includes 20,000 tons ferro alloys. Source: Ryland's Overseas Directory, 1964. Directory

entries for individual firms.

improve the position of a landlocked section at a time when a drift coastwards was anticipated. Begun in 1958, the canal was opened in 1964, and is suitable for use by self-propelled vessels of 1500 tons and barge convoys of 3000 tons (Fig. 5). Although there have been plans to extend it south to Nancy, and a Saar-Palatinate canalization project is under way, these two areas, and also the Longwy section of Lorraine, have been rendered slightly less competitive as a result. But in fact the whole project may be reckoned a generation too late. There will be no precipitate decline in Lorraine steel production: indeed expansion is going on steadily. But the coastal locations have already established their value, and for the supply of minerals in bulk, low-cost rail transport has become increasingly attractive in recent years. To travel along it for an hour or so is to realize how very little used the Moselle Canal is to date.

SOCIAL POLICIES AND THE

STEEL INDUSTRY

Though overall less important than in the coal industry, social policies have played a part in the location of at least two new steel plants in the E.C.S.C.

In July, 1962, a new Belgian steel company, Sidmar, was formed by a group of existing companies including Cockerill-Ougree, Arbed, the French

interests Schneider and Knutange; even Falck of Milan had a small interest. Sidmar, designed to make plate and sheet, for a time inclined in favor of a tidewater site near Antwerp, but was induced instead to build its 1 2 million ton plant in the interior of East Flanders which at this time was passing through a period of depression. The plant is now almost complete, situated on a much larger plot fringing the site which Arbed has owned for over a generation on the Gent-Terneuzen Canal. At the beginning of the sixties this canal could only take 8000-ton vessels, but it is being deepened and equipped with new sea locks to enable it to handle ships up to 50,000 tons. East Flanders, with a key position in relation to the big centers of population of the northern part of the Common Market, is already attract- ing outside metal-working firms, notably motor producers. The British Motor Corporation assembles cars at Malines, Opel has a plant at Antwerp, and Volvo a works at Gent. It is true that these largely work on brought-in knockdowns but eventually they may become big consumers of locally made steel.

In June, 1959, the Italian government decided that Italsider should build a steelworks in the far south. In April, 1964, the Taranto works made its first iron, and by 1965 was capable of producing 2.2 million tons steel and 1.8 million tons of flat rolled steel, mainly plate and sheet. From the start it was said that if a purely business decision had been involved the plant would have been in the north, but, although purchasing power is very low in the south, Taranto has solid economic advantages. One-tenth of the Common Market's population lives south of Rome, and Bagnoli, which in 1961 made under 900,000 tons of steel, was the only integrated works in this region. From the E.C.S.C. as a whole 112 million

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ECONOMIC GEOGRAPHY

tons of steel a year was being supplied to the M/editerranean countries by the late 1950s, and this demand is expected to grow rapidly. Finally, by building a giant harbor as an integral part of the works, following the recent Japanese model, the handling charges on the imported iron ore and coal have been

cut to a very low level. There is little local market, so that up to the present Italsider has quoted Naples as the basing point for Taranto products, but recent E.E.C. regional development policies envisage a large, assisted growth of metal fabricating industries based on the cities of Bari and Taranto. Care-

FIG. 5.

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fully designed, and helped subsequently in this manner, Taranto is likely to prove highly competitive.18

THE EARLY SIXTIES

At the end of the 1950s a recession in world steel demand began, and some of the weaknesses of the industry in the Common Market became apparent. The need to "align" on the low prices of steel imported from "third" countries went up sharply, and the E.C.S.C. had to increase its tariffs on some

products. Expansion programs were de-

layed, and, in order to avoid overbuilding of plant, new co-operative arrangements between companies were made. Most of these were local agreements. Bochumer Verein, building a new strip mill, took over this trade from Capito Klein of

Dusseldorf, which closed its small ca-

pacity hot strip mill, in order to con- centrate on the finishing of special sheet. An agreement between three other major Ruhr firms, Mannesmann, August Thyssen, and Huttenwerk Ober-

hausen, also centered around strip mill

development. One French development, however, was a link over a longer distance, Lorraine-Escaut sending slabs 70 miles to be rolled at Dunkirk.19

Whereas, in the period of boom, home ore and coal production had been

steadily extended in spite of large im-

ports, it now became progressively less economic to use lower quality home ore and production began to decline.

Except in the case of Lorraine, it has not recovered. At the end of 1957 there were 51,500 iron ore miners in the

community, but by the beginning of 18 E. Manuelli: Situation and Prospects of

the Italian Steel Industry, Banco di Roma, Review, November, 1958, pp. 578-579. Times (London), November 20, 1965; A. B. Mountjoy: Planning and Industrial Developments in Apulia, Geography, Vol. 51, Part 4, November, 1966, pp. 369-372.

19 Co-operative arrangements in the E.C.S.C., Steel Review, No. 29, January, 1963, pp. 42-48.

1965 only 30,000.20 Productivity has

gone up and production down. Home ore prices have fallen, but this decrease has not matched the decline in imported ore prices (Table IX). German iron ore

TABLE IX

INDEX PRICES OF IRON ORE USED IN GERMANY

(January 1960 = 100)

Imported ore (over 42% iron)......

E.C.S.C. ore (less than 42% iron)..

January January January 1963 1964 1965

89 78 76

124 90 90

Source: O.E.E.C. The Iron and Steel Industry in 1964 and Trends in 1965, p. 40.

production in 1960 was 14.2 million

tons; but by August, 1965, it was at

an annual rate of only 7.9 million tons.

Deliveries of Salzgitter ore to the Ruhr, made practicable only by the upgrading process known as the Salzgitter-Renn, and by water transport, ceased in 1963.

Siegerland ore production, long falling, was cut sharply in October, 1961, when

eight of the mines closed, and ceased

early in 1966 with the abandonment of the last two.21 Germany still gets

large supplies of ore from Lorraine, but non-E.C.S.C. and especially distant

sources now dominate (Fig. 6). Fuel economy has gone ahead much

more rapidly than was forecast only a

few years ago: the 1962 forecast for

1965 was a coke rate of 750 kg. per ton, but by the third quarter of 1965 the

E.C.S.C. average was down to 707 kg.22 Coal imports have increased again, and,

along with the switch to imported ore, have strengthened the competitive

20 E.C.S.C. High Authority Policy Report, February, 1965, p. 50.

21 Steel and Coal, January 18, 1963, p. 108; Steel Times, March 11, 1966, p. 318.

22 E.C.S.C. Objectifs Gne'raux. Acier. Luxem- bourg, 1962, p. 259.

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ECONOMIC GEOGRAPHY

GERMANY, ORE SUPPLY 1964 MILLION METRIC TONS

Canada Finland- Norway

oSS. R.

v 0.5

Western Hemisphere

Based on: Office Statistique des Communoutes Europeennes Sid6rurqie 1965 No. b

FIG. 6.

position of coastal works.23 Whereas Italian works have unrestricted access to coal at world prices, imported fuel

23 Common Market coal imports from all countries and for all purposes were 31.8 million tons 1958, 17.9 million 1960, but 31.1 million tons 1964. Rapport General No. 13, 1965.

has not been allowed freely into France and Germany. In France, imports have been controlled by a state agency which has sold only at prices which are equiv- alent to French coal prices. Only grad- ually was this system liberalized. The

328




importation of Y1 million tons of Amer- ican coal to Lorraine was approved in

1964, but its delivered cost was still rather high. In that year, in the whole

country, 37 per cent of coal for steelworks coke ovens came from French mines. Though mine cokeries supplied very large tonnages of coke in addition to this, the rest came, in declining order, from the Ruhr, the United States, and the Saar.24 In Germany an import tax was imposed on coal from third countries but coastal based industries were

permitted a duty free quota.25 Ruhr

firms, saddled with heavy capital investment in tied coal mines, had to pay the

duty on any foreign coal which they used, and reckoned that abolition of the duty, and use of American coal, could cut their coal bill by D.MJ. 14, or about $3.3 a ton.26

Meanwhile, favored in so many ways, the existing coastal works are expanding capacity and actively developing their

advantages (Fig. 7). By 1971 Ijmuiden will have a new dock able to handle

80,000 ton vessels, a second hot strip mill is to be built, and ingot capacity will have risen from 2.8 to 4.0 million tons.27 Dunkirk, wholly depending on

imported ore, started with an ore dock

capable of handling boats of up to

24Cheaper Coal for French Steel, British Iron and Steel Federation, Steel Review, 42, April, 1966, pp. 8-9.

25 German coal imports from third countries, for all purposes, were 12.9 million tons 1958, 5.6 million 1960, 7.4 million 1964. The Nether- lands obtains half its coking coal from the United States, Italy almost all that it uses.

26Economist, January 29, 1966, p. 435. By the autumn of 1966 the Council of Ministers of the E.C.S.C. had formulated a plan for a coking-coal fund which would subsidize the trade in coking coal between member countries. An effect of this will be to enable all countries and districts to enjoy the cheaper fuel which some of them, accessible to imported American coking coal, now have. Initially this plan was strongly opposed by French interests which recognized that it would especially benefit the German industry. European Community (Lon- don), December, 1966, p. 2, and Financial Times Supplement, December 5, 1966.

27 British Steelmaker, February, 1966, p. 40.

35,000-ton capacity, but this is to be increased to 70,000 and later up toward

100,000 tons. By 1971, Dunkirk's 1.7 million ton ingot capacity will have risen to 3.1 million. Piombino and

Bagnoli, with piers for 45,000-ton vessels, are to push their limits up too, and, at

Cornigliano and Taranto, Italsider can handle boats of about 60,000 and

100,000 tons.28 In these conditions, the interior centers of steel production, even such a splendidly endowed area as the Ruhr seemed to be only a few years ago, have become rather less competitive. In spite of the Mloselle Canal, the eastern districts of France seem to be in an even less enviable position, lacking a big local market or a waterway of the stature of the Rhine. Nevertheless, a number of steps have already been taken which seem likely to bolster the position of these works.

Further amalgamations of interior

companies, still far and away predom- inant in capacity over the coastal district works, have enabled them to rationalize plant and processes. Further-

more, the development of new concepts of bulk low grade movements of raw material or semi-finished products on the pattern of American unit trains, alters the significance of the distance which separates them from the deepwater ports.

In 1965 there were in the Community outside Italy 25 steelworks of over one million tons ingot capacity with two more building. The average capacity of the 25 works was 2.01 million tons. It is now realized that the 4.8 million tons of Thyssen's Duisburg-Hamborn complex represents a more desirable level for ordinary steels and that, where individual units of this size are as yet unattainable, a higger company organ-

28 Iron and Steel Institute, Special Report 82. Ore Mining and Materials Handling, 1963, pp. 36-37.

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ECONOMIC GEOGRAPHY

FIG. 7.

ization will also provide substantial

advantages. Yet, in poor years, such as 1966, the smaller, less well-equipped plants still have a very great nuisance value for they must produce as nearly at capacity as possible to break even.

In France, early in 1966, Usinor and Lorraine-Escaut combined to form a 6.3 million ingot ton group, and Sidelor and De Wendel formed a looser associa-

tion with 5.6 million tons capacity.29 By the end of 1966 a merger of steel interests in Central France was being negotiated. In return for this government-inspired merger movement, assisted by loans on favorable terms, the works will be allowed to buy American

29 Economist, February 12, 1966, p. 638. The new Usinor-Lorraine-Escaut group accounts for half the French sheet output and one-third that of tubes.

330




coal on longer-term contracts and at prices which are not increased artificially to French price levels. By spring, 1966, steel companies had been allowed to contract for 13 million tons of American coal a year, of which three-quarters will go to Lorraine.30 In the summer of 1965 the High Authority approved an agreement between the Ruhr firms, Mannes- mann, Hoesch, Dortmund Horde, and Huttenwerk Oberhausen, to establish a central agency to book, and allocate to them, bar and section orders so as to permit larger, more economic production runs on any one size or quality.3 In this way the tremendous agglomera- tion of capacity in the Ruhr can be used to cut process costs in a manner which cannot be followed by the more isolated coastal works. By 1966, German industry had submitted to the High Authority plans for four rolled steel sales syndicates which will coordinate investment, production, and sales. To the extent that the syndicates will be able to supply orders from the nearest works overall transport costs will be reduced.

The trend to bulk movements was illustrated by the imagination with which French state railways organized the supply of coke from ovens in the northern coal field to the Dunkirk works. A daily shuttle service of trains equipped with special hopper cars carry- ing 1100 tons coke at the start, but to be raised to 2000 tons was introduced.32 It seems possible that this sort of planning will render of little value big, new canalization projects, such as the Dun- irk-Valenciennes Canal, designed to handle barges of 1350 tons. On the other hand, the existence of water transport prods the railways to further iniative,

30 Steel Review, April, 1966, p. 9, January, 1967, p. 10.

31 British Steelmaker, September, 1965, p. 277. 32 Iron and Steel Institute, Special Report 82,

1963, p. 25.

and the fall in American and Ruhr coal prices in Lorraine in 1965 was attributed in part to the effects of the Mloselle Canal.33

Company reorganization and ration- alization of transport have been behind three important recent developments whose aim is to improve the competitive position of interior works by reaping to the full the advantages of deepwater ports handling imported raw material. Early in 1966, closer links were drawn between Dortmund-Horde and Hoesch, also of Dortmund. In addition to the usual benefits of larger groupings, they have agreed to long-term development plans which include Hoogovens of Ijmuiden which has a financial interest in Dortmund-Horde. Expansion of production of pig iron, crude steel, and semi-finished steel is to be increasingly centered at Ijmuiden, but the production of finished material will be concentrated at the Dortmund plants, nearer the larger centers of consumption. Hoog- ovens will be able to develop its low assembly cost advantages, and its present marketing problems will be reduced. The link between Ijmuiden and Dort- mund will be by efficient, cheap, bulk

transport. Later in 1966, Krupp, Thys- sen and Miannesmann, whose five main Ruhr works together have a capacity of 14.7 million tons, announced plans for a pellet-making plant on a newly reclaimed site at Europoort. This will be able to obtain cheaper fuel than the

primary works of the members, either oil from the nearby refineries or freely imported American coal.34 In the summer of 1965, an even bigger scheme for the benefit of interior works had been announced. The Duisburg engineering firm of Demag is to build a transship- ment and ore pellet producing plant to

33 Steel Review, April, 1966, p. 9. 34 Statist, January 28, 1966, p. 237; Iron and

Steel, March, 1966, p. 120; Economist, Novem- ber 12, 1966, p. 722.

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ECONOMIC GEOGRAPHY

supply 17 iron and steel works at Rot- terdam-Europoort, where even now ships of up to 130,000 tons can dock, and which by 1968 will be able to take 170,000-ton vessels and with further growth planned beyond that. The first stage of the project is large in itself, but ultimately 35 million tons ore and 10 million tons coal a year may be handled by the dock, and 20 million tons ore will be processed in the pellet plant. From Rotterdam, large push-boat units or goods trains running on fixed time schedules will carry the pellets to the plants inland. Later, coke ovens, and then an iron and steel works, will be built nearby, so that, on the Ijmuiden- Dortmund principle, semi-finished steel can be shipped in low-cost lots for further processing inland.35

Plant-in-being continues to be a great advantage of the existing works, and there is certainly no lack of expansion in the interior. At Dillingen in the Saar, Rochling of Volklingen, and two French firms with plant already in the town, are putting up a one million ton oxygen steel plant.36 On the Meuse, north of Liege, Esperance-Longdoz is building a $100 million steel and rolling mill plant which will obtain its supplies of 2400 tons molten iron a day from the existing blast furnaces at Seraing and Jemeppe, 12 miles to the southwest, and its oxygen from Seraing. Eventually, the company estimates that it may well invest $500 million on this Chertal development.37 At Gandrange on the Orne, a mile or so west from the Mloselle Canal, De Wendel and Sidelor are building a 1.6 million ton complex, to

35 Iron and Steel, July, 1965, p. 383. 36 Steel Times, August 6, 1965, p. 165. 37 Steel and Coal, May 1, 1963, p. 425. 38 Times Review of Industry, March, 1964,

p. 88.

be raised four or five years later to 2.6 million.38

ACCOMPLISHMENTS AND PROSPECTS

Everything seems to indicate further rapid growth and probably more important, organizational and technical change in the European steel industry.39 Here the peculiar new organizational framework has been added to, and has modified the transport and technical changes which the E.C.S.C. countries have shared with other steel leaders like Japan, the United States, and the U.S.S.R.

Once its own forests, small ore fields, and local markets shaped the location pattern of European iron production. Until 1952, outside Italy, it still oper- ated largely on ore and coal from the great ore and coal fields of western Europe, and, though each country had a share in world markets, customs barriers cut each country off from its neighbors. Now a common market is well established, and each year a greater proportion of the raw materials smelted in western European furnaces comes from overseas. All in all in spite of its present over-capacity, and serious policy problems, the E.C.S.C. steel industry provides an object lesson in the econ- omies of scale, of a readiness to think in imaginative terms, and of the results which accrue to those who do.

ACKNOWLEDGMENTS

I would like to acknowledge the work of Mr. Terry Garfield and Mr. David Orme of the Department of Geography, Leicester Uni- versity, in producing the finished maps. For ideas in part of the text I am indebted to con- versation with Mr. W. E. Thomas.

39 The new general objectives of the E.C.S.C., published in 1966, call for a steel production of about 110 million tons in 1975. Iron and Steel, July, 1966, p. 362.

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The Changing Steel Industry of the European Common Market

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