Senator KEFAUVER. If I may just clear up the point about the OPA matter. Competition was beginning in 1947 when this report was published, showing in great detail costs, and I recall no fuss about the matter at the time, Mr. Patton, from the steel companies.

Mr. PATTON. We were not faced with this problem of foreign competition. We were not faced with competition from competing materials until after the Korean war, and after the Korean war there was a drastic change in the steel industry.

It had new competition from competing materials and increasingly severe competition from foreign-made steel.

Senator KEFAUVER. May I also call your attention to this fact:

You made the point that this being published 3 years later, after 1944, did not give it much

The CHAIRMAN. Let us straighten the record. I understood it was 1949.

Senator KEFAUVER. May 1947.

Part of the costs that we wanted for comparison reasons was to show what had happened percentagewise, at least, in connection with raw material costs, wage costs, costs of coke, and profit from 1954 to 1961-1954 data.

That is a pretty long time ago.

Also, I assume that the earliest even the 1961 figures could ever be made available for any purpose would be 1963, which would be 2 years afterwards.

So that there is here a considerable time gap also.

Mr. PATTON. But it is a more serious situation, Senator, even with the time gap, because in the days of 1944 and 1947, we did not have to worry about this competition from abroad. We did not have to worry about the competing materials that were taking our markets. Today we do and, believe me, our profits and our unemployment situation illustrates how drastic it is to us.

The CHAIRMAN. Back in those days you were not reducing your dividend.

Mr. PATTON. No, sir, we were not. We were increasing our

dividend.

Senator KEFAUVER. Mr. Patton, so far as I know in reading the papers you are the only steel company that has reduced the dividends. Does that have anything to do with your selection to appear?

Mr. PATTON. No, Senator, that is not the fact. Wheeling Steel Corp. has reduced its dividend, Lukens Corp. has reduced its dividend, Pittsburgh Coke & Chemical Co. has reduced its dividend and if you look at the profits of the steel companies for the last quarter, you will see that a number of them did not earn enough to cover their dividend, and I am sorry to have to say that when you look at the earnings of the current third quarter when they are published they are going to look even worse.

The CHAIRMAN. You say that is the third quarter, that it will be worse?

Mr. PATTON. Yes, sir.

Senator KEFAUVER. Mr. Patton, according to the best information we have from the Steel Community High Authority, the export prices

for U.S. exports of steel to third countries are something over 30 percent higher than the Common Market export prices. Is that correct? (At this point Senator Scott entered the hearing room.)

Mr. PATTON. I could not be sure, but I assume that in many cases our prices are higher because we have much higher labor rates and other production costs than we find in other countries.

Senator KEFAUVER. I do not want to go into the history but I would insert "Steel Export Base Prices to Third Countries" in the record, Mr. Chairman

The CHAIRMAN. Did you finish your answer?

Mr. PATTON. Yes, sir.

The CHAIRMAN. All right, sir.

Senator KEFAUVER. That they are something over 30 percent higher. Now, Mr. Patton

Mr. PATTON. Pardon me, did I understand you to say that their prices were 30 percent higher than ours?

Senator KEFAUVER. No, your export prices to third countries were 30 percent higher.

Mr. PATTON. That may be a generalization, but we still get some business in rough tough competition by cutting our prices as low as theirs, and we oftentimes have to take it at a loss.

Senator KEFAUVER. You can go down the list of their prices and your prices.

Senator HRUSKA. Will the Senator yield?

Senator KEFAUVER. You will see they are about 30 percent or more higher.

Senator HRUSKA. It is my understanding you want that as part of the record.

Senator KEFAUVER. Yes.

Senator HRUSKA. May I suggest that the witness be given an opportunity to scan it and in due time produce for the record such comment as he might want to make analyzing and commenting on that information.

The CHAIRMAN. I understood he had a copy.

Senator KEFAUVER. He has a copy.

Senator HRUSKA. After all, he is confronted with some highly technical information. I do not imagine he carries around in his head. most of the details, that it would be necessary to set out after analyzing it and trying to verify the situation, in all fairness I suppose any witness should have that opportunity.

Mr. PATTON. Thank you, Senator. I would appreciate the opportunity if it is in order to be granted.

The CHAIRMAN. It will be admitted into the record.

(The information follows:)

Steel export base prices to third countries,1 January 1962
[U. S. dollars per metric ton, f.o.b. port of embarkation]

1 The pricing bases of the Community and the United States are sometimes somewhat different, especially for sheets. The above prices for the latter take into account extras that make them almost comparable. Price of Thomas steel for the Community and of basic steel for the United States.

2 (2.75-3 mm.).

. (1 mm.).

Source: Haute Autorité, Communauté Européenne du Charbon et de l'Acier, "Dixiéme Rapport Général sur l'activité de la Communauté," (1er fév. 1961-31 janv. 1962), Edition Provisoire, Luxembourg, 1962. See table 47 of the Statistical Annex.

Senator KEFAUVER. I think the figures will show that they are 30 percent or more higher in third countries. Mr. Patton, why are your prices 30 percent higher than the Common Market mills?

Mr. PATTON. In the first place, you are stating something as a fact which I do not know, and I do not think that I ought to be asked to comment on something of which I am not sure of the basis. I would like to do exactly what has been suggested by Senator Hruska, and have an opportunity to examine this document and file with the committee appropriate comments.

Senator KEFAUVER. Well, you can look at the comparisons here and see the percent. You have been saying you are losing the market, you are being priced out of the market. So why are you losing the export market?

Mr. PATTON. We are losing the export market to foreign competition because, as I said, in the period since the end of the Korean war, they have built new modern steel mills and are paying labor rates one-third to one-fourth of those paid here, and it is impossible for us to have the costs we do here and to have the same prices, except when we want to meet competition which may result in an actual loss to us as these foreign countries.

Senator KEFAUVER. In our 1957 hearing it was established as I recall that your greatest cost in producing steel is ore and scrap, that your second greatest cost is coking coal, and that your third greatest cost is labor. Admittedly, American labor costs more, although its productivity is higher than European labor.

Mr. PATTON. It used to be, but I would not concede that any more with their modern plants, in many cases they have greater productivity than we do.

Senator KEFAUVER. By all the statistics I have seen, unit labor productivity is higher than it is in the Common Market countries. Senator KEATING. In the steel industry? Senator KEFAUVER. In the steel industry.

Mr. PATTON. You say that, sir, but I have grave reservations that that is a fact in the European Community.

Senator KEFAUVER. You say labor costs are higher here. Now a greater cost is the raw material. You get your raw material, your iron ore, from Labrador, do you not?

Mr. PATTON. We get a portion of it. We get the great bulk of our iron ore from Minnesota.

Senator KEFAUVER. From the Mesabi Range in Minnesota.

Mr. PATTON. And there we had, together with Armco, to invest some $200 million in the wilderness to put in a taconite plant which enabled us to take cheap rock containing 23 percent iron and to beneficiate it up at a very expensive investment to a product that is now about 63 percent iron, and that is the kind of thing that the American steel industry is doing and has to do to remain competitive, make big capital investments.

Senator KEFAUVER. How does your cost of ore compare with the cost of ore for the European Steel Community?

Mr. PATTON. I would imagine ours was higher, Senator.
Senator KEFAUVER. Well, do you know?

Mr. PATTON. I do not know, but I do know that there is much ore sold abroad at prices less than we have to pay here in America. Senator KEFAUVER. Don't you know that they have to buy a great deal of their ore in Sweden and pay a very high price?

Mr. PATTON. It so happens that we are interested in an ore mine in Liberia that sells a lot of ore to Europe and other countries, and I know that the selling price of that ore to those companies is cheaper than the price that we can realize on our Minnesota ores here.

Senator KEFAUVER. I am talking about the big sources which are Sweden and Spain.

Mr. PATTON. Sweden is not a big source of ore but, of course, it is

a source.

Senator KEFAUVER. It is a high grade.

Mr. PATTON. It is a specialty ore in Sweden.

Senator KEFAUVER. But anyway, you do not know about what their cost of ore is to make a comparison with yours?

Mr. PATTON. I know I happen to be chairman of the board of the Liberia Mining Co. in which Republic Steel Corp. has a substantial stock interest. In that capacity I know that that company, mining ore in Liberia, is selling that ore in world markets at prices considerably less than we in Republic are paying for ore mined and beneficiated here in America.

Senator KEFAUVER. I am talking about the cost of European producers from the sources they rely upon, principally Sweden and Spain.

Mr. PATTON. Those are the purchasers of the Liberia ore, producers in Germany, Italy, and Holland.

Senator KEFAUVER. As to coking coal, is it not true, that coal is shipped from the United States because of our better coal mines, our mechanization, to Europe and sold competitively in Germany, for instance, in competition with Ruhr coal, because they have to go so deep in the ground and their veins are so thin?

Mr. PATTON. There has been some American coke and coal shipped to European countries. I think if you will examine the record you will find that there is not much of it being shipped right now. It

so happened that I was down to our coal mines myself just 2 weeks ago on a visit, and in that vicinity, I was with Mr. Raymond Sylvatti, head of the Ísland Creek Coal Co., who had been shipping considerable tonnage of coal to Europe and he was lamenting the fact that that business had disappeared.

Senator DODD. Will the Senator yield for a question?

Senator KEFAUVER. Yes.

Senator DODD. Do you know the cost of ore to the European producers and do you know what they have to pay for coking coal?

Mr. PATTON. I know the price at which European producers are buying ore from the Liberian Mining Co.

Senator DODD. My point is you are in business here. Do you know what it costs them per ton of ore and ton of coking coal?

Mr. PATTON. No. We would have to estimate that. We have no way of knowing their costs. We do not know what their contracts are or what their prices are in contrast. I only happen to know of one particular company of which I happen to be an officer.

Senator KEFAUVER. How would you estimate your comparison of coke and coal costs in this country with those in the Common Market, Mr. Patton? Is it not true that your costs are very much lower? Mr. PATTON. That their cost is very much lower?

Senator KEFAUVER. That your cost is very much lower for coke and coal.

Mr. PATTON. I am not prepared to say at this time.

I would be glad to look into the matter and find out. I could not answer that question, sir.

Senator KEFAUVER. But you have made a statement about the total cost of production here and total cost of production there, and there are quite a number of elements going into that that you do not know about.

Mr. PATTON. Oh yes, but the big element is labor. That makes the difference.

Senator KEFAUVER. Our hearings showed that it was the third element, Mr. Patton.

Mr. Patton, in the hearings in 1957 Mr. Blough and I believe Mr. Homer, who was with you then and I am glad Mr. Homer is here now-where is Mr. Homer? He is a very nice fellow.

Mr. BROMLEY. He is right here.

Senator KEFAUVER. It was stated that they felt that the demand for steel was rather inelastic, that they would have the same demand almost regardless of price as of that time. Is that your feeling?

Mr. PATTON. My feeling is that the demand element in the steel industry is not as important a factor in price as it is in the consumer industries because the demand for steel is a derived demand.

We sell a lot of steel if the people buy a lot of automobiles, we sell a lot of steel if the people buy a lot of canned fruit, and we have not much control over that. But I will say, Senator, that we are doing everything we know how today to encourage the end use of steel products so that that derived demand will be as great as we can possibly encourage it to be.

Senator KEFAUVER. Mr. Patton, I think it is a matter of great concern and it is a very sad situation that here in the United States the

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