Buoyed by strengthening orders, two leading steel producers have raised prices on products used in construction, but spirited competition is holding down prices for the industry's most popular product, the flat-rolled steel used in cars and appliances.
Increases announced recently by industry leader U.S. Steel Corp. and No. 3 Bethlehem Steel Corp. are actually remedial steps. They compensate somewhat for deep discounts and depressed prices brought on by several years of sluggish demand and an abundance of domestic and imported steel.
Analysts say the industry must raise prices to make up for losses of about $6 billion over the past three years and to prepare for any future recessions.
"There's no question about it: The price situation has to strengthen. The discounts have to be cut back considerably," said Father William Hogan, a steel analyst at Fordham University in New York.
Steel analyst Charles Bradford of the New York brokerage Merrill Lynch Inc. said he warned U.S. Steel and Bethlehem a week ago that unless they raised prices his firm would lower its recommendations to investors on the companies' securities.
"If these companies want to kill themselves, why should we go along for the ride?" Bradford asked Friday.
Whether the price increases stick will be determined by the market in the coming months.
"They're going to have to test the waters," Hogan said.
"The industry needs higher prices. Here we are at the peak of the cycle and prices are in the trough," Bradford said.
The first three months of any year usually see a strong flow of orders as processors, builders and manufacturers plan for the business year.
U.S. Steel's 5.8% hike and Bethlehem's 4.4% increase both cover structural shapes used in erecting buildings, factories and bridges.
Bethlehem said its increase returns base prices to levels announced April 4, 1982. The company said it also narrowed discounts offered to new customers.
Two specialty steel producers, Allegheny Ludlum Steel Corp. and Cyclops Corp., raised prices 6% and 5%, respectively, for certain stainless steels and other specialty alloys.
To produce enough steel to fill orders received last week, steelmakers would have to operate 85% of their mills and furnaces, Bradford said. That so-called rate of production capacity stood at 60% in January, according to the latest figures available from the American Iron and Steel Institute.
Markets for flat-rolled metal have been particularly active.
Steel shipments bound for auto factories rose more than 29% in January over the same period in 1984 and accounted for more than 20% of all the steel shipped from domestic mills, the institute said.
Yet producers continue offering discounts as deep as 25% off list price because those flat-rolled products are readily available from domestic and foreign sources, Bradford said.
"We have not raised prices on flat-rolled at all. Prices actually have decreased," said Robert Toothman, spokesman for National Steel Corp., a leading supplier of steel for autos, appliances and other such consumer goods.
Toothman said that National has booked orders at a strong pace through the first quarter but that with flat-rolled steel so abundant demand "hasn't been enough" to justify prices increases.
Bradford said cutthroat pricing among flat-rolled producers is in part a reaction by steel company sales officers to outdated information about the price of competing imports.
With imports beginning to slow under President Reagan's plan of negotiated restraints with foreign producers, import prices already are climbing. But in pricing their products to compete with foreign steelmakers, many American producers rely on import prices stated in months-old government reports.
"Steel that leaves Japan, let's say in January, ends up in the U.S. data in March, which is announced in late April," he said. "It doesn't take the steel that long to get here.
"They all blame imports, but it's really domestic mill killing domestic mill."
The bloodletting helps contain prices of finished products but may be a misleading sign of security to the auto and appliance makers that consume flat-rolled steel.
"A lot of consumers don't like the discounting," Bradford said. "They see the red ink some of the companies are putting out. They know they're not going to have a supplier for very long."
In a related matter, the Commerce Department ruled Friday that exports of carbon steel products from Austria, Sweden and Venezuela are being unfairly subsidized.
The preliminary determination, if upheld, could mean that an import tax equal to the amount of the subsidy will be imposed on steel shipments from the three countries.
The subsidies found after the initial investigation were 72.6% for Venezuela, 2.08% for Austria and 3.38% for Sweden.
The investigation was launched after a complaint Jan. 8 filed by U.S. Steel.
Imports of carbon steel products in the first nine months of 1984 were $44 million from Austria, $62 million from Sweden and $38 million from Venezuela.
If the initial ruling is upheld, the International Trade Commission must then determine whether the U.S. steel industry is being materially injured by the subsidies before the department can impose an import tax.