US Steel Price Rollback

President Kennedy forces U.S. Steel to roll back a price increase in 1962. Steel-industry executives cite this as the moment they lost profitability; Tom uses it to make the point that steel was the commodity controlling the global economy before the 1973 oil embargo.

Bethlehem was the second-largest steel company in the world at the time, after U.S. Steel. And how did U.S. Steel and Bethlehem get to be the first and second largest, with so much market clout that in 1962, when U.S. Steel wanted to raise the price of steel, President Kennedy stood them down and made them roll back the prices? The steel guys say that's when we lost our profitability. But the reason: steel was like oil is today. The world's economy depended on the price of steel. Before the 1973 oil embargo, steel was the commodity that controlled the world's economy. U.S. Steel and Bethlehem controlled 75 percent of the world steel production in 1945. Why? Because we had bombed out all the rest of the capacity. What a great thing — you have a war, you bomb out your competition.

The steel industry is so huge it actually controlled a lot of the world's commerce. In 1962, US Steel wanted to raise the price of steel. None of you were born in '62, but I was. There was a big battle between the president of the United States and the president of US Steel, and Kennedy forced the US Steel industry to roll back its prices, because he said raising the price of steel would be inflationary to the world economy. It's the same thing as oil prices today. He could control US Steel; he can't control OPEC. You could pump oil out of the ground for a nickel a barrel back in 1960, and we had plenty in Texas and Saudi Arabia had even more. But then when oil became scarce, energy became the big thing, and not steel.