SUPPLY LAGS AND DEMAND ACCELERATION IN THE UNITED KINGDOM STEEL MARKET
| Author | Christopher Blake |
| Date | 01 February 1965 |
| Published date | 01 February 1965 |
| DOI | http://doi.org/10.1111/j.1467-9485.1965.tb00746.x |
SUPPLY
LAGS
AND
DEMAND
ACCELERATION IN
THE
UNITED
KINGDOM
STEEL
MARKET
CHRISTOPHER
BLAKE
I
BETWEEN
the summer of
1954
and the summer of
1963
(the period
covered by this investigation). the
U.K.
economy
experienced two
more or less complete cycles
of
activity.
If
one
looks
at the impact
of this on the market for finished steel, perhaps the most interesting
fact open
to
immediate inspection is that output fluctuated
by
con-
siderably more than consumption.
OUTPUT
AND CONSUMPTION
LESS
IMPORTS
OF
FINISHED
STEEL
(Borh
series
seasonally
adjusted)
IN
THE
UNITED KINGDOM
1954-1963.
MILLION
TONS
OUTPUT
.-
CONSUMPTION
I&&
IMPORT8
---
SUPPLY
LAGS AND DEMAND ACCELERATION
63
Clearly this must have happened in spite of the intentions of
the
steel
industry itself. The present study considers how it came about that
the market exhibited this particular kind of instability, with supply
changes regularly over-shooting those in demand.
THE
MARKET
FOR
FINISHED
STEEL
The structure
of
the British Steel Industry, and the nature
of
the
market for finished steel, are familiar enough
to
be taken for granted.’
Three features are however particularly relevant to this study. The
first of these is the pronounced demand cycle-due to the predomi-
nance, among buyers, of firms in capital equipment
and
consumer
durable manufactures whose material requirements are fairly sensitive
to swings in aggregate final expenditure. The second is the presence,
on
the sellers’ side, of both statutory and institutional impediments
to the price mechanism-from the powers of the Iron and Steel Board
to fix maximum prices, and from the effectiveness of a recommendation,
by the various constituent
‘
Conferences
’
of
the Industry’s trade
association (the British Iron and Steel Federation), that their members
treat the Board‘s price determinations as fixing minimum levels as
Third, there is the marked concentration of finished steel out-
put, for the most
of
the main groups (i.e., sheets, plates, sections, bars
and rods. tubes, etc.) on a few large firms. Two characteristics of the
market at least presumably depend
on
this last feature: widely
varying delivery delays, from an industry whose members claim
to
compete on ‘service to customer’; and the determination of that
industry, in a market where sizeable inventories are
a
technological
necessity, to let the customer carry the stocks.’
Of course, price rigidity could presumably be disturbed at any point
where significant quantities of acceptable imported supplies are on
offer in
a
weak market. Yet, throughout the period covered by the
present study, such cheap imports as occurred were apparently not
1
For
an authoritative short account, see for example the chapter
on
the
industry contributed by
Mr.
Duncan Burn to Volume
I
of
The
Strucrure
of
British Industry
(Cambridge University
Press
for
the
N.I.E.S.R.,
1958).
2
The
latter may however be fundamentally affected by the recent judgment,
in
a
case before the Restrictive Practices Court, against the Heavy Steel Pro-
ducers’ Conference.
3
We
may contrast this assessment of the balance
of
commercial advantage
with the practice
of
steelmakers in E.C.S.C.
or
in the
U.S.A.
To continue reading
Request your trial