Optimism in Italy

«The Economist», 10 febbraio 1940, p. 251

The rise in share prices has continued since October. The changes, according to the index of 30 active securities quoted on the Milan Stock Exchange, published daily by the Sera (not Corriere della Sera as was misprinted in my last letter), are as follows:

A lively debate has taken place in the daily and financial Press on the causes of the rise. Those who saw in the rise a symptom of a flight from the lira have asked for some restriction or taxation on speculative dealings. Others, perhaps representative of a more general opinion, have pointed to the increasing profitableness of industry and to the more favourable balance of international payments as guarantees for the stability of the lira and for the genuineness of the Bourse trend.

What is the opinion of the Treasury and of the Istituto per la Ricostruzione Industriale, whose influence in Italy is now – like that of similar bodies in foreign countries – of the utmost importance in the fixing of the level and trend of Stock Exchange securities? That official circles do not view the optimistic trend adversely may be surmised from the big issue of 900 million lire of shares of Finsider, which will bring the issued capital of this huge concern from 900 to 1,800 million lire (about £ 23 millions at the present official rate of exchange), and will put it ahead of all Italian joint-stock companies.

The Finsider (Società finanziaria siderurgica) is a financial concern which controls four big iron and steel, engineering and electrical companies: Ilva; Terni; Dalmine; Siac [Cornigliano); and two mining companies, Ferromin and Rimifer. On December 31, 1938, the group possessed consolidated assets of 3,140 million lire, of which 1,752 millions were invested in industrial fixed plants, 601 millions were stock in trade and new works, 74 millions cash, 567 millions credits, 112 millions securities, and 34 millions miscellaneous. Liabilities (sums due to banks, trade creditors, mortgagors, etc.) amounted to 1,088 millions; capital was 1,521 millions; and reserves 531 millions.

Mass Produced Steel. – The 1937 production of the group and the limit which it is estimated will be reached when the 900 million lire new capital will be fully utilised are as follows: Minerals, 710,000 and 1,200,000 tons, respectively; pig iron, 570,000 and 1,560,000 tons, respectively; steel 915,000 and 1,700,000 tons, respectively; steel tubes, 81,000 and 185,000 tons, respectively; cement, 215,000 and 250,000 tons, respectively; lignite, 150,000 and 500,000 tons, respectively; and electrical energy, 1,225,000,000 and 2,100,000,000 kwh., respectively. In minerals, pig iron, steel and steel tubes will eventually supply about three-quarters of total Italian production.

Perhaps the most interesting part of the programme of this concern is its change in the method of steel production. Instead of utilising mostly, as in the past, broken iron and scraps, the two Finsider controlled Ilva and Siac companies now produce 310,000 tons of steel, and will produce 1,250,000 tons, directly from minerals. There are two reasons for this: to free Italy from the compulsion to import broken iron and scraps, mainly from France and the United States, imports which may become impossible and are now for several reasons difficult; and to reduce the cost of production to a competitive international level. To this end mass production is necessary. Therefore an Act of January 19, 1939, reserved to the Ilva and Siac companies, in addition to their standard production in the base period (July 1, 1936, to June 30, 1937), the total future national increase in production up to a maximum of 2,500,000 tons.

The executives of the Finsider group are sanguine about the scheme. They say that, as 15 per cent, of the present production (and probably more than 30 per cent, in 1940) of Dalmine tubes is sold at competitive prices in foreign markets, without any dumping or subsidy from internal consumers, the same will happen to the steel production. The Comigliano (Siac) and Piombino-Bagnoli (Ilva) industrial plants are of ultra-modern type; and, owing to their situation on the sea coast, the freight cost of minerals and coal should be at a minimum. The Finsider is controlled by the I.R.I., and this is certainly one of the foremost State ventures in the world. Carefully planned on autarkic principles, it is also a concern the sponsors of which claim to be on a strictly competitive basis.

January 17^th.