HUNGARIAN HEAVY INDUSTRY IN THE THREE-YEAR PLAN

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP80-00809A000700030323-8
• Release Decision: RIPPUB
• Original Classification: R
• Document Page Count: 7
• Document Creation Date: December 22, 2016
• Document Release Date: October 6, 2011
• Sequence Number: 323
• Publication Date: December 6, 1951
• Content Type: REPORT

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SE TY-I dt.RXr,
CENTRAL INTELLIGENCE AGENCY
INFORMATION FROM
COUNTRY Hungary
SUBJECT Economic - Heavy industry, plan
HOW
WHERE
PUBLISHED Budapest
DATE
PUBLISHED Feb 1949
LANGUAGE
TWIN NOCONCNI CONTAIN. NNIOIN.TCN onQlNN TON NwUONLL OIITNee
or TN, 011710 NITCTTe mnu m ^GNINe or U1104e1 .cr ee
O. e. C.. NN .NN NSa ?111100. Nn TN.NNNINTCN ON TNUrvxun0N
DATE OF
INFORMATION 1949
DATE DIST. 6 Dec 1951
NO. OF FAGES 7
SUPPLEMENT TO
REPORT NO.
THIS IS UNEVALUATED INFORMATION
The present au-,put. ?f cee. u_try ;. ,ignmr than it was before the war.
In the last year of tr:. P:ar, :ce output i:, to be 1'70 percent that of
the last year befoz_ tt,.t cf H?:ngsrian heavy industry in the third
plan year should t.r?.t.e! .22ni l...u.;, 'orrnt: as current, values, i.e.; 51.7 percent
more than In the per year icr ;.j n=rcer.t more tL_n in the second plan
year. in the Iron end :. -,1 _eda tr?v *:- ir.creeks should be 43.1+ percent com-
pared tc the fir,*, ,udustr,, 64.6 percent; and in
the consumers 3ood :
The main emEd:? e.t ::. Cr :f output of the engineering industry,
while the dev,:.cpment ;.re i_. .-el industry is to be slower. This fact
may give rise to many L;es ; 19188, only 52 percent r.' the output of
the iron and steel lnd'si.ry wa.; for further processing in the engineering
industry, while 4e of 't.e output was used without further changes (rails,
sections used in the 'tuildrng :,td,;-try, etc.), either on the home or the export
market. Raw-material s':iortag_,= are co be anticipated in the engineering in2us-
try if expar.siou of that ind,r_.t.ry will rot be accompanied by a quicker develop-
ment in the iro,i and st.Ce.t ~,iust-y
T'ner4 arc- :ffi-u`t.__ be overcome, as it usually takes a long
time to carry c.:t investments in the iron and steel industry. Also,
the cost of plant runic.': for a giver.. percentage of increased output is much
higher in the iron an, steel Industry than in any other irrlr;try. It is also
more difficult to obtain asizeeblelncreree in production in the iron and steel
industry by recrganizat or. of toe rroduction and small-scale investments than,
for instance, in some branct:es of the engineering industry. It is, therefore,
of utmost importance from the. vtewpoint of preparatory work to the Five-Year
Plan to estimate correctly the re;a:red output of the iron and steel industry
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low
The results of capital investments made in 1948 in the Ozd and Diosgyor iron
and steel works are already noticeable in the output figures. After completion
of the two ore-preparation and agglomeration plants, the production of pig iron
will be more economical owing to reduced coke consumption. It will be possible
to utilize pulverized ore ands owing to more uniform size of the ore, the blast-
furnace process will be quicker. It will be possible to increase the output by
10 to 12 percent. The twelfth open-hearts' furnace;at Ozd and the new, large
open-hearth and mixing furnaces at Diosgycr, which will be ready this year, will
result in full utilization of the rolling-mill capacity. Except for a few roll
sets, which were overloaded, the rolling-mill capacity could not be fully utilized
owing to insufficient output of the steel plants. It is now necessary to ascer-
tain whether mere is any hidden rolling-mill capacity which cannot be utilized
at present, owing to bad layout, inadequate furnace capacity, or other factors.
The large_, relative increase of production will be at Diosgyor because it
rece.ved most of the new capital and also because other plants, particularly the
Matyas Rakosl Works, were quicker in increasing their outputt,to " e maximum plant
capacity. In the first year of the three-year plan, Diosgyor prc. -ed only 400
tons of steel castings a month, while the present output is double that figure
and is to be increased to 1,000 tons a month by the end of 1949. It is diffi-
cult to increase the output in the M.aoyas Rakosi Works, because, in the tube mills
for instance, the production vas higher than prewar or at any time during the war,
and the percentage of high-duality tunes i- larger than it was before, despite
the fact that the plant is obsolete and the working conditions are unfavorable.
The shortage i-i step:. plate has teastd, 'ixcept for a few special types, e.g.,
transformer and dyna:ac plates said, are still in short supply. In 1949. the
planned output of transformer crates is to be double the output of the
first plan year, Intra urtion of better material and of a lukewarm rui_'ing proc-
ess made possible pnaducticr. of better-quality transformer pLates, but an effort
must be made to ensure a yearly production of 2,500 tons of transformer plates
by learning the modern method; of other countries.
The Zagyvarona ferrnsi,,con ant '.hieh "see placed ir, operation last year,
has considerably improved the supply ,;c ferro;ilican. This year, its production
will be about j,6GC ron_ i.,. Lout 2,200 tons of pure silicon. An even greater
quantity is needed by the deveio,.ir~, steelworks, and it is i:rgently necessary to
increase production o? these alleys. The Zaryvarona plant is unfavorably situated
from the geographical standpoint because it is necessary to relosi twice both
the raw materials and the finist:ed prodacts. Originally, the plant was built at
Zagyvarona because surplus power :as :?si!able there but this is no longer the
case, and it will be necessary to t,uild new wore: for ferrosi_icon prouuctlon
nsarer to the quartz deposits, the source; of power supply, and the processing
industries. It is likely that tree sites for the new plant will be chosen near
Tokaj and Satoru,jhely.
Ferromangar.eseis ::till being produced at Ozd, but increasing production of
raw steel requir- a.! increase in pig iron production, and the whole production
capacity will be required for this purpose by next year.
It is therefore necessary to build the prop led ferromanganese plant and
to modernize the manganese-ore mines at Urkut. .roductlot, with the utilization
of coal from Komlo and Pecs, should be begun nest year.
Iron-ore mining has not increased since the first plan year, because only
very limited quantities of trace ores can be utilized owing to their poor iron
content. To reduce the dependence of the country on fcreign iron ores, pros-
pecting for new deposits in Hungary will he intensified considerably this year.
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MAVAG (Steel and iron Works of the Hungarian State Rail roads) could produce
considerably more locomotives and the Matyas Rakosi Works would be able to produce
considerably more machine tools if their requirements of iron and steel castings
could be satisfied fully. The Hungarian foundries are still operated with very
obsolete methods and equipment, and not one of them is fully up to date in regard
to equipment, sand technique, and mechanical handling of the materials. The Hun-
garian steel-fo-ndry engineers are shy about introducing large-scale application
of castirg in :een sand moulds, although foreign practice proves that such meth-
ods are essential for high output figures. Synthetic sands are not manufactured
or used in Hungary, and in many Hungarian foundries sand analysis also appears
to be unknown.
For these reason:, the total rebuilding of the Rofherr Schrantz and Matyas
Rakosi iron foundries has been started already, and the total rebuilding, mechani-
zation, and mcderncz?aticr. of the MAVAG steel foundries has also begun, Soil se-
quentl,,, similar work will be carried out in the second half of this year at the
Diosgyor iron and steel foundries and the Ganz steel foundry. Troduction of
steel castings, planned at 26,100 tons for 1949, will be increased to 35,000 tons
a year after completion of the above-mentioned rebuilding and re-equipment or
equal floor space. Modernization is also to be introduced in cleaning the cast-
ings. The anticipated increase of output in iron foundries is similar to that
of the steel foundries.
MAVAG and Ganz will start combLaed production of the new type of the GAHZ-
KANDO single-phase, 50-cycles-per-second locomotives. The first of a series of
large diesel-electric trains, which are to be supplied to the USSR, is also to
be ready this summer. In 19149, the output of railroad cars is to be 60 percent
larger than in the first plan year, and more passenger cars are to be built this
year than in any previous year. This year, the output of the Ganz Shipyards will
increase by 40 percent, but the ft:ll effect of the capital investments will be
felt only next year, beca-ise the new buildings are not expected to be ready until
autumn.
Many charges will occur in the manufacture of cranes, lifting gear, and
other mechanical equipment. At present, specialization is being carried cut, and
the for'.,ation of a common crane-planning office is also in progress. hLRVAG will
start large-scale production of steam..-powered railroad cranes and it will have
the only plant in Central Europe for such large-scale manufacture. Electric-
and internal-combustion-engined are will also be manufactured there.
In 1949, power output Is also to be increased considerably. In the ep^'.,g
of 1949, a high-pressure power-generation unit will be put into operation in the
Matyas Rakosi Works, and, during the summer, another one will be put into opera-
tion in a site on the Matra Mountain. The production of the plant required for
the Hungarian power -supply-expansion program (about 300,000 kilowatts' total
capacity) will also be started this year, Large export cormnitments also will
make it necessary to reorganize completely some branches of production, e.g.,
that of steam turbines.
Heavy tasks are ahead in the machine-tool industry, and it is urgently nec-
essary to introduce production of modern turret lathes, horizontal boring mills,
planers, griuding machines, etc. it is necessary to increase the production of
the machine-tool industry to a value of 400 million forints a year, at least.
The new building for diesel-engine manufacture in the Ganz Works is to be
ready in the sumnmer, and it is anticipated that in 1949, its production of diesel
engines will be more than double the 1948 output. The production of large com-
pressors (piston type) and pumps will be stepped np considerably this year.
Large export orders have to be satisfied, particularly compressors.
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This year, the Hofherr Works are to produce over 2,500 tractors of the semi-
diesel type. A suitable quantity of agricultural implements for these tractors
will be produced by other Hungarian factories. The first series of the new type
Hungarian tractor will be given practical tests this year. For the purpose of
economic production and spare-part supply, it is to be equipped with diesel
engines of the same type as those used in Hungarian busses and trucks.
This year, the production in the Ganz Electrical Work is to be stepped up
by 155 percent, since demand for electrical machinery for home and foreign mar-
kets is fairly large.
The capital investment in Hungarian heavy industry, for the period of the
three-year plan, amounts to about 500 million forints, of which about 160 all
lion forints will be allotted to the Iron and steel industry. The distribition
of these it.vest-ments i4 as 35.5 :. '_.'.l i^ -"Grants for ore pfepAr'atlOn
(agglomeration) and pig-iror. procuct_ot; 22 million forints for increasing the
production of raw steel; 1'+ million for roiling-mill plants; 3.1 million forints
for tube-manufacturing plants; 7 million for forging workshops; 23 million for
iron foundries; and 26 million forints for steel foundries.
Otner capital investments are for the industry producing means of transport
(locomotives, cars, snips, base;, trucks.), 69 million forints; electrical machin-
ery '_ndustry, 22 million, forints; either engineering industries, 70 million
forints; completion of the f?Ltyas Rakosi hick-pressure power-generating station,
21 million forints; industrial water supply, canalization, and factory-road
improvements, 9.5 million forints; and building of storage facilities. 17 mil-
lion forints. Al-it '5 percent of these investments will be spent in Hungary
and about 24 percent costly or, machinery and equipment.
Of the total expenditure of .crz.^.tr;. about 100 million. wil_ be
spent on industrial buildings, 22, ?ni1_r.+n forint, on machinery and plants, 45
million on means of transportation and cechsni.ai handling equipment, 24 million
on industrial health projects, an., 15 million on var--cus improvements aimed at
reducing industrial power consumption. in l'); , the power costs acccented for
13 percent .1' the value of the prod%i_-ed goods. They are only b percent at present,
despite the fact tr:t Ira c - ' . r^al and .l.stric a; ba_ gone up in the meantime.
In the first pan year, the co,t. of :o adirgr amounted to about nalf the
value of the capital investments. tit r.,t present building coats amount to less
than one third of the capita nvestments. Expenditures for machinery and equip-
ment have, however, increased co ;siderab ,y, and it. is intone=d to replace this
year a large part of the obsolete m,n.';ioe tools wnizh are still in use. This
year, a total of 70 mil:iun forints i_ to be spent for this purpose. It will
also be possible to carry cut work on building storage space, improving indus-
trially important roads. canalization, and industrial water supply, which had to
be delayed owl g to financial difficilties.
0
At present, some of the most important capital investments being carried
out are as follows:
(At Ozd.)the most important part of the investments is being spent on the
completion of the Greenwald ore-agglomeration plant, a:. adjacent ore-grading
plant, and an ore-transporting railroad line which will c.;nnect the two plants.
In addition to reduction of the coke consumption in the blast-furnace plant, the
internal-transport system of Ozd will be relieved of its overload, The bull; of
the ore will be stored outside the factory, near the o:,-grading plant, and from
there, the graded ore tli be transported in suitable quantitie into bunkers,
while the pulverized ore will be supplied to the ore-aggt:: -elation plant.
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At Borsonad, experiments are being continued in the production of trans-
former sheets of better quality. Large-scale investments will not be carried
out here for the time being, because a new combine for production of thin sheets
will be built during the Five-Year Plan. This factory will then be required for
other special work, and investments will be made there only during the Five-Year
Plan period.
At Salgotarjan will be concentrated the manufacture of steel products which
are made of semifinished rolled sections by various cold-shaping processes, e.g.,
iron and steel wire, rails, bars, cold-roiled strips, etL. The manufacture of
agricultural implements will continue there. The Diosgyor wire-drawing plant
and the Csepel nail-manufacturing pact will be moved to Salgotar,jan this year.
The largest amount of money will again be spent on Diosgyor. The construc-
tion of new, large build rigs and rebuilding of some of the existing ones, which
was started lest year, will be continued this year. Most important ??re is the
building and equipment of an ore-brick plant which has been planned by the Heavy
Industry Planning Office. The open-heartn plant will be enlarged by a new 80-
ton Maerz furnace, a 250-ton circular mixer, and the appropriate cranes. After
these very modern furnaces will be in operation, the succes_ive rebuilding of
the obsolete furnaces will be started.
At least five or six of the eight furnaces in use at Diosgyor will be
rebuilt with radex or miaaoni.te bricks. It. is anticipated that this will result
in a further increase of the output of iiquid steel by 15-20 percent. This work
will be carried out in one to ? ,v-ars. Inc expansion of the iron and steel
foundries will also be c .^..oLet than year. and then their total or partial mech-
anization will be carried out. The forging shops at Diosgyor are the largest in
Hungary. The requirements of the Five-Year Plan were taken into consideration
when they were built.
In the Matyas Bahosi Work;, the expansion of the tube-mill capacity repre-
sents the largest investment espemiiture, The buildings will be enlarged con-
siderably and a new set of rolling stand, will be installed for the production
of large-diameter tubes.
The
tube capacity et' the plan'. will then be 60,000
tons a year, and the new
tube
stands will prod ice tubes w,;icu are most needed a.
present, i.e.. tube; of
Tarp-
dumensices for oil b:rings. These tubes are in
demand for t1*e hors market as :ell a: . _.. ice r?xp err ::,arket. ;Fins:aerable expansion
work is being carried out in the Matyas Works iron foundry, and a new
plant is to start operation by the eu-i c- ..a-, sr'tcer: it will he the most
modern fcundry in the country for ma. hine -tool castings And will eliminate
entirely the shortage of such castings in Hungary.
A large part of the investments to be made in the machine-manufacturing
industry will be spent on the Ganz Works The rebuilding of the structures
destroyed during the war will be completed this year. The old, obsolete build-
ings will be replaced new, modern ones with modern equipment. Practically all
the buildings of the old Ganz Wagon Factory will be new. Among others, the
diesel-engine shop and the steel foundry are also being bui~t anew. It is antic-
ipated that a large crease in production will result from this work as early
as the second half of this year. The new shipyard building and its equipment
will also be completed, and then it will be possible to start demolishing the
old buildings. In the Ganz Electrical Works, the turbogenerator assemb', hall
and the warehouses will be .ompleted.
Rebuildtnll of the Magyar Wagon es G p,yar (Hungarian Wagon and Machine Works)
is almost completed, except for the aircraft section. The plants will be merged
with MAVAG and will produce steam-operated cranes, mechanical material-handling
trucks, etc.
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Investments in MAVAG are mainly intended to eliminate the numerous obsolete,
40-year old or older machine tools still in use there.
Of the money to be devoted to industrial health projects, 24 million forints
will be spent on the following; washing and dressing facilities in the Matyas
Rakosi Works, the Lang Works, the Ganz Shipyards, Magyar Waggon es C'epyar, steel-
works and heavy rolling mills at Dicsgyor, steelworks at Ozd, etc.
In addition to the above investment plan, 100 million forints are available
for plant renovations.'
The 1949 production of Hungarian heavy industry will represent about 4,:...,0
million forints. Of this total. 15.5 percent will be exported, about 15.5 per-
cent will be delivered as reparations, 17 percent will be required by the plants
themse'ves, and 52 percent will be available for the Hungarian economy. The
export and reparati.,ns demand; are primarily for heavy machinery; in fact, 41
percent of the machinery output (representing 2,110,000,000 forints a year)
will be used for export and reparetic,cs.
Long-term agreements have either been concluded or are being negotiated
with the following :our.trles. USSR, Poland, Bulgaria, etc., and also Argentina.
Heavy machinery has played a primary part in all these agreements, particularly
in the case of the USSR. These re.uirecnents led co the production of entirely
new lines of heavy machinery, e.g., the previously mentioned steam-operated
railroad cranes. Mechanical material-handling trucks, locomobiles, and exca-
vatirs weighing 130 tons each w;.,,' also bF. produced shortly.
In 1946, Hungarian heavy ir-iustry operated at a deficit of 40 million fo-
rints. Results have improved considerably is the meantime, and this industry is
to have a profit of at least 400 million forints in 19t?1). The financial posi-
tion is most difficult in the Inc oand steel. industry, due partly to the lack
bf raw materials which have to be purctieoed abroad ana partly to the obsolete
equipment in use. This equipmera :ou:d hot be replaced adequately despite the
large investments made during the three-year plan.
Despite this difficult 7_t.ua,.i)n, it is anticipated that the iron said steel
industry will show a profit thin. .;yr r contribute ebo';t 100 million forints
in profits to the nationcl e_enomy. Tr production costs still further,
it is intended to introduce the Soviet y;ten of accounting in large and small
operating units and the b.rigsles.
In addition to the above-mentionea expenditures, 130 million forints will
be put aside as a reserve for later and much larger investments w'.ich are
envisaged for the period of the Five-Year Pian.
The principal political and economical aims of the Five-Year Plan are as
follows:
1. Develou c~cc,:'?; industry sufficiently to ensure the requirements of other
industries, e.g., large-scale mechanization of agriculture, extension of the
power supply, improvement of the transportation system, development of the min-
ing industry, increase of exports to friendly and underdeveloped countries, and
to ensure the maximum strategic independence of the country.
2. Expand home ,,roductior. of rav material for the heavy industry.
3. Improve the production structure of the industry so that types of goods
are produced which are justified and can be manufactured at reasonable prices,
i.e., heavy equipment which is produced in small series in most countries (e.g.,
locomotives and products which require relatively little machinery, etc.).
6-
STAT
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4. Put the country on its feet in regard to design and technical develop-
ment. At present, Hungary is at. 1-st 10-15 years behind other countries and
this gap is to be bridged by the purchase of foreign manufacturing licenses,
information on foreign experience, samples, and training of designers.
5. During the Five-Year Plan, production costs must be reduced by 20-25
percent under the present level. At present, the production costs in Hungary
are 30-35 percent above world prices, and the produced goods can be sold on the
world markets only at a price about 25 percent under production costs.
The most important bottlenecks anticipated during the Five-Year Plan are
quality rolled products, steel and iron castings, particularly high-grade and
machine-tool castings; large forgings; obsolescence and lac,c of the machine
tools (horizontal boring mi.lis large planing machines, modern automatic machines,
etc.); insufficient, member of skilled personnel (designers, metallurgists,
research engineers, etc). and difficultle in obtaining certain supplies from
abroad (ball bearings, hew .-y ncnferrcus metals, ferroalloys, machine tools, and,
frequently, basic materials for the heavy industry).
During the Five-Year Plan. it is ;nteei d to close down small firms and to
concentrate their production ir, rnedi nn-sized factories with 500-1,000 employees.
It is also intended to disron.ince the .nanfacture of various products in the
existing large factcr?.es, :f these products can be manufactured in medium-sized
plants and are a h-corence to the spa,is_rced large-scale production of goods for
which the large f-,ctorv is mainly vuftei It. addition to the existing medium-
sized factories. about 10 Ii new plants a:e to be built, each having a useful
floor space of c,000-6.000 square meters.
According to sc~t,s.r_s, nboit r-ra-nt of the machine tools in use in
Hungarian indi:ltry are mocero, while about 80 percent are obsolescent, and many
of these are fit oc'y.for s-rap. It it the u, the Five-Year Plan to reverse
this ratio. hie autrcr net: '/'_31Zcu ~tD.'.~C