(FORTUNE Magazine) – Wall Street, which originally feared that the new labor contract between Bethlehem Steel and the United Steelworkers would send up prices, has changed its mind. It likes the deal. Clarence Morrison, an analyst who covers steel for Dean Witter, calculates that Bethlehem's total labor costs will climb by only 5% annually through mid- 1993, from the current $25.50 an hour, including benefits and taxes. Says he: ''Even after this contract, the U.S. is one of the lowest-cost steel producers in the world, at $435 a ton.'' Only Korea and Brazil can produce it more cheaply, at $415, he says, and Japan's costs are about $480. Bethlehem gave the union what it wanted most: the restoration of givebacks conceded over the past seven years, which saw the entire steel industry go through a rolling mill to slim down to competitive shape. Since 1982 the steel producers have shed a third of their capacity, cut employees by 50%, and invested some $12 billion in new technology. The Voluntary Restraint Arrangements, which hold imports to a 20% share of the U.S. market, helped prop up prices. Thomas Graham, president of the steel operation at USX, describes the VRAs as ''a devil's bargain ((with foreign producers)), but it worked.'' It certainly helped the big steel companies to return to profitability.

Bethlehem's chief executive, Walter Williams, is happy with the contract, which will give workers their first real raises in 1991. Says he: ''With no wage increase during 1989 or 1990, flat wage costs will enable us to hold our own against domestic and foreign competitors.'' The VRAs expire in September, but Washington may well extend them in some form. If foreign competitors resist, warns Williams, ''we are prepared to file massive antidumping suits, just like we did in 1984. They'll like that even less than VRAs.''