Why Paper is Dearer
In a letter to the members of the News-Print Manufacturers Association Mr. G. F. Steele ably refutes the charge that the recent advance in the price of paper were arbitrary measures.
The writer was unavoidably absent from New York when the monthly report of production and shipments for the month of August was sent out from this office on September 19th.
You have doubtless observed the decreased production in August as compared with the month of July. This was largely caused by the difficulties encountered by one of the large Canadian mills by a terrible forest fire, which decreased operations for several weeks. It will doubtless occur, however, to every one of our members that due to the terrific pressure which has been placed on the operation of the mills during the past eight months, that it is a great wonder that production keeps up to the present high point. Machines are running at a much greater speed then they were ever expected to run, and ordinary shut downs for repairs and replacements have not been made this summer. It is usually the custom for most news-print mills to shut down at the end of the summer before freezing weather occurs, to run their screening and tailings into wrappers. I do not know of a single mill which has indulged in this desirable practice this year, and in order to get a supply of wrappers for the coming six months it may be necessary for some mills to stop making news-print paper temporarily and run out their wrapper stock.
During the months of June, July and August in normal years production drops down materially, and stocks are accumulated for the great Fall demand. During the months of June, July and August of this year, instead of accumulating increased stocks, you doubtless have observed from the statement submitted to you that total stocks at hand at all points, including stocks on hand at mills, in transit, and at destination points, decreased 7,316 tons or 10.6 per cent.. It was thought by those who are best posted in the industry that stocks were at danger point on June 1st, and that unless these stocks could be replenished there would be grave danger of the necessity of some papers suspending publication temporarily because of the inability of the mills to get paper to them in time for their requirements during the coming Fall and Winter. During the three months of June 1st to September 1st, 1915, storage stocks increased as much as they have declined this year.
During the past few weeks the newspapers have been full of violent outcries, uttered by publishers, regarding the high price of news-print paper. There have come to my desk during a period of two weeks over 1,500 radical and abusive articles, making all sorts of baseless and unfounded charges against the manufacture of news-print paper. It is quite evident that these newspaper publishers are more scared than hurt up to this time, for owing to the peculiar nature of this business and the fact that the great bulk of the business is contracted for the calendar year in the fall months of the preceding year, it is the belief of those who are best posted in the industry that on the average the price of roll news-print paper which is sold on contract has not advanced up to this time more than 5% or $2.00 per ton. Many newspapers have taken advantage of the situation to raise subscription prices and to raise their advertising rates, when these same papers are paying no higher price for their supply of news-print paper than they were paying a year ago.
So much has been said about the price of news-print paper, and so little has been said about the rise in price of other commodities, that I have endeavored to make up a list gleaned from responsible commercial publications regarding the rise in other commodities.
Just as soon as the price of news-print paper advances, no matter how little, the newspaper publishers promptly outdo the Prophet Jeremiah with their lamentations and demand an immediate investigation on the part of the government. We do not see the same demand when the prices of other commodities advance.
The selling price of the raw materials entering into the manufacture of news-print paper has increased to a very remarkable extent during the past year. Many mills now making news-print paper are paying a very much enhanced price for the cost of raw materials which they have to purchase. Other mills purchasing the chemical and ground wood pulps entering into the manufacture of their products are operating on old contracts which expire with the calendar year. There is every indication at the present time that the price of these two commodities after January 1st, 1917 will be practically double the price which ruled a year ago, and perhaps in the case of chemical pulp three or four times the price which ruled a year ago. The mills which are forced to make news-print paper from these high priced raw materials will necessarily have to charge what would seem like an inordinate price to operate at a profit.
Consider, for example, a paper mill which is dependent on the market for its supply of raw material. Sulphite pulp, of which news-print paper contains approximately 25%, is now selling around $100.00 at the sulphite mills and the mill which converts it into news-print paper will pay $25.00 per ton of paper for this item. Ground wood, which constitutes 75% of news-print paper, is selling at $30.00 per ton F.O.B. ground wood mill, and the converting mill pays $22.50 per ton of paper for this. As it takes approximately 110 pounds of pulp to make 100 pounds of paper, this brings the total cost per ton to $52.25 for the raw materials alone. Add to this a freight rate of 12c per hundred pounds for pulp, 40% dry, and the cost per ton of raw material comes to $58.85. Add to this the manufacturing costs which, according to the Tariff Board figures in 1911 amounted to $10.14 in the United States, and a larger figure in Canada. These costs have easily increased 50% since 1911, which makes a total cost of the paper $74.06 per ton.
The majority of paper mills make one or both grades of pulp, in which case increased expenditure is dependent on the increased cost of pulpwood, coal, labor, machine clothing, repair materials, chemicals, etc., but the mills dependent on the market for raw materials have to obtain large prices to operate at a profit.
In the year 1914, the average price of news-print paper was approximately $2.00 per hundred pounds F.O.B. cars at mill. The largest producer of news-print paper in the world, is now charging for renewal of contracts $3.00 per hundred pounds F.O.B. mill or an increase of 50%. Compare this increase with the increases in the following commodities, taken from such authorities as:
R. G. Dun & Co.—“WEEKLY REVIEW”.
“THE ANNALIST”.
BRADSTREET’S.
U.S. Market Statistics (As quoted by the “N.Y. SUN”.)
Monthly Summary of U.S. Commerce.
Then follows a long list of articles in daily use which have advanced from 25 to 467 per cent. showing that the advance in the cost of paper is not an isolated case. The cost of living index accordingly to the New York Annalist increased from September 1915 to September 1916 from 135 to 185, an increase of over 37 per cent., and the market value of securities listed on the New York Stock Exchange increased from July 30th, 1914 to September 1916, deducting value of new editions, by over $3,000,000,000.00, a net increase of 33 per cent.
According to Bradstreet’s, out of 106 commodities which their index table embraces, all but 17 advanced in price between September 1st, 1915 and September 1st, 1916, representing for the entire groups an average increase of over 16½%. According to Dun’s last review, out of 328 commodities quoted, 42 showed advances in price over the previous week, while but 25 showed decreases.
There is another matter to be considered. During 1915 there was a decided increase in the price of practically every commodity, except paper. The Journal of Commerce quotes from the United States figures as follows:
“Wholesale prices of commodities in the United States averaged considerably higher in 1915 than in the preceding year, according to Bulletin 200 of the Bureau of Labor Statistics of the United States Department of Labor. ***The Bureau’s weighted index number for December (1915) stood at 105, the highest point reached in any year since the collection of data for the present series of reports on Wholesale Prices, dating back to 1890, was begun.
“Violent fluctuations were recorded during 1915 in the prices of all commodities, particularly drugs and chemicals and metal products. ***In the fuel and lighting group*** in August the prices again advanced (after a Spring slump) the increase continuing for the rest of the year. ***Articles belonging to the food group were in the aggregate highest in price in December and lowest in September. The increase between January and December in this group was nearly 4%.” The paper market, however, remained unchanged.
In other words, the price of other commodities advanced rapidly during the year 1915, while the price of news-print paper was stationary, and at the present time the advanced selling price of news-print paper does not compare unfavorably with the high cost of living as evidenced by practically all other staple commodities.