Up to a short time ago electrolytic copper was selling at 20½ cents a pound, lead at 7 cents a pound, commercial zinc at 29½ cents a pound. Zinc ore, from which spelter is obtained, reached the price of $112 a ton. American spelter was nearly $500 a ton, compared with $110 a ton before the war. Spelter was almost unobtainable. In England the situation was acute, the metal there being quoted only nominally at around $550 a ton for immediate delivery.
Within the last few days prices have dropped materially, but how long they will remain at these lower levels it is impossible to predict. If the war continues for any length of time the demand for all these metals is certainly bound to increase, and this will automatically again send up prices.
The world's production of spelter in 1913 (the latest authentic figures obtainable) was 1,093,635 short tons. Of this the United States produced 346,676 tons, or 31.7 per cent.; Germany, 312,075 tons, or 28.6 per cent.; Belgium, 217,928 tons, or 19.9 per cent.; France and Spain, 78,289 tons; and Great Britain, 65,197 tons. The world's production of spelter in 1913 exceeded that of 1912 by 25,590 tons, or 2.2 per cent. The greatest increase was contributed by Germany, which exceeded its production of 1912 by 4.4 per cent. The United States made a gain of 2.3 per cent. The excess of the world's production over consumption in 1913 was only 27,316 tons.
As can be seen from the above figures, Germany has control of practically one-half, possibly now over one-half, of the world's production of spelter. Her position with respect to iron and coal is equally strong, the United States not included. In 1913 Germany's production of pig iron was 19,000 tons; Great Britain, 10,500 tons; France, 5,225 tons; Russia, 4,475 tons; Austria and Belgium, over 2,000 tons each; Italy, negligible. She has captured a large proportion of the coal resources of France as well. Her strength is her own plus that of conquered territory.
Before a contract for war supplies is let, more particularly with reference to contracts for arms and ammunition, the manufacturer is requested to "qualify." This means he must show his ability to "make good" on the contract he wishes to secure. If he is now or has been in the past successfully engaged in the manufacture of the particular article in question, this is usually sufficient; if it is out of his regular line, then he must prove to the satisfaction of the War Department or the purchasing agent, as the case may be, that he has the technical knowledge necessary for its production. In either event he must have an efficient organization, suitable plants, with proper equipment and men to operate same; also the necessary raw materials in hand or under option to purchase.
In most instances the manufacturer taking these war orders has been obliged to enlarge his plants, add new machinery and purchase raw materials so as to be able to handle the business. This meant the expenditure of large amounts of money on his part.
He did not have to depend, however, upon his own normal financial resources, as the contracts carry a substantial cash payment in advance, usually 25 per cent. of the total contract price. This advance payment is deposited in some New York bank simultaneously with the manufacturer's depositing a surety bond guaranteeing his deliveries, and upon the manufacturer executing an additional surety bond guaranteeing his responsibility he could draw down all or any part of the cash advance he might wish to use for his immediate needs.
Before issuing these bonds the surety companies make rigid examination as to the ability of the manufacturer to fulfill his contract. The commission charged for issuing these bonds is from 2½ to 5 per cent. on the amount involved. The demand for bonds has been so great during the last six months that it has taxed to the limit the combined resources of all the surety companies in the country.
The remaining part of the contract price is usually guaranteed by bankers' irrevocable letters of credit or deposits made with New York banks, to be drawn against as the goods are delivered, f.o.b. the factory—that is, free on board the cars—or f.a.s. the seaboard—that is, free alongside ship—as the terms may provide.
Banks here are beginning to purchase bank acceptances or bank-accepted bills of exchange, and in this manner payment is also being made to American manufacturers for goods sold to the Allies. For example, when a purchasing agent in Paris places an order for ammunition here he makes arrangements whereby the manufacturer will be authorized to draw on a New York banking institution at a stipulated maturity, and after acceptance of his drafts by such banking institution he could then negotiate these time drafts with his own banker—thus making them, less the discount, equivalent to cash—through whom they could be rediscounted by the Federal Reserve banks. These bank-accepted bills are discounted at a nominal rate of interest.