The Big Stone post. (Big Stone Gap, Va.) 1890-1892, 1891-05-01
WELL ANSWERED.
The ,u.s.d interest Charges on Insrse,
,,.nts IN Sbuiiiern Industries
- Explained.
Uron Age.)

|
industry appeared recently in the columns
of the Philadelphia Manufactures, in
which the writer points out that the great
est burden resting OH the iron makers Of
Alabama, Tennessee and Virginia is the
interest charges These he divides into
two classes-thc interest on bonded CAPT
tai and the interest on borrowed money
Dealing with The former, the writer Ill
question instances the Tennessee Coal.
Iron 4 Railroad Company, whose interest
he figures at $50 per ton of iron pro-
duccd, and the Sloss Iron g. Steel Com
pany, whose interest charges are made to
amount to 1920 per ton Of pig iron. He
distinctly disclaims any desire "to direct
attention to the two companies named as
examples of nsmanagemcnt or defective
constitution but cites them simply be
cause they illustrate very torcihly y sar-
Gus weakness in the Southern iron indus
try" is not quite fair to put the mat
ter in this light, although il is equally un-
fair to ignore these points when comparing
costs IN different sections Of the country.
The Southern producers named, and many
others like them, arc the owners OF large
tracts Of mineral lands Their interest
account on bonded capital represents, to
some extent, the royalty on ore and coal
which with the majority of producers
elsewhere enter directly into the accounts
as cost Of ras matorial With the South
crn producers the hnal,protit on the man
ufacture of pig iron must represent the
! aggregate retnrrs on capital f:om the
ore aud coal in The ground 10 the market
product We have adylseIly stated that
! the Intorcs. account 80 GONE extent rep
rescnts these itcms, because in the mn or
ity Of instances Southern companies have
acquired tracts Of mineral lands absurd
ly ont Of proportion to their immeaia!e
or prospective needs IL yspsr words. 4
eonpi0clshI part Of their capital Is em'
barkcl in the speculation for ah advance
in mineral lAnlc. 1t may be true that
thcec have been purchased cEeapy; that
ultimately they will bring large returns,
but it is certain that in the interval ihcir
ownership impascs heavy burdens which
must nc borne by tic product from oiton
q very small part Of the estate.
Whether it il q wise policy we do not
propose to discuss. Tie iron trade Of the
country must deal with the facts rs they
are. To the concerns who have adopted
it, the interest ci,argpo un nonds, whether
issued for mineral lands, railroad or cox
ing plant, are a. much an item Of cost as
the labor account in making pig iron. 1t is
usual in othcrpartS Of the country to charge
the furnace with the ore mined by The COM
pnmy or the coke produced hy thee. ~ .ne
price hich it I'll! fptEh N she open n'"rkct
This some of The Southern companies do
not do, and the natural result is that the
cost sheets show extraordinarily low
figures They could probably be cclipted
if the furnaces of the Lebanon district
put in their roasted Org ~ "a cents u ton,
or the lpa.ling Lclligh producer charged
its rich Richards orc at Sl.9D at tur-
naco.
but We believe II unfair to urge that be
Southern companies arc laboring under
an interest burden from which their rivals
in other parts Of country arc free. hat
the Southern ironmastcr pays in interest
on bonds and the SUMS which he must
earn TO pay fair dividends OH large issues
of stock. the producer North Of the Ohio
AMI Potomac must pas Indirectly in the
form Of royalty and profit on ore and
profit on coke. The latter need only meet
the interest charges on cost Of plant; the
former is trying TO make all the profits
along the line and naturally needs more
capital If all his earnings go to meet
fixed charges then the stockholders are
simply part owneis in speculation in
mineral lauls, who are waiting until the
day for realizing has come, or until high
prices of iron allow of sufficient accumu-
lation of funds TO build additional plant
to be share o: the cost Of carrying the
lands, and thus give Il chance for making
strictly manufacturing profit.
The prevalence Of the system Of owner
ship of mineral lands in the South, while
it keeps some concerns land poor, has the
tendency with others less heavily loaded
to further 4 policy OF extension Of m:nu-
featuring plant. In other words. when
the company--anl there is one conspicu-
Gus example in the Birmingham district
has a moderate though ample estate, is
actually making money i'll operating its
furnaces, it pursucs the policy of resery
inc a part Of the earnings for building
additional stacks, which then aid in con-
vcring II further part of the mineral
lands into Immediately profitable prop
erty.
We arc inclined to believe that nearly
every larger and older Southern company
has acted upon this policy, bnt the mnjor
itv Of them have evidently rushed in TOO
deferred until the finances can be put in
10 bettcr shape One concern, relying OH
the possession Of large tracts Of laud
found after adding heavily TO plant that
its ore property was not all that had been
expected, and succeeded in acquiring the
best body Of ore III the Birmingham
district
Another point which the writer Of the
article referred 10 las brought up is the
heavy charge upon Southern produc
crs OF interest on borrowed money. This
applies not only to townlot furnaces, but
also to those plants built to make iron at
profit. It is the outgrowth to some ex-
tent Of the necessity ~ accumulate fixed
charges, and also in measure to the dis
taucc OF markets. That these necessities
lave been taken advantage Of both by
commission merchants and by consumers
is we'll known, and ii is true also that
they have seriously influenced the iron
trade by sacrifice sales at different times.
Bur no one will question that every year
pulls the better concerns into more favor
able shape in this respect, and that SOUTH
ern furnaccncn will gradually be more
experienced and more conservative sellers.