Evening star. [volume] (Washington, D.C.) 1854-1972, 1912-01-23
Preliminary Report Submitted
to President.
MANY DETAILS ARE GIVEN
Corporations Ten Per Cent Profit
Called Cause for Concern.
IS AHEAD OF OTHER BODIES
commissioner Smith Does Not At
tempt to Suggest Remedies for
Existing Conditions.

GXlSllng conditions.
Inc preliminary report of the commits
sioner of corporations on the cost of pro-
auction IN the steel industry has been
presented to the President. In the re-
port which covers Ia pages and contains
forty tables of figures. detailed informa-
ton is given in regard to the cost OF
producing steel, from the iron ore to the
hnlShed billets or rails, and including
cost of mining coal and producing coke.
In his letter of submittal Herbert Knox
Smith commissioner of corporations,
says:
The cost of steel making is a basic
industrial fact, which bears OH tariff
legislation, prices and profits i'll "a great
industry. and the concentrated control
of a great natural resource.
The bureau has used the actual rec
or1s of companies covering. roughly. two
thirds of the country's production OF iron
and steel for the years 100. to 1906
These data are most complete. More
limited figures for 1902 to 1910 make it
clear that these five-year figures s,lbstan-
TALLY represent present conditions also"
Book Costs Discussed.
The report goes into a minute discus
sion of book costs and "intercompany
profits whereby one subsidiary company
of combination operating blast fur
naces pays to another subsidiary which
mines ore a price for the ore that in
cludes profit to the ore company. The
furnace company enters this price on its
books as a part Of its costs. These costs
are book costs" and include consider
able profits really received by the same
interests.
These intermediate profits are very inn
portant. For example. the average hook
cost" of Bessemer pig iron over the five
year period was si3.S9 per ton. Trans
fer profits were $1.79, leaving net cost
of $121O.
The report lays stress on the cumu-
lative Importance of the cost of iron ore.
High intermediate profits-"book costs" of
the mills-are carried on into the cost of
the finished product. adding considerable
sums to the last cost of steel. For in
stance: Starting with the chief raw ma
ore for the fve-year period was $264.
The only transfer profit in the cost OF
ore itself was an intercompany royalty of
5000 per ton, leaving a net average of ore
of 500.
Cost of Connellsville Coke.
For Connellsville coke, the principal
kind used. the cost was SLAB met toni,
with no intermediate profits.
Passing to the next step, Bessemer pig
iron, intermediate profits in ore and in
coke, as they go into pig iron, are large.
Furthermore, these costs, profits and
freights to the furnace are multiplied
because it takes about Is tons of BeS-
semer ore and over one net ton of coke
for one ton of pig iron. The average
book cost of the ore for one ton Of pig
iron was $7.36; coke, 1881. and limestone,
43 cents. The so-called ''cost above ma
terials," necessary for converting that ore
into pig iron, was: Labor, 70 cents;
other operating cost, so cents, and de-
probation and general expense, IS cents.
The total makes a book cost of pig iron
of $13.S9. Taking out now the transfer
profit $1.79, there is left net cost of
$12.1O.
Bessemer Rail Ingots.
Advancing to Bessemer rail ingots.
there appears book cost of $3.50 All
the preceding intermediate profits. how
ever, have been carried forward in the
book cost of the raw material, pig iron.
Thus. the total transfer profits for in
COTS were $1.S4, leaving net ingot cost
- $3.50.
For heavy Bessemer. rails finally the
book cost was S21.27 This is based on
the book cost Of ingots. The final trans
fer profits were SAT. Deducting these
one-third of this revised cost was for
labor in all stages of production. as APP
pearing directly in the cost sheets.
The report shows that, as the price Of
Bessemer steel rails has been fixed for
over ten years at about $2S per ton, the
actual profits Of the steel rail manu-
facturers is approximately $40 per ton.
The total mining and manufacturing in
vestment, excluding transportation prop
critics, is from $50 to $50 per ton, and the
actual profit-$9.20 in exact f1gures-rep
resents profit of II to II per cent.
Record Of Corporation.
The bureau received from the Unitei
States Steel Corporation its book costs of
various products, also the record kept by
the corporation Of it's own intermediate
profits on ore. etc. These records show
that the corporations intermediate
profits are larger, and its net costs lower,
than those of any other steel manu-
featuring concern reporting. The cCm-
missioner's comment on this point is:
This fact, and its unique character and
dominating position, make the costs of
this corporation matter of public inn
portance."
In the matter of heavy Bessemer steel
rails, where other producers nSure Il
book cost of say $2i.5O, and revised
cost OF about SIS per ton, the steel cor
poration figures the same book cost, but
it's revised cost is only about $16.67 per
ton.
That the steel corporation is earning
10 per cent on it's entire ore holding. both
developed and undeveloped. Is pointed out
in the report as cause for concern: not
that 10 per cent is an unreasonable return
on a developed and producing property,
but that the corporation is able out of
its profits to show 10 per cent earnings
on ore bodies which arc not being worked,
but are kept idle and unproductive, is
considered dangerous.
Matter of Transportation.
The report also takes notice Of trans
portation lines-railways. steamship lines,
ETC., owned by corporations and concerns
engaged in steel production, stating that
in the case Of the steel corporation the
ore rates on its two roads have been ex-
cessive.
The report says:
.sIn so far as they exceed reasonable
return, they not only benefit the cor
poration by high profit on the ore OF
other shippers. but correspondingly
handicap the business of such competi-
tors. who must ship over these roads.
In atN0N