New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1917-08-18
Steel Costs Are
Mounting Swiftly
Lackawanna Steel Company
Reports Rise Of 1856 Per
Cent in Single Month

| IN a memorandum SuOHllNltu W bHS
Federal Trade Commission regarding
cost in relation to the establishment
of fair prices under existing conditions
for steel plates, bars and shapes, the
Lackawanna Steel Company, among
other things, draws attention TO the
mounting costs in the steel industry
during the last eighteen months. In
May, 1917, for companies controlling
all raw materials the increase is stated
to have been about so per cent over
the average for 1916 and 25 per cent
over costs in January of this year. The
company's own figures showed an in
crease of 555 per cent in June over
May, and 1856 per cent in July over
June.
The company makes distinction be-
tween selling costs and inventory costs.
In calculating the former everything IS
included that must be taken out of the
selling price before a profit can be
earned. In computing inventory costs
everything is excluded that cannot
with unquestioned propriety be carried
as an asset until the goods are sold.
Cites British Methods
Concerning costs of labor and ma
terial it is pointed out that some Of
the uncertainty of the results of gov
eminent work might be eliminated if
the example of Great Britain were fol-
lowed-that is, if the producer were
given a guarantee Of essential raw ma
terials at fixed prices, or if these ma
terials were purchased on government
account and delivered to the manu-
facturer at fixed price.
Discussing depreciation and deple-
ton, it is argued by the company that
the value of ore in the ground at the
moment when production begins is
clearly capital, and the producer should
receive it's capital value at that time
as a part of. cost, this principle being
recognized in the present income tax
law. Where plants have been con-
structed at abnormal cost during the
war period it is held that provision
should be made for amortization Of the
excess of such cost from the normal
value. Emphasis is also placed upon
the consideration that should be given
to war taxation in the establishment
of prices.
How Ownership Varies
The disposition to make a percentage
addition to cost in fixing the govern
ment prices does not meet the question
of the relations between the volume
of output and the investment of CAPT
tai, in the opinion of the Lackawanna
Steel Company. In considering varia-
tons between costs of similar prod
ucts in different plants the company's
memorandum points out that in one
case the producer may be a self-con-
tanned unit owning adequate ore sup
plies and blast furnaces as well az
steel plants. In another case these
different facilities may be owned by
corporations which may have the same
arate entities. In a third case they
hhy NC N"hNb W NhSiiNAy Ni9NAAANN ~
terests.
"More frequently says the COM
panys brief, "steel producers control
part, large or small. of the ore or
furnace capacity needed for their re-
quirements, and are interested in, but
do not entirely own, mining or furnace
companies. If the allowance for profit
is to be substantially uniform, the
nrices TO he maid must vary widely
Such a method is characterized as eco
nomically unsound, besides imposing a
heavy burden upon the government as
to the verifcaton of cost"
The alternative suggested by the
company is "the establishment of
prices on broader considerations. such
prices to be sufficient to insure some
profit to any reasonably efficient pro-
Queer, leaving cases where it might
yield a liberal profit to be adjusted
through the operation of the war prof
its taxation"
D