The Ely miner. [volume] (Ely, Minn.) 1895-1986, 1925-06-05
OvERPRODUCT|ON
GUT ORE PRICES.
CAUSE OF THE SLUMP ANALY
SEQ BY A STUDY OF THE
SITUATION.

Whlle mucn mas DeeIl SdlV anu
printed on the recent cut in the price
of iron ore and also the cut made a
year ago, it has always been with
the yelled statement that the larger
companies We're doing the cutting to
Greece" out the smaller, or indie
pendent, companies.
L. P. Barrett, state appraiser OF
mines in Michigan after carefully
analysing the situation, came to the
conclusion that the lowering of ore
prices will continue until consump-
ton of ore increases or production
is decreased through the failure OF
some mines or their closing down.
In summing up the situation Mr..
Barrett reports as follows:
'.The most striking event In the
wear 1924 in the iron mining INDUS
try was the radical reduction In the
price of ore, winch amounted TO an
average of 81 cents over the previous
years price and which. was he low
est price received for ore since the
year 1916. This reduction in price
came about without any marked re-
duction in cost and was entirely
borne by the operators.
"This year the price of iron ore
has been still further reduced to an
average of about so cents per. ton,
under tn price of 1924. Last yeai
the total average cost of producing
iron ore in Michigan, exclusive OF
royalty, interest, depletion, carrying
cost of idle mines, and federal taxes.
was $4.13 and the price received by
the sale of ore was $4.85, leaving a
mining profit in the ore of II cents
Royalty, interest and carrying charg-
es for idle mines will approximate So
cents per ton, leaving net profit OF
about % cents for the operators. 1t
is therefore, easy to see that the rer
duction in the price of ore this year
will wipe out the average operator
margin and that the gross tonnage
coming from Michigan in 1925 will
be marketed at an actual loss to the
producer.
cat the present writing there is no
il dication that any item of cost will
be reduced, and we may therefore,
expect that the average costs for the
year 1924 will be a good index of
those for 1925.
at is necessary to consider the
reason for these conditions, because
they have an important bearing upon
the valuation of Michigan iron mines.
In connection, / wish TO call your at
tention to Table which shows the
1924 production of iron ore from the
Lake Superior district, together with
that of the past en- years and the esti-
mated productive capacity of the
various iron ranges. This estimate
of productive capacity for Michigan
and Wisconsin was made in this
office.
"The estimates for Minnesota are
taken from data furnished me by the
Lake Superior Iron Ore Association.
A glance at this table indicates that
there is yearly productive capacity
in the Lake Superior region of ST.
700, 900 tons. We are probably safe
In assuming that consuming require
ments at the present time, will aver
age around 100000 tons, leaving
an excess productive capacity in the
neigIhborhood of 100000 tons.
The iron mining industry of the Lake
Superior district is, therefore. con-
fronted for number of years to
come, with this large excess of pro-
ductive capacity over consuming re-
quirements and according TO all &C.
onomic laws, this IS bound to result
in sharp competition and reduced
prices for ore.
"While it is, Of course, true that a
big proportion Of ne Lake Superior
iron ores are taken by consuming in
te-ests. there still rema ms the fact
thu. there is considerable tonnage.
and in Michigan. a particularly large
pro, ortion actually sid tn the open
market We have seen in the past
years the result of overproduction in
tire coal and COPPER mining indust-
ries and we are cofronted, today,
with the same conditions in the iron
mining industry 1t is my opinion,
that for the period of the next five
years, at least, competitive condit-
ions in the iron mining industry are
going to be such that only the larger,
low cost mines will be enabled to
operate at profit. The high cost
mines must close or operate at loss.
''Your attention is also directed to
the fact that the majority of Michi-
gan production comes from under
ground mines, while the bulk of the
tonnage, shipped from its greatest
competitor the Mesaba range in Min
nesota, is obtained from open pit