Evening star. [volume] (Washington, D.C.) 1854-1972, 1938-08-21
Complex Price>Fixing Task
Faced by Coal Commission
Success or Failure for Experiment Will Depend on
Care and Wisdom With Which Countless
Problems Are Met.
By John II. Cline.

I make it imperative for the producer to get
| his higher priced product to his customers
as quickly as possible.
/ There are also number of factors en-
tirely outside the control of the mine owner
which none the less affect his business very
acutely.
Among these are the so-called captive
mines-mines wholly owned and operated
by the user of the coal produced from them.
The principal owners of captive mines are
the steel mills. also among the best Gus
toner of the regular mine operators. It
has ben estimated that when the steel
mills are operating at 80 per cent of Ca
paclty they can secure all the coal they
| need from their captive mines, but, of
course, if the production of the mills
should jump to 60 per cent of capacity the
mill owners would have to buy the addi-
tional coal needed from the outside mines
But, to put it, another way, if slump in
general business conditions should cut the
demand for steel in half the coal producer
loses all. not half, of his sales to the steel
mills. To some extent the same thing is
true Of the railroads, which use about %
per cent of all the coal burned. When
there is widespread industrial slump, the
coal producer loses not only on the sale of
coal to his other customers but also to
mis- principal customer, the railroads, for
If he cannot sell coal for the railroads to
haul, the railroads to that extent are re-
lieved of the necessity of buying coal to
operate their freight trains.
Truck Mines Are Problem.
Another problem arises from the growth
of truck mines, in Ohio and Pennsylvania.
One of these mines may produce from
SO to 100 tons a day, hauling the coal in
trucks to nearby purchasers. A single
truck mine does not represent real COM
petitor, but when that number is multi
piled by thousand the problem becomes
very serious indeed. Since the railroad
rates for short hauls are proportionately
much higher than for the long hauls, the
regular mines cannot compete successfully
with the truck mines for nearby business.
All of the producers from time to time
have endeavored to cut expenses, but their
costs have now reached the point where
there is not much that the mine owners
particularly the small ones, can do in the
way of additional economizing
If producer sells ton of coal for IS.
50 OF that goes for transportation and 81
for the cost of production. OF the cost Of
production at the mine. IS per cent was
represented by wages. The producer can't,
as rule, save on the transportation cost
and can't save on the labor COST There
fore, he has, out Of the IS sale price, a
balance of 10 cents to cover all other costs
and his profit, if any. On that basis, the
producers say, it is impossible for them to
further economiZe
1t IS true that some Of the big companies
have been able to make money by economy
of operation, effected by the mechanization
OF their mines, operation OF their own sales
and distributing systems, etc. These
factors enable them to sell coal at price
that would represent loss to the smaller
producers who cannot meet the expense of
such modernized coal production individu-
ally and who have never been willing to
combine to do so.
Little Producer Hangs On.
As result, one important aspect Of the
bituminous coal problem before Congress
when that body was considering the Guffey
Act was whether it was desirable to let the
big producers run their small competitors
out Of business
The flrst consideration leading to mega
tive answer was the fact that it has never
seemed possible to run them out When
one little producer has gone to the wall
there has always appeared another one to
take his place-willing to gamble his last
dollar On the hope of lasting until there
is another big year like that of the British
strike.
Secondly, was the matter of the numer-
ical set-up in the industry Although there
are some 1000 coal producers about 40
per cent OF all this country's coal is pro-
duced by the big" companies, which in
turn number only about twenty of the
1000. Consequently, if Congress had de-
cided to permit the eradication of the small
producers, it might have meant that even
tually the production of coal would have
been handed over to very few men, there
by laying the foundation for monopoly
In that industry
After studying the problem, the members
of Congress came to the conclusion that
the fixing of minimum prices was the only
way out The act also provides maximum
prices, but they are meaningless. In all
probability the new prices will mean an
increase in the annual coal bill approxi-
mating 81 900 900, but the legislators pre-
sumably thought the public would be will
ing to shoulder that if it would save the
industry from chaos.
AS starter, Congress divided the coun-
try into 10 price areas with a total of %
producing districts. Actually there are
but % producing districts since no coal is
produced in the 23u, regardless OF what
Congress thought about it.
The machinery for determining the price
at which each of the 1000 producers may
sell his various grades of coal in his several
markets in exceedingly complicated. Each
producer is required to certify his actual
production cost per ton of coal as of 1885,
Then the weighted average cost (the cost