Coal Age : devoted to the operating, technical and business problems of the coal-mining industry, Vol. 27, No. 18

McGr a w- Hi l l Co m p a n y, In c. Ja m e s H . McGr a w, P residen t E . J . Me h r e n, V ice-P residen t

Devoted to the Operating, Technical and Business

Problems of the Coal-Mining Industry

Volume 27 NEW YORK, APRIL 30, 1925 Number IS

W aste in R esearch

C

It is good to know that w hat w e ascertain, the B ritish w ill not concurrently be at pains to rediscover, and w hat the B ritish learn we shall not be compelled to determ ine over again by costly experim ent. France, B elgium and, let us hope, Germany, w ill soon join in, and we shall have all nations com bining to m eet th eir common problems. Some day the m illennium w ill stroll along Pennsylvania Avenue and we, having achieved co-oper- ation w ith foreign countries, w ill perform also that im possible task of g ettin g the Bureau o f Standards, the Departm ent o f A griculture, the Geological Survey, and th e Bureau of M ines not to duplicate one another’s stu d ies; but we are looking too far ahead into the m isty realm s o f the im possible. The “baseless fabric o f a dream ” is co-operation at the Capitol.

W liat Is B one Coal?

R

ingly, be strong. Only by the em ploym ent of chem ists could the ash percentage be determ ined. A nalytical m ethods are slow and that is another disadvantage.

A h a lf m easure would be to make a specifie-gravity determ ination and to term “bone” th at coal w hich lies between two specific gravities, and “slate” everything heavier than the higher of the two densities. One objec­

tion to th is system is th at anthracite o f equal purity from different regions probably varies in specific grav­

ity, due to the difference of pressure and m ineralization to which it has been exposed. U nless the specific- gravity lim its w ere varied w ith the region from which th e coals came, the heavy anthracites in the southern region m ig h t be at a slig h t disadvantage, for the coal in the northern region, being lighter, the quantity of sla te in the bone could be greater in that region than in th e southern w ithout resulting in a m ixture o f an excessively high specific gravity.

The d en sities th at would accord w ith certain per­

centages of im purity could be determ ined for each area of the anthracite field, and the standards could be set to accord therew ith. It would be sim pler, however, but not so exact, to apply a uniform density te st fo r all kinds of anthracite. W hether that would be feasible is a m atter fo r determ ination.

The su ggestion th at a physical instead o f an ocular

■or chemical te st be used m ay involve m ore difficulties

than are im m ediately apparent, but it is w orthy of consideration. It has the advantage th at it is not new, having been used for m any years in m aking w ashery determ inations. It is certainly m ore accurate than an ocular an alysis such as has hitherto been used, but it will be found a little more difficult and perhaps slower.

A system of separation by visual tests m ust alw ays be uncertain and unscientific as it is subject to the personal equation and to the uncertainty as to w hether the heart o f the bone has less, or more, carbon than the surface.

Only Clean Buckw heat W ill D o

F

The experiences, therefore, o f two men who have long resided in Scranton, in their attem pts to hurn buck­

w heat No. 1 in th eir house furnaces w ill be in terestin g in that they shed much ligh t upon the entire problem o f fine anthracite utilization. It is believed th at these experiences are typical o f others.

In Scranton, as elsew here, the steam sizes sell fo r several dollars less per ton than do th e dom estic grades, so th at to both householders there w as a pecuniary incentive to burn buckwheat. A lthough it is difficult to retain th is small size on th e g ra te of an ordinary house furnace, th is difficulty w as surmounted by both consumers. The first carried a bed o f ashes on his grate by which the fu el bed proper w as supported;

the second laid a piece o f old screen jacket on thé grate and built his fire on top of it, rem oving the ashes through the clean-out door.

T hese tw o men attacked th e problem o f buckwheat u tilization fo r dom estic h eatin g from entirely different angles and obtained widely divergent results. Mr. A utilized natural d ra ft; Mr. B used a blower. R esidents o f coal-producing com m unities, such as Scranton, enjoy at least one advantage over th ose m ore rem otely situ ­ ated in th at they can v isit m any collieries and buy th eir fu el direct from the one delivering the best prod­

uct. A fter try in g coal from various sources w ith mediocre to u n satisfactory results, Mr. A “went on a still hunt” fo r a breaker or w ashery th at produced and sold real coal. A fter v isitin g several plants he found one and only one— that produced a buckwheat w ith less than 3 per cent of extraneous ash or rock.

H e im m ediately laid in a supply of th is fuel and experi­

enced no difficulty in h eatin g h is house w ith it during the past w inter. Of course th is coal required careful firing and m anipulation o f the g ra te to avoid excessive loss to the ash-pit. The g ra te w as never shaken violently, and any clinker th at m igh t form w as gently broken w ith a stra ig h t— not a hooked— poker.

6 3 3

C O A L A G E

27, No. 18

Mr. B pinned h is fa ith to a blower. H is furnace and heatin g plant strongly resembled A ’s. He bought his fuel supply from the m ost convenient source (it con­

tained roughly 9 per cent o f slate and rock) and attem pted to m ake th is m aterial burn by forcin g air into the ash-pit. A fte r fu ssin g w ith h is furnace all w inter and try in g tw o or three different kinds and sizes of blowers he, like m any another, has come to the con­

clusion, “N ever a g a in !”

The experiences o f these two men, w hich are prob­

ably not exceptional, carry their own obvious moral.

A nthracite producers cannot expect to sell steam sizes containing any h igh percentage of rock for dom estic purposes and “g et aw ay w ith it ” for any great length o f tim e. When clean, buckwheat No. 1 can be burned in a house furnace if good natural drqft is available;

w hen it is dirty, even rather elaborate d raft system s fa il to give satisfactory results.

Again Co-operation Is Crushed

R

„ N orth W ales th at co-operation in coal m ines m ust be suppressed are not quite clear, but the action is not the less drastic fo r th a t reason. The Vauxhall Colliery in N orth W ales w as closed five weeks ago because the operation o f the m ine w as unprofitable. When the owners notified the m iners, the latter decided to make arrangem ents w ith the form er to work the m ine co­

operatively and raised in th eir home tow n a fund of

§3,500, m any of them subscribing to th is fund them ­ selves. The neighborhood realized, as did also the m iners, th at it would be unprofitable for the seven hundred workmen to be idle. A fter operating steadily for five w eeks w ithout touching the guarantee fund, the m iners found that they w ere m aking m ore money than before. True the working period w hich normally is seven hours w as slig h tly extended, but m ost of the workmen w ere m aking much more than the m inim um w age.

A pparently the N orth W ales M iners’ A ssociation feared that the operators o f th is m ine m igh t arouse a nation-w ide cam paign for the repeal of the seven-houi day act, for lower w ages and the sub stitu tion o f a local for the national w age scale. The men w ere disposed to w ork m ore energetically, and it w as feared th at th eir higher w ages m ight draw undesirable attention to th eir form er habit o f deliberately sh irk in g work. I f it w ere proved that the men could do m ore and make more w ages w ith the scale unchanged, there w as danger th at the general public would demand a w age decrease, the present scale being predicated on the idea th a t a m iner w orking h is best could earn even w ith the h igh w ages only a bare subsistence.

The union proposed to suspend the m iners ou trigh t but the officials o f the V auxhall branch m ost humbly expressed th eir “regrets” and agreed to cancel th e con­

tract a fter the three m onths had expired during which the agreem ent rem ained in force. Later, however, the m iners disavowed th e action o f th eir leaders and declared it to be th eir intention to renew th e contract and to continue to operate the mine. Had the men accepted th e union’s ultim atum they would have gone on the dole w ith a lot of ne’er do w ells w ho w ill accept charity from th e nation rather than undertake to knuckle to th eir work and make th eir occupation profitable.

In A m erica the objection to co-operative coal-m ining has not been to its efficiency but rather to the fact that the m iners w ere w illin g to work co-operative m ines at a loss, receiving full w ages but deducting from th eir pay the losses o f operation and thus receiving a w age equivalent really less than w as prom ised in the scale. Many co-operative m ines also have been w illing to accept a reduced w age scale realizing that a lessened w age w ith steadier work w as better than a full w age w ith irregular work.

In N orth W ales these do not appear to have been the difficulties. The m iners, apparently, had been la ggin g at th eir w ork in order to g et the m inim um w age and keep their con fre re s' w orking and, consequently, they w ere able, when th eir own in terest w as more clearly at stake, to make full w ages w ithout losses in operation.

The union in Great B ritain , apparently, is even less in favor of efficiency and fru g a l a ctiv ity than the union in the U nited States. N o wonder B ritish coal ow ners are appalled when they view the fu tu re at m ines know ing th at the men th ey employ are corruptly and dishonestly attem pting to reduce production.

D angers o f E lectric Barns

E

ing because being exposed to m oisture and a dusty atm osphere they are likely to develop short circuits, and trouble, causing burnouts w ith a blaze th at m ay set fire to the m ine and cause a loss running to millions, o f dollars. The average m ining superintendent is not interested in the condition o f m otors, and it may be difficult to make him realize th at ju st because efficiency and a saving in repair costs is thereby effected he m ust be w illing to pay fo r inspection and upkeep.

I f once, however, he realizes th at a burning arm ature m ay cause a m ine fire and prevent a m ine from w ork in g for a whole year or even more, h is attitu d e w ill change.

H e is b eginning to visualize th is danger, and better- installation, more regular inspection and prom pter repair w ith the tem porary removal o f m achinery in bad condition w ill result. E specially w ill he realize that oil, grease and rags m ust be kept aw ay from m otor equipm ent everyw here and m ore especially under­

ground, fo r a fire started by a burning arm ature may be spread by such means.

A little foolish economy in installation, a little care­

lessn ess in rem oving the covers of a battery locom otive, a little too great a burden put on inspectors, electrical engineers and electricians m ay end in a fire, which will keep several tim es as m any men busy for m onths and in the m ost dangerous o f all work— fire fighting. T h is thought should give anyone pause. A good plan is to trowel or spray cem ent m ortar over the coal around such equipm ent and thus make it im m une to fire as has long been th e practice in underground stables.

C ertainly, all pumprooms, substations and m otor barns, should have such treatm ent.

Some m ines, sen sin g the risk of sh ort circuits, have protected th eir haulagew ays w ith concrete so th at th e roof, often of coal, is not likely to fa ll, b rin gin g w ith it the trolley w ir e and sta rtin g a dangerous fire. The cem enting o f the walls is a fu rth er protection should the roof by any p ossib ility prove too heavy fo r th e cem ent coating to support it.

A p r i l 3 0 , 1 9 2 5 C O A L A G E 6 3 5

F igures T ell Story o f Coal In d u stry ’s S traggle T o A djust Itse lf F o llo w in g th e W ar

D a ta from C oal C o m m issio n ’s V a st F ile S h o w s L abor and M ine C o sts, R e a liz a tio n s and M argin s in M any F ie ld s — H o w U n io n and N o n -U n io n C o sts Com pare

I

rived from sim ilar reports m ade to the' Federal Trade Commission or collected by th e agen ts o f that body direct from the books. U se was also made of cost fig­

ures fo r 1919 and part of 1920, originally reported by operators to the N a­

tional Coal A ssociation. The sta tistic s shown in th is article are general sum m aries covering large areas or a ggregates o f coal fields. T hey are u sefu l prim arily for the lig h t they throw on broad questions of policy.

They have, however, little application to local problems because of the w ide differences betw een fields in natural conditions, operating methods, available m arkets, etc.

For such problems th e more detailed figures fo r the particular fields have a specific value. In subsequent articles there will appear a statem ent and an alysis of such figures for the principal fields.

The cost o f production figures given here show the per ton labor and total f.o.b. m ine costs, sales realiza­

tions, and m argins. The f.o.b. mine costs contain no sales expense, and the sales realizations are on th e b asis of sales made f.o.b. the mine.

Table I show s a comparison o f the averages of 1,180 identical operators in 83 fields in 23 states, fo r the years 1918, 1921, and 1922. T hese operators produced 66 per cent of the total output in 1918, 65 per cent in 1921, and 57 per cent in 1922. It is in terestin g to note th at th eir average sales realizations— $2.60 per ton in 1918, $3 in 1921, and $3.01 in 1922— closely correspond to the Geological Survey figures o f “average value” of coal fo r the entire output of those years; nam ely $2.58,

$2.89, and $3.02 per ton in 1918, 1921 and 1922 respec­

tively. T hese 1,180 operators, therefore, can be sa fely taken as representative o f the industry.

The N orthern Appalachian region w as taken to in­

clude the coal fields o f P ennsylvania, Maryland, W est V irg in ia and Ohio; the Southern Appalachian region

B y D avid L. W ing

W a s h i n g t o n , D . C .

Illlllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllll||||l||||||||||||||||||||||||[||||||||||[||||||||||||||||||||||||||[|||||!|[||[|||;

P I C K I N G T H E H I G H L I G H T S

T

s io n c o lle c te d a v a st b u lk o f in fo r m a tio n ab ou t th e co a l in d u s tr y . T h e la st C o n g r e ss p r o v id e d fo r th e p r in tin g o f th e C o m m is­

s io n ’s v o lu m in o u s rep o rt. B u t m o st co a l m en w ill a p p r e c ia te h a v in g M r. W in g p ic k o u t fo r th em th e m o st im p o r ta n t fa c ts fr o m th e m o st im p o r ta n t fie ld s. In th is a r tic le h e se ts fo r th w h a t th e C o m m issio n lea rn ed ab ou t th e d iffe r e n c e s in c o s ts and r e a liz a tio n b e tw e e n u n io n and n o n -u n io n field s, th e co u r se o f c o s ts and m a r g in s s in c e 1916 and a nu m b er o f o th e r s ta t is t ic a l h ig h lig h t s . In fo r th c o m ­ in g a r tic le s h e w i l l d e v e lo p fro m th e h u g e rep o rt o th e r c h ie f p o in ts c o v e r in g c o s ts and in v e s tm e n ts in th e b itu m in o u s field s.

lilt ■IIIIIIIIIIIIUIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIUII .

those of V irginia, Ken­

tucky ( e x c e p t ’ w estern K entucky), T ennessee and A lab am a; the E astern In­

terior region t h o s e of Indiana, Illinois, w estern Kentucky and M ichigan;

the W estern Interior and Southw estern region those of Iowa, M issouri, Kansas, Arkansas, Oklahoma and T exas; the Great Plains, Rocky M ountains and P a ­ cific region those o f Mon­

tana, W yom ing, Colorado, N ew Mexico, U tah a n d W ashington. Comparable figures w ith 1918 w ere not obtained for the North Dakota fields.

N ot one o f the years shown in Table I can be considered typical, however. D uring 1918, the bitu­

m inous coal operators, under the stress o f w ar demand, produced the largest tonnage ever mined in the country in a sin gle year. D uring 1921, there w as a severe business depression, and in 1922, th ere w as a five- m onths’ strike in m any o f the fields, w hile, at the same tim e, there w as a record production in others. In 1918, the sales realizations w ere controlled by the price-fixing policies o f the Fuel A dm inistration which w as endeavor­

ing to stim ulate a large production, in 1921 th ey w ere affected by lack o f demand, and in 1922 by strike conditions.

Since th e pre-war period there have been no typical years in the bitum inous coal industry. The year 1919 w as one o f business depression. On the other hand, the year 1920, w hile a year o f b u siness prosperity, can­

not be considered typical because of the unusual tran s­

portation conditions brought about in the E a st by the railroad sw itchm en’s strik e and th e ensuing buyers’

panic. N or can the years 1923 and 1924, even w ere sta tistic s available, be considered typical.

To show th e course of labor and total f.o.b. mine costs from 1916 to 1922, use has been made o f returns from 217 identical operators w ho produced about 16 per cent o f the entire output. Interpolations for the f.o.b. m ine costs have been made fo r 1919 and 1920 from the returns o f 264 operators, 83 o f whom are am ong the 217 operators. W hile 217 operators is but a small number, those included are fa ir ly representative fo r the purpose shown, since w hat is b eing m easured is the ebb and flow o f the tide, not the depth and volume

636 C O A L A G E

27, No. 18

Table I A verage Labor and F.o.b. Mines Cost, Sales R ealizations and M argins per Ton of 1,180 Operators in 83 Fields, 1918, 1921 and 1922

N o . o f O p e r-

R e g io n a t o r s

N o r th e r n A p p a la c h ia n ... ^53 S o u th e r n A p p a la c h ia n ... . E a s t e r n I n t e r i o r . . . . . ... . . . W e s te r n I n te r io r a n d S o u t h w e s t e r n ; . . . • • • • ■ G r e a t P la in s , R o c k y M o u n ta in s a n d P a c ific O o a s t 1 1

-C o s ta -

1 9 1 8 - 1921 - 1 9 2 2 -

S ale s R e a li­

z a tio n

$ 2 .6 2 2 .7 1 2 .3 6 3 .0 1 2 .6 7

M a r ­ g in

$ 0 .6 7 .6 5 .4 9 .2 6 .4 9

.--- C o s ts --- ' T o t a l S a le s F .o .b . R e a li­ M a r ­

L a b o r M in e z a tio n g in

$ 1 .8 4 $ 2 .7 0 $ 2 .8 9 $ 0 . 19

1 .9 4 2 .9 6 3 .1 1 .1 5

2 .1 1 2 .7 4 2 .8 3 .0 9

3 .2 3 4 .1 6 4 .0 8 a . 08

2 .2 7 3 .2 1 3 .5 1 .3 0

U n ite d S ta t e s .

$ 1 .4 6 $ 2 .0 0 $ 2 .6 0 $ 0 .6 0 $ 2 .0 0 ' $ 2 .8 3 $ 3 .0 0 $ 0 .1 7

,--- C o s ts --- * T o t a l S ale s F .o .b . R e a li­ M a r ­

L a b o r M in e z a tio n g in

$ 1 .7 4 $ 2 .6 4 $ 2 .9 8 $ 0 .3 4

1 .4 9 2 .2 8 2 .6 5 .3 7

1 .9 5 2 .5 4 3 .0 2 .4 8

3 .0 3 3 .9 4 3 .8 8 a . 06

2 .0 2 2 .8 8 3 .3 0 .4 2

$ 1 .8 4 $ 2 .6 5 $ 3 .0 1 $ 0 .3 6 i A m o u n t b y w h ich t o t a l f.o .b . m in oc o s t e x c eed ed s a le s r e a liz a tio n .

o f the sea. T hese 217 operators have felt, in common w ith the rest o f the industry, th is sh iftin g back and forth. They are w idely enough distributed to reflect general m ovem ents and not to em phasize unduly loca conditions.

There w ere tw o general increases o f w age rates m 1917, the first being on A pril 1 and the second on N ov. 1.

In 1919 there w as a general increase as of Nov. 1. In 1920 there w ere tw o increases, one on A pril 1, and

Table h— P er Ton Costs of 217 Operators, 1916-1922

L a b o r

$ 0 .8 3

I. II

I .4 7

C o s ts Y e a r

191 6 ...

191 7 ...

...

1 9 1 9 ...

J a n .- M a r c h , 1920...

A p ril-S e p t., 1 9 2 0 ...

1 9 2 1 ...

19a I n t e r p o la te d f ro m r e p o r ts o f 264 o p e r a t o r s o f w h o m 83 w e re c o m m o n to th e g r o u p o f 2 17 o p e r a to r s .

1.8 7 I .8 2

T o t a l F .o .b . M in e

$1 . 1 2 1 .4 9 1 .9 8 a 2 .3 3 u 2 .4 6 q3 .0 I 2 .7 7 2.51

another, lim ited to day men, in the fall. Since, 1920, th ere have been marked decreases in the rates of w ages in the non-union fields but in the unionized fields the w age scale has rem ained at the 1920 level.

The labor cost per ton m ust not be confused w ith the w age rates paid or the earnings o f the w oikm en. The labor cost per ton during a specific period is the total am ount paid out fo r labor divided by the number of tons produced. The changes in labor cost are, th e ie fo ie , a resultant o f several forces w hich may act in the sam e direction or in opposite directions. The labor costs are affected chiefly by changes in w age scales and changes in rate of production. Other causes are changes m m in in g practice and in m arket demand and also the attitu d e o f labor.

The general differences o f cost-of-production condi­

tion s in 1921 and 1922 betw een the unionized and non-union fields are clearly brought out in Table III.

In 1918 th e average labor cost for the 434 operators in the non-union fields w as 91 per cent, in 1921, 85 per cent, and in 1922, 76 per cent o f th at fo r the 746 operators in the unionized fields. The low er labor costs in the non-union fields and the consequent ab ility of th ose operators to sell th eir coal at relatively lower prices are fundam ental difficulties w hich confront the operators em ploying union labor.

A ccording to recent reports th e labor cost today in som e o f the non-union fields is back to the 1917 average.

Sin ce conditions differ w idely from field to field it is n ot sa fe to push too fa r a generalization drawn from averages for large producing areas. Those who a ie in terested in the conditions locally can best study that subject from the detailed inform ation available fo r the separate fields.

There are three kinds of sta tistic s available to indi­

cate w hether coal operations have been profitable or otherw ise— those th at show excess of cost over realiza­

tion, those show ing excess o f realization over costs and, finally, those .show ing excess of realization over both cost of coal and cost of capital used by th e company.

The difference betw een the average cost at the m ine of the coal produced and the average sales realization is called the m argin. W here the cost is greater than th e sales realization, obviously, the operation is a loss;

but, it does not follow th at the operation is necessarily profitable because the sales realization exceeded the f.o.b. mine cost.

The per-ton cost at the m ine, as shown by the U. S.

Coal Commission, contains no allowance for in terest on the money invested, w hether borrowed or owned and invested by the stockholders them selves. T h is is in strict accordance w ith the generally accepted cost- accounting practice which does not include in terest—

actually paid or theoretically determ ined— as an item of cost. In ordinary bu sin ess practice, however, an opera­

tion is n ot considered profitable which makes no return for the u se of the money invested in the enterprise fu rth er than its mere replacem ent or am ortization at the end of a number o f years.

Table III— Comparison of Costs and Sales Realizations per Ton of 1,180 Operators in Union and Non-Union

Fields, 1918, 1921 and 1922

U n io n iz e d F ie ld s (7 4 6 O p e r a to r s )

N o n - U n io n F ie ld s (4 3 4 O p e r a to r s ) g g ,— C o s ts —

£c

rt Ton- llions

.---C o s ts ---. c a

J e s

3 g H L.

■Q O _ D

H

«

s S . - ,

• g '- 'c

a a r *

ó ft* Ö

— C

«

"d O) Pi

O G C

R e g io n a n d Y e a r Ph

■cO

« Tota Mi J*C CO

"3 s —o s c 0

• a01

1-3 H

O too N o r th e r n A p p a la c h ia n :

19 1 8 ... 1 3 4 .0 $ 1 .4 3 :$ 2 .0 0 $ 2 .7 0 8 2 .1 $ 1 .2 8 $ 1 .'88 $ 2 .4 9 1921... 8 8 .6 1 .9 7 2 .7 9 2 .9 5 6 1 .4 1 .6 4 2 .5 5 2 .8 0 1922... 6 3 .8 1 .9 9 2 .9 3 3 .2 4 65 . I 1.51 2 .3 6 2 .7 2 S o u th e r n A p p a la c ia n :

2 .0 6 3 .0 1 2 9 .1 1 .4 3 2 .0 6

1 9 1 8 ... 0 .7 1 .5 7 2 .7 1

19 2 1 ... 0 .6 2 .5 3 3 .6 2 3 .2 5 2 1 .7 1 .9 3 2 .9 4 3 .1 0

1922... 0 .3 2 .3 7 3 .5 6 3 .5 3 2 5 .6 1 .4 7 2 .2 7 2 .6 4

E a s t e r n I n te r io r :

1 .8 7 2 .3 6

1918 7 7 .3 1 .4 5

1921 . 5 7 .0 2. 11 2 .7 4 2 .8 3

1 9 2 2 ... 5 2 .6 1 .9 5 2 .5 4 3 .0 2 W e s te r n I n te r io r a n d S o u th w e s te r n :

' 2 .7 4 3 .0 1 0 .3 2 .3 3

1 9 1 8 ... 1 8 .4 2 .2 0 3 .2 6 3 .3 6

1 9 2 1 ... 1 0 .5 3 .2 3 4 .1 5 4 .0 7 0 .2 3 .3 1 4 .5 6 4 .8 4 1 9 2 2 ... 8 .4 3 .0 2 3 .9 2 3 .8 6 0 .2 3 .3 4 4 .4 8 5 .0 0 G r e a t P la in s . R o c k y M ts . a n d P a c ific C o a s t

' 2 .5 5

1 9 1 8 ... 1 6 .6 1 .5 5 2 .0 4 1 4 .2 1 .7 2 2 .3 4 2 .8 0

19 2 1... 9 .9 2 .2 0 2 .9 7 3 .3 5 1 1 .8 2 .3 3 3 .4 1 3 .6 5 19 2 2... 1 1 .6 2 .0 4 2 .8 4 3 .2 3 1 0 .0 2 .0 0 2 .9 1 3 .3 7 E a s t o f M is s is s ip p i R iv e r :

1 .4 4 1 .9 5 2 .5 8 1 1 1 .2 1 .3 3 1 .9 3

1918... 2 1 2 .0 2 .5 2

1921 ... 1 4 6 .3 2 .0 3 2 .7 8 2 .9 0 8 3 .1 1 .7 2 2 .6 6 2 .8 8 1922... 1 1 6 .7 1 .9 7 2 .7 6 3 .1 4 9 0 .7 1 .4 9 2 .3 3 2 .7 0 W e s t of M is siss ip p i R iv e r :

2 .4 2 2 .7 9 1 4 .5

1918... 3 5 .0 1 .8 9 1 .7 4 2 .3 6 2 .8 2

1921... 2 0 .4 2 .7 3 3 .5 8 3 .7 2 1 2 .0 2 .3 4 3 .4 3 3 .6 7 1922... 2 0 .0 2 .4 5 3 .2 9 3 .4 9 1 0 .2 2 .0 3 2 .9 4 3 .4 0 U n ite d S ta t e s :

1 2 5 .7

1918... 2 4 7 .0 1.51 2 .0 1 2 .6 1 1 .3 7 1 .9 8 2 .5 7

1921... 1 6 6 .7 2 .1 1 2 .8 8 3 .0 1 9 5 .0 1 .8 0 2 .7 5 2 .9 8

19 2 2 ...136-7 2 .0 5 2 .8 4 3 .1 9 1 0 0 .9 1 .5 5 2 .3 9 2 .7 7

APRIL

30, 1925 C O A L A G E 637

Table IV— Course o f Costs, Sales Realizations, and M argins, 1916-1922

.— 2 17 O p e r a t o r s ---.

F .o .b . S a le s

<— 2 64 O p e r a to r s — • F .o .b . S a le s

.— 1,180 O p e r a to r s —.

F .o .b . S a le s M in e R e a li­ M a r ­ M in e R e a li­ M a r ­ M in e R e a li­ M a r .

Y e a r C o s t z a tio n g in C o s t z a tio n g in C o s t z a tio n g m

1916... $ 1 .1 2 • $ 1 .3 5 $ 0 .2 3 1 9 1 7 ... 1 .4 9 2 .2 9 .8 0

$0 ; ¿6 1 9 1 8 ... 1 .9 8 2 .5 7 .5 9 $ 1 .9 3 $ 2 .5 3 $ 0 .6 0 $ 2 .0 0 $ 2 .6 0 19 1 9 ...

J a n .- M a r .,

2 .2 8 2 .5 0 .2 2

1 9 2 0 ...

A p r .- S e p t.,

2 .3 9 2 .6 9 .3 0

19 2 0... 2 .9 3 3 .8 2 .8 9

à lo ô " \ \ i

19 2 1 ... 2 .7 7 2 .9 1 . 14 2 .8 3

19 2 2 ... 2 .5 1 2 .9 7 .4 6 2 .6 5 3 .0 1 .3 6

N o te :—-T he fig u re s fo r 217 a n d 264 o p e r a to r s c o n ta in 83 o p e r a to r s in c o m m o n ! th e 1,180 o p e r a to r s a r e in c lu s iv e o f a ll t h e o th e r o p e r a to r s .

F or a coal operation, therefore, to be considered profitable in the ordinary business sense, th e m argin m ust be larger than an am ount th at sim ply pays fo r the use o f the m oney invested.

The rate of investm ent per ton varies greatly from m ine to m ine and from field to field. Comparisons betw een the m argins o f different sets o f operators are of m uch less value than com parisons at different periods o f the m argins of the sam e sets o f operators. Such com parisons do g iv e some idea of the relative profitable­

n ess o f th ose operations from year to year. It should also be borne in m ind th a t the am ounts paid for federal income and excess profits taxes w ere not deducted from income before arrivin g at th e m argin.

The Coal Com m ission w as able to secure records from 217 operators covering the period, 1916-1918, and 1921- 1922; from 264 operators covering the period 1918- 1922; and from 1,180 operators fo r the years 1918, 1921, and 1922.

Table IV show s th eir f.o.b. m ine costs, sales realiza­

tions, and m argins. The 217 operators produced about 89.500.000 ton s in 1918 (16 per cent o f the entire output fo r th at y e a r ); the 264 operators produced 86.500.000 tons in 1918 (15 per cent o f the o u t p u t ) ; and the 1,180 operators produced 372,000,000 tons in 1918

(66 per cent of the en tire ou tp u t).

T hat 1917, 1918, and A pril-Sept., 1920, as compared w ith 1919, 1921, and , 1922 w ere more profitable is obvious from a glance at the m argins, but a more accurate idea o f the relative profitableness is obtained by com paring th e relation of the m argin, either to cost or to the sales realization, as shown in Table V. It m ay be pointed out in the case o f th e 217 operators th at w hile the am ount o f m argin in 1922' w as double th at of 1916, it form ed a sm aller proportion o f the sales reali­

zation in 1922 than in 1916.

Profits are included in a statem ent of the return on the investm ent. W hat properly con stitu tes investm ent on w hich to com pute profits, however, is an open ques­

tion. The U. S. Coal Com m ission obtained fo r the 10-yr. period, 1913-1922, inclusive, detailed reports for 88 operators who had an annual production o f 250,000 tons or over. T hese com panies fu rn ish ed detailed sta te­

m ents show ing th eir investm ents, th e income received, and m any other details, as carried on their books. Their production averaged about 74,000,000 ton s annually throughout the period, or about 15 per cent o f the total output o f the country during those ten years.

In Table V I there is shown, in the first column, the rate o f return o f th e net income applicable to the total in vestm en t in coal operations, such investm ent including borrowed money, w hile th e second column g iv es th e am ount, in cents per ton, o f th e net income to th is total investm ent. The third column o f the table show s the

rate of return of the net income applicable only to the stockholders equity both in coal operations and outside investm ents. The figures show, from year to year, a great variation in the profits w hich are computed before the paym ent of federal taxes.

Subsequent to 1916, because o f th e existence o f the income and excess profits taxes, th e book investm ent values o f m any com panies w ere increased, appreciations being added to bring the book values o f 1913 up to the estim ated m arket value of th e property o f that date.

The average investm ent per ton o f output fo r the four years, 1913-1916, w as $3.04, w hile that fo r the six years, 1917-1922, w as $4.83.

A sm all part of th is increase is due to a drop in production tonnage from 77,000,000 per year during the years 1913-1916, to 72,000,000 per year during 1917-1922. A substantial part of the increase, however, is due to the additions through revaluations of the prop­

erties. Thus, in 1920, the total book investm ent value o f the 88 operators for all a ssets used only in coal production w as $363,995,944, o f w hich $113,096,995, or about 30 per cent, consisted o f “w rite-ups” placed on the books. Had th ese revaluations been on the books during the years 1913-1916, th e rate of return on investm ent during th at earlier period would have been substantially lower than is shown in Table VI.

Table V— Relations of M argins to F.o.b. Mine Costs and Sales Realizations, 1916-1922

--- — P e r C e n t t h e M a r g in fo rm e d of--- ——--- • F .o .b . S a le s F .o .b . S a le s F .o .b . S a le s M in e R e a li- M in e R e a li- M in e I ie a li-

C o s t z a tio n C o s t z a tio n C o s t z a tio n

Y e a r 2 1 7 0 p e r a t o r s 2 6 4 0 p e r a t o r s 1 ,180 O p e r a to r s 191 6 ... 2 0 .6 17.1 ...

191 7 ... 5 3 .7 3 4 .9 ...

191 8 ... 2 9 .8 2 3 .0 3 1 .1 2 3 .7 3 0 .0 2 3 .1 191 9 ... ... 1 0 .3 8 . 8 ___ ____

J a n .- M a r e h , 1920... 1 2 .5 1 1 .2 ...

A p r il- S e p t., 19 2 0 ... . . . . 3 0 .3 2 3 .3 . . . . . . . .

1 9 2 1... 5 .6 4 . 7 6. 1 5 .7

192 2 ... 1 8 .3 1 5 .5 1 3 .6 1 2 .0

Table VI— Return of Total Investm ent, and Stockholders’

Equity for 88 Operators, 1913-1922

R e t u r n o n T o t a l I n v e s tm e n t R a t e o f R e t u r n o n i n C o a l O p e r a tio n s S to c k h o ld e r s ’ E q u i t y

C o s ts p e r T o n

Y e a r P e r C e n t o f O u t p u t P e r C e n t

191 3 ... 5 .7 $ 0 .1 7 5 . 7 191 4 ... 3 . 8 .1 3 2 .6 191 5 ... 4 .0 .1 3 3 .9

191 6 ... 7 . 2 .21 9 .1

191 7 ... 2 1 .5 .7 2 2 4 .8

191 8 ... 1 6 .3 .61 7 .5

191 9 ... 7 . 5 .3 4 7 .7

192 0 ... 2 0 .3 .8 9 2 0 .6

1921 ... 5 .4 .3 0 5 .1 192 2 ... 7 .1 .3 6 7 .0

A nother indication of the profitableness o f the busi­

ness m ay be found in th e am ounts o f income tax paid per to n of production. In com puting the follow ing figures it has been assum ed th at the tax paid in a given year is based principally on the output of th e preceding year. For the 88 operators, the taxes paid w ere: 1917, 23c. per ton ; 1918, 24c.; 1919, 6c.; 1920, 23c.; 1921, 5c.

R eturns fo r 1922 w ere not available.

The U. S. Coal Com mission w as furnished by the U nited S tates T reasury w ith a statem ent compiled from the ta x reports as origin ally subm itted by 1,234 b itu ­ m inous coal operators in th e U nited S tates fo r th e years, 1917-1921. The follow in g figures show ing the percentage o f net income to invested capital, b efore deducting fed ­ eral taxes, are taken from the statem en t: 1917, 26.47 p er cent; 1918, 16.04 per cent; 1919, 6.33 per cent;

1920, 25.07 per cent, and 1921, 2.59 per cent.

C O A L A G E

27, No. 18

B r e a k e r . T V csf E î i d C o a l C o ., M o c a n a q u a , P a .

B u ck w h eat Coal D em an d s R eal R ec o g n itio n in A nthracite M erch and isin g P ro b lem s

In se c u r ity of In d u stria l M ark et and U n s a tis fa c to r y P rice C o n d itio n s C o n tr o llin g S a le s F o rce S erio u s S tu d y o f F ie ld for N o . 1 B u c k w h e a t a s D o m e stic F u el

B y S yd n ey A. H ale

S p e c i a l C o n t r i b u t o r , C o a l A g e , N e w Y o r k C i t y

I

ket w as developed w ith the rapid grow th of the large office and apartm ent b u ildings in the eastern cities. T his m arket w as acquired, however, a t the expense o f broken and, to a lesser extent, at the expense o f eg g coal, which sizes w ere used in the older and sm aller buildings.

Increasing com petition w ith bitum inous coal and, since the w ar, w ith fuel oil and the advances made in the design and installation o f equipm ent to burn the sizes sm aller than No. 1 buckw heat have been narrow ing the industrial market. Today it is an axiom of the trade th at distrib u tion o f anthracite steam coals is lim ited to a territory w ith in a 100-m ile radius of the m ines. Even in that territory the fight for bu sin ess betw een anthra­

cite and com petitive fu els grow s m ore b itter day by day.

The secondary market, w hich m ay be considered a dom estic coal m arket as the bulk of the d eliveries to consum ers in that m arket is made by w agon or truck, has also been subject to the sam e restrictive influences, but, probably, in a sm aller degree.

Sm a ll Householder t h e Ob jec tiv e

The dom estic m arket th at is the subject of special consideration a t th is tim e is that o f the individual householder. O f course, an endeavor is b ein g made to

. No t e— F i f t h o f a s e r i e s o f a r t i c l e s o n t h e m e r c h a n d i s i n g p r o b ­ l e m s o f t h e a n t h r a c i t e i n d u s t r y . P r e c e d i n g a r t i c l e s i n t h i s s e r i e s a p p e a r e d i n t h e i s s u e s o f A p r i l 2, A p r i l 9 , A p r i l 1 6 a n d A p r i l 2 3 .

recover lost ground in the field of the office building and the large apartm ent house. T h e A nthracite Coal Service recently established in N ew York, and autho­

rized in a num ber of other eastern cities, is a develop­

m ent in th at line. A more in ten sive cam paign to regain trade in the industrial field is also on. The fu el en gi­

neer is becom ing a more popular member o f the sales staff o f the anthracite distrib u tor and he is a ssistin g in sellin g the steam sizes in power plants in com petition ag a in st bitum inous coal and fu el oil w here th e contract h in g es upon a cold dollars-and-cents an alysis of actual fuel costs. N o little success has attended h is efforts the past few m onths. The reduction in price made by some of the m ajor producers at the b egin n in g o f the present season is expected to help th is m ovem ent still further.

In sofar as it relates to the actual disposition o f the tonnage, the im m ediate problem w ith respect to the m arketing of No. 1 buckwheat to the industrial plant and to the large office and resid en tial b uilding is less acute. H owever, despite the headw ay w h ich has been made, there is no real prom ise of perm anency in th ese trade victories. M oreover, the b asis upon w hich they have been won is hardly satisfactory. C om petitive sell­

in g in a price m arket where th e m axim um realization is considerably less than the cost o f production cannot be called unduly a ttractive from a financial standpoint.

Lo sses o n Ste a m Sizes Pil e Up

A lthough the ju n ior sizes— except in in stan ces so rare th a t th ey m ay be ignored— have alw ays been sold at less than the average cost o f production, the situ ation is m uch m ore serious than it w as a fe w years ago. In­

creasin g costs, the burden o f w hich has been placed upon th e larger sizes, have w idened the price spread between stove coal fo r example, and No. 1 buckwheat from $2.12 in 1901 to $5.43 in 1925. The percentage o f sm all sizes

A pril 30, 1925 C O A L A G E 639

which m ust be m arketed is grow ing. Much of the coal now b eing recovered in second m ining is more or less crushed, thinner seam s are being exploited and the more h igh ly p itch in g seam s, and m ore coal is com ing from the southern end o f the anthracite region w here the m eas­

ures are m ore friab le and under greater cover than in the north. There fa cts preclude any hope th a t the operators m ight have that the percentage of fines will in the future decrease. The evidence all points in the opposite direction.

Would Create New Me r c h a n d is in g Problem s

W ith in creasin g sales resistance, revealed both in actual losses o f business to com petitive fu els and in pi ice trends, forw ard-looking anthracite sales executives have been im pressed w ith the n ecessity fo r developing a new m arket to absorb the surplus output o f No. 1 buckwheat. The m ore en th u siastic secretly cherish the idea th at it m ay be possible eventually to place all the tonnage o f th is size shipped w ith the dom estic trade.

Such a consum m ation would mean not only stabilization in pi ices, but, if the m erchandising basis w ere sound, an advance that would make th is size carry more o f the cost load.

A com plete change in the character o f the distribution o f th is size would create new m erchandising problems a s perplexing and as complicated as those now confront­

in g the anthracite industry. The likelihood o f an early realization of th is m etam orphosis, however, seem s so rem ote th at serious consideration o f all save one o f these problems m ay well be deferred. The problem which m u st be faced is the question o f the effect w id en in g the dom estic m arket fo r No. 1 buckwheat— and also for pea

— will have upon th e e x istin g trade in the larger sizes.

Norm al shipm ents o f No. 1 buckwheat in recent years have approxim ated 9,500,000 g ross tons per annum ; pea sh ip m en ts have been close to 6,000,000 tons. A lthough

•a sub stan tial proportion o f the form er m oves through retail channels to th e w agon steam trade and to the office, apartm ent house and in stitu tion al buildings, it is obvious th at the success o f a cam paign o f the type in d i­

cated in the preceding paragraph would require, not only an individual householder m arket fo r betw een eig h t and nine m illion ton s— or possibly more— of No. 1 buckwheat, but a new m arket equally broad fo r the la rg e r domestic sizes.

In other words, every ton o f buckwheat sold to the sm all dom estic consum er displaces an equivalent quan­

tity o f egg, stove or chestnut or a com petitive fuel. For reasons w hich w ill be developed later, eg g size anthra­

cite seem s to be the m ost susceptible to displacem ent in a drive to put No. 1 buckwheat into the householder’s cellar. If the anthracite industry can induce su b stitu ­

tion o f buckwheat for a com petitive fuel, the resultant gain is readily apparent. The c h a n c e s th at th is could be accomplished at the outset, how ­ ever, are not prom­

isin g . The m o s t lik ely prospect fo r sm all anthracite is the man who is now burning the larger sizes.

Retail distributors in som e parts o f the E ast— not­

ably in N ew York C ity and in Long Island tow ns— are keenly alive to th is fact. Because the m ovem ent o f the larger sizes— particularly stove and chestnut— has been the least troublesom e and because the developm ent of a m arket for No. 1 buckwheat in the dom estic trade is still in an em bryonic stage, it is possible that some of the shippers have not w eighed th is n ecessity as care­

fu lly as they m igh t had the in itial cam paign been to re­

move No. 1 buckwheat from the steam trade entirely.

B ut w hether the energy o f the anthracite producer is devoted to placing all th is size through retail channels or only the surplus production w hich the steam and quasi-dom estic trades will not absorb, the essen tial fa ct that it m eans the creation o f a m arket fo r that much additional tonnage rem ains. I f the larger sizes o f an­

thracite are displaced, it m eans a double m erchandising e ffo r t: first, to sell the buckwheat to p resent consum ers o f egg, stove and chestnut; second, to find a new m arket for the egg, stove and chestnut no longer used by those consum ers. I f the No. 1 buckwheat could go to the consum ers who do not now use hard coal, the m erchan­

d isin g effort, o f course, would be greatly sim plified. In the long run, however, it is im m aterial in w hat ratio these two fields of possible consum ption are developed because, regardless o f size, there is no escaping the n ecessity o f creatin g a netu m arket fo r w hatever ton­

nage may be sold.

Tie s i n w it h Larger Qu e s t io n

T his point is emphasized, not w ith the idea th at the attem pt to w iden dom estic demand for No. 1 buckwheat should be discouraged, but to show th at th e problem s in connection w ith the m arketing o f th is size tie in d irectly w ith the larger m erchandising problems o f the industry discussed in earlier articles in th is series ( Coal A ge, April 2, p. 495; A pril 9, p. 5 3 8 ). A s a m atter of fact, there are p ossib ilities in the m arketing o f No. 1 buck­

w heat w hich make it one o f the stron gest w eapons th at the anthracite industry has in the fight to hold its p res­

ent b u siness a g a in st com petition and to extend its area o f distribution.

W hat has been said w ith respect to N o. 1 buckwheat, also applies w ith dim inished force to the m erchandising o f pea coal. A lthough storage p iles o f the la tter size have been uncom fortably large and financially burden­

som e at various seasons o f the year to the m ajor pro­

ducing in terests, the operators have succeeded in one w ay and another in w orking off m ost o f th eir stocks.

The m ethods employed, however, have not been s a tis ­ factory either to the producers or to the distributors.

The application o f sound m erchandising principles grounded upon th e service idea prom ises to change th is.

too -

50-

0.

L e g e n d

— “Company’’prices -*• M atflndependenfprkes

—M in'.'j

Spot Prices on No. 1 Buckwheat in 1924

N o t e t h e w i d e r a n g e i n “ i n d e p e n d e n t ” p r i c e s : M o r e c o a l p r o b a b l y w a s s o l d n e a r t h e m i n i m u m t h a n t h e m a x i m u m

7 14 2! I J a n .

J 4 II 18 25 3 10 17 24 31 7 R 21 28 5

Feb. M arch April 12 19 26 Z 9 16 2330 7 14 21 28 4 il 18 25 1 8 15 22 23 6 13 20 27 3 10 17 24 1 6 15 22 29

M ay Ju n e J u ly A ug. Sept-. Oct. Nov. D ec.