bureau. You will note that they give an average cost per ton for the five years, of all the companies examined, of $22.39. The figures in the lower part of page 1 under the heading of cost items are obtained in a different way, to wit, directly from the cost sheets of the companies themselves and give an average cost of $22.23, a difference of 16 cents in costs on every ton, as obtained by these two methods. This difference, which is very slight, is due to the different sources used in compiling the figures, i. e., accounting as against costkeeping work in a given company. The same company gets at the same result in two ways and uses often different tonnages in doing so, thus getting a slight variation; and their approximation by the small sum of 16 cents is about as excellent a confirmation as could be desired of the accuracy of the results. (2) You will note that under "cost items," on page 1, we start with Bessemer pig iron, $14.52." On page 3 we go a step farther back and bring it up to the Bessemer pig iron, starting with the ore. We show here the cost of Bessemer pig iron to be $14.01, a difference of 51 cents between the cost as shown here and the cost of Bessemer pig iron as set forth in the second half of page 1. The difference between these two figures is due to the fact that the Bessemer pig iron figure on page 3 includes all the iron of this sort for all districts, while the figure used on page 1, $14.52, is simply the Bessemer pig used for steel rails. In regard to this particular division of Bessemer pig, there were some variations due to excess tonnage and the higher freight costs on this class of iron, and to the fact that some of the iron was purchased. (3) There is, of course, a certain amount of labor included in the items on page 3 for raw material, such as limestone and coke, as there necessarily must be in the cost of any raw material. So far as the steel companies are concerned, the only labor that they have put into these raw materials is substantially that of unloading. (4) I have set forth on page 2 certain extremes of cost and profit which I think may be of interest to your committee. You will note that I have stated that the highest cost for any company in any year was $31.27 for one company in 1903. It should be noted, however, that this is not a normal case, as the company was a new one. I have therefore inserted what was the next highest cost, to wit, $30.29, for another company for the same year. This company presented a normal condition. I felt also that possibly the figures for 1906 would be of especial interest, so I have inserted the lowest profit of any company during that year, to wit, 99 cents. The average profit for all companies during that year was $4.85. All of these figures, of course, are per ton. These results appear simple and are stated in comparatively sinall space, but they cover companies which have produced more than 93 per cent of all rails produced in the United States during that period. This means an enormous volume of tonnage and an enormous mass of transactions. To get these figures required the work of a considerable force of men in this office for over a year in an examination of thousands of accounts under the direction of an expert steel man. I think it is safe to say that no such complete or accurate figures have been compiled in this country, and that while they necessarily involve some variations, these are small in amount, and nothing approaching this statement in reliability can be obtained from any other source. I will endeavor to furnish you as quickly as possible such other information as I have available. Very respectfully, Hon. SERENO E. PAYNE, HERBERT KNOX SMITH, Commissioner. Chairman Committee on Ways and Means, Cost items of rails produced for five years, 1902–1906. "The difference of 51 cents between the average cost of Bessemer pig iron and of pig iron used for rails is due to variation in the cost of the excess tonnage and to freight on some of the iron. (See p. 3.) The item of labor does not include, for much of the tonnage, the labor in producing steam, which some companies include in the item "Steam." The difference of 16 cents between the cost of rails sold from sales statements and rails produced from cost sheets is due to difference in tonnage and in inventories. This statement includes the production of seven companies, and covers more than 93 per cent of all rails produced in the United States during the period. The item of labor does not include, for much of the tonnage, the labor in unloading raw materials and in producing steam, which some companies include in the cost of raw materials and in the item "steam." The tonnage covers 93 per cent of the Bessemer pig iron made in the United States during the period. DEPARTMENT OF COMMERCE AND LABOR, Washington, December 17, 1908. MY DEAR CONGRESSMAN: In accordance with your request, I am sending sheets, showing costs and profits on steel billets, both of the Bessemer and open-hearth basic. As was pointed out in my letter of December 14, transmitting profits and costs on steel rails, there are two sets of figures here, secured from two totally different sources, and therefore valuable as checks on each other and as showing their general accuracy. The figures in the first table herewith submitted are taken from the profit and loss accounts of the companies examined. The figures in the second table are taken from the cost sheets of those companies. The figures in the first are combined for Bessemer and open-hearth steel, giving a total average cost for five years, for all companies represented, of $20.60 per ton. The figures for the second set are divided according to Bessemer and open-hearth steel, but if the two are averaged up on a weighted average that average of cost will differ only about 13 cents per ton from the average cost given in the first set. This discrepancy is extremely small when the vastness of the transactions is considered and the enormous number of figures which had to be consulted. It would have been remarkable if there had not been a discrepancy, and 1 the fact that it exists shows the genuineness of the figures, and the fact that it is so small shows that they must be substantially accurate. While these results are comprised in comparatively few figures, they are the results of a great amount of work-practically 10 or 12 men for nearly a year-and cover all the large companies, practically all the Bessemer ingots produced in the country and more than 75 per cent of the open-hearth ingots for the period used. Very respectfully, Hon. SERENO E. PAYNE, HERBERT KNOX SMITH, Chairman Committee on Ways and Means, Commissioner. House of Representatives. Steel billets-Cost of Bessemer and open-hearth steel billets, sold and used at a profit. NOTE-The difference of $0.33 between the average cost of Bessemer pig iron, $14.01, and that used for Bessemer billet ingots is due to variation in cost of excess tonnage, and to freight on some of the pig iron. This figure, $14.01, here referred to was shown on the cost sheets of rails already transmitted to the committee by my letter of December 14, 1908. The differences of $0.36 on account of the variation in cost of Bessemer and of $0.06 in cost of O. H. ingots is due chiefly to the fact that only a portion of the ingots made was used for large billets, and the average price at which this portion was used differed by that much from the average cost of all ingots. The item of labor does not include, for much of the tonnage, the labor in unloading raw materials and in producing steam, which some companies include in the cost of raw materials and in the item steam.' Only a little more than half of the tonnage of Bessemer and O. H. billets covered by the cost sheets appears in the tonnage of billets sold or used at a profit, the remainder having been used without profit in making other products. Because of the way in which they are used no report of the total tonnage of steel billets produced in the United States is made, but the cost sheets obtained for Bessemer Ingots cover practically all, and of open-hearth ingots more than 75 per cent, of the production of the country for the period. COMPARATIVE COSTS AND PROFITS. Costs. Bessemer billets (any company for any year): It must be noted, however, that this cost ($17.43) was merely the cost for steel sold. But about nine times as much more steel was made and used by this same company at a cost of $18.26, which is perhaps a fairer and certainly a more significant figure. Highest cost under normal conditions (1903-). It should be noted that there were some costs still higher for certain companies, but these were companies apparently just beginning operations and are not fairly representative. Open-hearth basic billets: Lowest cost (1905) $17.43 24.95 18.24 29.04 As pointed out in a note above, it has been generally attempted to give figures that are fairly representative, and not those of companies whose conditions, for one reason or another, are abnormal, either as dealing in some special product or having just started, etc. It has been assumed that what the committee desired were figures which would represent different businesses of importance carried on under general conditions. |