Mr. HILL. Does that special advantage exist now?

Mr. SCHWAB. No, sir; it does not, for the reason that they have been able to adopt the things that we developed.

Mr. HILL. There is less necessity for a difference in the tariff now than there was then?

Mr. SCHWAB. I will come to that later, if I may go on, because I want to be very frank about the whole situation. I want to point out to you an apparent inconsistency which is not so inconsistent when you come to analyze it; in other words, let me put the question: If I were writing that letter to-day, at what would I put the cost of steel rails?"

Mr. DALZELL. I was going to suggest that you tell us, in the same detail, what it would cost to-day.

Mr. SCHWAB. I would be very glad to do so. First of all, some seven or eight years ago-no, probably in 1901 or 1902, I am not sure I testified before one of your committees in Washington that I placed a value on the ores of the United States Steel Corporation of a dollar a ton in the ground.

Mr. RANDELL. In order that I may understand you, are you going to talk in an optimistic vein or a pessimistic vein?

Mr. SCHWAB. I will let you be the judge of that; you may be the judge of that, sir. As I say, I then testified that the ore was worth a dollar a ton. It was then thought to be an optimistic estimate. I would call attention to the fact that since that time ores have not only been sold at a loss at a dollar a ton, but the lowest grade we have. I then spoke of 58 per cent ores, the same kind we have been using. The steel corporation are leasing to-day from the Great Northern Railroad-Mr. Hill-ores, the minimum of which are 89 cents, and in three years will be above a dollar a ton. So I want you to appreciate

Mr. UNDERWOOD. Is that royalty alone?

Mr. SCHWAB. Yes; without any cost of taking it out of the mines. Now, I can not say accurately-the steel corporation can testify to this but I think from one-fifth to one-fourth of all the ores that they take out this year will probably come from the properties on which they pay from 85 cents to $1 a ton royalty. That is first. Secondly, these mines that were formerly shoveling it-I have read in the newspapers some expert testimony on the cost of shoveling out Mesaba ores-but those ores were shoveled out at a cost of from 5 to 10 cents a ton. These mines are much deeper to-day, and much more costly to operate, and I do not believe that the Mesaba ores on an average can be produced to-day, mined to-day, anywhere below 50 cents a ton, and I think the cost is between 50 and 60 cents. You can not buy Mesaba ores to make steel, you must use old ores, or hard ores, and the cost is nearly double that, varying from 75 cents to $1 a ton.

Mr. COCKRAN. In what proportion?

Mr. SCHWAB. The best proportion is half and half. Please put these figures down, Mr. Hill. You have the cost of the ore in the ground at $1 per ton, as against our 10 and 15 cents I spoke of. If you will put the cost of mining now at 50 cents per ton; if you will put the cost of getting it to the lakes at 85 cents (I am giving you actual charges now); if you will put the cost of carrying it on the

lakes at 70 cents, the cost of unloading and taking it to Pittsburg at $1, you will have the cost of the ores in Pittsburg.

Mr. HILL. Has the freight rate from the mines to the lakes increased in these ten years?

Mr. SCHWAB. It has.

Mr. HILL. How much?

Mr. SCHWAB. My best recollection is-I have not the exact figures that it has increased from 60 to 85 cents. And it has increased

on the lakes not so much, but from 60 to 70 cents.

Mr. HILL. Then there is an increase of about $1 in the transportation?

Mr. SCHWAB. Yes.

Mr. HILL. And the United States Steel Company owns and controls the transportation?

Mr. SCHWAB. I can not speak about that. You must ask them about that. Now, if you will divide that by 49, which is the average percentage of iron in the ore brought down last year, you will have the cost of the ore to make a ton of pig iron during these past several years.

Mr. CALDERHEAD. Instead of 58?

Mr. SCHWAB. Instead of 58. We rejected ore up to that time that ran below 58, but now we take all of it that runs as high as 48. The other is not procurable, you can not get it.

The CHAIRMAN. Go on, Mr. Schwab.

Mr. SCHWAB. I would like to have these figures.

The CHAIRMAN. You had better make your own figures.

Mr. HILL. I make it 8.26.

Mr. SCHWAB. Well, I believe in labor saving.

Mr. DALZELL. 8.26, Mr. Hill says.

Mr. SCHWAB. If you will add what I did in the previous instance, the usual loss.

Mr. UNDERWOOD. I have worked it out and make it 8.20.

Mr. SCHWAB. Now, if you will add the usual losses in there you will find that that will be another 50 cents a ton. I allowed a lesser amount before

Mr. UNDERWOOD. Your figures, then, show the cost of ore at the Pittsburg furnace, to make a ton of pig iron, amounts to $8.50. Mr. LONGWORTH. And it was $4.50 in 1889 ?

Mr. SCHWAB. Yes, sir; I will give you further details if you desire it.

Mr. GAINES. You are talking about different figures. Mr. Underwood said $8.50

Mr. SCHWAB. Well, I added 50 cents a ton. $8.76 is right.
Mr. HILL. That is right?

Mr. SCHWAB. That is about right.

Now, if you will come to the cost of coking coal, you will find that in those years coking coal in the Connellsville region-I am calling on my memory for this; Mr. Dalzell will probably know better than I was about $600 an acre, and to-day it is worth $3,000 an acre, the same coal. The cost of coke, therefore, made from Connellsville coal is proportionately greater. These are approximate figures, because it is hard to fix a definite value on those two things. Therefore, I know that coke may not be produced in the ovens to-day under $1.50 a ton;

and-I am not quite sure of this-but I think the freight rate to Pittsburg is 85 cents, again, on coke. It is within 10 cents.

Mr. HILL. You mean to make a ton of iron?

Mr. SCHWAB. No, I mean that is for a ton of coke. Now, this is a thing I would also call your attention to. In the year I wrote that letter 1 ton of coke made 1 ton of pig iron, because the ores contained 58 per cent of iron. Last year it took 11 tons of coke to make 1 ton of pig iron, because the ore only contained 39 per cent of iron. Therefore, you must add one-fourth to the value

Mr. HILL. That is 524, which would make $2.62 for the coke.

Mr. SCHWAB. If you will add that to the $8.50 you have $11.10, or something like that.

Mr. HILL. Then there is another item, there is labor.

Mr. SCHWAB. There is limestone. It costs 30 cents to mine limestone and $1.20 to take it to Pittsburg-$1.50. And you use about one-half a ton of lime to pig, making 75 cents for your lime for each on of pig iron. The reason that more lime is used now than in that year is because the ores are leaner now. There is more waste maerial to flux away. I want to make this

Mr. HILL. That makes $12.13 for your cost, eliminating your office force?

Mr. SCHWAB. No; there is another item to go in there yet; you have your labor and your conversion cost, which you can put now at about $1.25 or $1.30.

Mr. CRUMPACKER. What is the last item?

Mr. SCHWAB. The labor and charges other than material.
Mr. HILL. How much-$1.30?

Mr. SCHWAB. About $1.30. That is about the cost of making pig iron in Pittsburg to-day. And if you will add the general charges the cost is about $14. I mean to make a ton of pig iron in Pittsburg. Mr. CALDERHEAD. What do you include in general charges?

Mr. SCHWAB. General administrative expenses and similar items. Mr. HILL. The taxes and insurance?

Mr. SCHWAB. No; the works' taxes have been included in the other. Now, I would like to make one explanation. There are works and works. Some works can do a little better than other works. But what I have given you is the nearest average of one of the good works of Pittsburg. My assertion can well be borne out. If you have examined the papers recently you know that nearly all the furnaces in the valley and about Pittsburg have been shut down this year because, as many of the operators told me, they could not afford to sell pig iron at $14 a ton. If you have noted, that has been about the market for pig. The pig will cost, for converting it into railsI do not believe we can convert it from pig iron into rails, in our mill, for less than $7.50 a ton to-day.

The CHAIRMAN. Making a total cost of $21.50?

Mr. SCHWAB. About that; yes, sir.

The CHAIRMAN. Fourteen dollars and $7.50

Mr. HILL. One moment.

Mr. UNDERWOOD. $7.50?

Mr. DALZELL. You have made the pig iron cost $14 up to this time, adding the different items given.

Mr. SCHWAB. Yes, sir; and $7.50 for converting that into rails.
Mr. DALZELL. That would be $21.50?

Mr. SCHWAB. Yes; that is about the cost.

Mr. HILL. You gave us the cost of conversion nine years ago as being $3.75.

Mr. SCHWAB. Quite right; but I am telling you why it is so much more to-day.

Mr. COCKRAN. Let us have that, if you please.

Mr. SCHWAB. Yes. Let us take the question of loss first.

Mr. HILL. Your letter said your cost was going to decrease. The CHAIRMAN. You said then that your cost was going to be less. Mr. SCHWAB. Yes; my letter was very optimistic, and one sees things very different sometimes from what the realization is. Let me take the item of loss, Mr. Chairman. I can not give you the exact losses from memory, but they are approximately 10 per cent. Now, 10 per cent on $8 is 80 cents loss; I mean when you convert iron into steel. You lose the silica and the carbon, which go into the air. Eighty cents loss on that. Now, there is nothing that enters into that that has not increased almost proportionately. The freights on everything you use to convert your pig iron into steel-like ganisters, like refractories, like coke for melting-has gone up two-thirds in many instances.

Mr. COCKRAN. Did you say the freights?

Mr. SCHWAB. Yes; on all the materials for converting pig iron into steel. Labor has increased more than anything else.

Mr. HILL. In your statement just now, in making a ton of pig iron you have made a reduction of 38 cents in the cost for labor.

Mr. SCHWAB. Quite so. Now, I shall tell you why. The labor in making a ton of pig iron is not skilled labor at all. It is common labor. It has not changed, or at least changed very little; and, secondly, the appliances in making pig iron have changed very radically in that period of time, while the appliances for making rails have not changed materially.

The CHAIRMAN. What do you put down as the cost of labor in converting pig iron into steel?

Mr. SCHWAB. There are several methods, so I would have to give you the cost by each method.

Mr. UNDERWOOD. Will you give the cost by the Bessemer method first, and then follow that with the cost by the open-hearth method? Mr. SCHWAB. I will, if you like; but I would prefer not to. I will tell you the cost of one.

Mr. COCKRAN. If you will give us the figures for both, we will make the comparison.

Mr. SCHWAB. I would prefer not to give you the figures for both. Mr. DALZELL. How do you make your steel?

Mr. SCHWAB. By the open-hearth method.

Mr. DALZELL. Will you give us the figures for that, then?

Mr. SCHWAB. Yes. The labor cost in the open-hearth part of the process is about 85 cents a ton. In the blooming mill the cost is 40 or 50 cents, and the cost of the rails proper is from $1 to $1.25, depending on the section, drilling, and kind of rail. That is the actual labor at the mill. Of course, there is this to be borne in mind in analyzing the cost of a ton of rails-that there is nothing that enters into the cost of a ton of rails in its finality but raw material and labor.

Mr. CALDERIIEAD. What do you mean by the expression "the kind of rail? "

Mr. SCHWAB. There are different sections and weights of rails. If a rail is 50 pounds to the yard it costs more than a rail that runs 100 pounds to the yard.

Mr. HILL. You are speaking of the standard rail?

Mr. SCHWAB. Yes. Then, there are different kinds of specifications.

Mr. CALDERHEAD. Please make that a little plainer.

Mr. SCHWAB. I thought I had made that plain. When I say different kinds of rail I mean different specifications and different patterns and different weights.

Mr. FORDNEY. It costs you more per ton to make rails that run 35 pounds to the yard than to make rails that run 90 pounds?

Mr. SCHWAB. Yes.

Mr. CALDERHEAD. That is what I want.

Mr. SCHWAB. Yes. And then there are other things that also vary the cost.

The CHAIRMAN. Proceed with the remaining items of cost to make up this $7.50.

Mr. SCHWAB. Against that cost you will have to go through the same calculation as before.

Mr. UNDERWOOD. You have labor at 85 and other items here, which I figure out make a total of $3.65 for labor and losses.

Mr. SCHWAB. I will have to go further. The open hearth, put that at 80. It takes 100 tons of open-hearth ingots to make 80 tons of rails. So to arrive at the $7.50 we have to go through a long calculation of percentages that I think you will find pretty difficult.

Mr. UNDERWOOD. You have to add one-fifth of this labor cost, then. Mr. SCHWAB. Quite so.

Mr. UNDERWOOD. The labor cost would be

Mr. SCHWAB. You will have to do the same thing with every item that enters into it.

Mr. UNDERWOOD. We have to add 45 cents there.

Mr. SCHWAB. No; 16 cents on labor.

Mr. UNDERWOOD. You said you add one-fifth.

Mr. SCHWAB. One-fifth to 80 cents.

Mr. UNDERWOOD. Oh, that would make $3.81.

Mr. SCHWAB. Now, the other costs are made up of an infinite number of things. There is the refractories, there is manganese, there is fluxes, there is coal for cokes.

Mr. HILL. But a ton of iron does not make a ton of rails

Mr. SCHWAB. That is an item of loss.

The CHAIRMAN. What is the manganese?

Mr. SCHWAB. The ferromanganese? That question depends on the specification of the rail. You can put it at 65 cents to 85 cents for manganese.

I do not want to give you these figures offhand and then have you add them up and find that they do not add up exactly $7.50, but you will find that they will approximate that.

Mr. HILL. Does this include the profit of $5 a ton?

Mr. SCHWAB. No.

Mr. HILL. As in the previous statement?

Mr. SCHWAB. No.