ping paper and boards and the materials therefor, the demands of these regions in excess of their production have been supplied chiefly by kraft paper and board brought from the South and by sulphate pulp from foreign countries.

Consumption of wood pulp and other fibrous materials in the production of paper and other products.

Over 98 percent of the total pulp converted in the United States is used by the paper industry. The remainder, largely special grades of bleached sulphite, is used in the production of rayon, transparent cellulose sheeting, and other compounds of cellulose; such consumption has expanded rapidly in the past few years, but in 1935 it still accounted for slightly less than 2 percent of the total pulp and for less than 10 percent of the bleached sulphite pulp converted in the United States.

In addition to wood pulp, the paper and board industry uses large quantities of other fibrous materials. It is estimated that somewhat over 60 percent of the fibrous material used by the industry, in weight, is new wood pulp; waste paper constitutes most of the remainder. Other fibrous materials used consist of rags, rope, bagging, and straw. The bulk of the fiber, other than new wood pulp, used by the paper industry goes into board. This is especially the case with respect to waste paper and straw. Probably less than one-fourth of the fiber used in the production of all kinds of fiber board taken together consists of new wood pulp, although about one-half of the total sulphate and all of the small amounts of semichemical pulp go into board. Fairly large quantities of container board known as kraft board, produced chiefly in the South, are made entirely or largely from new sulphate pulp. Most kinds of paper, as distinguished from board, are made entirely or largely from new wood pulp. Between 85 and 90 percent of the fiber used in paper as a whole consists of new wood pulp. The different kinds of pulp are only in limited degree interchangeable for making different types of paper; the major uses of each kind have already been described.

Integration and affiliation of pulp and paper plants.

Over three-fourths of the wood pulp produced in the United States is converted into paper and board in plants integrated with the producing pulp mills. Of the 154 pulp mills from which the Commission obtained information, 126 were physically connected with pulpconverting plants.

Combination of pulp production and conversion permits the pulp to be used without first being lapped or dried, operations which involve considerable expense, but which are necessary for economical transportation when the pulp is transferred to separate converting mills. The economy of integration is particularly great in the production of those kinds of paper which are made in large runs of uniform specifications from one or two kinds and grades of wood pulp-for example, newsprint and coarse wrapping paper and kraft board. Very little of these "mass production" commodities is made except in integrated mills. On the other hand, in the production of many other kinds of paper and board of which the volume of output is smaller or the pulp composition more varied, or which are made largely from other materials mixed with new wood pulp, the advantages of integration are less marked. They may in fact be more than offset by other considerations, especially when the paper or board is marketed in areas

distant from those in which the pulp originates. The advantages of proximity of paper mills to their markets or to the sources of the other materials used along with wood pulp, notably the sources of waste paper, tend to maintain the separation of pulp and paper or board production. The generally higher costs of transportation on paper than on pulp also affect the advantages of integrated as compared with nonintegrated operations.

Differences in the advantages to be gained through integration in the production of various kinds of papers, and differences in the geographical distribution of the production of the several kinds of pulp, are reflected in the different proportions of the domestic production of the various kinds shipped as pulp from the producing mills. A much larger part of the domestic production of sulphite than of other kinds of wood pulp is shipped in the form of pulp. Even in the case of sulphite, however, much the greater part of the output of the Northeastern and Lake and Central regions, which produce much less than their requirements, is converted in integrated pulppaper establishments. In the Pacific coast region, where far more sulphite pulp is produced than is required for the regional paper consumption, about two-thirds of the output is shipped as pulp from the producing mills, and though a considerable part of this goes abroad, and another part to domestic rayon and chemical plants, a good deal is shipped to eastern paper mills. This is due to the fact that sulphite pulp is used in many papers in which the advantages of combining the converting with the pulping processes are at a minimum, and also because, on the long haul from the Pacific coast to the large eastern paper markets, the higher transportation rates on paper restrict the shipment of the surplus in that form.

Over nine-tenths of the domestic production of both ground wood and sulphate pulp, and all of the small production of semichemical, are converted at the producing mills; this practice predominates in all areas in which such pulps are produced. The Southern sulphate production greatly exceeds the regional requirements of kraft paper and board but, on account of the advantages of integration in producing coarse wrapping papers and kraft board and on account of the fact that the Southern pulp mills are not a great distance from the large domestic paper markets, the surplus is shipped principally as further advanced products rather than as pulp.

About one-third of the relatively small domestic production of soda pulp is shipped as pulp by the producing mills, since such pulp is usually mixed with other pulps in making several of the finer white papers which are produced by many mills that do not have integrated soda pulp plants.

The amounts of sulphite pulp shipped by domestic mills have been increasing with the expansion of the Pacific coast production but no similar trend has occurred in the case of sulphate and ground wood or soda pulp.

Paper and board mills without pulp-producing plants are located principally in the Northeastern and Lake and Central regions and produce for the most part such papers as writing, the finer printing and wrapping, tissue, and specialty papers, and boards made largely of waste paper or materials other than new wood pulp. These paper and board mills use large quantities of wood pulp, principally sulphite

Similar products are also made in integrated pulp-paper mills.

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and sulphate, but also ground wood in substantial quantities and soda pulp in smaller quantities. Even the considerable amounts of domestic sulphite shipped to these converters are small relative to their demands; hence the bulk of the sulphite as well as of the sulphate and mechanical pulp used by paper or board mills that do not obtain their pulp from integrated pulp plants is imported. Shipments by domestic mills, on the other hand, constitute the bulk of the soda pulp used by domestic converting mills; this kind of pulp is not as generally produced in foreign countries as in the United States.

Considerable proportions of the shipments of domestic pulp, particularly in the case of the small amounts of sulphate and mechanical, consist of transfers to paper mills affiliated with the supplying mills. Similarly, part of the imports of each kind of pulp from Canada consists of transfers to domestic paper manufacturers from their Canadian pulp-producing affiliates. Thus, imports from Europe are especially important in supplying the demands of paper and board manufacturing concerns which do not produce their own supplies of wood pulp.

Ownership and control of domestic pulp mills.

There are a large number of domestic concerns each of which operates only a single pulp mill, or a single integrated pulp and paper mill, but there are several companies with more extensive interests. The 154 pulp mills from which the Commission obtained information (these mills in 1935 produced about 93 percent of the domestic output of wood pulp) were owned or controlled by 92 companies. Four of these companies controlled 45 of the pulp mills, 38 of these being integrated with paper mills; they also owned 13 paper or board plants without pulp-producing equipment. These four companies together account for over a third of the total pulp produced in the United States, and notwithstanding their large interests in paper as well as pulp manufacturing, they account for about a quarter of all the pulp sold by domestic mills. Many of the concerns that operate pulp mills have large holdings of timberlands and some have extensive power and lumber interests; some control pulp, paper, and lumber mills, timberlands, and other property in Canada and Newfoundland. Labor and wages.

According to the Bureau of the Census the pulp industry employed almost 25,000 workers in the predepression period. Employment had shrunk in 1933 by nearly 20 percent. For 1935, the latest year for which data are available, the number was 23,623; at the present time, with several new mills in operation, it may exceed the predepression level. The annual pay roll, which amounted to between $31,000,000 and $33,000,000 in the predepression period, declined between 1929 and 1933 by more than 40 percent, to about $18,000,000; it recovered in 1935 to about $23,500,000. The foregoing figures have to do with pulp mills only, exclusive of paper and board plants integrated with pulp mills. Except for a few office workers, all the workers in the pulp industry proper are men. Some women, however, are employed in paper plants.

From a fifth to a quarter of the workers in the pulp industry are engaged in machine shops, power plants, and other activities not directly concerned with the pulping processes; of the remainder about one-quarter are classified as skilled and about 40 percent as semiskilled. The Commission obtained information regarding wage rates in a

number of pulp mills; the average hourly rates of pay in 1935 were as follows: Northeastern region, 48.8 cents; Lake and Central region, 46.8 cents; Southern region, 39.7 cents; Pacific coast region, 51.1 cents. These averages are based on widely different rates of individual workers, especially in the skilled group. A few workers in the Northeastern and Pacific coast regions were paid over $1.50 per hour. The higher general average in the Pacific coast region was in part attributable to a greater proportion of skilled workers and in part to higher rates of pay of semiskilled and unskilled workers. Information obtained from the industry indicates that wages were higher in all regions in 1936 and 1937 than in 1935, but specific data are not available except for the Pacific coast. In 1936 base rates in the Pacific Northwest were increased 5 cents an hour and in 1937 were further increased 10 cents an hour.

Cost of producing wood pulp, by regions.

The following table, which relates to January-September 1935, gives costs of production of sulphite and mechanical pulp in representative mills of the Northeastern, Lake and Central, and Pacific coast regions, which together account for the bulk of domestic production of these kinds of pulp. In the case of sulphate, average costs in the Lake and Central, Southern, and Pacific coast regions are given, practically all the domestic output of sulphate being in these three regions. Cost data for soda pulp were not obtained. The table shows separately costs of wood and of reducing the wood into slush pulp. The costs of drying or lapping, one or the other of which operations is essential for pulp that is shipped as pulp from the producing mills, are not included, since the greater part of the domestic production of each kind of pulp is used in integrated pulp and paper operations and the pulp so used does not generally go through those processes. Costs of production inclusive of those incurred in lapping and drying are given where pertinent later in the report.

Average costs at producing mill of unbleached sulphite, sulphate, and mechanical pulp in slush form, January-September 1935

The cost of sulphite pulp in the two Eastern regions is about the same, but that in the Pacific coast region (excluding interest) is about 30 percent lower. The difference is chiefly due to the much

4 Cost of production data shown cover costs at the producing mills but do not include transportation charges incurred on such pulp as is delivered to separate converting mills.

lower wood cost on the Pacific coast, although conversion costs are also considerably lower.

In the case of ground wood the Northeastern region, which produces about 60 percent of the national total, has costs considerably lower than the Lake and Central region, a somewhat higher wood cost being offset by decidedly lower conversion costs. The Pacific coast region shows total costs about the same as those of the Northeastern region; wood costs on the Pacific coast are much lower, but conversion costs much higher than in the Northeast.

In the case of sulphate the total cost in the Southern region is less than two-thirds that in the Lake and Central region, the wood cost being less than half as great and the conversion costs also considerably lower. Both wood cost and conversion costs in the Pacific coast region are somewhat higher than in the South, but much lower than in the Lake and Central region.

In each of the two regions, the Lake and Central and the Pacific coast, in which costs were obtained for all three classes of pulp, the cost of sulphite was somewhat higher than that of sulphate and much higher than that of ground wood. These differences are chiefly attributable to differences in wood costs; these in turn are partly due to differences in the species used, but the lower wood cost for ground wood is chiefly due to the smaller quantity of wood required per ton of mechanical pulp. In both regions conversion costs for sulphite are somewhat lower, and for ground wood, much lower than for sulphate. In the Northeastern region, where costs were obtained only for sulphite and ground wood, the total cost at producing mill (excluding interest) of the former was nearly twice as high as that of the latter, each of the two main elements of costs being also about twice as high. It may be noted that the cost of sulphate in the Southern region is not widely different from the cost of ground wood in the Northeastern and Lake and Central regions, although the sulphate process is a much more expensive process than the mechanical and requires much more wood per ton of pulp.

Prices of pulp.

Broadly speaking, the prices of all kinds of pulp in United States markets fell sharply after 1929; the decline after 1931 presumably was accentuated somewhat by the depreciation of the currencies of the principal European exporting countries. When in 1933 and 1934 the foreign-exchange value of the dollar declined and demand partially recovered, the prices of pulp in the United States showed considerable increase. In the early part of 1935 pulp prices weakened and remained more or less stationary through the latter part of the year and into 1936. In the middle of 1936 the pulp market began to tighten and since that time prices have risen markedly. Present pulp prices are higher than for a good many years past.

In the case of sulphite pulp, of which there are substantial domestic sales, the prices and net realizations at mill on sales of pulp have direct significance to a larger part of the domestic pulp industry, as well as of the paper industry, than in the case of other types of pulp. Further information on the prices and net realizations at mill on sales of sulphite pulp is given in a later section of this summary dealing with sulphite pulp. In the body of the report detailed information on the prices of sulphite, sulphate, and mechanical pulp is given.