TABLE 83.-Wood pulp: Approximate freight per ton of 2,000 pounds air-dry weight to specified destinations in the United States,1 1935-Cont'd. 1 The costs are based on freight charges given in table 82, adjusted to show cost per air-dry ton. Marine insurance for water-borne pulp is included at an average of 18 cents per 2 Includes port charges of 60 cents per ton of 2,000 pounds shipping weight, or 63 to 65 cents air-dry weight. NOTE.-In 1936 freight rate from Pacific coast to east coast of United States was increased by about 65 cents per air-dry ton (60 cents per ton shipping weight). In 1937 European pulp. MARKETING AND PRICES MARKET PRACTICES Almost all sulphite and other wood pulp imported into the United States from Europe is handled by importing concerns in the United States. The importers either act as agents of one or more European pulp mills or purchase the pulp for their own account and resell to American consuming mills. The former is the more prevalent practice; only a few concerns import pulp as merchants, and some of these do not have a substantial and regular business in wood pulp, while several concerns handle the commodity in large quantities as agents of foreign mills. The usual procedure is for the importers, whether agents or dealers, to make contracts to supply certain amounts of pulp of specified grade and brand to purchasing mills. A single contract usually covers several deliveries and fixes the price and the intervals at which deliveries are to be made. Most, but not all, of the imports from Europe are covered by contracts made in advance of the actual shipments from Europe. The pulp is entered at United States ports by the importers and is either forwarded to the consuming mills immediately or stored at the ports until time for delivery under existing or subsequently concluded contracts. The above description of the handling of European pulp applies more particularly to that sold in the Northeastern, Lake and Central, and Southern regions. The large importers, all of whom are located in New York, have not been selling in the Pacific coast region. The relatively small amounts of European pulp sold in the latter territory are consigned by the foreign mills direct to the consuming mills. There are no resident sales agencies of European pulp producers on the Pacific coast. The contracts under which European pulp is marketed run from 1 or 2 months up to 5 years. Most of them have a life of from 6 months to 2 years. In general, the prices specified in these contracts are supposed to be binding upon both buyer and seller; that is to say, the contract price is supposed to protect the seller against a fall and the buyer against a rise in the market. However, reports to the Commission indicate that on some occasions, when pulp prices have weakened, some importers have canceled old contracts in consideration of the purchasers making new contracts at lower prices but for larger amounts of pulp and running for longer periods than were covered by the old contracts at the time of their cancelation. In other cases, when the market has weakened, deliveries and payment have continued to be made in accordance with the existing contracts, but the importers may have made price concessions to some customers on new contracts, concessions possibly greater than the market at the moment would justify. It is reported that some American paper mills as a result of these practices have on certain occasions contracted for a part or all of their pulp requirements from European pulp mills for several years in advance. On the other hand, it is reported that after the marked rise in pulp prices which began in the middle of 1936 some purchasers agreed to upward adjustments of the prices paid on deliveries made under earlier contracts. Such practices are by no means general but they have apparently been of some importance in the competition between European, Canadian, and domestic pulp in United States markets and are indicative of well-established trade relations between some European pulp mills or their agents in this country and certain domestic consumers. Domestic and Canadian wood pulp. The Pacific coast pulp entering the Northeastern, Lake and Central, and Southern regions is sold either through commission agents, some of whom act as agents for several Pacific coast and Canadian mills, or through the sales departments of the pulp-producing concerns maintained in the eastern part of the country. Some of the Pacific coast pulp, both from American and Canadian mills, which is shipped by water through the Panama Canal, is consigned to the eastern agents or sales departments of the pulp-producing concerns and may be stored at Atlantic ports for some time before delivery to the consuming mills. Nearly all of the pulp from Pacific coast mills moving overland, as well as some of that moving by water to eastern markets, is consigned directly to the consuming mills. Pulp sold by mills in the Northeastern and Lake and Central regions is sold and shipped direct from the producing to the consuming mills and the same practice prevails with respect to the intraregional sales in the Pacific coast area. Some of the pulp imported from eastern Canadian mills into the United States is sold through agents resident in the United States or through exporting concerns in Canada, and in some instances the sales are made by the selling organizations of the producing concerns. Contracts for future delivery are less important in the marketing of domestic and Canadian pulp than in the marketing of European pulp. Few contracts for delivery of domestic and Canadian pulp at definite prices extend beyond 6 months; but agreements or contracts are entered into providing for deliveries over periods up to a year, seldom longer, without establishing prices for the full life of the agreement. Usually the price in such agreements is subject to adjustment quarterly. The standard contract and the Rules of Fair Trade Practices and Trade Customs proposed under the National Recovery Administration provided that on continuing contracts prices be guaranteed for 90 days from date of contract, and thereafter be subject to revision to the then prevailing market level. These practices appear in general to have been adhered to in the past few years. The bulk of the domestic and Canadian pulp sold in United States markets probably is covered by such arrangements. However, some pulp from domestic and Canadian mills as well as some of that imported from Europe is sold on spot orders covering single shipments to be made immediately. DIFFERENCES IN PRICES AND COSTS AT DIFFERENT DESTINATIONS European pulp. European pulp is usually sold at prices on dock port of entry and, in general, the prices at which any particular grade and brand of European pulp are contracted for are uniform for all Atlantic ports. However, there are minor variations in the prices at different Atlantic ports because of different docking and handling charges at particular ports; for instance, because of port charges which were not absorbed by the railroads, prices for delivery at Albany 39 usually have been 60 cents higher than at other Atlantic 38 As indicated previously, a large part of the imports from Canada, especially of unbleached but also of bleached sulphite, represent, like part of the shipments of domestic mills, the transfer of pulp between affiliated mills. 39 By a decision of the Interstate Commerce Commission Feb. 27, 1937, the railroads are required to absorb these charges when the pulp is moved by rail. coast ports. Prices at lake ports east of the Straits of Mackinac are generally $2 per ton higher, and west of the Straits of Mackinac $3 per ton higher, than at Atlantic ports. This is attributable to the fact that the freight charges on pulp from Europe via Montreal and thence by water carrier through the St. Lawrence are about $2 and $3 higher, respectively, to the two groups of lake 40 ports than to Atlantic ports. Usually the consuming mill pays the inland freight from the port of entry to the final destination. A number of qualifications should be made to the above statements regarding the costs at which European pulp is supplied to American pulp consumers. Importers, finding themselves short of supplies at ports of entry most economically located with respect to cost of transportation to certain consumers, sometimes deliver pulp through other ports at higher delivery costs and make freight allowances to compensate for the higher freight charges. Such departures from the ordinary practices sometimes occur because the St. Lawrence route to lake ports is closed for a part of the year, and, during this closed season, customers who would ordinarily be supplied from lake ports may be served from Atlantic ports with freight allowances. Also, initial deliveries on new contracts may be made from a more distant port pending the arrival of pulp from abroad at the specified port. However, unless importers are unable to make deliveries from the port specified in existing contracts, such adjustments are not generally made, and when deliveries are made under contracts, the pulp is usually shipped by the lower cost route. Another departure from the general price structure in the case of European pulp arises with respect to the small sales in the Pacific coast region. Apparently the prices at which European pulp is sold at Pacific coast ports are about the same as those at Atlantic ports, although the freight charges from European ports to Pacific coast ports on wood pulp are higher than those to Atlantic ports, the difference being $1 or more per ton. Domestic and Canadian pulp. Each grade of pulp from Pacific coast mills, both American and Canadian, shipped by water to the eastern part of the United States is usually sold at uniform prices for all Atlantic ports with exceptions similar to those referred to in connection with the prices of European pulp. Purchasing mills in this territory usually pay the inland freight from Atlantic ports on their purchases of Pacific coast pulp as they do in the case of purchases of European pulp. Some imports of pulp from eastern Canadian mills entering through Atlantic ports are also sold on dock Atlantic ports. Other sales of domestic and Canadian pulp are made usually to the consuming mills at delivered prices. The prices of domestic and Canadian pulps at points of delivery other than ocean ports have usually been made up by adding to base prices the approximate freight charges from the ocean or lake ports through which European pulp moves to each particular point. The base prices used in determining such delivered prices are usually, like the prices of European pulp, uniform for all ocean ports, $2 higher for lake ports east of the Straits of Mackinac, and $3 higher for lake ports west of the Straits of Mackinac than the prices for ocean 40 The uniform $2 and $3 per ton higher prices for lake than Atlantic ports became effective early in 1934 in connection with the Code of Fair Competition, National Recovery Administration, but previously prices for delivery at lake ports reflected the difference in freight between Atlantic and lake ports. ports. This system of making delivered prices was incorporated in the Code of Fair Competition formulated under the National Industrial Recovery Act and continued generally to be employed after that act became inoperative. Much of the domestic and Canadian pulp sold does not move through the basing points on which the delivered prices are calculated. As a result, the freight charges paid by a domestic or a Canadian pulp mill on shipments to different consuming mills frequently bear no definite relation to the delivered prices paid by the consuming mills. As a further result of this system of pricing, a domestic or a Canadian pulp mill may realize different mill-net returns per ton on shipments of the same grade of pulp to different destinations. However, it should not be inferred that the basing-point system of pricing is rigidly adhered to by all mills on all sales. Its prevalence is more readily discernible, and probably it is more generally followed with a degree of precision, in the pricing of domestic and Canadian bleached sulphite pulp, especially of the more ordinary grades, such as book and bond, than in the pricing of unbleached sulphite pulp. Because of the relatively small amounts of domestic and Canadian unbleached sulphite pulp sold, and because of the lack of standardization of grading, it was not possible to obtain price information at a representative number of destinations for substantial quantities of such pulp of fairly uniform grade. In the sales of unbleached sulphite by Pacific coast mills that distribute their product to widely separated consuming mills in the United States, the basing-point system of pricing is apparently generally followed, but other domestic and Canadian unbleached sulphite is sold for the most part by individual mills within a rather limited territory. Although the delivered prices at which individual mills sell pulp to different consuming mills may not always be strictly in accord with the basing-point plan of delivered prices outlined, that plan is in general indicative of the price structure of the industry. To illustrate the more general features of the system, table 84 has been prepared. The basing-point prices and destination prices shown in table 84 are those at which a number of domestic and Canadian mills were quoting book-grade bleached sulphite pulp in the later months of 1935. The destinations for which prices are shown in the table are points that are important in the consumption of pulp, but some of them may not have received pulp of this grade from the Pacific coast in 1935 or at other times. Analyses of price data indicated, however, that approximately the same differentials appear in the prices or costs of other grades of pulp delivered to purchasing mills at the various points and that about the same variations in delivered prices of each grade of pulp appeared at times other than in 1935. In order to show some of the consequences of this system, the table gives the approximate mill-net realizations per ton on shipments of this grade of pulp by Pacific coast mills to the various destinations at the delivered prices shown. |