A substantial proportion of the relatively small quantity of unbleached sulphite pulp imported from Canada consists of shipments to domestic paper mills from affiliated enterprises in Canada. Because. of this fact, and because of the relatively small quantities of unbleached sulphite pulp sold by domestic mills, imports from Europe constitute. the bulk of the pulp of this class used by paper mills that obtain their supplies in the open market.

Large quantities of bleached sulphite are also shipped from Canadian pulp mills to domestic paper mills under the same control. However, their sales to unaffiliated paper mills are likewise large. Domestic, Canadian, and European pulp mills alike supply important proportions of the bleached sulphite purchased by domestic paper mills.

Transportation.

Some relatively short distance movements of domestic sulphite pulp take place, mainly within the Northeastern and Lake and Central regions, and partly by motortruck. The major movements, however, are for long distances, by rail or water. Pacific coast shipments to the Northeast, and to some extent to the easterly sections of the Southern and Lake and Central regions, are usually made via the Panama Canal to Atlantic ports, whence the pulp is distributed to converting mills chiefly by rail. Shipments from the West coast are made by rail direct to the western part of the Lake and Central region, and also to some destinations in the eastern part of that region and in the western part of the Southern region. Another substantial part of the domestic sulphite goes by rail from Maine, New Hampshire, and Massachusetts to New York, Pennsylvania, and New Jersey, as well as to the Lake and Central and Southern regions.

The bulk of the sulphite pulp imported from Canada is shipped by rail from Ontario, Quebec, and New Brunswick to the Northeastern and Lake and Central regions; smaller amounts move via Atlantic and Lake ports.

For the

Pulp imported from Europe is distributed in the eastern sections of the country in the same way as that from the Pacific coast. Lake and Central region, part of the European pulp is transshipped at Montreal and goes to Lake ports and thence by rail, and part is shipped via American Atlantic ports and thence by rail.

In general, the freight rates from mills in the Northeastern region' to converters in that region itself and in the Lake and Central and Southern regions, are lower than those from Pacific coast, Canadian, or European pulp mills to the same converters.5 However, to some points, particularly in the Lake and Central region, certain of the Canadian mills pay lower freight rates than do the more important shipping mills in the Northeast. In general, pulp mills in eastern Canada enjoy lower freight rates than European mills, and European mills lower rates than Pacific coast mills, on shipments to the more important domestic consuming areas.

Pulp mills in each of the four regions of the country usually have transportation advantages over domestic mills of other regions, and over foreign mills, in supplying pulp to converting mills within the region. In many cases shipments of pulp for short distances are made by integrated pulp and paper establishments which do not operate pulp-drying equipment but ship lapped (partially dried) pulp

In cases where the pulp moves by a combination of carriers, the freight here referred to is the total of the separate rates from shipping to consuming mills.

as a supplement to their major operations. A major factor influencing the costs of transporting lapped pulp is its high water content, which is usually from one-half to two-thirds of its gross weight.

Variation in water content of so-called dry pulp is a factor of some importance in the costs of delivery of pulp from different sources. The dry sulphite pulp of paper grades shipped from Europe and the Pacific coast generally has about 10 percent less water than that shipped by Eastern mills in the United States and Canada. Thus, the transportation costs incurred by the latter are higher in comparison with those on shipments of European and Pacific coast mills than the simple freight rates would indicate.

Marketing and prices.

European pulp is ordinarily supplied to converters at prices fixed in contracts made in advance and usually covering deliveries over periods from 6 months to 2 years and in some instances even longer periods. Sellers of domestic and Canadian pulps seldom make contracts for the delivery of pulp at fixed prices for periods of over 3 months, although they do make long-term contracts to supply specified quantities at intervals, with the prices to be adjusted quarterly. The bulk of the pulp from the various sources sold to domestic converters is covered by such arrangements but sales of single lots of domestic, Canadian, and European pulp for immediate deliveryspot sales are also sometimes made.

As regards European pulp, sales and contracts are usually made at prices covering delivery to ocean or lake ports and the buyer pays the inland freight to his mill. Similar practices prevail for Pacific coast pulp shipped to Eastern converters via Atlantic ports. Other sales of domestic as well as of Canadian pulp are usually made at prices including delivery charges to the receiving mill. The prices of domestic and Canadian sulphite pulps of paper grades at points of delivery other than ocean ports have usually been made up by adding to oceanport-base prices, differentials approximately equal to the additional freight charges on shipments of European pulp to each particular point.

There have been considerable spreads in the prices of different grades of sulphite pulp. Superpurified and rayon and chemical grades have sold much above the average prices of paper grades of bleached sulphite, and certain low and high quality pulps sold in limited quantities for paper making have brought prices considerably below or above the respective averages for unbleached and for paper grades of bleached sulphite pulp. However, the prices of those grades of unbleached and bleached sulphite which constitute the bulk of such pulps bought by domestic paper manufacturers have ordinarily fallen at any particular time within narrow ranges-within about 5 percent of the averages.

The following table shows the average prices at Atlantic ports in contracts made during each quarter of the period 1932 through the third quarter of 1935 for delivery of European unbleached and paper grades of bleached sulphite pulp. This is the period for which detailed information regarding sales contracts, deliveries, and prices was compiled in the Commission's investigation. Data upon which corresponding averages for the subsequent period might be computed are not available, but on the basis of partial information obtained by

Rayon and chemical grades of pulp as shipped from all sources contain little water.

the Commission from importers, monthly price ranges covering the bulk of the European sulphite pulp contracted for during the period October 1935 to July 1937 have been compiled and are also shown in

the table.

Atlantic coast contract prices per air-dry ton (2,000 pounds) for European unbleached and paper grades of bleached sulphite pulp

AVERAGE PRICES IN CONTRACTS MADE DURING 3-MONTH PERIODS

The variations in prices on actual deliveries of European pulp during the several quarters or months are not accurately indicated in the table, since the prices on deliveries during any period are determined by contracts made at various previous dates. This factor is of less importance with respect to the prices on deliveries of domestic and Canadian pulp, since the prices on deliveries from these sources under standing contracts are adjusted quarterly. With allowance for these considerations, the prices shown in the foregoing table indicate fairly closely the trends of prices of sulphite pulp from all sources, foreign and domestic, until the recent rise in prices which began in the middle of 1936. In 1933, however, presumably chiefly because of the decline in the foreign exchange value of the dollar in terms of the currencies of major European pulp-exporting countries, the dollar prices at which European pulps were offered rose sharply; the prices of domestic and Canadian pulps were increased only after a considerable lag. In the first quarter of 1935, on the other hand, there was a considerable drop in the contract prices of European sulphite pulp, which had been weakening throughout the latter part of 1934; adjustments in the prices of domestic and Canadian sulphite pulps lagged somewhat in this case also.

Much greater discrepancies between the prices fixed in contracts for European pulp and those at which domestic and Canadian pulps have been delivered have appeared in recent months. Much of the European pulp imported during the past 12 months was delivered to

converters in fulfillment of earlier contracts and at prices established before the recent rise in prices began. Under these circumstances domestic and Canadian sellers have not raised their prices to the level at which sellers of European pulp have been making new contracts for future deliveries. Prices of domestic and Canadian pulps have been materially raised, however, and the prices (as of Atlantic coast ports) established for deliveries of domestic and Canadian sulphite pulps under standing contracts during the third quarter of 1937 are reported as ranging from $52 to $54 per ton for unbleached sulphite and from $65 to $70 per ton for paper grades of bleached sulphite. Several domestic and Canadian mills are operating at or near capacity in fulfilling their long-term contracts at the prices indicated. A few domestic mills have produced in excess of the tonnage required to fill their continuing contracts and have sold the excess at prices higher than those just referred to. Only relatively small quantities of such pulps have been obtainable in the spot market and a few sales of European pulp for immediate delivery were made during the early months of 1937 at prices not covered by the ranges shown in the foregoing table.

Net realizations at mill on sales compared with costs.

There is a considerable variation in the average net realizations per ton by pulp mills in the different regions on their sales of unbleached and paper grades of bleached sulphite pulp to domestic converters. This arises in part from differences in the grades of pulp sold by the several mills and in part from the variations in the prices on deliveries to different purchasing mills and in the transportation costs borne by the shipping mills.

In the case of bleached sulphite, the differences in average net realizations at mill on sales to domestic converters are chiefly due to the transportation factor. On account of the higher cost of transporting pulp from Europe to the Lake and Central region, delivered prices in that region range in general above those in other regions. Consequently, pulp mills in the Lake and Central region, selling practically only in that region and paying relatively low transportation rates, realize a higher average net on sales of paper grades of bleached sulphite than do mills in other regions; however, mills in the Lake and Central region sell very little. Pacific coast mills, since they sell mainly in the Northeastern and Lake and Central regions, have substantially higher average transportation costs, and realize a lower average net, on bleached sulphite than do mills in either of the other regions, but their costs of production are also much lower.

Transportation charges also, of course, affect the average net realization on sales of unbleached sulphite by mills in the several regions, but a more important factor is the wide difference among them in the grades of unbleached pulp sold. The relatively small quantity of unbleached pulp sold by Northeastern mills is of a highpriced quality, and there is a wide variation in the grades of the small total quantity of unbleached sulphite sold by mills in the Lake and Central regions. The average net realization per ton on sales of unbleached sulphite in domestic markets by Pacific coast pulp mills has been considerably lower than that of mills in either of the other main sulphite-producing regions.

The following table gives the average net realization on domestic sales of unbleached and paper grades of bleached sulphite by mills in

the three main sulphite-producing regions for each quarter of 1934 and the first three quarters of 1935; the quantities to which the net returns at mill apply are also shown. The inclusion of export sales in the computation of average net realizations at mill would not have altered appreciably the regional averages shown in the table. Only in the sales of unbleached sulphite by Pacific coast mills does a substantial proportion go to export markets. The considerable export sales of bleached sulphite by Pacific coast mills consist principally of rayon grade.

Average net realization at mill per air-dry ton (2,000 pounds) on domestic sales of unbleached and paper grades of bleached sulphite pulp of mills in main producing regions

For purposes of comparison with the foregoing figures of net realization at mill, there are shown below the costs of dried unbleached sulphite pulp at representative producing mills in the Pacific coast region and those of dried bleached sulphite of paper grades in the Pacific coast and Northeastern regions. The sales of the mills for which representative costs are shown constitute the bulk of the domestic sulphite sold in United States markets. It has not been feasible to obtain cost information which could be considered representative for the small quantities of unbleached sulphite sold by Northeastern and Lake and Central mills and of bleached sulphite sold by mills in the Lake and Central region.

It will be seen that in the Northeastern region the representative cost at producing mills of bleached sulphite of paper grades, not including interest, in 1934 was somewhat lower than the net realizations on sales of such pulp by mills in that region. In 1935 the situation for mills of this region was less favorable, but with the marked advance in prices which has taken place in 1936 and 1937 it is probable that the net realizations at mills have increased to levels well above costs. Costs have probably risen to some extent but by no means in the proportion that prices have increased. The costs of dried sulphite,