Where Do Our Paper Profits Go?
NO. III IN THE SERIES "CANADA REVISITED”
AGNES C. LAUT
Above: Sulphur Tanks above Abitibi Paper Mills. Centre: A winter’s supply of pulpwood. From 200,000 to 300,000 cords are obtained in advance, in case of fire. Miss Laut can be seen in foreground. Below: Boarding house and hotel accommodation is supplied the paper workers, at Iroquois This Falls. is an ideal town-site in the wilderness. The cost to the worker is $40 a month.
THE paper and pulp industry of Canada is the red-hot end of a poker just now. I don’t happen to have gloves on. I may offend by the facts set down; so get a chip on each shoulder. In fact, get several; for everybody is mad and hot about the cost of paper.
First, the newspapers in medium-sized cities and small towns are mad because they are paying prices of 16 to 18 cents a pound; where they used to pay 1 and 2 cents. Next, the big metropolitan papers are mad because, even on long time contracts, they are paying 5 to G and 10 cents where they used to pay 1 and 2 cents. Then the magazines are maddest of all because they are almost where they can’t be sure of a supply at all, even at prices advanced 300 per cent. The book people are swearing and the book buyers are sweltering because books that used to cost retail $1.35, now cost $1.75, and if the price goes higher it will affect the sale of books. It is now affecting the sale of books. Only a book that is a sure seller, or a deadly steady and safe seller, has a chance of being published.
Then, the paper manufacturers of Canada are mad because they are being accused of "gouging” profits, whereas—with the exception of one small mill in Canada—the Canadian mills are not getting one half, in some cases one third, the prices being charged the American buyer; and when Germany gets back in the game full swing she may capture the American trade by cutting these exorbitant, “robber” prices.
And lastly, Labor is mad because though paper manufacturers' wages have gone up three hundred per cent, since 1914, if the profits are proportionate to the “robber” prices charged, Labor thinks it should have a larger share of those profits.
And because of those “robber” prices being laid at Canada’s door for her policy of preferring to have paper out of her timber limits manufactured in Canadian mills instead of in American mills, an American senator actually proposed laying an embargo on anthracite coal shipped to, and needed in,
Canada. If the American senator had probed a little deeper, he would have found the ring of gougers is not on the Canadian side of the boundary, but on the American side.
Here is how the impasse has come about.
Oodles of Prosperity
VEN if there had been no War, with the incréased demands for paper and the decreased areas of timber available for pulp in the United States, there would have been a shortage of paper supplies and an advance of prices; but when the war cut off supplies from Germany and Sweden, the shortage became a famine, and prices began vaulting.
The war cut German supplies off from the United States. The war cut off the supply of paper workers. It increased
paper two hundred and three hundred per cent. This machinery came chiefly from Germany. But the war did more than that. It brought oodles of prosperity to the United States. Papers multiplied in numbers and in size. So did trade magazines. So did trade requirements for wrappers, for cardboard boxes, for packing, for tissue paper, for wall paper and beaver boarding. The demands multiplied many hundred fold. Then when excess war taxes were clapped on in the United States, to escape such taxes, many trades began campaigns of heavy advertising in dailies, in bill and posters, in mails—all of which swelled the demand for paper.
Suddenly the United States awakened to the fact that in ten years it would not have a stick of pulp timber left east of the Rocky Mountains. Either it must buy its paper from Canada, or go to the expense of moving its paper plants west to the Rocky Mountain forest reserves; and the latter alternative meant heavy expense of money installing equipment and heavy freights to the East.
Now, certain people have a sort of sixth sense for sensing what is happening under the surface in trade.
I don’t know that we should blame them for it rather than ourselves, who failed to see ahead; but certain rings of importers in Chicago—Dayton in the West, and New York in the East, “sensed” what was coming and got busy.
Here were Canadian plants stalled by the war. Here were American plants in 1915 hit by the panic and afraid they would not be able to sell their output. To shut
down meant dead loss, inability to meet interest on accruing bonds, dispersion of staffs of highly trained expert workers. And here were these rings of brokers getting secretly and quietly very busy. They jumped into an arena of uncertainty with the nonchalance of gamblers taking risks and going it blind. Blind? No, but with eyes that bored through the stone wall of the future. They went to American paper mills, who were afraid they could not sell their output, and tied all they could up in long time contracts for certain deliveries at certain figures over a term of years. They also went to certain newspaper and magazine publishers and tied up on long time contracts at a profit over what they had contracted at the mills. The two types of contracts gave them collateral security at the banks to extend their brokerage operations. Many publishers refused to tie up, expecting paper to drop after the war. They have been kicking themselves since, and they are the people whom the brokers are forcing to pay “through the nose” now on short time contracts at prices which are advancing every three months.
How the Brokers Got the Coin '"pHEN the brokers came up to Canada. Many of A the Canadian mills had long time contracts with big American dailies. Those who hadn’t, or those who had a surplus over their long time contracts, tied up at prevailing figures. They, too, have been kicking themselves since; for when the squeeze came and prices began to
soar, they were still delivering at the old price; which was not half, in some cases, not a third, what the brokers
were charging for what they resold at no cost to themselves but the pen stroke. I know some mills in Canada that are selling paper at $90 to $110 f.o.b. Quebec and Ontario points, freight to American points runs $5 to $11 a ton; and that paper is being resold at American points at $220 long contracts, $360 short contracts; the poor beggars buying on short contracts being so near bankruptcy they can’t finance more than small quantities at a time.
Of course, when the Canadian mills saw how the wind was blowing, they rushed to install more machinery and increase their output; but here they came up against a real stall. The machinery came from Germany; and it cost 300 per cent, higher than formerly, and, in many cases, could not be bought at all. They could only buy options on the machinery when it could be delivered and the delay in the Peace Treaty still tied up German shipping.
During the war, a great many buyers of timber limits could not find money to pay the balances they owed on pulp limits bought years ago outright. Simultaneously, these limits owned in fee simple, which had probably changed hands a dozen times during the war, began to be mysteriously acquired by unseen hands. Canada’s paper company shares began to soar. They soared because of the threatened famine in paper, because of the high prices paid for paper, and because these same brokers were buying shares in Canadian companies on the open market.
While I am on the subject of prices I may add while I was in the paper sections of Ontario, Quebec and BritishColumbia, the prices being paid Canadians f.o.b. ran from $90 to $110 for newsprint, $65 to $60 for sulphite, $58 for ground wood. The prices being charged the American consumer ran from twice to three times these figures.
Fix the blame for “profiteering” where you like. The gouging has not been done by Canadians.
Get several other points clear on which there is great misunderstanding!
On lands owned in fee simple, whether in Quebec, Ontario, British Columbia, New Brunswick, there is no stumpage or royalty charge. Nor are there any restrictions as to export of unmanufactured pulp woods. It is only on crown lands leased, stumpage and royalty charges are made, and one province insists the paper shall be manufactured in Canada and not the raw wood exported to build up American mills. So that disposes of the charge that Canada is “holding up” American consumers for all the traffic will carry. If American mills want to buy raw wood — of which more than 300,000 cords
went from one small section of Ontario to points in New York last year—all they have to do is buy from Canadian settlers, who own the land, or buy lands owned in fee simple.
The Resources We Still Have
AS THE policy of the Canadian provinces is to-day only to lease pulpwood areas, are such areas owned in fee simple available? Yes—in millions of acres, in hundreds of millions of acres in British Columbia. In Ontario and Quebec, the answer must be qualified.
Lands owned in fee simple there are, but they -can no longer be picked up at a song, at 50 cents to $2.50 an acre as they were once bought. The owner sells them for what he can get, the most he can get. Lands close to cheap water power and water or rail transportation are mostly already taken. Also water power close to good pulp limits is mostly taken. There is abundant pulp wood back over the hinterland towards James Bay. Also there is abundant water power; but there is no railroad yet. That is buying the future; and does not lessen the paper famine of the present.
Whereas when you consider British Columbia, the conditions are still pristine. There is abundant land to be bought in fee simple at from $2.50 to $20 an acre. There is abundant timber to be leased on stumpage royalty basis of $1.25 to $2 an acre lease and royalty $1.10 per thousand, and water power to waste in ten thousand canyons of silent forest untrodden by foot of man—all within
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Where Do Our Paper Profits Go?
Continued from page 18
a stone’s throw of either rail or water transportation. I can conceive of no better site for pulp mills than Prince George, or Prince Rupert where I sit penning this article. British Columbia has to-day only four big paper companies and six paper mills. It could feed the output of twenty to the prairie provinces alone, or to the Northwestern States; and the rail haul on this output alone would pay Canada’s rail deficits.
While I am on the question of figures, I may add while the average yield of paper wood in Ontario and Quebec may run as high as 40 cords, it averages 6 to 8 an acre. In British Columbia, 40 cords an acre is a small yield. Operators don’t need to be told a big yield on a close-in area is more profitable than sparse yield over wide area. Where the paper mills can handle their wood close to their mills in Ontario and Quebec, it costs them only $7 to $10 a cord. Where they have to skid and drive on rivers and haul through woods, it costs them $20 a cord. The figures given both East and West on manufacturing are fairly uniform.
1 cord—1,600 to 1,700 pounds of paper.
1 cord—2 tons of ground wood,
1 cord—1 ton of sulphite pulp.
In British Columbia, 1,000 board feet— 1,400 pounds of pulp.
Logs at the pulp plant cost in 1920 $18 per M. Paper was selling at $100 to $110 a ton. Cost of manufacture ran at $14 to $18; but to this must be added the cost of installing the dam, the water power machinery, the building of housing facilities in remote wildernesses, which in all seldom ran less than $7,000,000, and often ran up to $14,000,000.
I have those figures from the foresters of both British Columbia and Ontario, also from the books of two large paper companies East and West.
I have also two very interesting circles:
First, for $100 of paper sold f.o.b. in Canada:
You can work these circles out finer, into scales of wages and freights if you want to.
Scales of wages I set down exactly as one mill’s pay sheet lies before me:
Common unskilled labor—1914,15 cents an hour; 1916—17 cents; 1920, 54 cents.
Skilled labor—1914, 30 cents an hour; 1916, 75 cents; 1920, $1.70.
River drivers—1914, $25 a month and board; 1920, $150 a month and board.
AÍ machinist—1916, 35 cents; 1920 91 cents an hour.
Paper room—1916, 57 cents; 1920, $360 a month.
Steam plant—1914, 17H cents an hour; 1916, 54 cents; 1920, 84 cents.
Labourers’ and Professors’ Wages
THINK this scale holds good as typical
all over Canada. If the brokers and paper mills have gained increased profits, so have the workers in proportion.
And the labor problem is a peculiarly difficult one for the paper mills. All labor is scarce. Trained skilled paper labor is peculiarly scarce; and the average age of all the paper workers in Canada to-day is twenty-nine years. Please look at the scale of wages. It is higher than for a university professor. It is higher than the salaries paid governors in New Mexico and Arizona. Bosses get $5,000 to $8,000 a year. That is higher than the salaries of provincial cabinet ministers and as high as the former salaries of federal cabinet ministers. (Sir Thomas White recently left the Finance pilot wheel in Ottawa for a better job in a private corporation). Will Sir Henry Drayton and Premier Meighen please forget this scale of wages; or tne first thing we know, they will be jumping their jobs to become paper makers though a mean-eyed cross-bencher in the Opposition might say that our present system of currency—but I won’t put the idea in the cross-bencher’s head. Making paper is more remunerative than making currency just now. Y ou can go on strike to raise wages; you can’t to raise taxes; and I am afraid to write what I am later going to write about track workers and coal miners for fear Mackenzie King and Premier Meighen and Sir Henry Drayton all forsake the benches in Ottawa to stoke coal out of sight underground; and what would we do if we had neither Government nor Opposition to kick at when elections come round? We have to have something to kick when the taxes and deficits come round. Let us keep ’em on the job so we can kick ’em! That is what makes public service such a privilege in a democracy. That is why we keep our good men on the job—as the Chinaman said about prophecies—“ Velly—mebby. ’ ’ Labor is a difficult thing in the paper industry.
It must be highly trained and highly skilled.
It must be young and husky, whereas at a pinch we do use fogies for government benches. Men past forty can’t stand the wet rooms. I doubt if men under forty have the tough hide to stand political “slams.”
Then pulp wood limits must necessarily be set down in remote wildernesses at the Back of Beyond. To keep labor contented there, you must build homes, create cities, put in such improvements as water works, telephones, schools, good hotels, amusement halls, hospitals—which can never in all time pay for themselves and cannot be charged as overhead. Yet they have to go into capitalization. You can hardly touch a paper project under outlay of seven millions. You may have to spend fourteen millions; and you may need thirty millions. You can’t just go to the bank and get this for the asking. You have to have security. What is your security? Large limits—an assured future; or no bank will touch your project with a long range pole.
We must treat our paper manufacturers generously as to limits if we are to get more paper mills; and we must treat our labor generously if we are to get more labor; and we must treat our investors in paper company stocks generously as to profits if we are to get the public to advance money for more mills; but if all three factors to success begin scrapping for the lion’s share in the hog trough, we shall simply “bust” the promise and possibility
of the biggest chance Canada has to capture an enormous and enormously profitable trade.
What are the possibilities of gain to unified effort in the paper industry?
We Should Quintuple our Shipments AA^E ARE shipping yearly a beggarly
’ “ eighty to one hundred million dollars of paper and pulp to .the United States to-day. We ought to be shipping more than four hundred million dollars, and that yearly shipment would represent billions of capital invested. Altogether the money invested in Canadian lumber industries at time of writing is between two hundred and ninety and three hundred million dollars plus. It ought to be billions.
The United States uses yearly two million tons of newsprint. Canada supplies only a fourth of that. She ought to supply three-quarters of it.
But newsprint is not a fifth of the paper requirements of the United States. There is the magazine trade. There is the book paper. There is the box paper. There is wrapper. There is poster. (I know a paper mill in Wisconsin that has grown rich supplying only one patent medicine firm with bill posters and advertisement wrappers for their canned and boxed frauds.) Do you see where Canada might get off if she jumped in this paper game for all there is in it, without any hog share going to the gougers’ ring of brokers, whom I do not blame? I blame our own parochial slowness and—shall I add?—our own stupidity.
In the old school books, they always used to tack a moral on to the end of the story. There is no moral tacked to the end of this story; for the moral runs all through it; and if I set it down, you would skip it.
Hunt for it.
As the real estate moralist would say— “There’s millions in it!”