STEEL WORKS

Evening Post, Volume CXXIV, Issue 90, 13 October 1937, Page 10

STEEL WORKS

THE COST FACTOR

NEW ZEALAND PROPOSAL

(To the Editor.) Sir,—The investigation at present being conducted by the Government into the advisability of establishing steel in New Zealand should be followed with great interest by all sections of the community, for are we not living in a steel age?

There are splendid deposits of iron ore available, but whether steel can be produced' in so small a country as New Zealand on an economic basis opens up a very wide field for investigation. It seems to be a question of population. If you haven't the population, you have not the demand. A leading English authority on this subject has said that, without such aids as a production bonus or a high tariff, it was not an economic proposition to establish a steel works unless an annual production of 400,000 tons was assured, but the Brassert Report, which we assume the investigating ex : perts are taking as a basis, postulates an annual tonnage of 120,000 tons. Incidentally, to obtain this tonnage a plate mill would be necessary and two separate establishments, one for making tubes and the other for manufacturing wire, none of which is included in the original estimate of approximately £3,000,000. Taking the figures of 1936—it was a good year for imports—we find that New Zealand imported in pig-iron, steel billets, iron and steel sections, bar iron and steel, galvanised and black sheets, barbed and fencing wire, hoop steel and tubes and fittings, approximately 120,000 tons—the steel for which the Broken Hill Proprietary Company could turn out in less than three months. In passing, may it be here pointed out that for the bulk of its steel supplies New Zealand buys from Australia, and the position at the moment is that New Zealand, in common with Australia, enjoys the cheapest steel prices in the world.

The Brassert Report presupposes a Government contribution to the cost of erecting the works of £87,500, plus a bonus of 35s per ton on pig iron and 15s per ton on steel for the first two years. With the cheap prices ruling for Australian steel, can we produce steel in New Zealand, taking into consideration the Government's, estimated share of the cost, cheaper? If we cannot, then we should consider well before we hang a steel mill round our necks.

The estimated cost of the steel works proposed in 1935 was £2,993,000, but since then prices have advanced and labour costs very much so, therefore the cost now would be nearer £4,000,000, and, as pointed out, such a figure does not include a plate mill, wire, and tube works. Nor does it include the cost of ships necessary. Certain manufacturing costs—-estimates, of course—have been arrived at, costs which are ridiculously low by the way. but even these costs are contingent on the securing l of a number of vessels to transport the ore and coal.; Buying or chartering ships today is rather an expensive business, and the cost of these vessels would, as before said, be required to be added to the estimated capital costs. A further point is that much of the labour involved would have to be brought from oversesa. You cannot turn a labourer into a steel #orker in five minutes. In, the early stages, the native-born labourer without steel works experience would be only a fetch-and-carry man. Even with skilled operatives; steel works in their initial adventures into production have their troubles. That was speedily found out when they put in a sheet mill at Port Kembla. Of course, the present investigation must deal with estimated capital costs, working expenses, and output, but it might be as well to take a wider point of view than a mere mass of figures will inspire. As I have already said, we have at the moment cheaper prices for steel than most countries. Australia has taken the New Zealand market for steel from Great Britain to a very large extent, is splendidly equipped to hold it. and will not let it go without a struggle. With a plant second to none, inexhaustive supplies of cheap but good content ore, cheap coal, its own fleet of ships to transport-both the raw material and the finished product, together with a rapidly increasing output, no one can predict with any assurance what prices Australia can get down to in the face of competition. How can we keep her out? An embargo or a high tariff or a Government bonus on production seem to be'the only means at our disposal, and all to support an industry the economic benefits of which may not justify any ofite of these lines of action. The result must mean inevitably higher prices for the New Zealand consumer. For New Zealand's comparatively small requirements, the scheme appears to be too ambitious and uneconomic, for production on a sound basis would entail an exportable surplus. Where is this surplus to be sent? We are too far away from the world's markets, and in any case we could not compete with Australia, whose large output ensures low manufacturing costs. One final point, and that is that the Brassert Report visualises an annual output of 30,000 tons of galvanised and black sheets per annum, but since that report was written there have been big changes in sheet mill practice—changes which threaten to revolutionise the whole industry in countries such as the United States and Great Britain. The cold reduced process is making headway in the United States, and similar plants have been, or are being, erected in Great Britain, which it is expected will very materially reduce works' costs. This cold reduced process requires very heavy capital expenditure and a large output to justify it. It would be quite out of the question to consider its use here, as our tonnage can never justify

it. Before the Government gives Its assent or help to any schemes for establishing steel works in New Zealand, it should seek the advice of'those best qualified to do so. It would be wise to invite a steel maker of repute from either England or the United States to investigate and report, neither of these countries being very much interested in the steel trade of New Zealand, as the bulk of it has gone to Australia.

Sufficient has been said to demonstrate not only the necessity for very close investigation into these proposals, but the necessity for the consumer. Who will have to pay the shot, either as a buyer or a taxpayer, to interest himself in them also. A departmental inquiry is not sufficient. Evidence should be invited from those best qualified to give it, and it is to be hoped that the Government will direct that, if necessary, a Royal Commission be set up so that the whole question can be adequately and thoroughly investigated.—l am, etc., FESTINA LENTE.