IRON AND STEEL.

Star (Christchurch), Volume LXVI, Issue 20365, 24 July 1934, Page 9

IRON AND STEEL.

Protest Recorded Against Subsidy Proposal. INDUSTRY IN N.Z. The council of the United Kingdom Manufacturers and New Zealand Representatives’ Association (Inc), after considering the statement that the Unemployment Hoard is subsidising the cost of the investigation of the possibilities of establishing an iron and steel industry at Onakaka, Nelson, passed the following resolution: “This association strongly protests against the use of the unemployment funds in an endeavour to establish an industry which has already been proved to have no economic possibility of success, as evidenced by the Onakaka Iron and Steel Company, Ltd., which, despite generous Government assistance in the way of bounties, eventually went into liquidation with great loss to shareholders, debenture-holders and ordinary creditors, and that the following facts be made public for the benefit of the taxpayers of New Zealand from whose pockets the subsidy has come.” Bounties and Losses. It is on record, says the association, that for the five years to 1930 the total bounty paid by the State was £33,823, and the total losses on trading over the same period (before deducting the bounty) were £62,028. In 1930 the company owed the State £14,350 on loan account and accrued interest, plus £20,836 to the State Coal Department. It is doubtful whether State assistance has ever been carried to greater lengths in the case of any individual concern in the history of the Dominion, and despite this the company is now in liquidation. It is stated that the proposal now is to establish a comprehensive iron and steel industry if the experts report favourably. There are no steel works in the world which cater comprehensively for the requirements of the iron and steel trade, each mill more or less dealing with one or more special product, and it would be economically impossible to start successfully the carrying on of such an industry in this Dominion, where the market is, comparatively speaking, extremely limited. The report of the Tariff Commission states inter alia: “We do not think on the available evidence that the industry can be regarded as reasonably assured of sound opportunities of success. We think that, to enable an iron industry to function satisfactorily it must be capable of continuous operation, and be able to use the by-products commercially. The present consumption of pig-iron in New Zealand is too small to permit of this being done. We do not think that it is in the best interests of New Zealand that a protective duty should be placed on pig-iron.” This association feels that the report of the experts cannot be anything but unfavourable, and while perhaps no objection can be raised to private concerns wasting money on such an enterprise, provided those behind it are in full possession of the facts and do not ask the general public to assist them, strong exception is taken by this association to the use of the unemployment funds for such a purpose, in view of the fate of the previous project, and the evidence that this local industry is not worthy of such extraordinary Government support. HIGH EXCHANGE. Protest from Importers’ Federation. The New Zealand Importers’ Federation is still of the opinion that the artificial level of exchange cannot be maintained for any great period, contending that the increasing London funds will force a readjustment. “ The statement just issued by the Reserve Bank that the existing rate of 25 per cent would stand for a prolonged period is. of course, dictated by the Government.” said the president of the federation. Mr Edwin Salrnond. “ Indeed. Mr Coates has never made any secret of the fact that control of the currency was a matter for the Government. That may be quite correct, but so long as the Government dictates that an artificial exchange rate should operate, so long will importers remain uneasy and trade be dislocated “ There is no doubt that the Government cherishes the fond hope that as a result of the Reserve Bank's statement funds now held in New Zealand by United Kingdom manufacturers will be immediately remitted, and that the tide of importations will swell to such proportions that these two factors in combination will not only absorb present London surplus funds, but will prevent funds piling up there again in the near future. “ Cannot Increase Purchases.” “ Importers fear that such hopes are doomed to disappointment. It mav be that portions of the moneys held here by English companies and firms will gradually return to the United Kingdom, but one has only to glance at the figures giving the details of our exports and imports for the twelve months ending June 30 last to see that even if all moneys due for importations had been remitted to England there would still be very large London balances on which a loss of 25 per cent will have to be shouldered by the Government. and so far as future importations are concerned the members of our federation are emphatic that they cannot increase their purchases to any material extent so long as the artificial rate of 25 per cent remains in existence.

“ It may be taken for granted, therefore, that funds will continue to pile up in London, and the time must come when the force of circumstances will take control and compel a reduction in the rate. The reductions in the Customs tariff which have just taken place will not alter the position. The 25 per cent exchange rate is a supertariff operating against imports, although, judging bv the remarks of the president of the Farmers’ Union on tariff matters, this particular point seems to have escaped his notice. “ Landed Cost Will Increase.”

“ One other feature must be noted, and this affects the general public. Since the exchange rate was artificially raised, many British manufacturers have simply carried the burden of the 25 per cent rate hoping that it would soon be reduced. In the face of the Reserve Bank’s statement, no doubt these concerns will now decide that it will be necessary for the market to absorb this charge. This means that the landed cost of a great many articles in everyday use will be increased.

The importer, in turn, will be forced to increase his prices to his customers, who will, of course, duly pass them on to the public, which will now be called upon to bear the full burden of this subsidy to the farmers.” “ Manufacturers are Naturally pleased to have the position regarding exchange definitely stabilised,said Mr A. E. Mander, secretary of the New Zealand Manufacturers’ Federation. “ The chief difficulty during the last year has been the uncertainty about the future exchange. Certainty was the chief thing wanted—now we have it.” No Return to Parity?

“ Although the Reserve Bank states that the rate will be stabilised for a long period. yet the announcement lacks any indication that the New Zealand pound will return to parity with sterling within a reasonable period,” said the chairman of the Wellington Chamber of Commerce, Mr D. J. M’Gowan. “ British industrialists, as an outcome of the Ottawa Agreement, and its concessions for the entry of New Zealand goods into Britain, have expressed many hopes for greater facilities for increased sales to New Zealand. While the recent concessions in the Customs tariff will be appreciated by I these British industrialists, I have gained the impression that many have been looking for greater concessions comparable with the very generous treatment which Britain accords importations from New Zealand. “ I am still of opinion that the artificial exchange position will leave a feeling of continued uncertainty in the minds of the business community, and the heavy costs involved will still fall on the shoulders of New Zealand taxpayers.” |