THE TIMBER INDUSTRY

Waikato Times, Volume 94, Issue 14768, 6 October 1921, Page 7

THE TIMBER INDUSTRY

BOARD OF TRADE REVIEW. A review of sawmillers, costs ana prices and the conditions of the New Zealand timber trade, prepared by the "hairman of the Board of Trade, Mr W. G. McDonald, has been submitted to the Minister of Industries and Commerce, the Hon. E. P. Lee. The report states that since August, 1018, the Board of Trade, in addition to enforcing restrictive measures in regard to export, has also exercised a control of the prices of timber. The board has refused its approval to any increase unless it could be justified by reliable cost data. The guiding factor in price fixation has been cost of production. The board has made an investigation into the industry in regard to the production costs, selling prices, and margins of profit. Owing to the varying conditions, a relation of profits to the capital outlay is not a true indication of results or a fair basis of comparison. An effort has been made to reduce the cost, and the return to the basis of 100 superficial feet of output. There are approximately 3. r io mills operating in file Dominion. Several representative mills have, been selected, and information collected that satisfied the board that increased cost had been concurrent with increased prices. One of the most important items which millers include in ihc cost of'production is the royalty charge payable on the standing timber, and in respect to this item of cost remarkable variations and found —e.g., from 3d to ids per lOUtt., according to the nature oi the bush and timber. Some of the older-established mills arc now cutting bush which was acquired many years ago at comparatively low prices. In many cases the royalty was adjusted on a basis of values ruling, say, 20 years ago. These mills have a decided advantage over mills which have acquired rishts in recent years. The life of a mill is also an important matter in its relation to depreciation charges, but here complications arise when it is realised that the "life" of a milling proposition is in many cases indefinite. The wiaciy-varyuig nature of the class of timber milled and the varying costs in the matter of transport to the market make it' impossible to present anything in the nature of an average Dominion cost. Variation in Freight.

The variation in freight charges, says ihe report,, influences largely the millers' actual return. This is demonstrated by the following instance: —Actual cost of a particular grade of timber in Wellington is 23s 2d per 100 ft. From the West Coast this includes freisht charscs of 7s 2d, leaving a net r.o.b. return or 16s per 100 ft., as eompnrcd with a net price on trucks at Ohakune of 18s fid, with railage only /is fid. As the result of the investigations, the board is satisfied that enly a reasonable profit has been made generally; but those mills that are working on rights acquired on advantageous terms years ago are earning fairly lucrative profits as compared with the mills working under current royalty conditions.

The present restriction on sales, due primarily to the stringency of finance, says Mr McDonald, is in itself adding to the cost of production. In many of the smaller mills it was customary lo effect delivery straight off the saw, but now the miller is put to the expense of stripping and stacking his timber and financing the stocks held. The timber industry is one that is subject to the law of diminishing returns. Eacli year's cutting necessitates an extension of the tram lines to the more remote parts of the bnsn. and thus involves heavier handling charges. The increase, in the value of timber has given utility to much timber that has hitherto been discarded as being considered unfit or 100 small for milling purposes. There has thus been an accretion to the timber resources of the Dominion; but although there has resulted an increase in the quantity of millable timber, there is an increase in the percentage of waste on this class of timber, and consequently an increase in the cost of production of useful timber. Permanent Reduction Improbable.

The report concludes: —"Allhough. as n temporary phase, the -present financial stringency may compel certain firms, not, financially sound, 1o realise on their stocks at a sacrifice, it is evident that, until there is a reduction in the cost of production, no permanent decrease in timber prices can he expected. As a counteracting influence to the persistent effect of the law of diminishing returns, thereby attempting to prevent prices from poiiiK still tiicrher, and with a. view to die conserving of our limber supply by the elimination of waste, the board is going ir.to the question of improving and standardising the system of costins with the object of improving Die efficiency of Hie mill organisation sener.illy, and it is also urging on millers the adoption of n uniform system nf measurement with the idea of establishing standards that will tend toward a reduction of the loss of cutting. The price of timber is nppronrhins' what may be termed Hie marginal utility point: hence it, Is imperative, in Die interests of the millers, of the industry generally, and the consumers, th.it no effort, should be spared to increase tiie efficiency in production, and thereby bring about a lowering of the cost."