1000

THE COLLIERY GUARDIAN.

May 26, 1916.

The Board of Trade has recently
Currency	pointed out as	an argument	for

and Coal	maintaining our	coal exports at	the

Exports.	maximum level,	that coal is prac-
tically as good	as gold for	the

maintenance of British credit abroad. The truth of
this statement is admirably illustrated by the
influence of the war upon international exchanges, a
subject which belongs, it is true, to the region of
high finance, but, nevertheless, is of vital importance
to foreign trade. It is not, perhaps, generally
realised what is the full effect of exchanges upon
prices. An example will make this clear. In Italy
the price of coal is now standing at about six times
the pre-war rate. This high value has been due
mainly to the rise in freight, which may be taken to
account for about 65 per cent, of the increase. An
analysis of the various factors which contribute to
the total price of coal in Italy shows the following
approximate result, according to a recent computa-
tion, which may be accepted for the purposes of our
argument: — Cost of coal in England (gold), 15 per
cent. : freight (gold), 60 per cent. ; exchange, 19 per
cent. ; margin (insurance, etc.), 6 per cent.

This analysis is highly instructive, as showing to
what a large extent the factor of exchange enters into
the price of an imported commodity. In this case,
the cost to Italy of the exchange from Italian* to
British currency is nearly 25 per cent, greater than
the value of the coal itself. If the Italian exchange
with London were at par, instead of being at a
heavy discount, there would be a substantial reduc-
tion in the cost of fuel in that country to-day.

The instability of the international exchanges has
been, perhaps, the chief economic feature of the war.
This is mainly due to the disturbance of trade, and
it is unavoidable so long as different currencies exist
in the markets of the world. The subject has
recently been ably discussed by Mr. Falconer
Larkworthy, in his capacity of chairman of the
Ionian Bank Limited, and his address is especially
worthy of study at the present time, when the
London market is successfully sustaining, at any
rate for the moment, its credit in the world’s markets,
notwithstanding a large adverse trade balance with
the United States. Under an ideal system, says Mr.
Falconer, assuming that the whole civilised world
possessed the same measures of value and weight,
there could be no wide variations in the rates of
exchange. Some day it may be hoped that this idea}
will be realised. In the meantime, the Bank Act of
1844, by fixing the value of gold in London at
£3 17s. lOJd per standard ounce, has gone far
towards the establishment of a universal currency
and providing a fixed market for gold, and has
raised this comparatively useless metal to the dignity
of an international standard of wealth. The only
real use for gold, in fact, so far as the world’s
present requirements are concerned, is to provide a
medium for settling the foreign exchanges repre-
senting the balance of trades between the countries of
the world. It could be equally well done by means
of any commodities, but for reasons of convenience,
and the necessity for a stable and free market.

The depreciation of exchange on London has been
mainly felt by France, Italy and Russia; more par-
ticularly the last named country, where it has reached
the high rate of 67 per cent, discount. The reasons are
obvious. In all of these countries there has been an
adverse trade balance with Great Britain, and only
by the export of gold or commodities can this depre-
ciation be adjusted. Both France and Russia hold
vast gold reserves, and also large supplies of market-
able commodities only temporarily diverted from
their ordinary channels. Probably Russia could
liquidate the whole of her external trading debts by
the shipment of wheat alone when once the means
are available.

In the meantime it seems not impossible that the
Italian exchange could be put upon a better basis by
the adoption of some such expedients as have been
found so useful in Greece. What is known as the
Valaoritis Currency Reform appears to have been
extraordinarily successful in maintaining the Greek
exchange. Its chief features are (1) the separation
of home and foreign exchanges, (2) the provision of
a gold balance representing an equivalent to the

paper circulation, (3) fixing the exchange by law
approximately at par value.

The expedient of fixing exchange by-law has
recently been tried without much visible success by
Germany, and it is noteworthy that, in the Reichstag
debate of the Budget Committee recently, consider-
able concern was expressed at the position which
would exist with regard to the depreciation in value
of the mark after the war ; but there was, never-
theless, an expression of confidence that by a
moderate export of gold, and of such commodities as
potash, there would be a speedy recovery in the
exchange.

The practical bearing of the exchange rate on the
export of coal has been recently seen in the
difficulties experienced by the United States in
regard to the South American coal trade. If the
United States exporter wanted cash for his coal his
only method was the somewhat complicated process
of arranging the transaction through London. South
America bought sterling in London, and this was
transformed into dollars at the current rate of
exchange. Thus two separate exchanges were
necessary in order to perform the single operation of
transforming coal into dollars. A remedy for this
condition of things is not difficult to find by the
establishment of selling agencies to act as inter-
mediaries—to perform, in fact, the same function
that the London free gold, market accomplishes.

We come back to coal as a substitute for gold.
Owing to the absolute necessity of this commodity in
countries such as Italy, Scandinavia, Denmark, &c.,
and the comparative monopoly of supply enjoyed by
Great Britain, this country is able to sell coal for gold
or its exchange equivalent. Depreciation of exchange
is only the economic result of the law of supply and
demand.

Unfortunately American exchange is not directly
affected by British coal exports because none goes to
the United States. At the same time it is the
American exchange that matters most to us at the
present time. The British Government has already
taken steps to stabilise the exchange value of the
dollar, and it is the clear duty of every British holder
of American securities to respond to the invitation of
the Treasury to place these securities under Govern-
ment control, either by sale or by a two-year loan
with certain options. Some holders have apparently
been holding back from this offer owing to a mistaken
notion that they run a risk of losing by the trans-
action. That this view is erroneous is clear from the
terms of the Treasury scheme as modified on May 9.
In the first place, the holder may, if he chooses, sell
his securities to the Treasury at the good prices now
ruling, together with a bonus of 2 J per cent. Or if he
prefers only to loan them he will get his annual dividends
as usual with an extra J per cent added by the Treasury.
If he wishes to sell the securities during the currency
of the loan he can do so. If the Treasury, on the
other hand, wishes to sell them, the lender can buy
them back by providing the equivalent exchange in
dollars for the sterling he receives from the Treasury.
The new Treasury terms are, in fact, so generous
that holders of dollar securities can have not the
slightest hesitation in falling in with the mobilisation
scheme. The maintenance of British exchange in
New York is important to every interest, and upon
our general credit throughout the world’s markets
our whole commercial stability depends.

Mr. R. P. Houston on Freights.—According to an inter-
viewer, Mr. R. P. Houston, M.P., states that he has no
personal interest in coal freights to Italy, as his ships did
not carry coal to that country. He thought that the British
ship owner was neither responsible for these high freights,
nor had he reaped the advantage from them generally
supposed. He added : “ British ship owners are paying for
bunker coal at Mediterranean ports from £5 10s. per ton
at Gibraltar to £7 5s. per ton at Port Said, much of which
coal is carried in neutral vessels. The British ship owner
is therefore more or less on a par with the Italian consumer,
and it is the neutral vessel (free from any Government
requisition or control and enjoying, free of charge, the pro-
tection of the British Navy) which is reaping the golden
harvest. There is not a single British ship afloat which is
not under Government control in one form or another. The
Blue Book charter rate of freight for requisitioned tramp
steamers, payable on the gross registered tonnage of the
ship, works out about 6s. per ton per month on the dead-
weight capacity of the steamer. Neutral tramp steamers,
on the same dead-weight basis, can obtain in the open
market as high as 47s. 6d. to 50s. per ton per month, and
the owners are not subject to heavy taxation like the British
ship owner. I do not altogether blame these Italian critics.
The fault lies largely at the door of our own Government
by reason of the mistaken policy of silence and suppression
of information.”

THE COAL AND IRON TRADES.

Thursday, May 25.

Scotland.—Western District.

COAL.

The coal trade in the west of Scotland continues in a
strong position. All sorts are in heavy demand for local
consumption, and values are still on the increase. Best
ells, splints and navigations are fully absorbed, and the
quantities available for shipment are very limited. Navi-
gations are quoted about 39s. to 41s. per ton. All sizes of
nuts are also fully taken up, and shipping licences for
these are very difficult to obtain. Clearances for the week
amounted to 111,889 tons, compared with 118,628 in the
preceding week and 113,539 tons in the same week last
year.

Prices f.o.b. Glasgow.

■	.	1	Current prices.	L’st week’s' Last year’s	
		prices.	prices.
Steam coal		28/ -33/	28/ -32/	15/ -17/6
Ell 		38/ -41/	35/ -40/	18/ .
Splint		36/ -45/	32/ -42/	18/ -25/
Treble nuts 		21/ —22/ !	21/ —22/	17/6-18/3
Double do		20/6-21/	20/6-21/6	18/ —18/6
Single do		19/3-20/	19/3-20/	17/9-18/

IRON.

Business in the iron trade is still without any special
feature. Pig iron makers are still very busy, the demand
for all qualities being fully maintained. Outputs are
quickly absorbed, and stocks have been drawn on in order
to meet requirements. The export trade is, of course,
greatly curtailed owing to Government restrictions. Ship-
ments for the year to date amount to 42,149 tons, a decrease
of 24,374 tons compared with the same period in 1915. The
prices of makers’ iron are unchanged, and are quoted as
follow:—Monkland, f.a.s. at Glasgow, No. 1, 125s., No. 3,
120s.; Govan, No. 1, 122s. 6d., No. 3, 120s.; Carnbroe, No. 1,
125s., No. 3, 120s.; Clyde, Summerlee, Calder and Langloan,
Nos. 1, 130s., Nos. 3, 125s.; Gartsherrie, No. 1, 131s. 6d.,
No. 3, 126s. 6d.; Glengarnock, at Ardrossan, No. 1, 130s.,
No. 3, 125s.; Eglinton, at Ardrossan or Troon, No. 1,
126s. 6d., No. 3, 121s. 6d.; Dalmellington, at Ayr, No. 1,
126s. 6d., No. 3, 121s. 6d.; Shotts and Carron, at Leith,
Nos. 1, 130s., Nos. 3, 125s. per ton. The ^'arrant market
has again been practically dead idle throughout the past
week. Buyers have again been in the market at 90s. per
ton, but holders have not shown the least inclination to
transact business even at that figure. Stocks are gradually
decreasing, and now amount to 34,966 tons compared with
116,098 tons at the end of 1915. In the manufactured iron
trade malleable iron makers are especially busy. A great
demand exists for both iron and mild steel bars, and makers
can book all the business they want, and at their own
prices. Crown iron bars are quoted <£14 per ton f.o.t. at
works for home delivery, and the same price f.o.b. Glasgow
for export. This quotation has, however, been exceeded on
several occasions. There are plenty of enquiries for material
for shipment, and business is limited only by Government
licences.

Scotland.—Eastern District.

COAL.

The collieries in the Lothians district report heavy
bookings to the end of June. Outputs of all sorts are easily
disposed of, and values show a tendency to rise still further.
Shipments amounted to 42,262 tons, against 39,525 in the
preceding week, and 38,631 tons in the corresponding week
of last year.

Prices f.o.b. Leith.

	Current	L’st week’s	Last year’s
	prices.	prices.	prices.
Best screened steam coal...	42/ -45/	39/ -40/	18/6-19/
Secondary qualities		40/	38/ -39/	17/6-18/3
Treble nuts 		25/ -26/	23/ -24/6	18/ -19/
Double do		23/ -24/	22/ -23/	17/6-18/
Single do		22/ -22/9	20/ -21/	16/6-17/

Business in Fifeshire is very steady and, as in the
Lothians, the collieries are fully booked for weeks ahead*
Tonnage is plentiful, and outputs, both of round and
small coal, are easily absorbed. Shipments amounted to
61,549 tons, compared with 53,316 in the preceding week
and 74,005 tons in the same week last year.

Prices f.o.b. Methil or Burntisland.

	Current	L’st week’s Lastyear’s	
Best screened navigation	prices.	prices.	prices.
coal			46/ -50/	40/ -45/	24/ -25/
Unscreened do		36/ -40/	35/ -40/	22/ -23/
First-class steam coal		42/6-45/	40/ -42/6	19/9-22/
Third-class do		37/6-40/	32/ -38/	16/ -17/
Treble nuts 		24/ -26/	23/6-24/6	17/6-18/6
Double do		22/ -23/	22/6-23/6	17/ -17/6
Single do		21/ -22/	19/6-21/	17/ -17/6

The aggregate shipments from Scottish ports during the
past week amounted to 215,700 tons, compared with 211,469
in the preceding week and 226,175 tons in the corre-
sponding week of last year.