T H E JOURNAL OF INDU8TRIAL A N D ENGINEERING CHEMISTRY
542
Vol. 14, No. 6
Can We Afford to-Make Potash in America?’ By R. Norris Shreve 43 FIFTHAvB., NEW YORK,N. Y.
In the last few years we have devoted a great deal of time, effort, and money to the development of an American potash industry, and we have marshaled many facts in support of the establishment on a permanent basis of this industry so essential to the safeguarding of the productivity of our farm lands. Is it not now an opportune time to pause and ask ourselves the broad question-“Can we afford to make potash in America?” This question is an especially timely one in view of the position taken by the domestic potash industry that temporary tariff protection is necessary to carry the industry over its development stage and until it has worked up its by-products, and has cheapened the cost of production. As a basis for this argument, reference is made to Table I, giving statistics and prices pertaining to the potash industry. No differentiation is made between potassium salts used in the chemical industry and in fertilizers. However, the fertilizers consume about 90 per cent of the country’s total. The prices in this table refer to those that were paid chiefly by the fertilizer industry. The prices charged for potassium salts which are used chemically are based on these fertilizer prices, enhanced by the cost of purification or conversion, as the case may be. TABLR I
Tonnage Manufac- Value of Tonnage of Tonnage tured DomesActual Manuand Sold tic Sales Potash factured Imported in IJ. S. in U. S. per Ton YEARShort Tons Short Tons Short Tons Kz0
0
1910 1911 1912 1913 1914 1915 1916 1917 1918 1919 1920 1921
279,780 274,446 253,678 270,720 207,089 48,867 7,885 8,100 7,957 39,619 224,792 73,887
.... .... .... .... ....
1,090 9,720 32,673 54,803 32,474 48,077 9,000
.... .... .... .... ....
1,090 9,720 32,573 38,580 45,728 41,444 ?
... ... ... ...
iii
437 429 411 231 180
...
German Muriate Potash Net Syndicate Contract Price c.i.f. Atlantic Ports Basis 80 Per cent Dollars
Spot Ton Prices Muriate of Potash Basis 80 Per cent Dollars 32.98 About 38 About 38
{ E:E
32 34 38.06-38.55 32:34 38.55-38.65 33.21 39.07-39.57 . . . 39.57-356 ... 475290 450-325 345-260 260- 85 300- 85 32: 00 32.00 85- 35
.... ..
Farmers’ cash price for muriate of potash, basis 80 per cent, bagged and tagged in ton lots, f. 0.b. Atlantic ports, was $37.50 in the early part of 1914, and $39 in 1921. The Schmidtmann price for muriate of potash, basis 80 per cent, C. i. f. Atlantic ports, was $20.40;this was on contract t o the large users in 1910.
The table indicates a total annual consumption in the years preceding the Great War bf around 250,000 tons of actual potash, under the stimulus of a very active potash propaganda on the part of the German Potash Syndicate. An annual consumption of 200,000 to 225,000 tons of actual potash will probably satisfy all the country’s pressing demands for some time to come. We may interject here an explanation of what is understood by “actual potash” and by “a unit of potash.” Actual potash refers to potassium oxide or KzO. It was adopted as the only means of designating the value of the potassium salts, varying as they do all the way from 12 per cent actual potash or KzO, in the form of kainite, to 60 per cent actual potash or KzO. as in 95 per cent muriate of potash (potassium chloride). When sold to the fertilizer trade these salts are always based on a stated percentage of actual potash or KzO. As a rule, for the fertilizer industry it is only the actual potash content that determines the usefulness of these potassium salts. However, certain salts are better for 1 Received March 31,1922. Presented before the Division of Industrial and Engineering Chemistry a t the 63rd Meeting of the American Chemical Society, Birmingham, Ala., April 3 to 7, 1922.
certain crops than others; for example, potassium sulfate works better on tobacco than potassium chloride because any chloride lowers the quality of this crop. It has become customary to state the composition of fertilizer mixtures as containing so many units of ammonia, phosphoric acid (as Pz06),and potash (as K20). In each case a unit stands for 20 Ibs. of the constituent, and equals 1 per cent on basis of a ton of 2000 lbs. Hence, a ton of 2 : 8:4 fertilizer contains 2 units or 40 lbs. of ammonia, 8 units or 160 lbs. of phosphoric acid (asPpOs), and 4 units or 80 lbs. of actual potash (as K20).
PROPOSED TARIFF LEGISLATION The duty in the tariff bill, passed by the House of Representatives, imposed the following specific duties on crude potassium salts imported into the United States, said duties being based on the weights of actual potash in these salts. Dating from Passage of Tariff Bill First year Second year Third year Fourth year Fifth year Thereafter
R a t e per Lb. of Actual Potash Cents
Rate per Ton of Actual Potash Dollars
2.5 2.5 2 1.5 1
50 50 40 30 20
Free
Free
The average rate for the 5-yr. period is $38 per ton of actual potash. A unique feature of this proposed protection is that the industry feels that after five years it will have so developed its processes and by-products and so cheapened its manufacturing methods that it can compete on a free basis with the world. All facts point to this decrease in cost. For example, one large company experienced the following cost ratio: Assuming t h a t during the first four months of 1919 their cost was 100 then during the first four months of 1920 their cost was 58.3 and during the first four months of 1921 their cost was 32.6
Furthermore the average cost per unit of potash (20 lbs. of actual potash or KsO) for a number of operating plants was $4.24 in 1918-1919, while in 1920 this had been reduced to $2.04, with the sure prospect of reducing this figure to around $0.70 or lower, if the opportunity for operation and further development is given again. By an inspection of Table I, it can be seen that the‘1921 production was only 9000 tons of actual potash, for the reason that practically all of the domestic plants were shut down. Costs cannot be cheapened under these conditions.
THEDEBIT S I D E OF
THE POTASH SITUATION
To answer our question “Can we afford to make potash in America?” let us draw up a balance sheet with debits and credits as an accountant does. In the first place what have we on the debit side, or what is it going to cost us to establish this industry here? The almost unanimous opinion is that the cost will be measured by the tariff protection as given in the House tariff bill. As has already been said, this bill grants an average protection of $38 per ton of actual potash for five years. It is certain that this will not increase the present prices by the full $38, for the Germans can and undoubtedly will sell lower to get their share of the business. Assume that they rut their present prices $10 to $15 per ton of actual potash, we shall then get an increase of $25 per ton of actual potash. The increase mill apply to both domestic and imported potash, and for an annual consumption of 200,000 tons of actual potash, there will be an annual charge of $5,000,000, which will go on for five years.
June, 1922
THE JOURNAL OF INDUSTRIAL A N D ENGINEERING CHEMISTRY THE CREDITSIDE
This is the only item on the debit side that the writer has been able to find. Turning now to the credit side, what have we to balance against this annual charge of $5,000,000? First, we shall save taxes by the amount of tariff paid. The best estimates are that under this tariff our domestic plants will produce annually 100,000 tons of actual potash, leaving 100,000 tons to be imported. The domestic plants did produce 54,000 tons of actual potash in 1918, and have a capacity to produce the 100,000 tons and will do so when economic conditions warrant. The tariff paid per annum on 100,000 tons at $38 per ton will equal $13,800,000; this is our first credit item. Without this, the country will have to pay this sum in taxes levied in some other way. According to the latest statistics, the capital invested in potash plants in America was $28,696,143.2 This value is a conservative one. If the American potash industry receives this temporary tariff protection, most of this capita! will prove a good investment. Our next credits are interest and capital write-off (or depreciation) on this investment. The interest at 6 per cent amounts to $1,700,000, and the capital write-off (or depreciation) a t 5 per cent amounts to $1,400,000 annually. While we are considering the item of capital, attention may be called to the fact that some $30,000,000 invested in America. can produce 100,000 tons of actual potash, while Germany has an investment of $380,000,000 to produce 1,100,000 tons of actual potash. This rate is slightly more than the American. If the American potash industry is firmly established, it will give employment directly to about 3000 men and be the means of livelihood for some 12,000 men, women, and children. At an average of $20 per week, there will be paid to Americans over $3,000,000 annually in wages. I n these days of unemployment, this feature is an important one, especially from an economic viewpoint. Writing of prices of fertilizer constituents in the “Report on the Fertilizer Industry,” the Federal Trade Commission states that the wholesale prices of nitrogen compounds and phosphates are due to natural conditions of supply and demand, while “the wholesale prices of potash salts, on the other hand, are governed by monopoly conditions.” Why do we pass laws to prevent monopoly within our own domain, and yet not even discourage a foreign monopoly? Furthermore, what treatment can we expect of this monopoly? We do not need to turn back many years to find an example of the actions of this “potash monopoly.” I n 1909 the Schmidtmam interests in Germany, on the occasion of a temporary break-up in the Potash Syndicate, made contracts with American consumers to sell them what amounted to 90 per cent of America’s total requirements at a price reduction of from 25 to 38 per cent from what the “Potash Monopoly” had charged. These Schmidtmann contracts resulted in a saving to Americans of around $3,000,000 annually. The “Potash Monopoly,” however, persuaded its partner, the German government, to pass the potash law of May 25, 1910, w,hich acted to invalidate the Schmidtmann contracts, and to force the Schmidtmann mines into the Syndicate. Such is the policy of the “Potash Monopoly!” When we did make a good buy, the German government invalidated it. We must remember this in considering the potash situation. By establishing our American potash industry, we shall prevent any such happening. Judging by the past the only way that Americans can eventually secure cheap potash is by domestic competition with the potash monopoly. We are temporarily getting German potash as cheaply as we did before the war, but we must not forget that depreciated currency will not always prevail, and that it is costing more to produce potash in Europe now than it 2 Hearings before Committee on Finance, U. S. Senate, December 30, 1821,4698.
543
did before the war. These enhanced costs will be noticeable when the foreign exchange rights itself. Many by-products from our potash industry will be developed if this industry is established here, and they will eventually cheapen the production to a marked degree. We have heard of borax, salt, sodium carbonate, sodium sulfate, and the like from the potash brines of the West. We have also in mind alumina as well as potassium salts from potash minerals, and even building bricks and agricultural lime, as such by-products. In certain industries, such as th6se manufacturing alcohol and cement, we find potash as a by-product from established operations. This phase of potash production offers great possibilities, as for example in the smelting of iron ores in blast furnaces, provided that the incentive is here to collect these otherwise wasted potassium compounds. One of the smaller potential sources of by-product potash is in the scouring of wool which could easily yield 10,000 tons of actual potash annually, besides other valuable products. Another credit that we should list on the right side of our balance sheet is that the potash industry is essential to safeguard the food and clothing of the nation. It is not necessary to dwell on this very emphatically, as we all are of one opinion tfiat it is wiser to have within our own boundaries all industries that are necessary to t‘he very life of the people. We do not want our potash industry to be in the hands of the nation that stated, in the words of Dr. Wilhelm Ostwald, “America went into the war like a man with a rope around his neck, which is in the enemy’s hands and is pretty tightly drawn.” Several other phases of this matter need only to be mentioned. The development of our own industries by a tariff is the American way of doing things. But when did a n industry ever before ask for a tariff decreasing and finally disappearing after five years? Furthermore, the development of American raw materials is one of the fundamentals of our economic life, and in the case of the potash industry our raw materials are almost inexhaustible. To summarize our annual debits and credits we have DEBITS Charge due t o imposition of tariff., .
.. . .
$5,000,000
CREDITS Tariff revenue.. Write-off or depreciation on qapital already invested.. . InCerest on capital already invested.. Wages..
.. ...
.. . .... . . . . .. .. ..
$s,ooo,ooo
. . .. .
GAIN.
$3,800,000 1,700,000 1,400,000 3,000,000 $9 900 000 $4:900:000
This $4,900,000 does not include the various intangible credits which cannot well be valued in dollars. But the only hope of permanently cheap potash in America is to establish the domestic industry on a competitive basis.
THESITUATION FOR
THE
FARMER
One final point remains to be considered. We may grant that the economics of the situation are such that it is to the financial advantage of the entire country to establish the potash industry, but what of the farmer? What price must he pay? Over 75 per cent of our entire tonnage of fertilizer is used in the southeastern states. where the principal fertilizer is the “2: 8: 2” mixture, or one containing 2 units or 2 per cent of actual potash. The amount used per acre of cotton, for instance, varies; while 1000 lbs. should be employed, the amount i s generally 500 to 600 Ibs. On the basis of 600 lbs. of fertilizer, containing 2 per cent of potash, we have an additional charge of 22.8 cents per acre of cotton, provided the entire additional cost due to the average duty of $38 per ton of actual potash or 38 cents per unit, is added to the price. It is quite likely that this will be only two-thirds of this amount, or around 15 cents per acre of cotton or per bale of cotton-a very small amount. The real way for the farmer to get cheap potash is to buy his own fertilizer constituents and to do his own mixing. The Federal Trade Commission in their “Report on the Fertilizer
