No_7_November_and_December__1950 — Page 38

DE-CONTROL OF SOFTWOOD IN THE UNITED KINGDOM

EXTRACT FROM A SPEECH BY MR. J. L. BAYNES

(Chairman, Softwood De-Control Committee of The Timber Trade Federation of The United Kingdom) At a Dinner at the Trocadero Restaurant on November 23rd, 1950.

We are met to-night to celebrate a very notable event. For more than eleven years, Timber Importers in this country have been no more than Government Commission men. Our only function has been to yard and distribute the wood which the Government handed to us, to holders of Consuming Licences. We had no say about quality, specification or price. For much of that time, and never more than the present, our stocks were so bare that licences had to be refused or the consumer had to be content with goods which were often quite unsuitable for his purpose. For five years or more we have been ceaselessly urging the Government to hand the purchase of Softwood back to the Trade, for we believed with all our hearts that the needs of the country could only be supplied satisfactorily if our nearly 630 importers were allowed to buy what they required for their own customers, and bring them into the nearest port to the point of consumption. This carries with it no criticism of the very ble buyers in Timber Control, who have had the responsibility of buying each year, some- thing like sixty million pounds worth of softwoods. As the "Manchester Guardian" has so well pointed out, such responsibility is too heavy for any one man, for no man can be expected to cater in such a wholesale buying policy, for the differing and exacting needs of a hundred separate ports. We are also persuaded that the time has now come when bulk buying can only have the effect of keeping prices up to the detriment of our building and exporting programme.

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If we had studied our own interests alone, there are many who would have been content to continue the present arrangements indefinitely. We carried no responsibility for the indifferent service which was all we could offer our customers; we were assured of modest profits, and being protected by a Fall Clause, we ran no risk of loss on our stocks. Notwithstanding this very natural feeling on the part of many importers, when a month ago, freedom to buy in soft currency areas was offered us, only one hand in meetings of nearly 600 members, was held up against whole-hearted acceptance. We can be very proud of a trade that had the courage and longsighted vision to accept the responsibility and the inevitable risks entailed in buying, at present inflated prices, the softwoods so sorely needed in our building anci export programmes.

Stock Position

At the present time the stock in this country has fallen to an unprecedented low level, and during the next two months we shall find it very difficult, and sometimes impossible, to supply the needs of our customers. Nevertheless, the supply position for 1951 is more hopeful than it has been for some years. It must, of course, be remembered that even now, the Government will still be responsible for the purchase of two thirds of the country's needs and the fact that Timber Control has already purchased some 660,000 standards for import in 1951, assures the country of half its import on the austerity basis with which we have so wrongly been satisfied in recent years. Further, looking realistically on what it is still possible for Control to buy in the areas open to it, it seems likely that the Government will have possibly 1,250,000 standards to sell to the trade during the year. This estimate, which I think is not unduly optimistic, assures the country of its minimum requirements and gives some freedom of manoeuvre for the trade in negotiating for the goods that are available in the countries allotted to it for purchases. It must, however, be made abundantly clear to consumers generally that these Government purchases have been made for the most part, at a very heavy advance in price even on last year's figures, and as the Government is not willing to subsidise our commodity, the price which the trade will have to pay for the timber from our areas is bound to be affected by the much larger quantities bought by the Government in dollar countries. I do not for one moment criticise the authorities for their purchase of dollar goods for our most imperative need is to build up an adequate stock position in this country, but I think it is only fair to the trade that the public should know that the inevitable rise in the price of softwood is in no way related to the decision to revert to private buying, but had actually taken place before that decision was made. It is likely, I think, that the Government will themselves confirm this fact by raising the present statutory selling prices in this country well before price restriction is removed on March 31st. At the present time Swedish and Finnish exporters are asking an advance of about £20 per standard on the very high prices paid to them last They argue that if Canadian and American timber is worth this price, their goods are at least equal in value, while they also tell us that if they put their logs into the pulp and paper mills they would yield at least as much. should be sorry if this was counted as another iniquity on the part of our national press, but it must be admitted that the enormous price paid for pulp and paper has a very material effect on the price of building timber. So far, 1 believe that comparatively little has been bought by timber importers at these advanced prices, and I cannot too highly commend the trade for the restraint and caution with which they are exercising their newly gained freedom.

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It would ill become me to offer any kind of advice to I have importers regarding the present market position. always held the view that 600 importers buying for their own needs and knowing their own markets will find a truer market

level than can be assessed by any one individual sitting in a government office. Time alone can tell whether the present level of prices can be maintained by the exporters, and each individual importer in this country must make up his own mind in the light of his own business. The fact, however, that the Government will be offering such very large quantities to the trade from their purchases will. I trust, give him more independence than would otherwise have been the case.

The Government is, of course, anxious that we should use our freedom to purchase to the full and bring into this country as much wood as possible, and indeed, this is also our desire. But we have a responsibility to ourselves and to our shareholders, as well as to the nation. The present fantastically high price of wood involves the trade in a risk which they have never been called upon to face before. In 1921 after the first War there was a sudden drop of £20 per standard which would have spelt ruin for the trade if it had not been for the refund they were able to claim from the Excess Profits Duty. To-day, a drop of £20 would be "mere chicken feed" and would only bring prices back to the level at which we are now selling, while there is no cushion in the form of a Fall Clause or a refund from Excess Profits Tax. That drop, and a much larger one, will come one day and it may come sooner than we think, The trade is anxious to be allowed to build up a reserve pool against this very serious contingency.

I have had a discussion with the President of the Board of Trade on this subject, and he fully understands the position in which we are placed. He has not, of course, committed himself to any approval of such a scheme, but he has assured me that when we place the more detailed suggestions which we have in mind before him, he will give it personal and careful consideration.

I have reminded him that we are dealing in a material which is still subject to consumer licensing, so that if indeed we saw a fall in price coming, we should be unable to sell our stocks unless licences were obtainable. It is true, of course, that we have a promise from the Government, that the goods we are able to purchase both privately and from the Govern- ment. will be licensed, but there is the important proviso that an adequate stock must be maintained by importers in this country, and it is also a consideration to be borne in mind that licences may not be evenly spread throughout the country, and it will be little consolation for an importer on the South Coast to be told that there are licences available in Scotland or Northern Ireland.

Such a reserve pool, if established, could not be large enough to take care of more than a small share of our losses, but it would give importers a greater confidence in risking their capital to provide for the country's needs.

There is no doubt that Finance will be an over-riding consideration in our trade for some years to come. To purchase the goods that are in prospect in 1951 the trade may well have to find more than £100,000,000, while the unlicensed stock which the Government require the trade to hold at its peak month, will cost at least thirty millions.

The capital required by the trade to finance the much larger pre-war import, did not exceed twenty five to thirty millions, while the stock maintained in this country was not more than seven or eight millions. We have been unable to build up any large reserves during Control. Each time prices have been raised, the whole of the increase has been taken from us by Timber Charges Orders, and taxation has kept us, in common with all industries, short of capital to finance the very heavy increase in prices. I have yet to be persuaded that the trade is able to finance these huge sums, and in my opinion the success of the new scheme largely depends on the amount of security against a fall in price which can be obtained.

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