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to obtain the permission of the Ministry before placing orders, and thus in effect, though not in form, the purchase was central- ized. This action, together with the fact that Germany was no longer in the market, prevented the price of ore in Spain from being unduly raised. Freight rates, however, and the cost of insurance rose to enormous sums; but as the Government bore the excess over the official rate, ore was delivered to British works at a fixed price. This became an important factor in stabilizing the price of steel. As regards Swedish ore large quan- tities were bought, and supplied to British makers.

The difficulty in securing shipping from Spain and the Mediterranean led to two internal developments, (i) The Cumberland ore mines, which were the only substantial source of non-phosphoric ore in Great Britain, were taken over on the basis of a guarantee to the owners and developed to their maximum output. (2) Under the most favourable conditions, however, no more than a small proportion of acid steel from British ore could be expected. A great effort was accordingly made to develop the manufacture of basic at the expense of acid steel, which had hitherto constituted the larger part of the output of Great Britain. This involved in the first place an at- tempt to increase the output of the low-grade phosphoric ores of Oxfordshire, Northamptonshire and elsewhere, and in the second place a modification in the programme of steel works ex- tensions, which first had been planned mainly for acid steel.

This question of basic steel, though a technical one, was potentially of great political importance. In peace-time, Great Britain had been content to be dependent on foreign sources of relatively high-grade ore for more than half her steel. The problem in 1916 was whether it was either possible or desirable to become self-dependent in this vital matter. There was much to be said for and against each of three possible courses: (i) making basic steel from low-grade British ore, (2) making acid steel from imported ore, or (3) importing pig-iron or steel from America. The difficulty of importing ore which required a large tonnage on a submarine-infested area was obvious; but the use of low-grade British ore involved a larger consumption of fuel and therefore of man-power in the coal-mines, and an increased con- gestion in internal railway transport. Imported American pig- iron, on the other hand, utilized neutral labour and economized tonnage, since two tons of Spanish ore are needed to make a ton of pig-iron, but until America came into the war the difficulty of financing purchases and the desire not to become too de- pendent on the United States caused the Ministry to persevere with home supplies, and even after America joined the Allies the policy could not be materially changed, owing to the large scale of the war demands of the American Government, which left little margin for export. Hence the production figures (Table II) show a steady development in basic output. TABLE II.

Acid Steel Output (Ingot tons)

Basic Steel Output (Ingot tons)

1913 1914

1915

1916

1917 1918

4,860,000 4,478,000 5,111,000 5,468,000 5,772,000 4,992,000

2,804,000 3,357,000 3,439,000 3,523,000 3,945,000 4,547,ooo

The total of 36,700,000 ingot tons of steel for the four war years 1915-8 (toward the production of which there were im- ported 26 million tons of ore and over i million tons of pig-iron) represents about 28 million tons of finished steel, to which must be added 2j million tons of shell steel imported from the United States and Canada, and a million tons of general steel.

In Nov. 1916, a control order restricting steel consumption for less urgent uses was passed, under which the department was entitled to obtain itemized returns of steel deliveries from every works, and to insist that the orders in hand should be carried out in order of urgency. These returns showed how much steel was being used for each branch of war production; and although at first it was difficult for the various departments of the Govern- ment to reduce their demands to a fixed programme and to

convert these demands into terms of steel, a system was gradually evolved in which it was possible to balance deliveries against requirements. From July 1917 onwards steel allocations were made at monthly meetings of departments presided over by the controller of steel production.

By this time, however, the balance of needs had been sub- stantially altered. The shell programme had been in effective operation for nearly two years. Stocks of empty shell and of shell steel had accumulated, the orders placed in America had materialized, and it was now possible to deal with the supply of ammunition without providing large margins for contingencies; hence the actual monthly allocation was substantially reduced. On the other hand, a very urgent demand for steel for shipbuild- ing had arisen, and with increasing demands for tanks, aircraft, military railways and other needs the supply of shell steel dropped to a relatively minor position. The figures for the allocation of steel for the first six months of 1918 (Table III) show the balance between the various departments.

TABLE III. Steel Programme for First Six Months of iQi8. (Weekly average in tons.)

Admiralty (mainly plates and sections)

War Office Contracts Department ....

Ministry of Munitions

Explosives 556

Guns, large 2,760

Machine-guns and S. A 900

Trench warfare 9 2 4

Mechanical warfare 3,4^0

Mechanical transport 1,376

Aircraft 3,536

Steelworks extension l,4 2 8

Factory construction

Machine tools and cranes 1,176

Railways, U.K 4,536

Railways, overseas 4,9 2 4

Electrical power supply 676

Total M. of M

India Office

Other Government Departments and Priority.

Allies:

France

Italy

Shell steel :

Great Britain land service and Admiralty

France '

Italy

Tubes

Wire rods

37,076 10,016

Grand Total

26,272

492

19,804

6,940 1,092

900 3,360 7,672 4,808

i39,88o

The actual realization was fairly close to the estimated figures, but in addition an average of 16,400 tons of shell steel was imported from the United States and Canada.

In regard to prices the Government, after attempting in 1915 to regulate prices by agreement, found that costs were rising to such an alarming extent that it was faced with the necessity either of raising the price of steel, and so altering the basic figure of vast numbers of Government contracts, or of keeping prices fixed and making good the balance to manufacturers in the form of direct or indirect subsidies. The change in prices would ultimately have been very large, as the subsidies finally amounted to no less than 10 per ton on steel made from imported ore. Of this sum, ocean insurance amounted to 5. The event thus justified the decision of the Ministry to adopt the policy of subsidies, for otherwise it would have been faced not merely with the readjustment of numberless contracts, but also with a rise in the general level of prices, involving increased middle- men's profits, wages variations, etc. Moreover, the Government was itself directly or indirectly the purchaser of 98% of the total produced, and, except as regards freight, the increases in steel cost were largely caused by wages advances, which were to a substantial extent controlled by the Government itself. The policy once started involved controlling the materials for production, including ore, coke, pig iron, scrap, ferro-manganese, and magnesite, fire, and silica bricks. Increases in wages in the steel works themselves were met by paying subsidies direct to-