COSTLY OPERATION

Dominion, Volume 37, Issue 5, 1 October 1943, Page 6

COSTLY OPERATION

£2OOO To Restart Blast Furnace

HISTORY OF ONEKAKA

One of the causes of the iron mining industry's failure to 'become established in New Zealand was the cost of restarting a blast, furnace, about £2OOO, it was pointed out by the Court of Appeal in its judgment in the Onekaka iron mining rights case, delivered this week. It was remarked in the judgment that lhe Onekaka Iron and Sleel Co.. Ltd., seemed to have made a most Valiant attempt to establish the pig-iron and east-iron pipemaking indpstry. 'but its efforts after many years resulted in the loss of all its capital, and it was compelled to go into liquidation. “So far as the manufacturing of pigiron is concerned, it was successful in producing a merchantable article, 'but the difficulty it encountered was that the demand in the whole of iNe-w Zealand for pig-iron was quite inadequate to keep the blast furnace going.” stated Mr. Justice Callan, who delivered the judgment. “The peculiarity of the pig-iron manufacturing industry is that a blast furnace has to be of a certain minimum size, and such a furnace must operate continuously, that is. 24 hours a day all the year round without intermission. If such a company is unable to keep this continuous operation going by reason of want of demand for.its products, then the fires in the furnace have to be allowed to go out, and it is a very expensive matter to get the furnace started again. It was stated that the restarting operation costs somewhere in the region of £2OOO. “In order to get over the company’s difficulty due to the small local demand for cast-iron, it was faced with the necessity of cither exporting it or finding some means whereby it could Ibe used' up: exporting was not found practicable. It was (because cast-iron pipe manufacturing would' provide an outlet for its surplus pig-iron that the company then decided to embark on manufacturing castiron pipes. A plant was acquired to make such pipes by lyhat is referred to as the ‘vertical process.' There was also involved the importation of expert workmen to handle this new 'type of business. “So far as the making of the pipes is concerned, the company achieved 1 success, but it found itself faced with competition from outside New Zealand, as a-new process of pipe-making known as the ‘spun process’ had (been introduced into the trade and the competition from this new type of pipe resulted in the company being unable successfully to compete with the pipes so imported, ami contracts for pipes which otherwise might have gone to the company were given to outside manufacturers. The ruling price when pipemanufacturing was embarked upon was some £l4 a ton. but owing to competition as already indicated, plus slump conditions which came into (being early in the 1930’5, the price of pipes fell so low as to be impossible of manufacture except at a loss. State Assistance. "The company had increased its capital to £420,000, of which £104,000 was allotted, (but in addition to that it had issued debentures amounting ultimately to £llO.OOO. At that time the Government was desirous of encouraging the efforts of the company, and did a great deal to help it in its endeavour to establish this important new industry. It paid a bounty on manufactures, and it also assisted tile company 'by giving substantial credits for coal. The Government itself made a loan to the company of £14,000, which was secured by a second charge subject to the first charge given to the first debenture holders. The company’s indebtedness for coal provided by the Government on credit amounted to some £23,500, and the Crown had no security for that. Its total indebtedness to the Crown was therefore some £37,500, for which the Crown held only a second charge for £14,000 of it. “The Mines Department was naturally enough concerned about its unsecured and partially secured indebtedness. The company's position reached such a pass that on Marcli 28, 1931, the directors gave formal notice to the trustees of the debenture holders that the company had ceased operations and h"d abandoned the assets to the debenture holders. The company itself went into liquidation. From that point onward, the company itself has played more or less a nominal part, because whatever operations took place were carried out by the receivers or the trustees for the debenture holders. From the point where the company ceased operations, its liquidators had really nothing to do, 'because the receivers or trustees for its debenture holders -were really in charge.” The total capital expenditure by the company was £168,972. according to a summary presented to the Court, and some of the items, amounting to about £38,000, or their value, had disappeared. Of the remainder, said his Honour, some might very well 'be greatly depreciated by time and the elements and want of repair. The company was incorporated at New Plymouth in 1920, shortly (before it acquired the lease that has (been the subject of litigation, and it went into liquidation in 1931.