PRICING SYSTEM FOR MEANS OF PRODUCTION IN INDUSTRY WITH METALLURGICAL INDUSTRY AS THE EXAMPLE

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP81-01043R000900140007-6
• Release Decision: RIPPUB
• Original Classification: K
• Document Page Count: 191
• Document Creation Date: December 22, 2016
• Document Release Date: September 14, 2010
• Sequence Number: 7
• Publication Date: June 18, 1957
• Content Type: REPORT

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Pricin&_ Svstem
Pr
Js*2 y Borya ie4CZ
flGIA
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PRICING $ OF PBc 1JCTIt i UST1Y
1e na
Pricing 3y'e' o 14e na of Pro
duction ix2 t179 with Meta1> .
1ur,tcai Industry the ~.
1955, Wr raaw, Pages 74-x28 and
Table of Caaatentc
Chapter
1~.
Jerzy Bory 4e1fricz
TABLE OF COTE 3
Litroduction
Prices or ?r Pei; teria13 arid upp1ie
i o ? Irox 16eta11ur
l Price $ of Orre~,.... and :ion Y el 1 i ~er
~Y e tali ;ica1 value of o s Ore price ieve1 a Deteri inin
ere pricec iu rela. iOX to price oar s n&rd ore. Pavlov?
forrnu:L t Ind'? uence o:' kcicity Q: ~a:LLig on Metallurgical
value of ores . Methods G ' coi uti! inividua1 ore ca
ponentc . Price of tircu1 rieldi g ) i:raate utilized within
the plant. Variable rnatur : of uietai3.ur .c 1 value and o
the price relaticmEthip be oiit.
2. pric i:e St C1 7u 33"t~3~ t:x L
Equivalent re1tttion3hip Iucler o~ equivalent relation'.
EIhip < de: of equivalency S'rap sa1e3 prices . Scrap
a:i El. c Odity, Utilization of the lax o~ value to in'.
teng3 i scrap collection, Role of price in traxasitiOU
frc~a in&ividua1 t4 collective ncrap colection. Loco
and ranco pric . P2.CGO' zcrap purchh frea~ ipM
d.uatri i pests 4 i.ce3 aUc''.steel ac..
22
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xice~ of Refracto Materials
General characteristics of refractory materials. Direct
relationship. Index of direct relationship. Cost of
average weight scrap or standard-plant cost. Consider-?
ing quality of products when determining prices. Prices
of defective rmaterials. Prices of imported raw and
other materials.
~+. Prices of other Ma or Cozxgnodities
Coke. Coal. Gas. Prices versus scheduled rates.
Chapter 3i. Sales Prices
of Ferrometa11urgica1 Products 64.
ci.Pig
on
General characteristics of pig iron. Processable pig
iron versus foundry pig iron. Changee in interplant
cooperation and the prime costs of n rketable output.
Application of sales prices i interdepartmental turn-
over. Composite relationship. Index of composite rem
lationship. Price versus profit. Prices of individual
grades and types of pig iron. Prices of defective pig
ironq
2, Cast Steel
General characteristics of steel classification. Group
prices. Pertinency of the surcharge and discount system.
Surcharges for metallurgical certification and technical
reception.
35
82
+ ifiaa hed Rofl$ Praducte and BolLip Mill Products 90
aifiniahed rolled products. Units of relationship
adopted in determining the pr9cao of aemifiniehed steel
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produce Mverae effects of a uniform price for a
rn niber of sizes with different production costs. Group.
ing type sizes accardiri to the tiinc of rolling per ton.
Grouping type-sizes according; to hourly ;product1vityChange of mean weighted priiae cost in cal.cu' t-.cam group
owing to changes in mriety of output. Idormed p~'i ie
costs of the production of individual type.'sizcn e Scope
of the products of rolling a ilia Relationhips ron'
mean weighted prices of calculation groups M Rels,tiox.
ships among prices of products within a given calcuia
tion group e Relationships among prices of identical type
aizes executed fraail diverse games of steel. Trends for
a revjsioa of the current method of determining the
prices of rolled products . Prices raid theoretical weight
of products . Surcharges for "wri uita'biity. " Surcharge
for small quantities . Surcharges for cpecif is length
Surcharges for accurate rolling
Other Rolled Products
Gex eral characteristics of slabbing~nll products
Aeterrnining the prices of siabbixig ni? l products. Rem
lationshipc among prices of products rolled froori diverse
materials.
Stet p3?~,,,,,s
General characteristics of pipe grad. Methods for
determining pipe prices.
General characteristics of 'erroella~rs. Determining
tbe prices of fsrroaUoya their interrelationship.
Prices of ferxoail versus prices of refined steels.
117
122
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:.- I B ems,
Gcuera1 ccteristics of quality steels The surcharge
and dis count syatai . Prices of refined steels versus
prices o; nonferrous metals . Prices off' re bizled atee1
versuuc prices of plastics
13
6. Prices of flarthe gcra, 13
Concept of M1rdw ?e scrap. ucourrmic c pe&Le~cy of t
utilization, of harthrare ccrapa thOd, of determining
t prices o' staudard 1aa,rtrare scrap. lations amore
the prices of individual groups of bardwe scrap.
IIrd:mirc > cr p price level aid the uti1izatian of that
sr.. p by & iaiIlor jndust:c ra
Chapter III. Prices of Nonfcrreus tales 151
1. Prices of Ores Of iorurerrou3 Netals 151
-.. :....
-
Principal kinds of ores of riomferrous neta1 Deter
minin; the foiu1a prates (prices depena;.n on the con-
tent of pur. e metal in are ). Irf 1uence ` variable
(forxiuia ) prices of Q~'ez7 on ti rofitabi1ity of no ri
ferrous are mines Prices or" nof"errOUS Ore s and the
ec 3anic profitability of nines.
2. Prices of Nonterraus In of eta1s
Co nit of noni errous ingot metals. Pricix g syste3 f03r
nouf'erroua me is as an incentive for econc ny in their
use ? Relations ng the prices of various types of
x nf'err0us metals. Determining the prices of d stic
and : rted ray materiala accortpg to their actual
puz'ch ee prices . P rche prices ~f nonferrous metal
e+P. Scales prices #03? nonferrous metal scrap.
ldo
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Pricea1ied. in N ezToun Metela Proceaaiz ZnLuatii
,
General ch iructerxstica of the proceof non2 errour
n talc Price ite ^ro1abion3 ,i in 1i rocc in i~a
d tr~' a
Ch~ptez IV, Process ?'or A inistrat?ve 169
Deterusination of the Prices of -3upp1y
and Investment Good. ire Meta11iu icaI r1u try
Conciu:;iori 176
Bib1io rapby 133
'
-.
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FRICxNcj 8 3 1Z4 lOB MEANS of PROI~UGTION 161 INDUSTRY
WAN TALWRC;tcA1, INDUSTRY AS T N A 'L
m] RoioUCTIQN
When apehking of the prices of means of production in a ao-
cialist economy we refer to the prices observed by the producer and
purchaser when transact ,nL! whe Transfer of means of production in a
socialist system of society. Accordingly the expression "sale,"
recurring frequently in this book, is not a perfectly appropriate
definition insofar as it pertains to such transactions regarded
frc n the econc ajc point of views This is bemuse such transactionu,
do not entail that change in ownership which is so characteristic
of the sale.purchase act. For this reason, among others, the means
of production circulating within a socialist econoaay are not coin.
ffiodities in the economic sense of the word, even though in practice
they are referred to in such terms as "codity" and ''marketable
output" and, consequently, "value of marketable output" and "costs
of marketable output."
Al]. these definitions, which customarily are used jointly
with such definitions as "price," "prime cost," "profit1 a "turn..
over tax," and so forth, are related to the utilization of the
forms of value in the socialist system of national economy for the
purpose of contrOliing and appraise,z~ the performance of enter.
prises. The utilization of the forms of value and of the law of
value (by means of the socialist cyst of econoamic account is
of vital importance in creating econcsnic incentives for the thrifti,.
eat and moat rational consution of znesn of production and for
raising labor productivity. As is knovm, these are the iMie aa.
b].e prerequisites for the continued gro,th of the national eccnciy
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and for materializing the fundamental economic law o~ oocialiazn:
the :,av of insuring the maximal satisfaction of the continually
increasing naterial and cultural needs of society as a whole
through a ceaseless growth and perfecting of socialist production
as based on most modern technology
Although the means of production circulating within the ao-
cialiat system are not comiuiodities, their production is indirectly
affected by th law of value considering the exir3tence of mar.
ketabie production and of money. This ensues chiefly from the
fact that the tr'agea received Uy the worker must be in a ronetary
fora, because the conaucmption productB necessary for reproducing
the expended huwan labor are, under tlae present conditions, com<
modities and as such may be acquired only in exchange for money.
Th utilization o?' the effect exerted by the law of value on
production is an essential factor in the performance of the economic
accounting system. The outlays of labor and the production costs
and results and incaane and expenditures of socialist enterprises
are expressed and measured in the form of monetary value.
"Economic accounting is based on the utilization of the law
of value. Economic accounting, by utilizing the monetary form,
makee it possible to appreiae, audit, and control the activities
of enterprises. It reveals the profitability of every individual
enterprise Economic accounting educates enterprise managers in
the spirit of rational management, teaches them discipline and in-
Structs them in Ctflputing the extent of production properly, rain
in labor productivity, reducing production costs, and increasing
the profitability of their enterpriae&' (z4m a po2it7cznw or
litical Ec nonij, a handbock, Academy of Science USSR, stitute
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of Economics, issued by the isiazka i Wiedza Publishing House,
1955, pse 6i6).
The price as a monetary expression of value is an important
factor in the action of economic accounting. This is because en~
terprises ti nafer their products to purciasers according to estab-
lished prices, that is, in the form of an act of sa1e. The mone.
tary ineczne attained by enterprises is subject to planned division
for purposes related to the unfolding; of the process of the social.
ist expanded reproduction. A apecific part of such inecame is as~
signed for reproducing the expended means of production, that is,
for the amortization of machinery, facilitiea, buildings, etc, and
for the purchase of raw and other inateriala. The remainder con-
stitutes national income, a preponderant part whereof is assigned
for paying wages to workers. in this way, among others, through
receiving their wages, the workers participate in the division 0?'
national income.
The stun total of the monetary expenditures necessary for re'
producing the expended means of production, paying wages, and for
other expenditures connected with the in rkettiXk of products (ales
costs) is tenned prime cost of realized (od) production
The net inc+!e of enterprises, or anecXZIe crstituting the
difference between the over-all total inccame from the sales of
their products and the prime coats of realized production, is ccl-
loauially termed enterprise accutnulatiora? A prevalent part of such
accumulation is transferred by enterprises to the state budget, be
it in the farm of turnover tax (if the prices include such tax) or
profit1938 Prewar prices. However comaidered frc n the viewpoint of
level arLt interrelationship these prices have not been cc*ixaenaurate
with the present conditions in Poland.
The rep1aciu~ of fix prices by comparable prices should
yield positive resultsd It will undoubtedly contribute to atren the
eninb the performance of t' sales price system and thereby to
strengthening econcmnic accounting; znd i.rtez~sifyying the efforts pur-
porting to raise the profitability cf industriai enterprises .
CRAPTER I. PRIGS OF RAW MATERIfl AD SUPPLIES
FOR IRON TAY
1. Prices of Orel and Ian..Yie1difl4 teri 1o
Metall.ur~ ica1 value of ores. Ore price level,. Deter
ruination of ore prices in relation to price of standard ore.
Pavlov' s formula o Influence of slag basicity on metaallur-
,cal value of ores. Methods of computing the value of i.pM
dividual ore components . Prices of (iron -yielding ) waste
utilized within the plant. Variable nature of metallurgical
value ,and of the price relationship based on it.
Among the proble~ws discussed in this sectici the paramowpt
one is the problem of determining the proper price relationaabip,
that is, the interrelationship among the prices of the various
sorts and grades of raw materials coflsUmed in the manufacture of
products that are identical or very similar.
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If diverse kinds and grades of a raw material iaay be used
for identical purposes, the relationship of their practical values
may be expressed in the equivalent form. In the case of oreri such
a form is constituted by their metallurgical value. Therefore the
relationship among the prices of such raw rite ials may be termed
"equivalent relationship." The main principles of this expression
will be discussed in the other parts of this book. The foxm of
equivalent relationship applicable to i rcm ores is specific but
very interesting.
The pricin4! system for iron ores and iron-yieldin; materials
the basic raw rnaterials of the metallurgical industry ?- fulfills
definite economic tasks in the field of ecoaomic accounting in the
metallurgy of iroQ . To understand the mechanism of the performance
of this system it is necessary to study at least a rouih outline of
the characteristic properties of iron ores and the importance of
these characteristics for the user- the metallurgical industry.
Iran ores are minerals containing fon in the form of diverse
chemical compounds (mostly oxides) and ari ue. she chemical ccampop
sition of the gangue exercises a considerable influence on the evo-
lutiof and productivity of the blast furnace process . This cc npo-
sition decides whether a given ore can be melted down with ease or
with difficulty, and hence it affects the extent of the consumption
of fluxing agents and coke per too of obtained pig iron and the
daily capacity of a blast furnace (volume or output per 24 hers
of blast furnace operation ) and, consequently, the level of prime
coats per to of pig ? Iron. Moreover the quality of an iron ore is
considerably affected by its content of sulfur and phosphorus which,
even when present in relatively small quantitlee, cause (s harmful
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action ixY the productiVity of the blast furnace
ach~ixtures~ ~ a red other
the quality of the obtained pig iron. On the o
process or in
hand the the blast furnace
adrixture off' man nese afrects favorSbly
,
proceB~ o
ica1 car~pvsitis aF an ore its degree oi'
Besides the chem
its . ranulatit~n or lpBess, ~.~ of raajor 3s~~
.c~c~ninuticm, ~. ee o , ~. ~
ss of the i~last face process
porte,nce to the ~i'eoGiVeaae
Y contai much ore slack this leads to incree,sed
the furnace charge
ore : tVyrS~ aUt Mb,~a Mt V+ ~AI.Yv"'L7t f4~ii JiaW4 dUA7V 0
ConF3'l~ilo~3n~ to ~YILW.~. Gam'
x~sel the level of prime costs given in
This in turn affects adve y
s caughtn by
onsiderab1e part of thi3 dust i ?
the event that a c
rive costa of pig iron are bound to increase,
purii'yi; detiT2ceL'3 , the p
.~.+t ace dust must, after . i~eing processed,
uecause the 19caugha blast f'um
n der?;a the entire technological process .
a~gai i.m
the chemical composition axed physical form
The influence of
v t of the ~~las t furnace process and the ex?
of pre on the prc~ucti i y
e rterials 9 anbence also of the prime
test of Ction of Chard
is impressed by the concept of the
costs off' the obta3,ned 1~ iron 3
ore o The greater is the metallurgical value
meta~..urgical value of
of an ore the smaller quantitie8 of fluxing agents and fuels are
c:e rocess ands accord1ngly9 the smaller
consumed. by the blest ~ p
Qssing posts per ton of obtained pig iron.
are the corresp0d~g pros
@SS of molting iron out of an ore having a
In other' words the prof
fires smaller outlays of hum and ~"
~, ~tal~,rical Value , ~~
}erica, labor r
se factors is of enormO j , ce for an
'~nc~ledge of the
llur~y C iron ? This is becau~ae it
econ~nic anal ~' the `
t a riper ~px~aisal of the reaulte of pax.
should be lied tom' p
foxmance of a b 1St furba-c~s on t1' baste of wait prime cOst of p
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iron is possible only upon eliiuinatin~ the fluctuations occurring
iM the level 0? the prime costs of pig iron owing to the variations
in the metaUuricai values oi' the diverse ores. Therefore it is
nece8Sary to create appropriate relations between the price of a
liven are and its meta11ur~ica1 value o Ore prices should be de-
termined so as to cause the prune costs oi' the obtained p iron
to r i:i at a uniform efficiency of blast'afurnace peri'ormance
on an essentially constant level regardlcss of the kind, c ical
composition, and physica1 form of the ore used.
Othertdj(3it rouibe iauch more, difficulty to r Jaiyze the
prixue costs of the blast furnace dopartiQerrt acrd, rno: eover, the e -
feet of ecoi c sccountir;L one the results oi' the pcri'orr mce or
iron foundries OUld be greatly weakened. In such a situation the
prime costs of pig iron, and hence the profitability of both the
blast fun ce department and the iron foundry as a whole would be
liable to extensive axrd accidental fiuctuations exasuin from the
compositio of blast furnace charge A- factor or which but a
rnodicuxn oi' influence can be exercised by the foundry rnarragenerrt.
Thie is because ore supplies are affected by the raw niaterial
situation of a country, that is, by the actual possibilities for
extraction of domestic ores and by imports of foreign ores
The interrelationship of the prices of various hinds and
grades of iron are must, therefore, be a reflection on the metal..
lurgical value of such kinda and grades.
The problem of determining the proper level of iron ?ore
prices is another fact ~.._ _t .~ to ~ ~..,~, be caxidare - besides the problew of
a- ...~...._ _ _,
the interrelationahip of prices, when drafting a price list for iron
ores. From the econric viewpoint considered, this problem is a
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rather complicated one and is connected to the oversll econ~nic
policy of the state. Its detenminiz the price level due note must
be taken not only of the extraction costs of do~aestic ores but uleo
of the purchase costs of foreign ores. At such a approach to the
problem it may be fouh tha..t, in view oi' the necessity of c3xaa7
utilization of domestic mineral resources, the prices of certain
ores have to be set at a level below the actual costs of their ec?
traction, in order
.... naturally ... to j revert the rise oi' the prune
costs (ana hence also prices) of metaUurgiCal products to c too
hid 8d economic i11 y un justified level.
So far practice has sgO that the price costs Of the extrac-
tion of domestic ores stand on variegated levels. 'ln this connection
it is chrracteristic that, as a rule, the mines with lower extrac>
tion casts produce iron ores that are mostly of higher quality frtn
the metallurgical viewpoint ? For instance the extracting costs of
the relatively high de basic siderites in the CzeetochOwa region
are considerably below the extracting costs of the less high~grade
acidic sideritee in the St. Croix Mountain. region.
Considering that a suable part of the iron ores consumed in
Polish steel plants derives fral imports and that the extracting
costa in certain mines of the Czestoc1o'fa ore region approximl~tely
equal the coats of purchasing foreign ores, the level of iron-Ore
prices for the year 1956 has been determined on the basis of the
level of extracting costs in just these mines. At the same time a
general intex has been calculated for indicating the ratio of 1956
ore prices to ube 1916 price le. el .
It clear t t the adoption of relatively lowest extraction
costs as the basis for determining the price level would result in
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the unprofitability ~f the iron ore mining industry as a whole
However this must be regarded as an objective necessity enauing
frt i the fact that iron ore e tr action costa in r any d+uestic mules
st&nd as yet on a much too high level and should rot be allowed to
affect the costs and prices in the metallurgical industry; the more
so as the percentile share of these ores in the whale of t : cots
sunned rr s ( irnpoz'ted ax;d domestic ores) i a minor one.
As is known iron ores occur ira various ki th3 arid grades
Therefox'e decisions concerning the price level cannot either eatabrt
lisp clo 7e1y th; weighted ave rs;e price per tom of ore because such
price must vrs.ry dependirsg on the actui trait o he ores delivered
to ineta11urgicai iazduztry. In practice the ccnpositiO off' the ores
consUed by b1 is t furnaces i s suo jact to extensive f1uct atios ia~
terms of chemical ca positiof (dependii on the on its and r y
other actors ) 6 these conditions the only price that can be
ea tablished with any reasonable accuracy is the price of one spe-
cific kind oaf' ircrrr ore aowledged as the standard ore because it
is consumed i1 greater quazatities than w7y other ore. In Poland a
certain Bade o1 Krivoi Rod; are may be said. to be such an ore.
The determination of either a genera1 price level or the
price of the standard ore constitutes merely the point of departure
.. ?wM..
for drartiiag the prices c j Y ~i idea c1s and grades of ire ores.
In this connection it is necessary to consider the interrelationship
among the metallurgical valuea of ores especially in relation to
standard ore. vever it has to be emphasized that in practice
the overall effect ect ci in ?
thia is not aXl ISY 'GaSi. 1"Iie eAO'I
dividual ore characteristics (cheaica1 coarrposition and granulation)
on the blvst.furnaCe rOcess is generally kna~n, but ao !ar no one
-10.
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his yet worked out tables of interrelationship auong ore cbarac
teriatics, evolution of b1 t furnace process, and concrumption of
f'luxing agents and coke n 'p'lus is probably acring to the fact that
there st ' 1], exist gsps iin the theoretic. 1 : ,nowledge of the evo1uw
tion of the b1 t furnace proceus a Therefore we encounter with di~
verse ~ysteraa for deterithth g the mcta11urica1 value of ores fOra
mulcted by eciinent b1astNfurtaace experts.
Iii Metalt of I oii the rex o reed Soviet , wart
sa
academicism M W Pr1ov furnishes a rethod for computing raeta11ux
;jcai value and deter~ainir3g the prices of a specific kind of irons
ore (Pavlova N? , M wl~a 4h unj, press of the Academy of Sci-
enceu IJSsL third edition; Moscow4 ningrad, 19I3, page 170) Ac~
cordin; to M o Pavlov the cost of the production of one t of pig iron
racy be expressed by paeans of the x'oliowiig formula:
P p1(f SF) + pr) -L cps f- s
xhere:
f sF : ratio of iron content of pii iron to iron content of
ore, expressing the theoretical finitude of ore cones
auudation necessary for obtainii% a unit (one t ) of
pig is
p1
C > consumption of coke per unit of pig iron
p2
price of ore unit (one t)
* price of coke
*ion of f1ucirg agent per u it aF ce-s t iron
p3 s price of fluxing a?ent
proceaaing costs (coats of direct hwnan labor arid de-
partmental costa) per unit of production
The price of one t of ore nr be Obtained upon traneposin
the formula thus
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pl : (F:P) (I' - cps > cp' > )
"The ratio P3f y ecpressing the theoretical yield of pig
Lr4x1 from ore, may be applied without necessity of cc.'r ectf on in
to event, Jf compariaon of lumpy ores or of ores with identical
content of Black; in cases to the contraa'y due note has to be tak ci
of the difference in losses of iron o rin to the outMblaet effect"
(i, page l7c)
The above citei ?o alas indicate tlmt the couputing of the
price of a given ore entails a prior determination of the cost of
production o pig iron as a constant magnitude serving as the basis
for inter re1Utjn ; the prices o' diverse ki~ids and r ides of ores o
This magnitude chould correspond to the cast of producing pig iron
fro the standa:'^d ore~ hoao price is estab1i Shed when determining
the over a I price level for ircm ores
WIth respect to the rater factors o the a'bo've forziula Lt
pry Vii V 1f vwrw wv v
has to be stag that, hereas the price of coke or flucb? agent
i a known value (it has to be deter feed prior to i'ormulating the
prices of iron ores ) the extent of ti cansuwption of coke or
fluxing cents ensues fram purely empirical postulates. This ie
easily evident Pram the sizable divergences in the figures cited
by various metallurgists with regard to the interrelationship bee.
tween to consumption of coke and fluxing agents and the chemical
ccposition of the ores used. The cause of these divergence is
the fact that the related. measurement, were carried out in blast
furnaces differing in their designs and containing furnace slag
of R,ry n decree of bscty . vhich Le alO related to tb tech
of M,-w1.Y.1decree .,.~wwwrv~ ~ w v< ?r N~M.MM w~iw iAFi Y~
nological mastering of the operation (performance) of a blast fur -
race. This is because a smaller degree of basicity involves, on
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the one hand, a much smaLjer cosuzption of fiuxing agents and coke
per tan of obtained pig iron and, on the othor hand, causes greater
dif r*,u1tyirexxzovirg suf.i'ur fraa the metal bath and entails the
can er of e~cee g the permi~Iaibl.c ~t ndar t or the content of
sur i'si pig irQ~
Sulfur ~rhich, as is km, causes pig iron to be irpure,
origi?yiatea chiefnly from cake ashy ~,.Ithou ;h in certaj cases Lt i ay
also infiltrate pig iron fro the orig. mi ore or fro; a. f1zxis~
agent # The t ?anafe ? of "u f, ur to sIag con iett in that it bec rr~ez~
chemically c biped with the briises contained, in sia(; as accordint
to this M en cti on Cf en ir~eer L ersi; sz Nazar ek, O u je]k1ego
ie p?ca iast Face - ervicin ; State Tec iica? ,b1i h ng Hauec
1950, page 256)9
FeS -! cao . FeO ? C r 73O keal
Fe?fi C Fe CQ -G loaf
.~ CaC C Fe CO -f Ca( 33,730 kcal
Next, ca1cii.n sulfide; being a lighter substance, floats to
the surface and unites Frith s g The transfer of sulfur to slab
by reaps of the rnesium oxide (MgO) cor~tajzaed i; slag occurs
through a thriiIar procesa.
Pi u the above deacription it can be clearly coneudei ~jjy
w b_
can be ~~~,.~
ti reductiv21 in the basicity of s],ag sggravates considerably the 6e.
sulfurization oi' pig iron and requires an improved mastering of
blast furnace performance.
The Polish bleat furx)ace industry c boast of Heide ble
aehieve nta on t ?a sector< Whereas in thi hithe u rt? rice
P
list the relationship among iram ore pricee was bated y r a index
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of ~~. basicity (ratio of CaO + Ngo to Sion ), amouxttin to i 0 , irn
the price 1iet for 1956 that index could be already assumed at lol
Th:La index ffecta som wh t (in the postu3. tes or the price a.ist )
he ma itude of consumption of coke ~tnd fusing Gents at the melt
ing of an ore with a specific chemical CC npositior
The postulates of the iron ore price list for 1956 were bss ed
on the following major enipjric ~i, values ece sary for cotputing the
meta1IUr~jcaI value of ore s
(a) consunptiors of 1 ro~estcsne for Liuxing into alai; 1% of the 3i0r
contained in a. ton of ore (or per 10 of siUcaceou~ earth) w
b ) cor~siz pti on of coke per ton .percerat of aiiicaceow earth
Si0 in a toys of ore) : io 1 o kg3
(ci ) consurption of coke per ton o pig iron for Aeducirit Fe : '75~' ,.,
d
(C ) coJu ptior of wake per ton percent of A12C " 2 g
~3
The e-';peeaa t' z of ore per for oj' pig iron (value 'ti':F" in
the form. w of the academjczaMPavlov) hinges on the Fe comet
dY
o?. ore, upon ronsiderjng that a11o rance must be made for the con-
sumption op' a certain amount of Fe in the form of irretrievable
losses (cinders and others).
In the 1956 price list postulates the irretrievable laasea
were dote njned thus t the consumption of Fe per ton of cast iron
was assured at 1,000 , although the actual content of Fe in the
iron avers ea 93%.
In order to can ute the metallurgical value and price of an
ore accong to the academician Pavlov"a i'ormula it is necessary
to determine an additional factor, namely the cost of processing a
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ton of pig iron as related to the given grade a ores 1~s is krno:m
the pracesstr cost per ton of pig iron is inversely proportional.
to the pw oauctitirity of the blast fair ace r.th respect to the ;iverl
grade o?i ores According to viewpoints universally accepted oxlg
the metallurgistss the turnover of coke is a yardstick for teas-?
twiW1 the productivity of a bla 3t furnace (here we s ^.al1 desit
froar~ e~plathing thto thesis, because this would exceed the cape
of the 'rte) This thesis leads to yet another ccrnciusion; viz ,
that the prOcessing cost per tOf of pig iron is, in principle,
directly proport3ona1 to the conuuinption o" coke per t of pig'
iroui ice the v ue o? the I1! i~~ `the aCadcX1?ciax) Pavlov 'ri
.'o uia nay be caicu1 ted by the fo1iowi11g JLozi u1 O
~zhere c C
Lw W 'W' wib
quantity of coke carsurned for producing the aver-el
tom e of pj fVi'3 fw~Vti~ a iYerJ o~.e;
p cost ci" processing a. ton of open..hearth pig iron per
ton of coke ccrsurea in pi'educing such pig iron out of the stund<
and ors:
totaaI cost of a?ocessir3 a ton off' iron pig quantity off` c e consumed to produce the
aver-x,11 tonnage of pig iron
on the basis of the above described formula of acade iictan
Pavlov general principles have been narked out for interrelating
the prices of individeal grades of iron ore
fever in practice rase is made off' re precise solutions
Beaidea the pizre iron content (Fe ), the silicon dioxide camtent
( iO2 ), and the baoea ( Q and MgO ), note is also merle of the
mjCal constituents of ores, ouch as the comtezt of alt~-
i*irnuu conpound (A2O3 ),
ng see (D4n ), P hoepborus (P), az4
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sulfur (S), Such solutions are, of course, based on principles
similar to those of the Pavlov formula, except that they slightly
differ in their detaile. This is because the first stage is de-.
voted. to computing the (monetary) value per ton-percent of every
major ore constituent (10 kg per ton of ore), upon taking into ac-
count the influence it exerts on the unfolding and effects of the
blast furnace process. In the second stage the value of every in-
dividuai. ore ig calculated s a s of the values of their consti-.
tuents.
l`hese valueE are explained below.
(l) One percent of S102 in a ton of ore represents -~ as
according to the postulates for the 1956 price list -- a negative
value of 5.60 zlotys.
~. plaannatton . Assuming that the number of free bases in the
limestone totals 5O.9, and assuming that 50% of the limestone's
composition unites with the slag, it is to be asswaed that, at a
slag basicity index of 1.15, the quantity of limestone necessary
for slagging-up 10 kg of Sits amounts to 10 x 1.15 x l 11.5 x
1.97 : 22.5 kg; in this case the quantity of this slag would amount
to 10 -~ 10 -+ 22.5 x
22.8 kg. Coneidering that, according to
empiric?' eta, 0.16 kg of coke are consumed per kg of slag, in-
depexsdently of the con sumptiox~ of 0.30 kg of coke per kg of 1ime~
stone, the consumption of coke per ton -percent of Si02 will amount
to 22,8 x 0,16 -r 22.5 x 0.30, that is, 10.1+0 k .
The price of coke, jointly with the pig iron processing cost
per ton o consumed coke (see description of Pavlov's formula), is
assumed at i48o zlotys per to in the postulates for the 1956 price
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hilt) Therefore the negative value of rnie too-per ent of J102 its
G
the ore wi11 amount to iO~io kg x O 3o zlotys/1c -~ value of co
sumed 1ixlentalne (22 45 k~ x O.O2 zlotya f ), i.e., 555 zlotys (or
roughly 5.60 Zlotys ).
(2) one peY cent of A12( in a ton oi" ore ha s negative
value of 0.96 zlotys, because its ; 1a?gingup requires 2 k; of
coke (2 k; x 0.0 z1ot3r,y/
w 0.96 zlotys).
(J ) One percent of CaO sn natural condition (in the fox
of a carhonate) in a ton of ore has a positive value of O75 zlotys;
while if in the form of o4de tha value ourat to 31.O zlotys
The ono perto Ni O.
}
x "' 1 nat?on .
Whereas
r r~
? V(5
.
0g75 (io 0.7 0.786 x O.13) 3O (approxixnately),
(4 ) 0ne percent of M in a tou of ore ~i a positive value
oil ]j zlotys.
(5 ) One percent o' P in a toxi of ore has a negative vale
or 20 zlotys, but this is cored when ccputiY~g the prices of the
ores with a bi h phosphorus content used in the production of
?naaaian pig iro i.
(6) One percent oil a a tom, of are haM a r~egat3,ve value
of 6.70 zlotys.
(7)e percent ail'e a 'Gom orb care ha,s a positive value
of 6.20 zloty:.
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Ca1cu1ation8 of the value of 1% of Fe in a ton of ore have
been carried out > e3mjlar to those for i ~- by aasumira deii
rit e price ox" the standa ore and deducting t~ex e x the vu1ue
of every individual canpox~ent
T determination of the price of a specfic ore n the basis
or the above cited domes rou1d be rise a very s bn ~e task. This
is 111u3trated by the table below,
?'~e as j V4. fr.c Kri ykoi i1og 1:.iJ~Mc J
ctzcu.
TABLE I
Ana;
ii': D?
-.a?,ebo~nawr..,.r
~ f
Fe : 6Yv
r
+eYi?ww,fnwwrnya.
tirig the price o? CJa: 2
Value o1' One Total Value of Givers Ore
`~c ~ -hex?ce t ~!r ont ii Zlotys
4_w .. m....~,.,..m.w,..,__.
.
.L o Vi)
I4 50
075
5)60
0 96
;1000
4h S
~4YrM-+.www.r.r.wK,vw+~wM
stances causing the fluctuations of their prices on the vorid rnar-
keto Such a kind of accidentality in the evolution of ore prices
is excluded by the principle that the price of an ore corresponds
to its metallurgical. value.
8esidea tare, the iron.yielding furnace urge contains a
sizable percentage of diverse iron yielding materiale such as blast
furnace dust, iron containing slag f z'an apen.hearh furnaces ingot
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scrapii~ etc. Such ri aterials are i'arely exchanged among the steel
plants because they are normally utilized by the piant where they
appear. Nonetheless the height oi' the aaleEs price 4 ' ?yieJ4ing
anateria1a affects conaiderab1y the scope of their utilization in
the bia turn&Ce process This as because these materials are i<
clues, in tie riaterial costa of pig iroir according to their Bales
<
prices no riatter whether these 1iaterials have been purch 3ed out
side or uti1iz o'n to spot as ucabie tiTastew of fu11.va1ue products
True enough the u~eta11urf v of iron, as in many over branches of
industry, observes thy; principle off" protracted costa which can ii is
in that the said lni 3heu product S3 2fianufact9 d tnd consuE ed vith n
a given enterprise are included in further production as according:
to prime co ts, but so far as wasted are concerned it is assuied
that their p ae costs equal their sales prices Thie i ox' course
purely convention;.l assuxrption, ride because the cost Qf wastes
ay be deteruined only on a contractual basis in genera. a The
adoption of the sales price of wastes as their cc~tractual prime
cost has Tome sense a1ao because the prince cost of the finished
product is reduced by the value of wastes o
When individual production departDents strive to imprOVe their
efficiency , consumption of wastes rmy take place only when their
price is determined in such a way as to take into account the tech-
no1ogical value of wastes and, on the other hand, not to result irr
lowered efficiency in the event that tireae wastea are utilized in
further production ? These requirements are aatiafied by including
vaetea jn further production eatimatea according to sales prices.
of course, the sales price must thexr correapomd to the metallurgical
value of these wastes; in any event it cannot excel that value.
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l ourever sales pace of certaj wastes ouch as open-hearth
slag gay be set at a level elightly below their xnetallurical value
when their chexaical craosjtioz~ js particularly difficujt to reduce
(e .g. iron silicates ) or when a slab containc~ too much
phospkroru~
and thus is difficult to pzocea~, The stipulatjoof the price of
open-hearts slab; at a level below its etallurgIcal value coutt?ter<
acts the %rho]J.y uijderstaw~dab1e reluctance of bIast~st - tce iiien to
use ti N k? ri of sl :; o HQrever it is to be kept i~~ dnd tint on
the other hax]., the pricing of sl~a at a too low level so ie th
y t
diseouia~ e the steei workers 1'r carp ; out prof er].y the
process w that modern and raor t ecofoe;3ica:l method of steel plant
~p~~`~~z t ~o>+~ a
The prices of ison~yjei ink; r,~atc riuis the process: ; of which
does no4 et fl specja:l. difficul?tzes (roiling ci I 1 vasteL. heatin
sla&, etc) should he deterxii ed in relation to the ;prices of iron
ores and eased on their et~ai-urical value
The ironwy~elding raaterals consumed. by the blast.ft^nace
process iciude also steel scram which has becczie considerably
corroded acid wlicha therefore, is not very suitable for use in the
stee1~productiora process l prices of such scrap should be deb
te112ined in their relation to, on the cee hand, the prices of or~
dinary? steel scrap, and on the other hand., the prices of iron ores
upcx tale; into account the metallurgical value of the blast..
furnace scrap.
fever it is to be particulsr~y einphasjxed that metalur..
gical glue is not a atable concept because its level is affected
by diverse d often variable factory such as the price of coke
the method blast.fu' ace process operation (wnon others basi
e city
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of a:la; ), the type and equipment of blast furnace . which a ,.
feats the hermit of prcceasin~ costs ), and other factors,
if after the elapse of a period of time these Factors cue
1~ajor and irreversible changes in the rnetallur~jcai values of ores
in relation to the values adopted as the 'psis for the offici3.
t
price list, t h e relationship between the prices c u ' iron ores z w t
be reviewed and revjBed, so rs to deteijre the near ~aeta.lur ~i~
values and then, to work out a new price list on their basis.
this ja not done there raay arise conaiderctble deviations in the
evolutioz] of prime casts of cart iron deviatjana caused by i
proper arr~n;gent of iron.ore prices and not by any chances in
the efficiency of the biaat-rurraace process,
~. Prices ?a Steel and Iron Sara and ~?10 steel Sera
&juivalent relationship. Irtde; of equivalent relation-
ship . :.mac of equivaien cy o Scrap sales prices . Scrap an
Cofnodity, . Utiliza tiw; or the law of Value to intensify
scrap coUectjon. Bole of price in transition front individ? r,l
to collective scrap co1Icti,on. Loco ?ind frsnco prices.
Prices of Scrap purchased from industriaj plants. Prices of
alloy steel scrap.
This section will discuss the general principles of a ui.va.lent relatioxaehip, These may f the a wide application not onlY In
the metallur y of iron or noxrferroue metals but also in a nwanber
of
other branches ?f industry. The example of scrap will be used to
discuss also the price $yatema incorporating a aolution of t
Prob
lem of taking into account the difference between the eco cc face.
tors considered when determinjng scrap purcbaae pri,cea and thooae
considered in salea prices.
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In the production process steel and iron a e fulfill a role
ai ila~: to that of pig iron as they are among the major ccnponerats
0:1: the furnace metal charged, Scrap may be ;supplanted to a certain
degree by pig ircu) and conversely. From the vie point o?' utle
value a. certain equivalet relationship exists bet'reen p iron and
scrap, The relations between the prices of pig iror) and acrap and
among the price cf diverse kinds of ;scrap ahouid exre this
equivalent relation$hip MTh scrap 3] es prices, Qnd hea ce tip
prices according to which scrap is included in :lie grime cost$ Of
productions should be based on a reIationthip which nay be traied
equivalent and e~.pressed by the following #or ula:
P w Se
?'cx(
where,
Sc :; index cif ecruivaient relationship;
PC : basis of relationship (price of basic product on which
the determination of relationship is based, in the case of scrap ~.a
price of standard pig; iron having t specific comical composition);
index of equivalency (expressing the ratio of utile
values in the process of production or consumption, s counted in
natural unites between 2 c *mnodities ~- the basic e n nodity and the
one whose price is to be co~aputed from equivalent relationship; an
the case of scrap this concerns metallurgical value of one t of
scrap, ir; relation to one t of pig iron;
F * price of ccodity calculated from equivalent relation..
chip
The index u equivale~at relationshjp ~Se} hingea aliso on the
postulatea adopted for a given star of the eccmanic level nt oi'
the country, Thia ie because the level of that index decides whether
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and to what degree is it profitable to replace material with an W
others thus this is one of the economic incentives affecting rewa
ductinn in the conauniptiori of .-a ?ce ateriajs, Up till 1955,
c?usive )the Contractually accepted index for steel and it
tln sCY'tlp
wa3 set at 0 7. In practice this has proved incorrect becaua
e the
scrap prices #?xec at an irsdex of equivalency amountj,ng to O7
1
tended to obscure the result? of st :el.ap ~n , operatjoOw ,n .
their replacjaa pig iron with scrap the steel, pia i is could tthor on
paper a reductioaa in their prime costs aIthou actually no real
economic acco Wli:thinent a by d been dnade Luch a pricing am eme
~s nt
could got aaf tiraf y e eoura e a thrIr ty utilizatiob o scran in
steel ialttnts cUpecial.l y when bonuses were paid id for z ed,uc~3ons in
pririe cost.
in vier of the liidted opportuxities for scrap utjlizatj ;
the pricinj systeia should create conditions favorable to iaacr
ease
the percenta;e of pig iron in furnace r~etal charge and decreasing
Correspondingly txae percen-ta;e of scrap. Therefore the index of
equiVale relationship adopted in the 19% pace ii t amounts
to
If the nev systean of pig iron and scrap prices results in
an increase in the ratio of pig irc to soap in the ii9etal chai'es
of any steel plant this will not entail any increase in prise
c?ats9
and neither will any such increase be entailed in the event tint
tl4a ratio decreasea.
It is not out of questjou that in the future et c con-
s .derations may cause the iaadex of equivaent re1atione2aj to
p be .
fixed a t a level exceeding 1..0 - his vou1d a jgn j tbaa crea
tiara of
a strcmg eco ,c incentive (re srdless of the bonuses paid for
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reduct,o?a in casts) or increasing the ratio of pig iron to scrap
in furnace metal charges, that is, or the thriftiest possible con
3u1T1ption Of scrap in the production price as b
When the values of Se annd Pc are knptm, ~.t becomes very
iznple to determine the height of the sakes paces of various
ki.2d3 and. groom of nona11oy steel acr~ap. `phis is achieved by
trcnsposing the formulr..
w b
e
into:
hercfo* e the prices of i;arious kinds mnd grades of nonallay
steel. 3Ct j) 1 CaiCUiated according to these forau1as
P1 : (P x
P? ~e (Pc x )
'1L ? :e (Pc %) etc
where th : numera1~~ 1, 2) 3, ete, are used to denote individual
kind;; o:: UCJrai) Lti~ fdhe.Ir correcporidi? indexes cgtuvaiency f
T the postu1 tes for the price list of non, l1oy steel scrip
(for the year 1956) the value of Pc was aswumed to equal the price
of apem hear h furnace pig Iran Grade KI, Variety 1 (containing
1.3* of Mn) p with a s content of 0.05%, i.e., a price or 1, ioo
zlotys per ton.
The fixing o f the iud x of equiva1~acy of steel scrap is
relatively easy because it is based on Polish Stai4ards and Meas-
ures which postulate the "relative utile value o 8Icrap" ( cord
ing to Standard. Pr f H limited here ire view of
the type of purcht' ser9 reveai iteeJi frith sufficient force and
hence it 1 as to be serious:Ly con ic~ered ~ahen fixing the prices for
put chasing scrap frOci the public social or~anizutiois9 a l coop..
eritives. among others, t1th is expressed in the ratio of pure.
chasing prices of heavy steel scaap to prices of light serape
Aitlo 'h heavy scrap hw~ a nigher rietallurgical value, the price
therefor to the collectors is twice as low' cs the price paid
for light crap This is because the collection of Night scrp
requires a ruuch. greater outlay of labor ad moreover the costs of
vy ans )ortiX g it to rarebouses are higher a For instance a ton of
heavy scrap gathered by collector in a field. or frc n ruins or dunp-
ing, grouxads may coriaittt of several, or a scare of pieces of steel
girder, pipe sections, chaina, or artillery shells. Such scrap
occupies relatively little space and thus the collector is enabled
to utilize efficiently his means of trnaport, On the other hand,
the collection of a ton of old tincaria, sheet tal triers, nar~
raw pipes, or fittings less than 3 mm thick is mluch more arduous
and the cost of transporting such a. tom is much higher because no
more than aeveral hundred kg of such scrap can be loaded onto the
platform of, e.g.' an autouobile. Therefore the collector, be he
private or a state organizatiora, is paid at the rate of 103 zlotys
per toe for heavy scrap anu 250 zloty, far light scrap, upcai de-
livery to warehouse
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The econc ,c expediency of such a pricing ayi texn consists in
that it acts as an incexntive to scrap collectors and thereby sa?ew
girds the Gestic scrap resources from being destroyed by corro.
sion covered by enov, buried in the ground, etcp
It tou1d be also worthwhile to xention th t in the coux'ne of
the pazt decade the scrap purchaciz prico have changed (increa ed )
ixi proportion with tho cec i irie in the 'esoaa'ces opostwar scrap
And tiae incre
iection profitable without however involvizig any uAnecessary ex.
penditures of government funds
Another instance of the utilization of the 1rav of value to
intens; scrap collection is the introduction of az additional incentive in 1955 for the social orgaaisaticns conducting scrap col-
lective ? Block committees, parental cc,ttees in schxols, volunteer
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fire deparwt,~aet~ts, youth organizations, end other groups establishing
sc;r~p collection and purchasing; stations are paid f'or their colts
lected steel aniron scrap at a price that is 147 zlotys/ton
h?i&he:t1;an tip: price paid to privato coIiector :d furthermore
they receive s: surcharge of 90 ziatys a ton for transporting scrap
to warehouses. Th thy.,. gray the heavy steel scrap delivered by
saciai organization to a scrap ~rrehouse is p,id for at the price
of
103 zlotys/tai; - 114`7 z1 oty'i~/toi1
j ~
2501c~t;yrs~tC~n
Transport surcii r ;e e of s ton
Tri;a1 3)40 zlotya/tcAl
Whereas private caUec,tOrs are paid 103 ,1oty3 ton for h ? vy
scrap aid for delivering; ii ;1r scr .:p the socia - orgy anizatior rc
cei vei3i
ys/toys
~,dry J,5?~~~ G~ 41 ~l W.a
tt\ J1ot .f5=yM/}}i~on1l ~~ ]A7 i'. 1VA~1E ~' : , YS~97 1ot
2`/~
Trap epos G surcharge a ____ ~Clt ~ L__
T'c~ ai I.87 zlotys/tQn
Wiere~zs private co11eetors are paid 250 zIoty per ton.
If a certain social org nization merely collects scrap vith-
out delivering it, and the scrap i arehause has to use its awn or
hired means of transportation to get the scrap, the price paid, by
the arehouse to the organization mounts to 250 zlotys a t for
steel scraps lass, the price of heavy scrap (even if such scrap
has been separated on the spot into :Light and heavy scrap). This
principle is applied not only because heavy and light scrap may
intermix during their traaspoxtation and thus cause additional
costs to the warehouse owing to the necessity of reseparating tbms
a much more iUIportant won way behind the creation of additional
incentives for pre x ting the aocial organi tione to deliver
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themaelveF3 the scrap they collected. This is because a scrap ware
->
house has limited tr?inaport possibilities and thus, if this pricing
system were nQt applied, the scrap collected would have to wait
L,1onth be:"ore being delivered to the warehouse
- uch a scrap purc}isii!g price syster~ creG+tes further incen->
tines for the emp1oyceu of scrip warehouses They bect~e interested
alga scrap transporting bec :u e the light steel scrap collected by so>ciao. organizations is purchased frsx the warehouse by the interested
party (A s3tee1 plant or a storage center ' the Central Board o?
scrap i~1a emelt ) at the price of .9?' zlotys a ton plus 90 1otys
as ctm ens Etion for transport, or ktitogether 587 zlotys per tc a~
Hence this 587 zlotys a tou includes (ithen scrap is delivered to
the warehaus e):
97 zlotys/t paya`ner1t to socii organization, for scrap
90 zlotys/t .,.. reiinburseue rt of trzynapart costs to socia.1
. organization
100 zlotys/t -~ warehouse profit rriargin to coyer its storing
costs and the costs of transporting scrap to
railroad station and transloadi.ng it onto
frei~ht cars
Total 587 zlotys/t
or (if the warehouse used its own means of transportation to convey
scrap from collection stations):
250 zlotys/t -- payment to social organization for scrap
g? zlotys/t -?> transport surcharge collected by warehouse
loo zlotys/t >- warehouse profit margin
111.7 zlotys/t -~ additional warehouse profit (partly assigned
Total 587 zlotys/t
to cover the increase oosts of transporting
light scrap
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thi 3 Way both parties have been imbued. with interest in
to trunaSporting of lcrap
The new scrap purchasing prices paid to loc i organlzatiO1)
tiay result iz3 a gratw.1 & aint tion oall wcrop collection by these
or 3i izations snd thaw a par~"aia.3. e1.iiaiiraution of private colectoro.
This will hoc ever take place yo1ely th.n to the creation oy eco
nctnsic incentive; and not through any a atni tr ttive decree beau e
t prices pai i to pxyivate ca13 ccta i h:.ve not been reduced a.arFd.
neither lave their right
been r+estricted, in any gray. this way
the p?Yob1e6ii of ocia.'IiZiti F7crCi.p co11ecViOi i11 be io1vd without
ha apering the teria1izatiora o important goals on the sector o1
;3ceap deiiv :cries.
Th price list wrOVides fQr tae rtght of socil org; nizati?ns
to paz~. a.: ?,L' ;e ; cr p from priv.te cO1ic:ctoa'3 i'o:i 'rro purpose off' reale
to 3Cr ap i :.re index of direct relationship (expressing ratio oi' price
of &zven product to its prime costs}
The price of given product reeuLt3S3F' from such rela-
tionship amo n is yo:
The direct relationship index for refractory raw materials
of dcanestic origin emounts to 1.05 (prices for 1956). This signi-
fies that, in addition to covering its prime costs, the sales price
of a given product also inaures a 5% profit. However this index
has not been applied to all the prices of supply-'investment goods
determined according to the principle of direct relationship. Very
often the direct relationship index has been aastmaed at 1.0 and in
some cases even at a lower number. Of course this happened when
ever circumetances made the obtainment of profits impossible or
resulted in the expectation of losses.
.. 37
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A calculation of the height of prime costs, which is to be
the basis for fixir! the price of a specific refractory materis1,
is genera1Iy riot difficult, because hire the problem of average
prime costs is, in principle, absent.
Various refractory c1-ys, quartzite, quartzite elates, aid
other rth erals deriving frcan diverse regions and diverse mines in
a given region, display a- in addition to their coon traits ->
specific properties affecting decisively the quality of minerals
and the feasibility o?.' their extractioi'~ Therefore the refractory
materials s price list specifies individual ,nerals not only ac-
cording; to rind but .,lso to mine of origin.
The problem is not exhausted by stating that the prime costs
in specific mine should be used as the prime costs on the basis
of which the price of a given mineral is deterr ins ble . It is to be
added that such costs should be of s planned nature and not of a
resultant one because otherwise it might happen that the height of
prune costs adopted for determinbg the price would be based on
specific and unrecurrsbie circumstances arising for subjective
reasons during some given reportin?; period..
&1pht~si3 is deserved by the fact that if a mine extracts re~
fractory raw materials of differing properties and differing classi-
fication the accounting of the extraction costs of each of such ma-
terials is conducted according to identical methods and indexes for the purpose of determining both the planned and the resultant
prime costs. This axioms affects the method for determining the
prices of diverse kinds of refractory materials extracted in a single
mine. It leads to the conclusion that the prices take into account
to soave de,ree the utile value of appropriate grades of a raw
. 38?
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materi]. extracted in a specific xitne. This is of great econcmic
importance because it creates incentives for the extraction of the
refractory raw materials having a higher utle value..
A].3 these principles have found applicatio when determining
the 1956 prices of refractory raw materials r It is to be only added
thi2.t when the prices of the cla.ya extracted in the Strzegon region
were being deterrdneGi the coats taken into accoun t were not the
costs of individual mines but the average costa of the enterprise
ac a whole. The same pertains to the Rolesiawiec quartzites
Direct I?elationship can not only be used to compute the
prices of th era1 in row state, it can be also applied to roasted
rainerols ant to refractory material products such as fittin s (uni~
versa1-use stra ht fittings and keys, str uighta and keys for spe~
vial use, ailed products, batches, arid fireproof masses ) In this
case the expedicx~cy of the ppiication of direct relationship ensues
from the ;bove rentioned thesis th t the heirF of the carte costs
of refractory x:ateriais revealu aevhat the degree of their scarcity
in national econ~yw
In a majority of caaee similar or even identical refractory
products are manutactured by a. number of enterprises subordinated
to the Central Board of Refractory Materials Industry. Hence there
arises the buoying problems which prime costs should be adopted
as the basin for determining the price of a. given product
the
costs of average weight products in all enterprises as a whole or
the prime costa in enterprises selected us standard?
This problem is of a universal cherecter. it arises wh> ever
the price of almost any means of productic has to be determined,
w 39 M
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'4,;
and so far it has not yet been eolved. Thus there is nothing sur~
prising in that varioue solutions have been applied in practice.
It appear that the optimal solution would be to determine the prices
of means of production on the buds of the prime costs in the plants
selected ae standard planta
Let us attempt to study this problem by reviewing ran exaanple
taken fran the refractory materials industry
The po=stulates for deter?ix~ing the prices of refracte17 iia

terial cost, which appears w ong pia is bec&use the differences
in the technological facilities of plants and also the varying share
of each plant in the output oi' given products might be inadequately
expressed in the fog of average~reighted material costs, as then
the scale of dif'ficu1ties in the execution of individual products
right not be revealed clearly enough. This may be illustrated by
the following example .
Three plants r>anufacture various kinda of fittings from re<
fnictory materials (in the table below these fittings are deai~nated
by letters , A, and C) out of identical raw materials and according
to identical inepection norms per ton of fittings. However the dif-
ferences in the quality of technological facilities of each of these
plants, and other objective factors, cause the prime costs per ton
of given type of fittings to differ in each of the plants o Let us
now conoider that, in view of the varying degree o difficulty ix
the executiann of fittings in each plant the unit costs (per ton ) of
fittiuga A, 8, and C, niay be expressed by the ratio of 1:1.5:2. At
varying shames of theae p1 nta (aa envisaged in the yeer1y plan ) ii
the production of fittinga !, B, acid C the average ighted unit
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Plant I
eanec3 P].a:,nect
Output, Prime
in Thou- Costs,
sands of in Zlotys
#1&t qB Per `Pnn
A
B
5?o zoo
3?a 150
2.0 200
10.0
Plant II
'l ied ~ :i "
thxtputr Prime
iI} Tilt- Co ta
sand,3 of ir; Zlotys
'tons Per T on
. ,..r.,r -
a
30
t30
20 120
10,0 160
III
?1 *rn
Planned
ep.
Output, Pr
ire
in Thou. Cost s
sands of in Zlotys
tons Per T
120
...o 2`Y0
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d
Phi *Dae
Out ut
ix T -
&.nd o:f c
Tors P
-I ?i-rr
r..
;? 4
X57
2
172
7
_J : ? Ic giidf
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If the prices of commodities are determined on the basis of
their prime coats thi8 problem may be solved by means of the follow-
ing 3 methods.
(l) Prices are fixed upon taking into account the unit costs
of the plant with the highest productive capacity.
(2) One of the plants is selected as shndard plant. Tn
such a plant the unit costs should be at a level that is moat ap-
proximate to the average level of cons (on the scale of the branch
of industry as a whole), whereupon such unit costs are used as the
basis whereon to determine prices.
(3) Prices of indivjdual products are determined upon taking
into account the average..weighted unit costs for a given branch of
industry as a whole
The results of the adoption of any of the above solutions
are illustrated in Tah1e 3 (to simplify this example we asaumed the
direct relationsbjp index Sp to equal 1.0).
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TABLE 3
ice Aq,~la
!t Cwt in
1'3att With
t Pro-
Wt5ve Cs.
Prcitit + or ypsi
(-) in Zlotys Per
Tan of Output of
Given Product
P2aat Plant Plash
I II XLI
_30
120
16c -40 -- .8a
Method III
Profit + or :.a}a
Price Psciual$ (?) in Zlotys Pier
Average Tort of Output say
Weighted Given Product
Unit PrSane Plsnt Platat P118n2
Cost r u
3
'5?
+l$
+7
t37
172 -28 4-12
iiethod II
Profit t or Loss
PPj.CE Eq1:8.~.9 (4.P) j.D 7..Z.Q'Gy#} Per
Prime Cost Tar., of Output of
of Plant Given ?raduct
Y73zh Average Plant Plant Plant
Cost _ I II III
y
100 ~- +20
150 #..30
200
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1t us first study the results of the adoption of Method III,
The u1ts acldeved by the individual plants viii not show
any regularity even though such regularity may occur 'nth regard to
prime costa, Although the prices may cover the x eaxi weighted costs
o:i the branch of industry as a whole, they do not reflect the prime
costa of any specific plant n This causes a grew; divergence amor g
the indexes of profitability of the rnax ufacture of iw~divjdual protl
ducts in diverse plants, and moreover such indexes axe not the ef-
f ect of any definite economic policy but are rather the rewuLt of
the actun.1 distribution of production goals among the plants at the
time then the averse'-weighted prime costs are being determined
As a result improperly acting eCOnomic incentives are prcuaoted which
cannot but exert an influence on the implemexatation and, especially,
upset the p1ai for the range and variety of production,
Fro i Table 3 it nay be seen that the manufacture of Product C
Causec the greatest lasses or the smallest profits to all planta .
Hence it is nothing surising in that the plants will, insofar as
possib],e, shirk the manufacture of Pra.uct C o7r desist from over.
fu*flhifg the plan with respect to that product. On the other hand
they will be very interested in manufacturj g chiefly Product B zic incentives act in a contrary trend a
If Method I be adopted for detez pining the costs to serve as
the basis for price fisting the results would be rare favorable? In
this case prices will cover the unit casts of producti,aoi of all t
range oi: pro. ucts (manufactured by the plant with the highest pro.'
ductive capacity) Thus, 11 necessary, that plant y increase its
output of the product that iiay prove more needed in nationa1 econoaay
without thereby in cur i ng 1os 8ers w In the other plants the price
level would not either be them ~a. factor retarding the fU1fi11X1ent
of the plan of range and variety of output, even in cases when it
is below prime costs (as seen in the above cited eacamp1e ) because
the extent of :ins s per unit of cost will re~iaa constant value
in indivith'al products. Of' course this t&tes place only whenever
as in the above cited e~amp1e .'- the wait costs o? individual pro
ducts are identical or sii i1ar in the plants concerned. Appearances
to the contrary however are not rare . But even when the ratios of
unit costs of various products are expressed in differing figures
is various plants, the use of the costs 01' the plant with the great-
est productivity capacity as the psis whereon to determine prices
aafeguarcis, as noted before, the fulfillment of the plan of range
and variety of output on the scale of ind.uatry as a whole.
What are the negative sapecta of this aolution (Method. I)?
If the plant with the highest productive capacity manufac-
tures more cheaply than ite eister plants, the baaing of prices on
the prime costs of that plant would cause lasses to the sister
plants and thus the entire giver industry would become unprofitable,
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which 313 withal an undesirable pherxca nenon . r still wore situation
would arise if on the contrary t1e coats in the plant with the hijh-
est productive capacity here higher than in the other plants (as
happens in a e brunnches of industry). ?hereupon the entire branch
of industry would indicate high accumulatiorn which actually would
be equivalent to the pim>prixain of the funds from other state
enterprises or off' the fuzds sired for coverage of tnvesthent
projects (a in tip case of the refractory materials industry)
For the above reasons the best ; o1ution wou34 seem to be the
adoption of Mete II: the basing of prices on the unit coat of ~).
plant selected as standard, i,e., a plash in which the costs stand
at a level that is average for the given industry as a whole Of
course the plant selected should be the lamest or one oi the largest
plants a Such a solution, by combining the advantages of Methods I
and III, would at to sane time eliminate considerably the negative
aspects of these xethodsm By applying Method II industry is as -
cured. of having its production costs essentially covered and at
the acne the the distribution of production targets does not exert
any influence on the relationship aeon the prices of diverse pro-
aucta
However the determination of prices of refractory materials
in 1956 was based an the worst of these 3 solutions >w the average
weighted unit costs, The desire to lig4dote losses in the refrac>
tory rtteriala industry owing to a too law price level had prevailed
over other considerations. Thus the problem of the proper interre>
lation of pricee has not been worked out ccsnpletely,
Honetheleas the issuance of a new price lint for refractory
materials constitutes a majar stride forward. This is expreaaed
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chiefly in the circuraatance that, first, prices were coif ferertiated
accordi>ra; to quality of products and, second, a principle was intro,
duc@d to the effect that defective products (prouucts riot c :tisx"y,..
ing the qualitative requirements adapted in the official state
standards) may be sold also but at a price 3c lead tin the price
of ;ood waua1 ity products
The prices of seconda17. ua1 jty products ~?re 15 :lacrer thin
the prices of the correspondinC prixary~quaIity products (here the
termino1 used. is rox+i the price iist of refractory ma.terial?
where the term "grad&? i.3 interpreted in a $a~ewb:t different way
than it other price 1ists) . This iu very disadvanta eous to piaxits
whose output includes i large percextage of 3econrhary t uaIjt )ro'
ducts, especially considering that th prices determined on the
basis of direct relation hip according to the foz iiu1a p K x ;3p
pertain to primary quality products,
It is t .O be eraphas jz j th:it thi principle bas foul cl a de
spread application also in a nunber of other price li_.ts which prop
vide either for the e?-c81ied percentile discounts cu3 sales prices
in the event that the proper quality of a product i.s not maintajned
or for a differentiation of sa.1es prices de~erc jn on the quality
of products
The principle that defective products may be siarketed but at
a price 3o;;6 below the price of reuiar products is of 2..fo1d, iui..
parta nce to national econca y. On the onne hand, it is a stye
against inefficiency, through stimu1atijg reforma in einterprisee
whose output includes a major percentage of defective products,
and on the other hand it facilitates the mar t g of defective
products by enterprisoe poeing sma11er requirements regards t
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lied refractory materials. In t]:ie past dei'ective
qiualtty a:i: the .pp
products were regarded as scrap to be used in the rnanui'acture of
claotte products Accordi1 to the new price list the prices of
efraCtortittin s derivinL 'rsmt the dis ntlirl of old u~tce
r,~ ~
," also 30% laver that the prices o~ articles oi'
~ irebo~+es s etc ~ are good duality derivin~
iron regular protuctiQX3 Tbese itti s must,
s cif'ic qual.itative requirents~ trtherta?se
of course, satisfy
rded as scxap and priced correspondiM&ly raurh lower.
they are r
or) of the ricCS of refractory materials cannot
.f+, cliscua.i
'blem o:?' dete'niniD the priCeai Of imported ref raC<
overlook the ~ pro
a'~ : The vapid development of polish ~a;Auatryg espe`
tort ma~? ,e~.1~.
? a uat neceSs'tater~ the importuti0 of a certain
i Is/~.~te Y~~ the t
af p
of ."~;/. " ~ `~eri~sls frsu ?UJ.FJili, .L
C~ua~7 t~. tJ of xt~~. ~ ?~c.~,o~'y rya
.. their a ne$tiC output anc. in their quality.
mendou:~ ~~:?o:dr~a+ a~i
The beat solutio~a would be to bt se the prices of i iported raw
acts (prices paid by a dor.1estiC cuat~ner to the
~iate.riai~~ axed pxvd
l trade ?bu eaU) on he j~rincipiC of equivalent
mppropw~ z~~te ~. orei~
e r as possible If this principle be r,.dC )ted
nr
rl.at~.anship ~ insos
the do'c1eStiC price of ua~ forted refractory .terial will be es
same as the price a an identiCal dcnestically mau~
sential.l,;y the
. If however a liven raw material or i"inished
factuxed material
product is not ? auuf8Ctured ,i esticfillys to danestic price oi'
~
s determined upon app1yiflk equivalent reo
the ~-?ported ccodi 4y i
lationship to the price or a, dtnestical~y i~aa~ui'aCtuxed cpmUtcxditY
that is of the mOst a ?lar nature, upon takiI3 into account the
quiv tics betwee2 the utile values off' both Cam "
?
e~'~' index
ties ) . This principle applies not only to re~xactO 7 materials
also to other impoz'te mks of productio S
but
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:t: the determination of the prices of imported refractory mw
mtteriais i riot based, on the princtpie of equivalent relationshil),
there ray occur a distortion off' the reDitionulhip among the prices
az" products3 which are partly u~anufactured fran domestic xnaterialr~
and pc,rt11 from imported ones. A iriii1ar situation would occur
with respect to finished refractory products imported froau abroad.
The ignoring of the utile value of imported products in relation to
domestic products, when determining their prices, could cause the
purc masers to acquire chie'J y i ;portcd. products (if t" it prices
are fixed at a low 1evei ), or it would cue ar invoiuntary rise
in the e~gendit ures of the enterprises supplied with ixapor ted prom
ducts (if their prices are fFLed at a high level).
It appe s t1? t the dol3estic prices 0? I1 imported rearac~
tor4, r,r terik ~,u i:ay be eeeentinlly determined or she basis of eruiva>
lent relatiohip Q This is becuuBe, in prir~cip1e, all refractory
iiateriL*ls serve the s ine purpose: protection of diverse facilities,
equipment, a;nd plant K asenbxies frorn the, destructive action of high
temperature.
Casea when eciuivalent relationship it not applicab].~ to the
fixiiig oz' the prices of imported cominodities ..~. and when therefore
it is necessary to adopt other solution>w viii be discussed in
the chapter on nonferrous metals.
+.rce~ of Qther off' Coaodities
Coke. Coal. Gas. Prices versus scheduled rates
Among the probieme toi shed upoi in this section the perm
moount one is how to conduct accounti o~ c +UVOies when the prices
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of cone minerals are so differentiated that a proper classification
of a given delivery according to the price list requirea prior
laboratory analysis, which in practice is not feasible owing to
various reasons. The lack of a solution of this problem hampers
(e.., in the case of fluxing agents) the coneideration of the
factor of quality in the prices of certain ruinerala v It appears
that a method of accounting for coal deliveries may also find ap-
plication in many other cases and may considerably lessen the above
cited dfficulties.
This section a100 corita ins an attempt at pan explanation of
the difference betireern the concept of price and the concept o?'
scheduled ante.
One o:t: the principal raw materials of ferrometallurgy is
gal&-ast furnace coke which fulfills 2?fold role in the pig iron
production process.
(1) It furnishes the heat necessary for liquifying; the
blast furnace chsrge and reducing the iron oxides contained in the
ore.
(2) It makes possible the obtainment of metallic iron, be-
cause during the reduction process the carbon (C) contained in the
coke combines with the oxygen of the ferro compounds contained in
the ore.
Blast furnace coke should contain the highest poasible per-
centage of pure carbon (C), and the least possible percentage of
other componenta, especially of ash which affects very adversely
the results) of blast furnace operation. According to various em-
rical data every 1.0% increase in the ash content of coke (above
pi
50
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the 9.0% limit) causes a l.5 uu2 . qincrease in the outlay of coke
per ton of pig iron and a proportional decline in the daily pro-
ductivity of the blast furnace.
The extert of coke consumption and. blast furw ce capacity
are most adversely effected by the degree to which the sulfur cox
tamed in coke penetrates the pig iron ? The chemical ccanbiraing of
this sulfur Find uniting with slag requires additional dosages of
f1uxin& agents and coke, and this also lovers blast furnace produc-
tivity. The indexes of increase in outlay of coke in kilograms per
ton of p ire gat a 0.1% increase in the sulfur content of coke
ere as follows -- according to diverse f~uthors. (See Tee x!
Technika na rok~?1,,,,~, Lecician Manual for 1957, ` , issued by the
i4ain Technica.1 OrgaDiZation, i95, page 150 ~- data coripiled by N.
Krasawce'J. )
(a) According to L. Uiicki s
17 kg at a coke with a sulfur content of 1.67 '2.17`
10 kg t a coke with a sulfur content of 1.17.1.6?
7 k; at a coke with a sulfur content of 0.67-1.17
(b) According to . Ootlibs
15.20 kg at a coke with a sulfur content of over 1.5%
5.5 kg at a coke with a aulfur content of below 1.5
As can be concluded frown the above, the sulfur content of
coke exerts a tremendous influence on the reaults of blast furnace
performance.
The quality of coke is aleo adversely affected by its water
True enough 1$rogen (whether previ?uely cvmnbioed with
content .
carbon, or with oxygen .- when it creetee Ho) also participates
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actively in the reduction of iron oxides but, on the other hand,
this involves tremendous conaumpt Lon af' heat (and therefore coke)
necear~ary for the prior deco?npositlon of water contained in coke
into free hydrogen and oxygen. Therefore blast furnace coke should
not only have the smallest possible content of sulfur and ash but
also have the emaUest passible content of water.
The quality of blast furnace coke is affected, besides its
chemical compoaition, by its mechanical properties. Blast furnace
coke should not be crushed inside the furnace by the enormous bur-
den of charge materials (weighing several hundred toom in the laser
parts of the furnace ) a$ it would then hamper a free flow of re'.
ducing gases, axe: hence it should display appropriate strength
which is defined by 2 indexes: hardness and abrading quality.
Tn view of the flow of gases in the furnace the degree of granu-
lation of coke is also of some iriport~ance to the blast furnace
process.
How well have these factors, decisive to the quality of coke,
been considered during the determination of new prices for 1956?
These factors have been considered only partially. Blast
furnace coke has been divided into 3 grades depending on its me-
chanical properties and 1 groups depending on its degree of granu-
lation. on the other band the sulfur, ash, and water contents have
not been taken into account. In this way the relationship among
the prices of various grades of blast furnace coke does not fully
take into account the utile value of individual grades. Under the
present conditions this cannot influence considerably the purcbaaer'e
attitude, as he is cc pe11ed to receive whatever coke may be de-
livered to him by 14a purveyor (because coke is a scarce material).
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Nonetheless the lopsided interrelationship of the prices of blast
furnace coke affects adversely the purchaser's econarnic accounting.
Inasmuch as prices do not reflect the quality of blast furnace coke
the purchasing foundry may involuntarily incur either an increase
in its prime costa or a seeming decrease therein. The latter phe-
nomenon will occur more rarely because such an interrelationship
of prices is not a factor mobilizing coke-plant personnel in the
struggle for raising the quality oi' production. True enough the
sulfur and ash contents of coke hinge preponderantly on the quality
of the coking coal delivered by the coal industry to the coking;
plant, but the coking plant itself may exert a decisive influence
on the water content of coke.
The principle that the purchaser is entitled to reject a
coke delivery if the water content exceeds the standard limit is
not an adequate measure at all. First the purchaser is partly in
a position of pressing need which compels him to accept coke reW
gardless of its quality, and second, coking plants have no interest
at all in reducing the water content of coke below the permissible
standard limit, although this would improve considerably blast
furnace performance. At the present situation, in order to facili -
tats the fulfillmei,t of their production plans, coking plants are
not going to spare any water when quenching their coke (especially
at wet quenching).
It seems that a future revision of the pricing system should
consider the problem of the quality of blast furnace coke as fully
expressed in the interrelationship of the prices of diverse grades
of such coke. Here use may be made of the conpoaite relationship
method which will be described later on in a discussion of pig iron
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prices. Also it would be advisable to use the prime coats of a
atandard plant as the basis for determining the price level instead
of the mean weighted prime coats used as auch basis in 1956. This
is because the considerationa applicable to the prices of refractory
materials are equally valid in relation to blast furnace coke.
A discussion of blast furnace coke necessarily entails a
mention of its original raw material, namely coal.
As is known coke is obtained through gaseous distillation of
black coal. however not every grade of coal is equally suitable
for processing into coke. In view of the df'ficulties in supply-
ing coking plants with sufficient quantities of high grade coking
coal, use is made of mixtures of various grades of coal. The best
grades of coking coal are used to enrich such rlixtures. In this
connection such enriching best gxwades should be used as thriftily
as possible, and hence their prices must be so determined as to
constitute xajor factor in their thrifty consumption. The 1956
price list expressed this principle by fixing the prices of the en~
riching grades of black coal at a much higher level ththe prices
of the coy+l consumed for power generation purposes.
In Poland the cost of extracting the enrichizag grades of
black coal is generally higher than the analogous costs for other
grades of coal. Nonetheless the application of the principle of
direct relatixnship to coal prices would not be justifiable. This
is because geological conditions cause the extracting coats of in-
dividual grades of coal to be of a quite accidental nature. The
struggle for coal savings should hence be concentrated on the sec-
tor of reducing the cosumpton of the grades of coal that are moat
valuable and also most scarce and not of those grades whose extracting
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costs atcnd at the lowest levels under epecif is conditions, But
even if the extracting coste of the enriching grades of coal were
to be lower then the analogous costs of pover~genersting grades of
coal, the prices of the fox er should be higher than those of the
latter.
As can be concluded f rc the above, so far as coal is con>
cerned the most ppltcable principle would be th.. t of equivalent
relationship, as discussed in the section on scrap.
Through a proper aligning of the equivalent relationship in-
dexes (se) it is possible to exprea~ certain definite trends arisin;
in natiopal econcny. For instance in order to increase the incen-
tives for greater consumption of slack and low-grade coals, their
prices should be fixed at a lower level than they should be consid-
ering their caloricity as canpared with other grades of coal, On
the other hand the equivalency indexes () should not express any
trends of economic policies but should rather express the objective
factors affecting the utile value of coal, such x.s caloricity, chem-
ical composition, ash content, content of volatile constituents,
and so forth.
One might risk propounding a thesis that the correctness of
the relationship among the prices of diverse grades of coal hinges
decisively upon whether the equivalency indexes have fully taken
into account the most vital. parameters reflecting their uttle value,
and that this also depends on the pertinence of the assumptions by
which we were guided when determining the indexes of equivalent re-
lationahip?
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The ecanowic significance of thin problem is obvious even
if only frona the attempts undert -ken by the coke?che uical industry
to reduce its prime costs by uaing the cheaper grades of coal in
the mixtures charged into coke-oven batteries. The most recent at--
tewpts to use coal of the power-generating type for this purpose
have been crowned with complete success and. have resulted in a
major reduction of casts in that industry.
Aside from the deteruination of proper prices for diverse
grades of coal, another very important problem is a proper pricing
classification of the coal extracted fran diverse strata in indi-'
vidual mines. It would be practically unfeasible to analyze, e.g.,
the chemical composition of every coil delivery, and therefore coal
is clr^seified according to its site of extraction. Such a practice,
which, true enough, facilitates the accounting between purveyors and
purchasers, causes the latter to protest against faulty deliveries,
and often With good reason. An improper classification of col-'
lieries may limit considerably the efficacy of even the most ra-
tional postulrates adopted for determining coal prices. In addition
there occur changes in the classification of collieries, and such
changes upset the financial planning of the purchasers who suddenly
have to pay different and often higher prices for the same grade of
coal. For these reasons it appears that any changes in classif ice -
tion should be carried out solely in exceptional cases and even then
the purchasers' interests should be considered as greatly as posaible.
It is also to be mentioned that the adopticm of the principle
of equivalent relationi~hip does not conflict with the trend for fix-
ing coal prices at a level that would insure the profitability of
coal industry. However to aeve this it is necesaazy, after a
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prior determination of the prices of indjvj ual coal ,fides, to eeti-
mate the value of the over-all output and, if it is found tht value
differs by a, specific percentage from the over..all suz of the prime
costs of marketed output, the prices should be commensurately re.
vieed.
Fluxes occupy a place of no small importance in the blast
furnace process. They include limestone nd dolomite. The purpose
of fluxes is to create the prope? balance 4Si - A1203)s(Cao + NgO)
in blast furnace slY.g, tint is, to bring the b ..sicity of the slag to
the proper degree. Without fluxing agenta the blast furnace process
would result in the appearance of irc silicates in nearly all the
ores charged (save the self4luxing ores whose gangue contains
great quantity of bases), and these silicates are reducible only
with great difficulty in the absence of calcium or magxesium oxides.
Fluxinggents also fulfill another iwportant role by decreasing .-
through decomposing; iron sulfide and creating calcium or magnesium
sulfides which combine with the sllg the sulfur content of p
iron.
The quality of fluxing tiger is depends on their chemical com-
position and degree of granulation. Silica and clay (~:ontained,
e.g., in limestone) act negatively because then additional doeaee
of liznestone and coke are necessary for creatix g s1ag. Limestone
slack having a granulation of less than 2~ mm should not be used
either. This does not mean tbough that the greater are the lumps
of limestone or dolcsnite the more suitable they are. Large lumps
of fluxing agents are undesirable because they disturb the regular
performance of blast i'urnace and require a greater outlay +cxL' coke.
M 57 .
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Therefore these factors should be taken into account when de>
tennining the prices of limestone and dolawite. However both these
raw ;xaterials are also used in the production o bindir materials ?~
in relatively greater quantities too. In the binding materials in>
dustry the lumpiness (granulation ) of a charge is likewise Of great
iiiraortance but there the chemical coznpusition of the above mentioned
materials le of much less importance o the fact that the 1956 prices
of limestone and doloidte were determined concurrently with the
prices of binding materials has exerted some inf luebce on the rew
lationship arapng the prices of various grades of these ruateria1s
These prices were fixed chiefly from the viewpoint of the degree
of granulat?on, am:s without taking properly Into account the in-
fluence of the content of silica or clay on the quality of 1imeM
stone or dolomite. The major factor considered ir3 fixing these
prices was the prime costs of extraction and the costs of granuia.
tion and sortinga Thus, for example, the price of small-lump lime-
stone with pieces hsving a cross-section of 5 to 15 cm amounts to
30 zlotys a ton; for r~edium
sunne is received by the steel plants from their own coking-oven
batteries, gas flues, and blast furnaces. Nonetheless considerable
quantities off' gas have also to be acquired frcm the outside by scene
plants. Therefore the prices of the consumed gas fulfill score role
in pTOceaeing cuts.
.~
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Ga3 is sold to steel plants accordtrg to scheduled rags sand
not according to prices r Uere we are dealing with a schedule of
rates and not with a price iigt. It would be difficult to supply
here a complete definition of the scheduled rate, However a brief
definitiar of that rate would be pertinent.
Prices usually pertain to raw and other materials and a'nished
products of all kinds, which can be stored and preserved for sar;re
tune, tht>at in, to mecanr which can be stockrpxled for th future and
whose consumpticn in the production process raay occur c?ter thy;
elapse of sane time cl n ce the x ornes~t of their delivery e
& hedu1ed rates , on th other h and, pertain irr principle to
products (rind :cervices ) consumed At the moment of their appearance,
and hence to tmnaportation services,.nd to various forms of power
such as electricity, rater, stein, and the like.
The above proble i is of great ecoriornic importance. There-
fore the postulates adopted for determining scheduled ratec often
differ frthose adopted for determinibg prices. This is ex-
pressed no others in the privileged treatment of certain pur'
cba ers ard chiefly in the differentiation of scheduled rates de-
pending on the purpose for which r purchaser conauaec the parer
supplied to hin, = For instance one and the same load of gas when
sold for illuminating purposes is priced at a different rate than
whets sold for heating purposes and at a dill another rate wben
aold as raw material for production (in chemical industry),. Sched.
uled rates urged for power coned above the assigned limit are
higher then rates for power conaumed within the limit ? Thd achedulee
off" ;rates for parer super provide moreover for c1 az in y i er ra,tee
or rewardin the purchs.sers who contribute to the most tbr'L`ty
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utilization of poster. `fie is expressed in the schedule of rates
for gas aupplieu where the rates for excess coking gxs Mre much
lower This is the gas which rou1d. otherwise be burned in the sop
called 'ttorches" on Sursdays afld holidays owing to the then reduced
demand for gas in order to prevent it fry polluting the air if
liberated. Incidentally it is to be mentioned that the schedule
of mates for electric power contains similar provisions, e.g., re~
duced rates for subacribers consuming electricity at night outside
of peak hours, reaates for high cos, etc
The tund(;iIflent1 purpose of this rate policy is to ar .? x~ge
the scheduled rates and rate deciaiolla so c~ to utilize cost efp
ficiently these ?orrns of energy in nationaL econO 1y cox dering
that they duo cannot be stored.
The previously mentioned scheduled rtes for as pain
of course, to rates charged to the purchasers who use it for proM
cessing, heating, or j11uminating purposes . However it must be
also explained that a as producer bis to deal with a different
kirad of contract3n party, namely the gas industry, which receives
gap, eventually purifies it (coking gas ); and distributes it through
a network of pipettes to vrarious puz sers. here the gas industry
ip a middlerUan between the gas producer and the gas purchaser (aside
from the fact that thin industry itseJI is also a gaa producer)
Hence there ariaes the question whet price (here we mean a
pace and not a scheduled rate because thi.a term is cuatcinarily apw
plied in relation to purchase frc~rn the producer) should be paid by
the gas industry when acting as the middl? In order to deter..
mine the purchaaimg price pble by the gas industry it is first
necessary not cnly to determine the level of profitability of the
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gas industry but also to solve the problem of the price of excess
coking ga. s .
Beginning with 1 January 1956 excess gas is sold to units
of socialized economy at a scheduled rate of 6o zlotys per i,ooa
Cu m. To insure the profitability of coke-chemical industry the
purchasing price of coking gas payable by gas industry has been
fixed at 210 zlotys per 1,000 cu in.
This entails yet another question. Is it right that the
gas industry, as a distributor, should purchase as at the price
of 210 zlotys per 1,000 cu in and resell it at 60 zlotys per same
volume just because the question whether as is excess or not can-
not be settled until after it is sold to gas industry by the proy
ducers?
Hitherto gas industry used to purchase excess gas from the
producer at a higher price than that charged to the ultimate pur..
chaser. This was because of the opinion that gas industry in its
capacity as a distributor exerts some influence on the rational
consumption of gas for heating purposes or in chemical industry
(in the latter case gas was sold at normal scheduled rates),
It
was also believed that the coke-chemical industry should not sus>
tain losses for this reason and that, for instance, gas industry
as a distributor fulfills its duties inadequately and that, hence,
a part of gas will not find purchasers at normal scheduled rates,
unless it is sold as excess gas. $ovever this reasoning ignored
the circumstance that the coke?chemicai industry may, like any
other industry, have its output plans lowered, including also the
plan for the yearly output of gas. On the basis of the plans of
the coke chemical industry, gas industry maps out the diatributicu~
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of gas anci its profitability, upon cornsidering that on Sundays and
holidays a part of the gas will have to be sold at excess-gas rates.
And yet In the course of the plans' fulfillment it has been found
that as industry is furnished with much greater quantities of gas
than planned. The purchasers, having previously adjusted their
production plans to the expected volume of g~,s deliveries, cL4nnot
alter these plans. As a result there hPve arisen unexpected losses,
financial difficulties, and similar phenomena. Thus there is nothing
surprising in the reluctaiice of gas ind-uatry to accept excess gas,
so that coking plants are often compelled to burn it up in the so-
called "torcheN." This is, of course, disadvantageous to national
econcoy.
Therefore a different solution has been adopted for the year
1956. The producers henceforth are paid the regular coking>gaa
price for the gas they furnish in accordance with the plan, that
is, the price of 210 zlotys per 1,000 cu my and a reduced price of
60 zlotys per 1,00c cu m of any quantities of gas they furnish above
and beyond the plan, i.e., the same price as that charged by gas
industry for excess gas, Thus gas industry sustains no losses when
acting as excess-gas middleman between producers and purchasers.
However whenever gas industry charges a rate of 210 zlotys per
1,000 Cu m of such plan exceeding gas, it pays the producer at the
same regular rate.
The above solution may perhaps not be a perfect one but it
yields the following results.
(l) It. creates incentives for a realistic planning of out...
put in the cake chemical industry and in the coking plants belong
ing to the fer rometaIlurgical industry.
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(2 ) Ii contributes to reducing bases in gas industry thanks
to the elimination of the difference between the purchaaing price
of plan-exceeding gas and its echeduled rate.
(3) It prampte gas industry to transmit gas principally to
those purchasers who utilize it most rationally.
When speaking of gas, mention should be also made of marsh
gas which is produced by the petroleum industry. This kind o' gas
is also distributed by the gas industry. The caloricity of marsh
gas is twice as high as that of coking gas, and it is a valuable
raw material for chemical industry. Tn order to curtail the con
sumption of marsh gas for heating purposes the scheduled rate for
such gas is (men consumed for heating purposes ) twice as high as
that for coking gas.
Whenever it is not at once received by the gas industry,
marsh gas is stored in the earth, which constitutes a natural marsh
gas reservoir. Therefore marsh gas cazanot be excess gas and, be.
ginning with 1 January 1956, the gas industry ~ril1 pay for it at
the fixed purchase price of X00 zlotys per 1,000 cu in.
CHAPTER II. SATES PRICES OF TERROMETALLURGICAL .PRODUCTS
11. P. );'o.
General characteristics of pig iron. Processable pig
iron versus foundry pig iron. Changes in interplant coop-.
eration snd the prime costa of marketable output. Applica-
tion of sales prices in interdepartmental turnover. Index
Of composite relationship. Prices versus profits. Prices
of individual grades and, types ?f pig iron. Prices of de-
fective pig iron,
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11
In the field of price policiea one of the most interesting
prcblers is how to apply sales prices in interdepa.rt iental turaa-
over within individual plants. This prob1er concerns not only
ferrornetallurgy but also many other branches of industry which in-
volve, on the one hand, phase cycles of production and, on the
other, frequent cbangea in de1iveriea of aemifinished producta
s~mong individual enterprises e he often discussed problem of the
application of sales prices in interdepartmente l turnover vu3. be
reviewed here fra. novel viewpoint, on the b7.ais of instances
teen frox ferrgtmetallurgyo The conclusions t1ia may be inferred
frcma these instances can be also applied to other branches of in>
dustrym
This section will also describe -- with pigi'. ron prices as
the example one of the more interesting types of price relation-
ship, n ly, composite relationship which may often be an effec-
tive means of influencing an improvement in the quality of products
The concept of "pig iron" is construed an meaning a large
group of the baaic semifinished products manufactured through fer-
rametaliurgyo The chemical composition of pig iron contaians, aside
frcra iron, carbon and manganese, also a considerable percentage of
impurities, chiefly silicon, phosphorus, and sulf'ura Fron the
viewl)oint of destination, pig iron is differentiated into process..
able types (openhearth, Beasaner, Thomas) and castinig types (regu-
lar, special, phosphoric, Spiegel, etc ) a ;u girjals of pig inn sine
classifiable into types aaad gratea depending on chemical cgmposi.
tits. The eteel plants subject procesaable pig iron to the sinterw
ing process, which consists in burning out the harmful adiixturee
and any excess carbon< ire also pig. irons a gives a caryetaUine
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structure proper for steel. Proceeeable pig iron is suitable only
for processing into steel.
From the economic point of view the organization of produc-
tion in ferrometallurgy is most advantageous when processable pig
iron can be used b liquid state with the steelmaking department
of the same foundry in which it was manufactured This saves on
the heat (reduces the consumption of a) which would, otherwise
have to be expended on melt ig the "pigs" of iron . Therefore the
planned development of heavy industry places special emphasis on
the expansion of blast furnaces in steel plants
According to the official financial system, processable pig
iron in liquid state consumed in the steel-riaking department of the
same plant is included in further production on the basis of prime
costs. Therefore sales prices are applicable only to pig iron in
solid state.
A question may arise whether the problem of a correct deter-
mination of the price level of processable pig iron is of great im-
portance considering that its share in the marketable output of
steel plants (with respect to the pig iron set aside for sale)
should be gradually reduced.
The specific situation and conditions of performance in Po-
liah steel plants necessitate a continued complete or partial sup-
plying of certain plants with processable pig iron purch sed out-
side. In addition, a correct determ4ziati n of the prices of process
able pig iron is an indispensable requireuent for determining the
correct prices of casting iron, which in sane ways is a finished
product of ferranetallurgy because it is cc*psumed outside, as the
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charging material for cupola furnaces, e.g., in the machine
building industry. 'therefore in practice a major pert of the
produced casting iron is included in marketable production.
The factor interrelating these 2 kinds of pig iron, which
should be considered when determining prices, is that blai t furo'
nacea cau produce both processab1e iron and casting irons Therea
fore if the price of canting iron is compered, e.g., with its
prime cost, while the price of processabie iron is determined.
without cansidering its pate cost, there will occur a diatortion
in the system by 'rhich econonic incentives influence to fulfill.
gent of the plan of the rauge and variety of output. Individual
steel plants may be interested in increasing or reducing their
output of processable iron (depending on the relation of price tom.
prime cost ) at the expense or to the advantage of their output of
castiI iron; and this may conflict with the needs of national
economy. ThiB mar happen, of course, only with respect to plants
producing enough processable pig iron to supply their own steel-
making departments and still to have some left for sale to the
outside.
Hence, in view of these circumstances, it may be atated that
a per interrelating of pig iron prices requires the adoption of
e single criterion for determining the price level. Such a cri,?
terion can be only the basing of prices on prime cost.
Aa noted before, at preaent in apite of the strivinga to
attain co fete prnducticn cycles in indiviiu8Y1 planta proceaaable
pig iron and other eemifiniahed metallurgical products ~Iti1 ccn-
tinue to be part of interplant turnover. In view of the cuaaiderable
difference between the prices and the prime costa of pig iron it can
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11
be seen that in a given steel plat the prime coats of steel, ad
in turn, also of rolled products, depend anon; others on the ratio
of the pig iron fram the plat itaelf to to outside ,pig frog in
the f urnoce charge. For instance if the price of outside pig iron
is much lager than the coats of producing pig iron with reaources
of the plat itself, to p1az t will reduce pore eaaily the prime
coats of` its stee1 and rolled products and hence the prime eoutr
of its marketable output by purchasing core pig iron frt outaide.
Under certain conditions this circatace may retard the perso-
nel. ? s efforts to increase biact 4 urnace capacity, especially when
the ua1t,ement of the steel prat receive bonuses Lor reducing
pr3xne costa.
The same pertains to the other sexnilniahed metallurgical
products sold in interplant turnover, such as cast steel in ingots,
billets, bioona, etc a
With regard to pig iron deri\ing f'ro aother plant, the
steel plat must also consider the additional costa connected with
melting it to a liquid atate, and it aauat calculate whether the
coat of meltiwill cover the dif'f'erence between the price of
cast iron and its prime cost a fi ver this coneideraticn doea nat
apply to other products; the difference between their purchasing
price and prime cost causes directly either a reduction of the
prime costs of marketable output in the plant consuming these semi-
finished products tin the event that their share in the overall
mas+ of processed materials increaaes ), or an iancreaaae in the prime
costs in cases to the contzary.
Phenciena of this kind have arisen during the donation of
the salaa prices of metallurgical pucta before 1956.
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Chiefly for these reasons proposals were advanced for the
partial modification of the pricing system in the ferrenetaUur.
gical 1ndustz7 (and in others, such as textile industry), as con-
sasting in the introductiob of the prlr ciple that semifinished
producta subject to interplant cooperatioi should be included in
the further production of the plants in which they were manu?ac>
turgid according to official saleo prices and not to prirue costs a
That is, they shoula be appraised the same basis as inported
sedfinished products. In this event the prime coots of finished
ferrtallurgical products rmd hence also the prime costs of ,ar-
ketable output would not be liable to fluctuations awing to changes
is. interplant cooperatioi ire a, pens to cranes in the percentage
of emifinished products purchased outside an the total mass
processed0 This would yield a direct and siCap1e method for e11xi
inating the influence which any evenf;uai diifez ence between the
coats of producing a given semifinished product and the costs of
purcb sin ; it from the outside might exert on the reduction of
pie eo; is of an enterprise as indicated in its periodic reports.
r
If the price of a charging material be uniform regardless of the
size of ita production, this will facilitate the ecc~nczic analyzing
of not only an enterprise as a whole but also of its individual
production departments.
The application of sales prices in in terdepartm~ntal turn-
over ban, though manly negative aapecta, its specific advantages.
Therefore acme authors prcYpose that this system be introduced in
f'errgmetalxurgy only for an interim period {see S. erszenberg and
3. Borysi,cz, "A Unifoiin Pricing Systeca for S,finiabM Products
in Interdepartssental Turnover," ppod,arplea' ff1Zned &or ,
No 7/8, 1953; and Zbniew Au ustawski, P + Je?~s car wlaeu ch
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w rem 1 fflaEnixlg or Prime Costc ix Ixidustr, r~, ?olskie Wycawnictwa
Gospodarcze Publiohin~ louse, 1914, page 8C), until such time when
sales pricey will be fixed on the arse level as pri e costa; although
in certain industries (textile, paper~aakin;, meat ) this system has
been introduced on a per agent basis f3 a major factor of ecoaaanic
accounting`
The negatiVe side of thin ayatem is tI &' it distorts the
prime costa o' the pro ucta belora;ing to the marketable output of
individual enteipri$ea and, therefore, it also distorts the prime
costs of that output on the scale of , branch of industry as a
whole o
To iilu~trate this thesis ley ua cite the fb11aWi.rak; exazflple
het us as ume th It Foundry X, iii which the prime cotta of
pi iron are much hi 1i r than it other foundxd.ea , and hence higher
than the Baler price, ha increa3ed its output oz' pig iron by 3O
thereby makia possible a ~ increase in the steel production of
that foux: d y or a 3% increase for the xtetaliuriiCal industry as a
whole o If the processiza costs per ton of $teel and the yield per
metallic charge in the steel L aki S departs ent or" Foundry X stand
at a level average for the metallurgical industry as a whole, then
at such a system periodic statistical reports will indicate that
M
the prime costs of total steel output have also ix creased 3%. Hov
ever this is not correct. The quantity of mss conouaned to manu-
facture that adtiOna1 3% of steel will -.. according to the above
cited example -- actually exceed 3%. To appraise properly the mag
nitude of the ccsumed mearaa, it is necessary to increase the. prune
costs by the difference aetween the sales price and the prime cost
of the coaaaiaed p iron.
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This is because if sales prices are applied in interdepart-
mentai turnover the prime coat oib marketable output Will not f"luc-
tuate (rise) if a rise in cash occurs luring the preliminary pro-
duction stages or too if there is an increase in the output of aemi-
finished products in plants where prig: costs stand at a relatively
higher level. This difficulty is being saiewhat surmounted through
introducing the principle of" computing the reduction in costs and
axalyzing the dynaiuisra of costs in relatian to overall turnover
(total output), which constitutes the sum of successive stages of
production (this probierFi it touched upon oy S. Herszenberg in his
article "Concernin Un:fot~a Prices," published in Fins LtanT,
No 3, 195I) 9
However this oolution does not e1i&tnate the greatest o? the
errors arioing in the application of sale prices to interdepart.
mental turnover, namely, the error consisting in the distortion of
the statistically ahem reduction in prime costs in the event of
afy changes in the quality of the sexaif`inished products nanufactured
by the enterprise itself .
This may be illustrated with the following 2 e mplea .
(1) In foundry X there occurred, owing to improved per-
f'nce of its blast furnices, an improveuaent in the quality of
its pi iron, and the percentage of defective pig iron (cot taining
harmful impurities to an extent above the permissible nos ) was
reduced by 1/2,
(2 ) In Foundry Y there occurred, owing to diverse cmiaaio s,
an increase in the share of defective pig iron in the total output
0?' its blast furnaceso
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4
Here let ua aeatuie that in both roundries the prine costs
of pi iron re aineed unchanged. Hoer will these differences in
quality and output be expressed in the extent of the reduction of
the prime coats of the vteel produced and, in turn, of the prime
costs of r arketab1e output?
At the system currently rci ning ir ferrcraetallurr, the
prime costs of the consumed pig iron ire transferred in heir en~
tirety to the priiie costs of the steel produced. Hence although
the casts of pig iron in Foundry X a ,sined unch.red, the prime
costs of cant steel should decrease scrire~rhat, because the charging
of fuJj.-value pig iron instead of defective pig iron reduces the
outlay of labor in the steel akin departmerat, and it also reduces
the cooasumption of certain ferroalloys added. to the charge. In
other words, an :i proveinent in the quality of pig; iron should also
be reflected in a reduction of the costs of marketable output.
In Foundry Y the increased share of defective pig iron in
the charges would be adversely reflected ix~ the performance of the
steelaking department, even though the pig iron is included in
charge costa according to fixed prime costs. Thus processing costs
and admixtures of alloys will increase, and hence the unit prime
costs of steel will increase, which in burn will also increase the
prime casts of marketable output. in this way a deterioration in
the quality Of the:pig iron produced may be properly expressed in
the ahaping of the prime costs of niarketable output
0n the other hand thin problem wail loo quite differently
in the case that the sales price system is introduced in interde>
partoental turnover, In Fury X the reduction in tl* percentage
of defective p iron and the increase in the percentage of fu).l.
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value pig iron will cause an increase in charge coats. This is be-
cause the sales prices of defective pig iron are (as they should
be) lower. Considering that the difference between the sales price
of full-value pig iron and the additional costs caused by the use
of defective pig iron is (as it should be) sizable, the processing
costs in the ateel~making department aixd. the costs of charge ad-
mixtures will decrease at a lesser rate than will the costs (prices)
of charge increase. As a result the statistical reports of Foundry
x will indicate an increase in the prime costs of steel and mar-
ketable output, and also in the prime casts of total output, which
will actually not be the case. Such an increase would be seeming
only; it occurred merely because the price of the better quality pig
iron is correspondingly higher. Iii Foundry Y the situation will be
just the reverse. At the system discussed the accounting books of
Foundry Y will indicate a reduction in prime costs, whereas in
reality the quantity of means consumed in the production of steel
will have considerably increased.
The introduction of such a system in metallurgical industry
might thus lead to an unfair reduction in paymenta of bonuses to
workers in the event of an improvement in the quality of the pig
iron produced and, conversely, it would lead to payments of bonuses
for thriftiness in cases of waste and squandering. This is because,
when bonuses are being assigned, it is not always feasible to carry
out a thorough analysis which might reveal whether the savings
achieved were apparent only and actually entailed cases of waste
and squanaering-
Besides it is to be onphaeized that such statistical distor-
tione of the level of prime coats in the event of a change in the
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quality of charge materials (e.g., if the quality is decreased)
occur also when the price difference caused by change in quality
does not exceed the additional costa of processing such materials.
Let ue aseuae, for instance, that the pig iron produced and coz
suraed by a steal plant heal diminisd in quality but its production
coats remained the same. If the difference in the price of the pig
iron equals the additional costa ii olved in processing such ma-
terial, the steel plant will not show an increase in the prime
coats of the steel it produces . ldkewiae the statistics and re-
ports of the plant will not indicate an increase in the prixoe
costs of either narketable or total output oSeeiingiy it might
apps that there occurred no increase in the consumption of means
of production, but actually this is not so. As a whole, all de~
partments of the plant woui then actually expend more means of
production and diminish the process of
naii
jag profit for the plant.
However the losses austained will not be fully reflected in the
statistical reports concerriing the height of prime costs.
Likewise an fmprove~aent in the quality of pig iron would
not be reflected in the evolution of the unit prime costs of steel.
This is because charge material would, then be included in further
production at a higher price, although its production costs will
not have increaeed.
It is clear that such a system cannot act as a atimulue for
reducing production costs by means of improving the quality of the
aemifiniahed products manufactured within an enterprise.
The pricing ayatem currently observed by metallurgical in~
dustry gives a more correct picture of the shaping t' prime coats.
For inetamce the production of better pig iron contributed to a
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reduction of the prime coats of marketable output, and conversely
the production of worse pig iron tends to increase such costs.
'mss system also eves a correct picture ix caaea of purchac~ing
semifinished products front outside, For inatance a deterioration
in the quality of semifiaaished products owing to the purveyor's
neglect will not affect adversely the evolution of prime costs
and profitability in the plants purchasing such products, provided
df course that the pricing system for ae~ifinish~:d products con-
aidere fully their quality
`+ idea of introducing sales prices i.i interdepartmental
turnover is then unacceptable, especially whenever the prices of
Se iriiahed products take into account their quality.
From the above described considerations it appears that the
bei.ght of the reduction of prime costs indicated in the statistics
of the textile industry, where such a system has been introduced
and where, e.g . , the price of yarn varies depending on its quality,
is rather quewtionable
returning to the problen of pig iron, it is to be explicitly
stated that the only correct solution of the problems touched upon
would be to determine the price of the raw materiai on the level of
average prime cost.
However it is to be emphasized that average
prime cost is construed here not as an average.wejght cost but as
the prime cost in a foundry selected as standard foundry according
to the principles described previoualy in the section on refractories
Proceeding on this aestmtptic i the determination of the 1956
prices of pig irOD was based on the cats in a specific blast.
mace department which has been selected as typical or standard
far the Polish m .llurgjcal Industry as a whole
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However should the price of every kind and grade of pig iron
be fixed Ott a level equal to its corresponding prime cost?
Actuary this would be neither feasible nor correct This
is because proceseable pig iron is differentiated into as many as
about 60 different kinds and grades, and for caating iron the num>
ber of kinds and grades is even trice a s high. Individual kinds
and grades differ frp each other in their chemicttl ccz position,
often very aubatantially= I4oreover acmetimes the kind or grade
of pig iron obtained differs frt the kind or grade desired
(usually, is worse) , or it nnay be found that the higher costing
pig iron proves to be meta11urgic11y less valuable than the pig
iron whose production cost is ioer A
Hence there wises the problem of detem i.ning the proper
price interrelutionahip 1roa the viewpoint of the metallurcal
value of pig iron b In this case we would designate as pig irons of
higher x eta,1lurgica1 vaite those kinds and grades which in the steel
production proceas require a sra filler outlay of" labor, fuel, and
charge admixtures than the kinds and grades classified as standard
oneso On the other hand. piw irons of lower metallurgical value
necessitate a greater outlay of labor, T'uei, and c ?trge admixtures
in the steel plant, and hence cause an increase in proceasg costs
The prices of individual kinds and grades of processable pig iron
should be generally so determined that the prime costs oi' the steel
produced would not fluctuate awing to variations in the metallur>
gical value of pig iron, that is, owing to reasons on which the
steel plant cannot exert any influence o
The problem of the proper interrelating o the prime of in-
divides kinds and gradate of :pi iron arises also when the prices
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of pig irons are not generally at the level ai' their prime costs.
Therefore a correct interrelation of pig iron prices may be ex
pressed by the fo11o ring fo u1a:
P1 1C0?E1
see
PO
where Pl is the price of ,given kind and grade of pig iron;
PO is the price of standard grade of pig iron;
is, is the prime cost of standard. grade of pig iron;
1 is the chance occurring in the prime costs of the prOdUCTM
tion o a tan d? steel in the event that the stondard grade of pig
iron is cupplanted by n grade oi' iron whose price is denoted by the
Pl eyx bal; this raa~nitude (determined accordixng to empirical data)
may either positive or neg t 1ve -~ positive when the p .~ iron
1las a higher zneta11urgica1 value than the standard pig iron, and
negative when vice versa
'ire exia is a morn: advc:nced #oru1a for thd,s re1ationshia,
which we will term co site relationship to distinguish it from
direct relationship based on prime cost (.;nd described in the seG-
tion on refractories ), and which has the following aspects
per... P.
:
K0?]1 1~,
where index Ss is the index of canposite relationship, expreseing
the price level of given co io tities, fixed by the appropriate eco.
noanic authorities, in relation to the prime casts of their produc.
tion.
Until 1955 inclusive this index was below 1.0 ao far ae pig
irons were c M1cerned ? The 1956 price 1st adapted an index of 1. .0,
which also signifies that the expectatiae of a 5% gait were
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relinquished, in general. This is becauae it would riot be expedi-
ent to add to the burden of prime costs of the steel plants cons u
ing pi , iron purchaaed from the outeide by providing; Lo r profits
for the foundriea producing and sealing such irao to these plants.
Moreover in a number of fouzzdriea this is of no practica1 imporr
tancce because the prime costs of their pig irons may deviate some
what frown their sales prices 4 If these cosh o dowt the foundries
attain sane profits, aM if they go up there are some losses sus-
tained .
Speaking of profits, it is also to be stated that it is not
always expedient to add the profit znargi to the prime costs of
production when deter dr ing the price of a given product, espe-
cially when we expect that thin a relatively brief period prime
costs may be considerably reduced d In such cases tbs fixing of the
ccmposite relationship index at the level of 5 1.05 right cause
a rhoi1y unnecessary and unintended a.c...umulation of monies in inw
dustrial enterprises which have not been created chiefly for such
a purpose a This would unnecessarily complicate the system of col..
lecting the monies accumulated by industrya
A charge of prices in order to counteract such effects is
not always advisable: frequent changea in prices should be avoided
becauae they extai1 the necessity of revising the distribution of
means in national economy, and thin requires unusually labor.conaum-
ing analyses and calculations.
The formula for detenniaing the price of a specific grade
or pig iron (aa resulting fran traneposing the above cited foznula )
is as follows:
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If it be aareumed that a equals 1.0, then v would alav
Kb
equal 1 .0, and hence:
l < Ko ~' El
Pig iron of the MJ ki xd, Grade l (containing 2 o(5J x anganeee
and 0, 5% ui:'ter) as adopted as t standard pig iron when deter<
:pining the 1956 prices w The cost of this p iron is denoted in
the above formula by sywbo1 Ko, and it o price, in the preceding
formulas, by symbol pa o
In order to determine properly the prices of individual
kind and grades of pig iron it im necessary to have a reserve of
extpirical data i a ing it possible to determine the fuctuatioiic in
steel plant costs ovine: to c1'an ;ea in the kind or grade of the pie;
iron used. The lack of a sufficient qurntity of such data during
the drafting oi' the 1956 price litit has caused the necessity of
enpl,oying certain simplified preliminary estimates, with chief at
tention devoted rather to the transparency of the tabular arrange
merit of the price list (e.g~, 'iith respect to open hearth pig; iron,
if the sulf ar content changes by OOi% but the norra is not thus ex>
ceeded the price per tom changes by 20 xlotya ) a The prices or the
various kinds and des of four dry pig iron (at va.rying contents
of sulfur) have been likewise determirxed, with the price of the
standard ode for every kind of pig iron being basted on prime
coats
The determixrtion of the prc~er height of El for individual
dee of pig ircatx will still require a number of tidal, studies
where results may be utilized at a subaequent ch nge of pig iron
prices
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The new pig ire price list for 1956 contains considerable
econonhic incentives for raisins the quality of the pig ironc prow
duced < l pr ;cea rr defective pig irons were fined at 70% of the
price of the cheapest good .quality grade of a given kii4 of pig
iron. In this connection, it was asamied that faulty pig irons
containin an excessively high (in relation to reigning etandards)
amount of harmful impurities (especial ,, sulfur) should be generally
regarded as defective products L If however a purchaser conaents to
accept such pig irons he should receive then at a much lower price
than that of goo th quali ty iron 4 On the One hand, the producer will
thus 'be :impelled to raise the quality of his output to avoid the
considerable lasses involved in selling defective pig iron and, on
the other, the purchaser will be thus enabled, by paying lower
prices for defective pig iron, to defray the additional expenses
involved in its sintering here it is advisable that the price
difference between defective and good quality pig irons should ex-
ceed the additional sintering costs. In this evexat the purchaser
will becorite more interested ira buying and cox swmin, defective pit
iron; and this is very itzportant because frcrr~ the economic point
of vier it is more profitable to use defective pig iron in a steel
plant than to reamelt it in a blast furnace
The origin of the 7c index should be also explained. N~+mely,
this is quite caanonly accepted throat industry as the ratio of
the prices of usable defective products to their correapding full
value prodw-ta. True enough this is a conventional (c tractual )
index, but in this case it is regarded as effective enough for dia-
caging blast furnace workers frog producing defective pig irons
never it is also to be bated that the height that index cannot
be fix arbitrarily. Such an index is oietermined, cn t T; .b M,
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by the Niue of the o a1 raw material Fran which the pradu t
is created ands on the other, by the additional costs borne by the
purcbaaers owing to the utilizati,or~ of defective ~naatej a)..
Zn this concrete case the price of de ecti,ve p ira should
not be fixed, at a level low enough to make it profitable to use such
iron as charge for blast fuurnacea, Neither should the price be
fixed at a too high level becau8e then the difference an the prices
or fuUavalue and defective pig irons ~rould not be hih enou a, for
d~frayin the additions{1 costs caused to a steed, plant by the neces~
city of burning out the cxces har ful itpuritjcs in defective pig
To determine the lower price limit, it i necessary to ca1M
cuI; to the cheujcal CoriIppsition of defective pi ircai in the terms
of the indexes adopted for co putin, the net 11urgic2 i value of
ores. For instance in 1956 the price or defective Ml pig iron con-
tnin 92% Fe, 2% Mr, 1.5% Si, J.l5 3, ax x,35% C, show riot
be loner tban :
92.00 x 6.20 zlotys =.- 57Q.4O zlotys
2.OO x 1;a . pO zlotys : + 30.00 zlotys
1.50 x
Q.15 x
Total
5.60 zlotys 8.ho}otys
6>7o zlotys w . ],.oo zio rs
591.00 zlotys per tor,
The upper limit o' the price of defective pig iron is deter-
mined by the price of standard full-value pig irc decr lied by the
additicmal proceasirig costs caused by the increased, consumption of
materials, reduced human labor productivity, and reduced msc)4nery
productivity involved in the einterjn of defective ptg iron. The
maxi n price of defective p iron having the above mentioned
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chemical Gtupoaitioca should not >- It t~ppears ~- exceed 880 zlotys
per ton C The 1956 price list materializes the above poatulates.
The price of defective Mi pig ir, c r containix more than 0.1% iuJi ur
amoult 3 to 683 zlotys a ton, aid the upper lixait of sulfur' content
is not ftxed. This ensues from the assumption that atee1 on the other hands
qua is grsded in classes -? 2, 3, , and 5 (structural.,
quality steel
tool, special, and nouatandard steels),
illuatrate this classification by means of a brief
het us
example.
Class 2 (structux'al steels) contains Croup 21 (structural
with rio nickel in th ) which turai coat s
alloy steels
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Subgroup 210 (silicon steels for the manufacture of dynamo and
transformer plates). This subgroup is in turn divided into 2
grades: 2100 (silicon steels for the manufacture of dynamo
plates) and 2101 (silicon steels for the manufacture of trans-
former plates).
Grade 2100 contains these kinds of steel; B805, BS10,
B520, B325, and B830, and Grade 2101 B838 and BS1i.O. The indi-
vidual forms differ from each other in chemical composition and
mechanical properties.
Now there arises this problem: should the price list for
steel and rolled steel products be based on the above described
classification into grades, groups, etc, which is applied in pro-
duction, supplies, sales, planning, and reporting?
Here we will deal solely with ordinary steel (Class 1) be-
cause the problem of the prices of quality steels will be dis-
cussed separately later on.
The above described classification was drafted from the
viewpoint of the suitability and adaptability of every individual
type of steel for specific purposes, without taking into account
the production costs. It may thus be found that a given group of
steels may comprise subgroups with sharply varying prime costs of
production. Hence the necessity of classifying steels in the price
list in a somewhat different way. In this connection the following
reasoning has been followed.
The over-all level of cast steel prices as well as of the
prices of nearly all metallurgical products should in principle
correspond tO the prime costs of their production. The reason for
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this has been explained in the preceding chapter What mains to
be explained is the problem of price interrelationship, i.e., in
this case the problem of the relations among the prices of various
types of cast steel in Class 1.
The most correct solution here would be to apply the prig
ciple of direct relationship. This is because in contrast to pig
iron cast steel is designed for diverse purposes depending on its
chemical composition, structure, and mechanical properties. Be-
sides the selection of a relationship that would not correspond
with the dynamics of prime costs might cause the underfulfiliment
of the plants for the range and variety of output. This is be-s
cause steel plants would then be interested in manufacturing the
types of steel that assure the highest profits or the least losses.
At such a situation it might seem that it will suffice to
compute the prime costs of each type of steel in Class 1 and to
fix the sales prices according to the direct..relationship formulas
cited in the preceding chapter. However an additional difficulty
arises here. If the price of every grade of steel were determined
separately, over 120 different sales prices would exist for steels
in Class 1. This would not be advisable considering that cast steel
is merely a semifinished product and constitutes the raw material
for rolling mills. Otherwise it would be also necessary to deter-
mine a, tremendous quantity of prices for emery type and type size
of rolled product (in certain cases, as many as 100 prices), dew
pending on the grade of steel out of which it is manufactured.
Practical considerations required, therefore, the fixing of
group sales prices for cast steels in the 1956 price list. All
grades with similar prime costs were comprised in a group, and. there
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were altogether 9 such groups, denoted by letters A, B, C, D, B, F,
G, H, and Ig thue any grade of steel comprised within a given group
is sold at the sales price fixed for that group. In this way 2 ef
fects have been achieved: the number of price list items has been
reduced and at the same time it became possible to fix the sales
price of every grade of steel at a level approxixnately correspond-
ing to its prime cost. As can be concluded froinl the above price
list groups have, of course, not much in common with the groups in
the classification of metallurgical products (except for Group
steel for pipe manufacturing). This is because price list
groups are compiled from the viewpoint of the prime costs of the
steels they comprise, whereas the metallurgical classification is
based, as noted before, on the specific uses of individual grades
of steel. In view of the planning needs it would be worthwhile to
arrange the price list groups of steels in such a way as to make it
possible to determine easily the mean group price.
The price list of cast steels for 1956 ccsnpriees prices for
dressed. and rnondressed ingots, and. the difference between the 2 is
minimal considering the smallness of the surcharge (15 to 20 zlotys,
depending on the steel group) payable for dressing. This is of
dubious efficacy considering that thus the steel plants do not re-
ceive sufficient encouragement for delivering ingots in a dressed
state. It would be also worthwhile to consider that a sizable part
of defects in ingots is not xevealed until they are dressed, and
this is another factor discouraging the steel plants from carrying
out this operation, because rejection of ingots by the steel plants
themselvea would mean a decrease in the fulfillment of their plane.
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A major component of the pricing system in metallurgy is
the widely applied system of surcharges and price discounts. Sur"
charges fulfill generally a 2 'fold role.
(1) They contribute to reducing the bulk of the price list
and simplify its reading because, e.g., specification of receivable
and unreceivable type-sixes, with or without certificate, is elimi-
nated in favor of citing the prices of basic type sizes (without
taking into account any additional wishes of the purchasers) plus
percentile or numerical surcharges,in absolute figures, for tech'
nical reception or metallurgical certification.
(2) They create additional economic incentives for an op-
timal utilization of the production potential of steel plants.
This is because in many cases steel plants are "snowed under" by
additional specifications sent in by purchasers who pose qualita-
tive or dimensional requirements that are not always necessary
from the technological or economic point of view. Very often the
purchaser is simply concerned about reducing the number of opera-
tions in his own plant, without considering that this may add to
the expenses to the steel plant and hamper its productive capacity.
It may be boldly stated that if all purchasing plants confined their
qualitative and dimensional requirements to the minimum, the output
of the processing departments of metallurgical industry would in-
crease considerably. True enough certain purchasers are not even
scared off by the surcbarges demanded by steel plants for the ad-
ditional processing, but it is to be expected that the further ad-
vance of the struggle for the reduction of production coots Will
stimulate them. to drop their unjustified demands.
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The purpose of price rebates or discounts is essentially to
mobilize metallurgical industry in the struggle for increasing the
quality of production. This is because discounts pertain to second-
class and defective products. Likewise the prices of utile hardware
in the group of metallurgical wastes anu rejects are based on the
rebate system. This problem will be described in greater detail
later on.
With respect to cast steel ingots, the price list specifies
only 2 types of surcharge ?- for metallurgical certification and
for technical reception, similarly ai in the case of semifinished
metallurgical products.
By issuing a certification the steel plant guarantees the
proper quality (chemical composition and mechanical properties) of
its product. However this alone is not enough. The certified
product should be inspected as to its quality by the ateel plant,
and subjected to proper laboratory examinations. In this connec-
tion there arisee the danger that these investigations may cause
the coamnodity to be disqualified and classified in a lower quality
group. In this event the steel plant will sustain a loss.` There-
fore the fee for metallurgical certification comprises not only
the expenses on the inspection of quality and suitability but also
any eventual losses that might be sustained if a part of the certi-
fied output has to be declassified.
Seemingly these solutions might appear as unfair and sane
what sanctioning any neglects and dis1oneety of the steel plant.
In practice, however, the matter looks otherwise. If the fee
charged for technical reception or metallurgical certification were
to comprise merely the expenses on the inspection of quality and
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suitability, its height would be too small in relation to the price
of the product. Then purchasers would have no motive for desisting
frcxn asking for metallurgical certification or technical reception,
and the dexnande posed to the steei plant would not always be eco-
nalmically justified. This matter cannot be regulated adwiniatra-
tively, because of the excessive multiplicity of the conditions
and circumstances in which steel is used. 'T'herefore it is necessary
to apply appropriate economic incentives, which in this case means
a high surcharge fee.
It appears also that the struggle for s high quality of
metallurgical production shou:Ld not consist in reducing the fee for
certification or technical reception. It should be rather concenM
trated on the system of price discounts for second-class products
and rejects. In addition it appears expedient to base the system
of bonusing for the fulfillment of output plans also on the quantity
of declassified products as revealed during technical reception.
With respect to metallurgical products surcharges for both
metallurgical certification and technical reception are generally
expressed in sums of money (zlotys ) per ton, except in cases of the
prices of pipes and quality steels where these surcharges are ex-
pressed in percent, and in the cases of rails and other parts of
railroad surfacing, where they are included in effective prices.
This principle was established because it was found desirable
that the prices of the qualitatively higher and more expensive
grades entail lower percentile surcharges for certification or re.
ception than the prices of the lower grades. Besides it is under
standable that the purchaaing plants which must use high..rade
steels may have objective reasons for desiring to examine the
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mechanical properties of such steels, whereas this is not as valid
with respect to lower grade steels.
Semifinished Rolled Products and Rollin Mill Products
Semifiniehed rolled products. Unite of relationship
adopted in determining the prices of semifinished steel
products. Adverse effects of a uniform price for a number
of sizes with different production costs. Grouping type
sizes according to the time of rolling per ton. Grouping
type-'sizes according to hourly productivity. Change of
mean weighted prime cost in calculation group owing to change
in variety of output. Normed prime costs of the production
of individual type sizes. Scope of the products of rolling
mils. Relationships among mean weighted prices of calcula-'
Lion groups. Relationships among prices of products within
a given calculation group. Relationships among the prices
of identical type sizes executed from diverse grades of steel.
Trends for a revision of the current method of determining
the prices of rolled products. Prices and theoretical weight
of products. Surchargea for "unsuitability." Surcharges
for small quantities. Surchargee for specific length. Sur-
charges for accurate rolling.
Tie section serves to discuss further the problem of the
prices of products manufactured in a wide range of forms, with semi-
finished. rolled products and rolling mill products as the example.
Among the major problems discussed here the ones most interesting
to the reader might be: determining the scope of the ramie and
variety of a product which is to be comprised within a given price
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list position; determining prices on the basis of normed prime costs
of indjvjdual aQsortwents of products; and the problems oi' relating
the prices of products to their theoretical weights.
Rolling is at present the most widespread method for the
plastic processing of the steel cast in ingots. The other forms
of plastic processing, such as forging and stamping, are applied
to a considerably smaller extent. buffice it to say that at present
about 95% of all finished products of ferrc ietailur?;y are treated
in rolling mills. Rolling serves to confer upon steel specific
shapes and appropriate dissensions. Ra11in also serves somewhat
to improve the mechanical properties of steels because it alters
their original internal structures.
Sc>~rever rolling mills rarely use cast steel in ingots as
the charge, because these mills can process directly small ingots
weighing several hundred kilograms. The castirg of small ingots
hampers an increase in the output of steel plants, and therefore
production is rather concentrated on large ingots weighing 5 to 8 t
which are then subjected to the first stage of rolling and emerge
as semifinished products which are later finish-rolled. Small in..'
gots still continue to be used (although not exclusively) as charge
in pipe mills.
The semifinished rolling products, i.e., products of the
first stage of rolling, are chiefly blooms of square or rectangular
cross-section, rolled from large ingots. Such products also include
certain semifinished products rolled in large mills and subject to
further treatment in other mills. They include the so-called bil.
lets and rods for the production of pipes. A special group of semi..
finished products is constituted by Plato, which is manufactured
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frara small, flat ingote, slabs and flat billets, and later on
processed into aheets.
Semifinished rolled products are uaed exclusively as charge
in rolling mills, but nevertheless they occupy a mejor role in the
marketable output of many steel plants and. are part of interplant
turnover. Therefore a proper determination of the prices of these
seraiproducts is of great importance to economic accounting in steel
plants and to a correct appraisal of their efficiency.
The proper determination of the price level of semifinished
rolled products necessitates solving these problems:
methods of determining price interrelationship;
(b) ratio of price level to prime-cost level;
(c) scope of units of relation to specific list prices
(price-list sizes).
As in the case of cast steel, the determining of the inter-
relationship of the prices of semifinished rolled products requires
the application of the principle of direct relationship, S.c.
This is motivated by the same considerations as in the case of
cast steel (see page 85). Therefore the 1956 prices were based
on a direct relationship index of Sp > 1.0 expressing the ratio of
price to prime cost.
A much raore difficult problem is how to determine the scope
of price~liet type-sizes (units of relation to prices ) for semi-
finished rolled products. It appears that a correct solution of
this problem should follatir the reasoning given below.
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Proceeding on the assunptian that 3n the case of senuiftlshed.
rolled products the principal cost factors are genera1iy propor-
tional to the operating time of the blooming mill (save for the
amortization coats, which are rather related to calendar time), it
should be assumed that the cost of rolling a ton of a given steel
should be directly proportional to its roling time. 1 practice
this is not always true because there may occur deviations connect-
ed with the index of utilization o:L' calendar time, cha~ges in the
consumption of electric po-ter, etc
however in this case these
factors may be overlooked a This is because any further attexapts to
attain a still greater accuracy in computing the relationship be-
tween rolling time and prime cost might oz)ly lead to coi`uaion and
the essence of the problem might get lout in the forest of details.
S:peaking of the problem of the rolatiouship between rolling,
time and prime cost of semifinished rolled products, it should be
emphasized that the type'sizes of bloama whose prices are fixed at
diverse levels should canprise cross?aections with the most similar
rolling time per tons The number of such type.sizes needs not be
equal to their cataiogued number, because chanee in the blooming
coefficient and in apeed of rolling (which are possible within cer-
taro limits) nay cause a number of diverse cross sections to have
identical (or very aimilar ) rolling time per tom
Metallurgy employs a concept termed "rolli cycle" which
aerves to determine the time neceaaary for bringing a given piece
under the rollers, rolling it and removing it. Now if the xolUng
time per ton of bloaina with varying crosa.-sectioua is to be identi
cal, the average rolling cycle tor these croae
finished rolled products (billets, plates, and rounded rods for
pipe manufacturing).
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Whether the choice falls on the first or on the second solu-
tion it must in either case be preceded by selecting as standard
one of the blooming or slabbing mills and one of the billet-and-
rod mills, in order to determine the theoretical hourly output or
rolling cycle in the manufacture of various products,
In this case the adoption of mean weighted values for all
such plants in ferrarnetallurgy as a whole would excessively compli-
cate and distort the relationships among individual price-list
items, especially when the share of Individual plants in the total
mass Of output would chance.
Hence the plants to be considered should be the most modern
ones that have the highest possible share in the output of semi-
finished products of a given type.
In the 1956 price list the probleYn of determining the scope
of type-dimensions has been solved thus: with regard. to all square
and rectangular blooms, their prices were differentiated solely ac-
cording to (price.list ) groups 01' steels, regardlesa of cross ?sectior.
.
For instance in Group C (21 grades of steel), all nondressed blooms
with square cross-section and a thickness of 120 to 300 mm, and all
nondressed billets of rectangular cross-section which are also pros.
duced in diverse sizes, have a uniform fixed price of 1,590 zlotys
a ton. The dressed blooms are priced in the list at 15 zlotys more
per ton.
The situation with regard to plate metal is similar, as there
the prices for the corres-ding steel groups are differentiated
solely depending on whether the plate is cut into pieces of a spe~-
cific length or is sold in uncut strips. On tie other isnd it was
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completely overlooked that plate occurs in diveree thickness and
has 6 df f erent widths.
The prices of square billets were determined at 2 levels for
every steei group (not counting the dres8ing surcharges);
(a) ballets up to 50 rmn thick (in 2 catalogue dimensions);
(b) billets 50 to 120 mm thick (10 catalogue dimensions).
With respect to rounded blooms and billets, which the price-
list terms rounded rods for pipe manufacturing, their prices were
differentiated only depending on grade of steel, without consider-
ing that these rods are manufactured in l4 catalogue thicknesses
(from )1 to 300 mm).
It is indubitable that such simplifications considerably
ease the using of the price-list. On the other hand their correct-
ness seems dubious if coe~isadered from the viewpoint of their in.
fluence on econc~nic accounting. After all it is obvious that the
rolldng of a 120-mm thick bloom requires a considerably greater
outlay of labor than in the case of a 300-mm thick one. Hence the
processing costs per ton of blooms with smaller crosss.section are
higher than per ton of bloom with larger cross..section. If then
a uniform price be introduced for all blooms in a given steel
group, regardless of cross..section, the steel plant marketing these
bloc~ns to the outside will become more interested in rolling the
blooms with the largest cross-section. This cannot but affect the
range and variety of its ?output As a result it may happen that
there wi3.1 be a scarcity af blooms with smaller cross sections
(purchasers Viii not be supplied adequately) and a glut of blooms
with larger ones.
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Besides there ariaes the question of the form of the prime
cost$ of bloom production on which the price should be based.
Let us assume for instance that a given foundry rolls blooms
of varying cross-sections ?- from 120 to 300 mm -? partly for its
own rolling mills and partly for other foundries. If the price of
the marketed blooms is fixed at the level of the mean prince cost,
the purchasing plant, which is bound to receive mostly the thicker
cross'.sections, overpays for them as much as is gained by the de-
liveriing plant which retains the thinner cross-sections for its own
rolling mill. It would be also worthwhile to note that a steel
plant which includes its thinner Motu cross 'sections in its further
production at mean weighted. cost thereby artificially reduces the
prime costs of its own finished rolled. products, whereas the steel
plant receiving thicker cross sections at the sane price as thinner
ones ?s bound to increase as much the prime costs of its finished
rolled products.
The same effects may be caused by determining uniform prices
for a number of sizes of other semifinished rolled products (bil-
lets, slabs, and rounded rods for pipe manufacturing).
A$ can be concluded fran the above, the price list for 1956
has not solved properly the problem of determining the scope of the
typed-sizes of semifinished metallurgical products. In the future
this scope should be so etermined that every type-size would cc
prise products with the moat similar prime cats.
Following the above discussiara of methods for determining
the scope of type
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but also a camparisnrn of the evolution of prime coets of group "repw
resentatives," or at least a compariaon of the quantity of labor re-
quired by the manufacture of principal type-atzee ("repreaentativea")
in individual groups. ` laat ]ma been made in the course of, not
prior to, the ? drafting of the price 1L t.
If during this examination it were concluded that the produc-
tion structure within individual calculation groups distorts the
intergroup relationship, the estimates should take into account the
percentile shares of individual type..sizes within each group in-
stead of correcting the mean prices of calculation groups as was
the case before.
The breakdawn of the mean prices of calculation groups into
prices or diverse types and dimensions of types was made upon taking
into account the outlay of labor (labor consumption) involved in
the manufacture of each type-size. The following parameters were
considered,
(1 ) hourly productivity for the manufacture of a given type-
size (in tons per hour of plant-assembly operation);
(2 ) the so-called recalculable number of workers employed in
the technological process of roiling (in rolli-ani11 assemblies,
finishing mills, operation maintenance, aM auxiliary teams ) per
working shift;
(3) yield in percent.
With these parameters an the is, the following fundamental
fonnula has been estab34shed for computing the initerrelationab of
the prices of indl.vidual sizes and trpea :
?lo2-
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recalculabl&' number of workers
After the "K" coefficient was determined for individual typeweizes,
its reversibility (Kl) was computed. This reversibility may be ac-
cepted as standing for the labor-conauming capacity of the produc
tion process for these types and dimensione s
Kl
p "racalculabl " n i b er 0f workers
K hourly productivity of rolling mills x yield of finishing
mill
Next, out of the prcxlucts of cogging mills one product with
specific dimensions and profile was selected as the most character..
istic or standard one. It was given an index of 100 and all other
products of cogging miLir were arranged in relation to it, with the
index R1 being determined for each according to this formula;
K] X 100
Kl ? o
where: K1n > K1 index of the given product,
K1 = o : K1 index of standard. product baving the index of
100.
In turn, the relationship among the prices of individual as-
sortments of rolled products, prices comprised in calculation groups,
'aa detenniaaed as follOWs.
The Lowest R1 index in a given calculation group was assumed
at 100 and the R1 indexes of the other products in the group were
arranged in relation. to it.
This was carried out according to the foiowing formula (by
determibiug the R~ index of each product in the group ) :
103 -
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where: R1n
: Rl index ut given product in the given group
Rl .> o < R1 index of product assumed at 100
In tbis connection it vaa assumed that the R2 index evolvee
in direct proportion to the normed processing coats of a given
product. In regard to material costs, it was assumed that the cost
of charge material for all products in a given calculation group is
the eame, and that it accounts for 80% of the total prime costs of
every cogging hill product. Proceeding on these assumptiona the
ultimate index of the relation of each product in a given calcula'
tion group to the standard product in that group was determined by
means of the foUowin formulas
1,000 ~- (R2 . loo) a 2
In this way the followinw values were co:.puted for, e.c?,
product (profile ) X (calculation group );
(a) thickness 15 to 19 mm relationship coefficient 1,192
(b) thickness 20 to 21 mm relationship coefficient 1,145
(c) thickness 22 ii relationship coefficient 1,118
(d) thicknesa 24 to 30 mm relationship coefficiet 1,100
(contractual data)
The problem is now how to determine the specific prices
(expressed in zlotys per ton ) of individual aixee of Product X
upon being familiar with its iueai cost (and hence akao mean price)
and. with the above cited relationship coefficients.
It is to be kept in mind that Product (profile) X is manu?
factored not only in varying thickness but also fray various grades
of steel vbich are included in several diffet prce*liet groups.
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hence, first of all, it is necessary to ccnpute, or -- in
the event of the abaence of appropriate statistical data ,.- esti~
mate the mean price of the basic price-list Group (of steel grades)
A.
Let us therefore assune that the mean price of Profile X
amounted to 2,250 2lotye a ton, and that in the A Group of steels
in the price list that Profile was listed at 2,188 zlotys a ton.
Thereupon, with the help of statistical data or estimates,
it is becessary to determine the percentile share of each thickness
of Profile X in the total tonnage of the output of Product X from
the grades of steel comprised in the price-list Group A. The
existence of such statistics would stagger the imagination. There-
fore there is nothing surprising in that these magnitudes have to
be merely estimated.
Let us further assume -- in our given example -- that the
share of individual thicknesses oaf' Profile X it the total tonnage
of ita output from the steels comprised in price list Group A is
appraised on the basis of the fo11awing estimate:
(a) thickness 16 to 19 mm
20%
(b) thickness 20 to 23. mm
30%
(C ) thickneaa 22 tarn
io%
(d) thickness 21i to 30 mm _
___
Total 1o%
Therefore the subsequent calculations would be as follower
(a) 1,192 x 20
23,844
(b) 1, A6 x 30
31, 380
(c) 1,118 x 10
* u,a8o
.105..
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(d) 1,000 x 1.0 u ~p 90
Total 109,1 oo points, which correspOnds to the value
2,188 zlotys x 100 w 218,800 zlotys.
Therefore, 1 point : 2 zloty.
Accordingly the price of a ton of Profile X in price list
Group A will amount to:
(a) thickness 1619 mn 1,192 x 2 zlotys * 2,3B zlotys
(b) tldckness 2021 mm 1,11+6 x 2 zlotys w 2,292 zlotys
(c) thicknes 22 ni 1,118 x 2 zlotys = 2,236 zlotys
(d) thickness 21..30 r 1,100 x 2 zlotys = 2,000 zlotys
There arises the question: how to determine the prices of
individual dimensions (thicknesses) in the other price list groups
of steels?
The 1956 price list did it in a very sbiplified manner;
first by determining the indexes of relationship anong steel groups,
e.~.s
0:A :
1011-.25:100
D:A
1o6.i~0:10O
E:A w 117.00:100
G:A > 122.35.100
etc.
These indexes correspond approximately to the relationships
among the manufacturing costs of diverse grades of steel comprised.
in these groups.
Upon multiplying the prices of individual type.BiZes ct
Grou:pA by these indexes of relationship it YSs passible to detezii.fle
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the 1956 list prices of the corresponding type.sizes in the other
price-list groups of steels.
This, of course, is not quite correct because the processing
costs of a specific type.se made of higher-grade steel do not
necessarily increase in direct proportion to the increase in charge
costs. Frequently these processing costs may remain at an identical,
unchanged level.
As can be concluded from the above, the methods applied for
determining the prices of cogging mill products in 1956 have been
very labor conaum3ng and not wholly consistent. This was because
of the excessive number of estimates and simplifying assumptions,
aside fr the overly coruplicated calculations of certain values.
As was emphaaized before, the prices of individual type-sizes
should be so determined as to be directly proportioaal to their
manufacturing costs. This is to avert a situation in which the
aale$ prices of the more expensive and labor cansuzaing type?si:es
would n t be commensurately higher and, ae a result, the profit of
the steel plant would. be reduced. It is clar that to such a case
the steel plant would curtail as much as passible its output of
a
certain profiles and sizes in favor of others, and the puricba~.ig
plant, in offer to avoid stoppages in its operatzu~: , veild have
to accept substitute profiles of greater size. As a. result there
would occur a decrease in the labor productivity of the purging
plant and an increase in the labor canauxn$ion of its productsi
also co sumption of metals and the material costs would bath rise.
This pheucnon has recurred vei i'requ~atly in the machine build*
iI)g industry, and it may be assumed th*t it has been caused by,
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among others, the improper relationships of prices within individual
groups of metallurgical products.
Excessively high prices of certain profiles and sizes >- and
eventually grades of steel >- also are unfavorable because they
lessen the interest of steel plants in manufacturing other, cheaper
profiles and eizes.
Now the et:acc~ 9p lied in determining the 1956 prices of
rolled products does not insure the obviating of certain dispro-
portions between the evolution of prices and prime costs of indi..
vidual type-sizes, Nonetheless the use of this x~ethod signifies
tremendous progress compared with the preceding years when owing
to the absence of any special concept >- the relationships among
prices within individual groups of metallurgical products were the
result of more arbitrary decisions,
The concrete (although secondary) advantages which the ap.
plication of this new method brought to ferrametallurgy consists
in that the determination of prices was accompanied by the examina~
tion or reanalysis of the hourly productivity of mill assemblies and
the labor-consuming capacity of diverse rolled profiles and sizes
in a number of steel plants. here is not a grain of doubt that
the data thus obtained would be very suitable for production
planning ptarposea and for the distributioaa of output targets among
individual plants.
It appears that in the future the following postulates should
be adopted for determining the prices of rolled products.
Considering tit the ferrc etaliurgical i d try does not
plan nor break down the manufacturing cows of t.di4uai
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profiles of rolled products in all the list-priced sizea and groups
of ateela, neither planned nor resultant calculations can be em-
played in price deteacmination. Inatead t is neceseary to formulate
normed calculations for standard sizes (''representatives" ) in i~adi~
victual profiles, for each of the price list steel groups fry which
they are manufactured. In this connection use might be made of the
method described in the section on the prices of semifinished rolled
products.
After the prime costs and prices of the 8o4.called "represen-
tatives" are calculated, the prices of the other sizes may be cor.
respondingly related, assuming thats
(1) the charge costs for diverse sues of a given profile in
a given group of steels stand at the same level (in zlotys per ton)
as the casts of the "representative" of that group, provided that
the yield be expressed by the same percentage; at a change in yield
the charge cats should be ccanensurately revised;
(2) the processing costs of individual sizes of a given pro'
file in a given group of steels evolve, in relation to the process.
fang costa of the "representative" of that group, in direct propor~
tion to the indexes of labor-consuming opacity,
hence to this case use may be made c~ the B ices whose
method of calculation has been cited previously,
In this way it will be possible to avoid the irregularitjes
ensuing ram the excessive number of estates entailed in t
method adc pted for Bete *i ivg prices for 1956.
It appears that the p mountt error mks duzixg the deter
mining df the 1956 prices of rolled prroducts (and also the error
lC9
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fran which the other, Willer errors ensued) vas the attempt to base
the prices of indiVi4UaJ ty e.>sixes on3 the meaxi weighted prices of
calculation groups in spite of the total inorce at the assort
cent structure within these ,groups. 7xa this connection it was over..
looked. that any errors ii esthaates (not al' ys avoidable ) that re~
8u1t iIa ergs in the relationships determix ed amoxg the prices of
individu . products cause the veriobilitude of the mean weighted
priceo per c&c"lion group to be very doubtful. nce there may
even arise axaother danger consisting in that, contrary to the postu-
iates adopted, the total value of the output of rofing mills a
calculated, in sales prices may differ considerably fcx the sum
total of the pr1e cots of that output. Therefore, as it appears,
in the future the determination of prices should be based on the
nonmed coats of individual type sizes and not on the mean weighted
prime costs of calculation groups.
As noted before the relating of prices to the theoretical
weight of product is another important problem, and this pertains
not oEly to metallurgy but also to other branches at industry, such
as the paper n& xag industry.
The 1956 price list introduced for the first tine the prim
ciple of" the breakdown *- with respect to certain products of cog-
giag ini a >? of the deliveries fr x i purveyor to receiver on the
basis of the achy delivered linear maters of these products as
calculated in terms of the price-listed theoretical weights. Ruch
products include, among others:
(a) C.eectioxrn 200 to 300 mm high;
(b ) Z.section 200 to 550 mm hid;
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(c ) a1?g1e sectiona with arms 150 and more mm vide,
(d ) z*il eectiona four portal cor veyore j
(e) railroad rail sectiona 115 and more mm high;
r) tramv- ra~,i sections.
Prior to this, when, for instance, a purchaser needed 10 kkc
of narrow-groove (160 w) tramway rails and ordered 525 t (as per
catalogue ), he actually received 525 t of rails but their length
totaled only 9.6 kin. This was because the steel plant found it
more profitable to roil the railm at an upward thickness clearance,
because this was less labor consuming, while the purcbasi ; plant
had to pay for the actual weight of the goods delivered.
Or if a purchastaag plant plans to lay, for instance, 5 km
of tramway track, although it has exhau tea the finds assigned to
it in the investment plan project for the purchase of rails, it
will be able to use the received. rails to lay a track 200 m shorter
than pJ.anned. Therefore the material plan of the related inves t-
menta could not be fu3!i11ed, because the purc1a ing plant exhausted
concurrently the rail tonnage aas ied to it.
such practicee oui the pert a the steel plants not on1,y
exerted an edverse influence on the tulfil]xnent of the iuvea'rent
plan but aleo ct itt ibuted to the wasting o steel iii the national,
ec ncany.
Let us assume tt the clearance for a linear meter of rail
amounts to 3%. the plus clearance be abandon ed in fa*or or the
minus one, 6% o ateei cauict be saved. This would mean fist the
quantity of ete+el assigned far iutacturiiag 100,000 t ei' rails
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would cuff ice for rolling an additional quantity of rails sufficing
for laying an additional 6o ism of track.
The new principle adopted ix~ the 1956 price list will un-
doubtedly influence a reduction in the weight of the rolled rails
and sections down to the limits of the "minus" clearance (permitted
by the staaadards ). Otherwise if in 1956 a steel plant delivers to
the purchw; i ng plant 525 t of 160 W rail, having an over. ail length
of 9.6 km instead of 10 km, it will be paid for only 5011. t, and
thus it will sustain a loss. Furthermore only 5014. t will be
crated to its fulfillment of the value of output, and this will
affect the bonuses received by the steel plant management for iIn-
plementing the plan of output by value.
There is not any doubt that the principle of computing the
value of rails and sections according to their theoretical weight
will be an important econodc incentive for a more efficacious
utilization of steel in national economy.
It needs only to be considerecl whether this principle could
not also be gradually applied to the other rolled products.
There exiats a price list in which the principle of com-
puting the value ocr production according to theoretical weight has
aiready been applied to all products caamcerned. This is the price
list of steel structures. Uowever in this case the problem was not
?to eave metal (the cobined total weight of the Polish-produced
structures is much more lower than the corrreepondiing weight o
the Poliahwproduced rule. and sectione ) but to safeguard the nonaurM
peesing of the planned (in estimates) quotas of funds ? assied for
the purchase of steel structures. However a close obeervance of
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11
this principle might lead to adverse econon4c consequences. For
instance the producera who do not have in shack steel aections of
sufficient thinness would have to poetpte manufacture of steel
structures until such time ~rhen the steel plants deliver to tam
the necessary type-sizes. Bence an arbitrary solution was decided
upon Producers of steel structures may invoice them according to
actual weight, provided it does not exceed 3% of the theoretical
weight of structures, Whenever actual weight exceeds by 3%, the
delivery is invoiced according to theoretical t~reight increasea by
3%. To avoid having to make any subsequent corrections, the value
of the structures is planned in the estimates according to theo-
retical weight increased by a 3r~ allowance.
However this aolution is not adequate in every case. The
producer may continue to avoid man facturing structures from sects
tions or sheets with dimensions that might cause the structures
to surpass the theoretical weight by more than 3%? Therefore the
price list contains an additional clause permitting the producer,
in exceptional and especially well founded cases, to sign a contract
with the purchaser ~? subject to approval by the minister to wham
the purchaser is subordinate ~- f'or delivering and invoicing steel
structures according to actual weight even when it is more than 3%
higher than theoretical weight.
Aside from the previously mentioned surchargea for metal-p
lurgical cex'Uication and technical reception, the price lists of
rolled. products also include surcharges for "unsuitability," ac-
curate oUing, specified length, standax'd4.zatiof, softening, anal
delivery in cuantitiee below the mum prescribed norm.
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The introdur,.tion of surcrgea for "wasu,tability" purports
to reduce and eventually to elite the demand, for products of
this sort. This is because a reduction in the scope of the rolled
profiles and sizes is one of the moat effective ways of raising
labor productivity in rolling mills. hence any profiles and sizes
not mentioned in the prescribed prograra of rolling and cataloguea
are regarded as "unsuitable" products. The surcharge for "unsuit-
ability'? is thus of : e'plicitly prohibitive nature ? it is thereby
expected that the purchaser,, desirous of reducing their prime
costs, would attempt to modify the designs of their products ao
as to avoid having to place orders for "unsuitable" raw material
products.
A prohibitive trait can be also discerned in the surcharge
for the delivery of quantities smaller than the minimum prescribed
ones. The purpose of this surcharge is to protect the steel plants
from receiving an excessive number of petty orders that would dis-
organize its production. Clients for small quantities of products
should acquire them fran the stores of the Sales Bureaus of the
Central Board for Steel Marketing, and not from steel plants. These
stores, by accumulating orders placed by a n~uuber 0f purchasers,
are able to order the products from the steel plants in quantities
great enough to make the surcharge inapplicable. In this case
every purchaser who places orders with the said stores pays the
regular price plus only as the store profit margin whereas if
belaw in~.mwm guar tjtiea are ordered directly frc~n a steel plant,
the purchaser has to pay the following surchargssl z
up to 50% of the nt 10%
less than 50 sad up to 5% oP the n 20%
less than 25% of the norm 50%
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It is only in the exceptional cases when a store cannot acs
cumulate a sufficient number of orders that the purchaser is sur.
charged far the euali quantity. ifowever auch cases occur only
whenever it is a matter of a particularly "unsuitable" or special
profile or size or when it is necessary to rake an exceptional dew
livery.
The other surcharges (for specified lengthy accurate roll-
ing, standardization, and aoftening) make it possible for the steel
plants to defray the casts caused by the additional requirement8
posed by the purchasing plants. Nonetheless they also are of a
prohibitive nature, especially the surcharges for specified length.
By demanding products of a specified length the purchaser
can be sure of reducing its awry material costs because then the
quantity of wastes is &aaUer. This can be easily illustrated by
the following example
Plant X employs in its production process, aside fran other
rolled aectios, flat rode with a thickness of 6 rn , width oi' 50 mm,
and length of m, in a quantity totaling 800 t annually. If an
order placed by Plant X does not mentjon a specxfifed length but
merely mentions rods with limited dimenajons (s to 6 m) na surw
charge will be required. However Plant X would the, ;ati~c a great
number of wastea (flat rod trimmings up to 2 m by length, which
may total, for instance, 200 and more tons),
#' speci!ied lengths are ordered ~-~ th a tolerance of up
to 75 mm the wnouat of weatee viii decLjne considerably and
plant X will reduce ita material coats N
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on the scale of the machine building industry as a whole,
such savings could be expressed in tens of milliorne of zlotys.
on the other hand, although it is to be expected that steel
plants meet with definite difficulties when cutting rolled ?ecttona
into specif y diiensiona, they must take Sato account t1e~ ehrtuka e
"/
of metal at various temperatures, a they must make sure othe
proper profile dimensions and length of the bloods uaed as cbsrge
in rolling mills, etc. All this not only cauaes additional coeta?
to steel plants but also restricts the productive capacity of their
rolling mills, which, in principle, would be much more ha1u1 to
national econc y than the appearance of an additional aout
wastes in the proceaaing industries. This is because these waster
may be utilized in secondary production in situ or in the other
plats of the major or minor industry, whereas if the productive
capacity of rolling mills is?reduced, national econan.y will receive
a smeller amount of rolled. products, and ilia will an others also
curtail the possibilities for an increase in the output of the ma-
chine building industry.
Surcharges for specified length, vhich is certato cease
amounit to as much as 20 and more percent of the regular price of
a given rolled section, diecoaxnge the puzc1muers tre! ? too 1
petuous and unpr~neditated placing of orders.
Surcharges for accurate rolling apply xle~rar a purcb a.r
demands that certain rolled products be manuf*ctrMl at etaaller
c>earancee of the dimenaioo~s of profile or tbtcess thwua provided
by the prescribed etandards. These clearoacis ire toreses Chiefly
because when a rolled product is cooling it also shrinks, and the
exact extent of that abriukse is difficult to eetimate, because it
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hinges on the tenpersture of the metal at the moment when it paeees
through the rollers (a tonperature that, ao is knoim, fluctuates).
Besides the extent of clearances is also affected by the extent of
the depreciation of rollers and their attacbnits.
The prteczr brd etand.axde pruv 4e for epecif is clearance
limits for rolled products as juetified by objective cOnoiderations.
On the other hand, if a steel plant h~ao to execute rolled products
with clearances smaller than prescribed by the staMards, it is
posed by a very difficult task and 1nce it sustains additional
losses,
Other Rolled Products
General characteriettcr Of slabbi ?~ill products. De>
termining the prices of slabbing-mill products. Relation
ships among prices of products rolled from diverse materials.
This section uses the prices of the products of olabbing
mi11s as the example of the previously unmentioned problem of re-
lationships among the prices of similar producte msLe from different
raw materials. This section viii also deocribe the moet character-
istic errors caiunitted during price determination end tie conoe-
quences of these errors.
addition to cogging mills, slabbing mille also account
for a considerable share in the plastic processing of stall. Millo
of thins type serve to manufsctuxe slabs, plates, thick, thin, and
atandard sheets, and co1dmrolled strips.
The thickness at there products is variegated. For elabs
the thickneae rimes fran 60 to 200 mn, for standard obeete from
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5 to 4p mm, for thick sheets from 5 to 60 mm, for thLn sheets froan
0.24- to J+.5 mm, and for cold..rolled strips from 0.10 to .0 nun.
The divergences i.n the widths of these products also are
considerable.
The data pertaining to the multiplicity of the products of
slabbing mills reveal clearly the great difficulties involved in
determining the prices of these products.
Various methods have been adopted for determining the 1956
prices of individual products of slabbing mills.
The price, of slabs and sheets rere determined according to
principles analogous to those applied to square blooms and other
semifinished rolled products described in the preceding section.
In the case of sheets a noteworthy fact is that every price"
list item comprises a considerable number of catalogue sizee
(thicknesses aid widths). For instance the first ranking item in
the price list of universal sheets (2,206 zlotys a ton) comprises
li.8 catalogue type-sizes made from 3 grades of steel representing
2 price-hat groups of steels. Such an approach evokes reserva~
tions.
It is certain that the manufacturing costs of such a great
number of catalogue type.eizes will deviate considerably from each
other. If a ux iform price be fixed for all these type-sizes the
differences in the profitability of the production of specific
0
type-sixes wiU impel, the steel plants to concentrate their pro-
duction chiefly on the more profitable typewa ee oi' sheets. This
may result in a oituation in which the purchasing plants Vii). be
?~
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colmpelled. either to wait months for sheets of a specific thickness
or to accept whatever sheets are offered to them by the steel plants
(provided of course that they are suitable). As a result a steel
structure which was to weigh 200 t according to theoretical weight,
would actually weigh 205 and more tons. This of course leads to
aquandering of steel.
As is known, saline steel, plants have stocks of certain types
of sheets which cannot find purchasers, whereas other types are in
a very great demand. It is also known that purchasers may obtain
certain type-sixes of sheets with greater ease than others even if
all these type-sizes were comprised together in a single price list
item. Among the various reasons for this pheno~eno~i the undoubtedly
major one is that the uniform price of type-sizea having varying
prime costs is not favorable to the fulfillment of plans of the
range and variety and output nor to a proper supplying of purchasers
with the products they need..
The prices of individual sizes of sheets were differentiated
depending on the grade of steel from which they were rolled. The
subgrouping of steel grades in the price list of sheets does not,
however, correspond to their subgrouping in the price list of cast
steel. tkring to this discrepancy between the 2 price lists of fer-
rcanetallurgical products there occur such irregularities as, for
batance, the fact that the price of a l0-cn sheet, whether made
frc in the "x" or the "St 0 S" steel grade, is the seine, nazsely,
2,233 zlotys a tarn, wheroae the price of Grade "x" cast steel in..
gate amounts to 1,350 zlotys a ton., aM the price of Grade "St 0 a"
cast steel iigots is l 3O zlotys a ton. .
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A similar difference occurs also between pricey of plate (a
t emifiniehed product made fram both grades of steel ), although plate
con+titutea charge material for thick>sheet rolling mills.
All these discrepancies, and many more, ensue chiefly fraei
the circumntance that the problem of interrelating the sheet prices
has not beers properly solved. Thi is because the determination of
sheet prices was baaed on the mean weighted production costs of as
aortment groups, while the relationships among prices within in
dividual price'.iist items were worked out on the basis of insuffi-
ciently reanalyzed empirical indexes (pertaining to the yields and
labor'.consumption of the production of individual type..sizes of
sheets), or were merely estimated. In the future the prices of
rolled sheets should be determined differently.
First of all it is necessary -- it appears ?~ to increase
the number of items in the sheet price list. No single item should
ca prise such a great number of type-sues as at present. At such
an approach it may be succeeded in approximating the prices of in-
dividual type..sizes to their prime costs. In this connection use
might be made of the same method (see page 110) as the one applied
for the products of cogging mills (in spite of are difference be.
green the technologies of production in both types of mills ) .
A similar method might be also applied when determining the
prices of cold-roiled straps.
The 1956 prices of cold-rolled e trips have been determined
by the same method as the prices of the products of cogging mills.
Therefore at is unnecessary to describe here the mistakes involved
in determines these prices as they have already been scribed in
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the precedig aectiooa. However it is to be empbasised that in
spite of theae miatakes, the prices of cal4~-ro11ec1 strips have
been determined much more corarectly than the pr?cee of rolled
sheets, because the method applied for determining the prices of
coidwro11ed Stripe and cuing-mill products certainly constitutes
considerable progress ccnnpared with the previous 3.y used methods.
never the same carnot be said of the method used in pricing
rolled shta and, besides, that method cannot be perfected and
should in general be abandoned.
The detex ring of sheet prices should entail an examination
of the cerrectc~ess of the relationships among the prices of sheets
rne f'rom differing kinds of raw material. For instance a zinc
sheet of a definite thickness should not cost less than a gal nixed
sheet of same thicknes. White (galvanizedwtin ) sheet should not
be cheaper thhan a galvanized-zinc sheet of swae thickness. Unfor-
tunateiy a mistake of just this sort was made in the 1956 price
list where galvanized*tin sheets 4.50 x thick, of C Steel Grade,
are priced at a lower level than gal vanized.zinc flat sheets of
same thickness. Such an error had to arise wring to mechanical ap..
placation of the principle of making the price e~ua1 to prime coat.
if galvanizedtin sheets are manufactured in the more modern plant
assemblies than galveLi$e1.zinc sheets are, then even if the price
of tin is much higher than the price of zinc, it be fwd that
the pri costs of the galvanized-ziac sheets of same tbic Y esa are
higher The method applied in determining sheet prices mar give
rise to relationships emcng the prices of various products that do
not concur with the utile value of theme products and are un usti-
f ied fram the econcrnic viewpoift c ad.
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It becones thus clear that the mere proper interrelating of
the prices of raw materisi,s is not in itself sufficient for insuring
a proper relationship among the prices of the products made from
these materials. Pu'thsrrnore it is to be noted that the degree of
labor consumption requirec1 by ndivjdual products should be properly
expressed. If, for inatance, 2 types of products may be manufactured
in identical plant assemblies within a single production enterprise
but for various reasons are actually manufactured in different n.
terprisea with differing prime costs of production, the nonmed prime
cost of the staudard plant should be adopted ae the basis for deter-
mtning the prices of both kinds of products. In this connection the
nonmed labor costs and. departmental costs should be calculated in
the same way as when both these types of products are manufactured
in the same plant assembLy.
The applj.cation of this principle for determining sheet prices
creates the conditions for avoiding the above described errors, and
moreover then the interrelationship of the prices of the materials
used for manufacturing these sheets will be fully expressed in the
level of the prices of the finished products.
Steel P ipe
General characteristics of pipe grades . i1ethada for
determining pipe prices.
The prices of steel pipes differ fro a the prices of other
metallurgical, producta in that they pertain not to weight of pay.,
duct but to its length as preseed in meters at the prqper wall
thickneas and pipe diameter, The pipe price list also cif
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the theoretical weight of individual pipe grader used as the bads
on which to calculate pipe length for invoicing purposes.
Pipe prices constitute the simplest and -W it appears ..
most glaring example o' he adverse effects of determining prices
on the basis of the mean weighted prime cost of an entire group of
products.
Steel pipes are divided into 2 principal kinds: seamless
pipes and welded pipes.
The 2 kinds differ from each other chiefly in the methods
by which they are manufactured. Seamless pipes are manufactured
in tubing mills by means of hot or cold drawing. Welded pipes are
manufactured by means of heating together or welding properly pre-
pared strips of sheets.
In addition the following types of pipes are distinguished:
light (gas ) and heavy (steam ), threaded and smooth, flared and
flanged, long distance and precision conducting, boiler pipes,
drilling pipes, well piper, etc.
The pipe price list has, like refractory materials price
list, a practical purpose. Instead of specifying the grades of
steel fram which the individual types of piping are made,, it in-
dicates the purpose for which a given pipe type is applicable.
This is doubtless a great aid to the purchaser. Moreover the steel
pipe catalogue is arranged in the same was, and there is practically
hardly any difference between the nvaenclature used in the price
list and that used in the catalogue.
The method of determ ing pipe prices adapted for 1956 La
distinguished by its tr~mnen~oua aiznplicity. It eneuee fxou the
toll4wing poatulatea
A ].23.
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(1) Every kind and type of steel pipe is represented in di-
verse diameters, and each of these diameters may pertain to a di!.
ferent wall thickness] hence the price of a ton of pipe having a
given diameter should be uniform regardless of wall thickness.
(2) The height of pipe prices should correspond to their
planned prime costs.
(3) Uniform pritne costs M- to be used as the basis for de"
termining pipe prices .>,. should be calculated for all the diwnetera
of a given kind and type of pipe.
(1) Pipe prices should be calculated in relation to a linear
meter of the given kind and type of pipe having a specific diameter
and wall thickness in this conjunction, these prices are to equal
the mathematical product of the price of one kg of the pipe multi-
plied by the weight of the linear meter (as expressed in kg) proper
for the given wall thickness.
Let us assume for instance that the uniform prime cost of
an electrically welded steel pipe with an outside diameter of 26 mm
amounte to 5,040 zlotys a ton, and hence the cost of one kg of that
pipe equals 5 zlotys.
According to the above mentioned principles, the price of
one kg of that pipe should equal 5 zlotys and the price of one
linear meter of that pipe, which has a wall thickness of 2.6 mm,
should equal 7.50 zlotys, considering that 5 zlotys/kg x 1,500 kg/m
7.50 zlotys/m, the 1,504 kg/m being the weight of such pipe with a
wall thickness of 2.6 man.
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 1ll
AB mentioned before the unueual simplicity of this method
would seem to be its great merit, eepecially as the determination
of planned prime coats dots pot either involve any difficulties be?
cause calculation groups pertain Duet to Lzidividual diamet.ra of
the appropriate kinds sod type. od pipe.
Actually ba~rever, this method entsila ouch t'sr?reaching
overstoplitiesttone that it vbolly distorte tit carrectaeas of
prig relationship among individual price lint !tame.
This Is because if, for ex&nple, the prime coot of a torn of
an electrically velded pipe vith er outside dl teeter of 26 sam !a
unUot' rogsrdless of vall thicbaae (0.8 to 2.6 mm), eu obvioue
error is thereby co ttted. Attar s11 eleatrtcslly v.ldsI pipes
are made of sheet metal, sod the prices of sheet aaete-1 ditter de.
pen41ag on its thicb ees. per iaoetsace a 0.8?s~ ahsst a* tram
Grsde 8 60 steel caeta 3,618 slotya s ton, vhile s 2.6. ebetmade ire t s same steel coats 3,298 s1tore t ton. Beside. tb~e
length of a tea of the pipe Frith s va11 thichoQeas of 0.8 sw would
be 3 times ae gTest se the length of s tons of u pipe vttb s
wall tMrlrn.ee of 2.6 mfa. Therefore, t ?tbe torair fin, the eat
of electricAl welding will be 3 tJiee u 45gh a Sa the JsttSr.
The prime costs of pipes (o relstSd to tbsfr 4tssteri o i1')
are hsncs map vtgbtsd costs sad heir bsigbt dipodr Lager as
the r+ttts of pips vtth thtna vaUs to pipe vttb tbtck*t villa
in the totsi output of pipes of a giv n dtsoaster.
If' the prtc.. of wLdod ytjM aetoaarl tbs 1~aeis of
these coats it may be towad tit s stafl plant sustains lases Yhen
manufacturing pipes with thinner v*11s, vhereu it will drsv high
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profits from manufacturing pipes with thicker valle. Such a pricing
arrangement would obscure the actual picture of the achievements of
the plant and it might affect adversely the fulfillment of the plans
of range and variety of output. Desiring to avoid losses the
steel plant would avoid manufacturing thinner>walled pipes, and
the purchasing plants would meet with great difficulties in ob-
taining such pipee.
It is also to be emphasized that the planned mean weighted
r
prime coat of a calculation group cannot serve as the basis for de-
terminng the ealcs price. Therefore it is necessary to deterrnine
the normed prime cost of the production of individual assortments
comprised within a given marketable output group.
The above described problem pertains to all pipes, including
seamless ones although in the case of the latter the errors of the
current method are not as glaring as in the case of welded pipes.
6. Ferroalloy
General characteristics of ferroalloys.. Determining
the prices of ferroalloys and their interrelationship.
Prices of ferroalloys vereua- prices of refined eteele.
In certain cases specific caimmoditiea are inttrchsngeable
and the relatimship between t1kir utile values ie eaey to estab-
lieh. hence it vould ce+nn that all conditiom are provided for
determining the prices of such products according to the principles
of equivalent relationship. lio~rever sometimes eca ci is caaeidera-
tione make it necessary to use the principles of direct relation-
ebip when determining the prices of such interch*ngeable products.
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This takes place whet determining the prices of, among others,
ferroalloys.
The term "ferroalloys" is generally applied to those alloys
of iron with other metallic and nonmetallic elements in which these
elements are more greatly represented in percentage than in diverse
kinds of steels, Condiderinng that ferroalloys are used nearly ex-
cluaivtly $3 alloy admbtureo to charges ii7 steel plants in order
to inaurs the deeired chemical composition of steel or to remove
hur ful sdbnixtures, the group of ferroalloys includes also certain
other alloys of metals with nonmetals used for similar purposes.
The principal types of. ferroalloys includes ferromanganese
(Fe ?? 1&n), ferry nolybdenum (Fe -- Mo ), ferrotungsten (Fe ~? ),
ferrotitanium (Fe ?. Ti), t.rrocbramium (Fe -~ Cr), ferrozirconium
(Fe ~- Zr), ferrovanadium (Fe v), ferronickel (Fe
ciple be based on.prime costs; in t}4e connection, the interrela..
ti,hg of the prices. of ferrosilicons with varying contents of eiUcon
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or silicon-calcium with varying contents of calciun and silicon,
should be based on the previously described direct relationship.
In this way, for instance, the price of ferros,liccm with a higher
content of silicon will be higher because the related prime cost
is also higher (we refer here, of course, to the production costs
of t}ae standard plant ) . The use of the mean weighted prune cost
of the ferroailicon might backfire here in view of the differences
in the technological equipment of individual plants.
' same pertains to calcium silicon, where the prime cost
of production is lower at a lower content of calcium and vice versa.
Is it correct to determine the prices of these ferroalloys
on the basis of the principle of direct relationship, that is, in
a directly proportional ratio to their prime costs? It may be ob-
jected that the utile value of ferrosilicon alloy with a content
of, e.g., 75% of Si does not evolve in the same relation to the
utile value of a ferrosjlicon alloy with 85% of Si as do the prime
costa of both these ferroalloys.
In this connection the prime cost of the production of a
given grade of steel depends also on the type of the ferrosilicon
alloys (and its content of Si) used as alloy admixture to charge,
Zn the former case, a somewhat greater (by about 10%) amount of
ferrosiljcon has to be used, but its price will stall amount to
less than 1/2 of the price of the fer rosjlicon with an 85% content
ofSi.
This appears right and proper. ?errasilicon alloys with
differing contents of Si are mutually replaceable. Frmm the view..
point of the interests of the national econany, steel plants should
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therefore use the ferroeilicon alloys whose production and utili..
zation are cheaper. Let us illustrate this by an example.
Let us assume that the prices of ferroailicon alloys with
75% and 85% contents of Si are about equal to their prime coats
of production. The production of a specific quantity of molten
steel requires that cast steel be admixed. with 170 t of the
silicon contained in the ferrosilicon alloys f or . technological
reasons. In order- to furnish the steel with that amount of sili?
con it is necessary to consume.?ither 200 t of a ferroeilicon alloy
with au, 85% content of silicon or about 227 t of the alloy with a
75% content of the same. The manufacture of these quantities of
ferroalloys will cost national economy:
(a) in the former cases 200 t X 9,45 zlotys a to
1,889,000 zlotys;
(b) in the latter cases 227 t x 4,000 zlotys a ton
908,000 zlotys.
If the price of these ferroalloys corresponds to their prime
costs, the purchasers, being desirous of reducing their own prime
costs of production, will try to use more of the alloy with a 75
content of Si because this will be more profitable to them. It
is also simultaneously profitable to national economy.
It appears that this problem 1a much greater implications
and that the above cited solution may also be applied toward other
kinds of mutually replaceable supply goods manufactured from do>
meatic raw materials.
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However here a very vita]. circumstance should be mentioned,;
namely, does the purchasing plant when placing its orders have
full freedom in selecting materials? If this is not the case and
the purchaser is caupelled to take obly the products that are
offered to him, the adoption of the principles of direct relation
ship for determining the prices of replaceable materials would not
yield positive advantages to national economy and might ever cause
it to sustain considerable losses because then the producer would
offer a quite accidental range of output without considering pro-
duction costs as the height of the price would assure him in every
case of the profitability of producing these goods. The purchaser,
on the other hand, having no choice but to accept the materials
offered to him, would sustain fluctuations in his prime costs and
profitability of production -> depending on the kind of delivery
he receives. It is clear that such a situation would contribute
to a senseless squandering of means of production in national
economy.
Hence it appears that so far as replaceable materials are
concerned, when the purchaser lacks complete freedaim of choice,
the price of the material should be determined according to the
principles of equivalent relationship. Thereupon the purchaser
will not sustain avoidable losses and. the purveyor will becane
interested in manufacturing products whoee prime costs are minimal
and utile values maximal.
To illustrate this thesis, let us proceed on the following
abstract assumption.
A producer manufactures only 3 kinds of Ierroeilicon alloy ...
d
A, B, and G. Zn this connection, the purchaser mulct accept the kii
offered to ha because be Will not receive any other.
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The prime cost of ferroaiUcoxa alloy A is 3,000 zlotys per ton.
The prone coat of ferroailicon alloy B is l,000 zlotys per ton.
The prime cost of ferrosilicon alloy C is 10,000 zlotys per tarn.
The ratio of the utile values of these alloys is as follows: A:B:C s
1:L.5:2.
If the prices of these ferroalloys be determined on the basis
of direct relationship, at a Sp (direct relationship index) equal
to 1.0, these prices will be:
Alloy A ww 3,000 zlotys per ton
Alloy B M- 1#,000 zlotys per ton
Alloy C M 10,000 zlotys per ton
On the other hand, if these prices be determined on the basis
of equivalent relationship, when Be (equivalent relationship index)
equals 1..0, and with the price of Alloy B adopted as the basis for
the relationship (Pc value, the interrelationship will be differ-
ent. If the price of Alloy B be fixed. at 1, 000 zlotys a tan, the
price of Alloy A will be 2,666 zlotys a ton and that of Alloy C ?>
5,333 zlotys a ton.
While 1,n the former case (prices determined on the basks of
direct relationship) the producer has no interest in manufacturing
a specific ferroailicon alloy, in the latter case (prices determined
on the baaie of equi,lralent relationship), he will concentrate chiefly
(if not solely) on manufacturing Alloy B becauae its utile value is
the highest and the ratio of its cost to its price is the most fa>
vorable.
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As ca be concluded frcn the above, the selection of the
form of relationship oz, the basis cf which the pricea of mutually
replaceable materials are to be determined must be preceded by
deciding who should have a greater influence on defining the range
and variety of output, the producer or the purchaaer,
If a producer must absolutely execute the orders placed
with him by purchasers and draft his output plan in consonance
with their demands, the principles of erect relationahip must be
applied when determining prices. In this way the purchasers will
be inclined to place orders for the lowest priced materials (whose
prime costs are lowest also) with the highest utile value, If
however the purebaser has but a very limited influence on the
range and variety of the producer'a output, the sole correct so-
lution is to apply the principles of equivalent relationship for
determining the prices of mutually replaceable materials.
Hence the justice of the one or the other method applied for
detexiuining the prices of ferroalloys produced from do neatic raw
materials depends on the justice of the decisiOn that the orders
placed by the purchasers exert the principal influence on the range
and variety of the output of these alloys.
The prices of the ferroalloys deriving from imported raw ma*
terials may also be determined at a level correepanding to their
prime costs . This iie unnecessary only whenever a givem ferroalloy
produced .Prvm imp~rted raw materials may be replaced by a ferroalloy
produced fr~ta dcieatic raw materials. Xn this cave the ratio of
the price of the former to that of the latter should riot be smaller
thee the ratio of the utile values of both alloya, even if the
ratio of their unit prime cats is dfferet~ it, the other
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hand, the ratio of the unit prime costs of both ferroalloys (of
the former to the latter) is expressed by a higher number than the
ratio of their utile values, the prime costs of both alloys should
be used as the basis for determining their prices.
The third group ccnprises ferroalloys that are not produced
?11 Poland (are imparted.) and the ferroalloys produced in Poland
from the imported raw materials the prices of which should be based
on their relatioi to the prices of the ferroalloys; for instance
the ferrotitanium produced frc7m rutile or ilmenite. I Poland
these 2 minerals are generally used solely for producing that
ferroalloy.
Accordingly the principle adopted ?~ and apparently correct ..
was that the prices of these minerals should be determined according
to the following formula:
Px :
where : Px > price of imported mineral in zlotys per ton (that is,
price of raw material necessary for producing a given ferroalloy);
Pz ' price of ferroalloy in zlotys per ton;
Kp : processing cost per ton of ferroalloy;
N : quantity of tons of mineral consumed for producing a
ton of the given ferroalloy.
Uowever there arises the question of how to determine the
price of the given ferroalloy itself, or of other lzported ferro>
alloys. This problem ie quite difficult because the absence of
aui'ficient experience prevents a canparison of the utile value of
these ferroalloys in relati * to the ferroaUC ra 'Whose prices are
Yao of p Sue coaVo ? Hence there an abeence of Y1e 'facto
nece8sar7 for a ~y i the equivalent z tioDelip methods.
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The detemnatian cif the 1956 pcea o?' hese products was
based on the pricee official it the Soviet Union This was because
it was considered that Soviet cteelxien pacsess caaniderable experi-
ence in this Field and that the relatiaxaships g the prices of
ferroalloys in the Soviet Union are doubtless econciifly Justi-
fi.ed.
However it is to be e1 )1la ixed that the acceptance oL' t
price iiaterrelationship based ox th above votive shou:4 be y
garded as a necewsary evil: This is because benefiting frQY1l the
experiences on-other countries should in no case signify a p'blind"
.
emulation.
The correctness of the level of ferroalloy prices is of
great ixlpOr`r ce for determinir the correct level o? tho prices
of alloy steels because the prices of the former are generally
based as prime cost a the value o' the expended alloy components
a:feot considerably the pre costs of aUoy rt+ael.s.
It may be thus stated t 1t ti e decisio~ty concern the
price levels of ferroalloys affect ubstantiallr .the relationships
among the prices of diverse kinds of refined steels.
.- Refined tee-
General characteristics of quality stoelu. The sur"
charge and. diecou t, sy Prices ' rsL'tzsed steep versus
0
prices of nferiu taie. P1 p~? toned etwle vereua
prices of plastics.
The preceding sects described xriethods of ai 1ifYiiag price
lists with z aspect to produced ms~aufactured in a wide range and
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variety of foriaa . The determination of the prices of rolled pro-
ducts rolled from ordtaary carbon steel was based on indjviduaj.
type-sizes (sizes of specific types ) as the fundamental units of
relationehip. The classification of products according to the
grades of steels from which they were manufactured fulfilled there
merely an auxiliary role. This vas because the important thing
wan to maaka the prices incentives for a maximal utilization of the
producttw cApscttlee of rolling ai11v. On the other hasd the
prob]sm is quite different with respect to products from refined
eteelaa Ybtch are ~r,ufactured in a still wider range and variety
of forma than is tha ceae with praclucts rolled from ordinary carbon
etsel. Considering that refined steels usually contain very valu-
abia end ecexce alloy admixturea, the prices of refined-stee1 pro-
ducts should act ac incentives for purchasere to save the most
scarce steel grad* sF oemely, grades with the highest content of
each components ae chramta*, Rickel, molybdenum, tungsten, vana-
dium, cobalt, etc. Thin goal to nnaterialized by, among others,
the specific structure of the price ]tat of refined steel products,
as demcrlbed In thta cacttaan.
Thus aecttae viii also touch apes the problem of the neces-
rttY of presew tbR
. Yz'oper rslat&oish#,p a~lgg the prices of
large groups of product e- manufactured from different raw materials
when such products find identical or similar applicationa. This
pertains, for example, to relationahip among the prices of certain
(corrosion-resistant ) grades of refined steels, and of ferrous
metals (copper, brass) and plastics (faolite, textolite vinid
etc),
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Refined (quality) eteels include various kinds of steels
belonging to the followxig classes: 2, 3, 1, and 5 (Class 1
Includes ordinary carbon steels).
Class 2 comprises structural steels;
Claaa 3 cuzapriaes tool steels;
0
Class t caunprlaes- special steels;
Class 5 ca~prisee nonstaxadard steels.
Class 2 comprises chiefly 2 kixids of steels: alloy and
nonalloy steels. In Class 3 the 3 principal kinds are rionalloy,
low-alloy and I tgh.alloy steels; and Class l+ cantaixas only alloy
steels . The official. roster of quality steels nwrbers about 14.00
steel grades, and each cthese grades may be used for manufac-
turing roiled, dram, and forged metallurgical products of various
shapes and dimenatons . Bence the price list of these products can <
rant be dravn up in the seine way as the price list of products from
Claw 1 steel becau$s this would require several years of labors
by an entire "staff" of axpertadl~ and the price list itself would
then cen tst or a~vsral score volumes.
Zi1vid~-1 gre4ea af" refined steels cannot be combined into
groipe uallkm orlfaxyr atssle. The substantial differences exist..
ing amoag IMirlduil grades t refined steels cause the necessity
oI' dstsr tiL ? a S *cU1c sales price for each of these grades.
wits rsrpsct to r.ttned atM1 the problem of the accurate deter.
minatit~ of the price of aaaterial frcam vhich a product is manufac-
tured is of much greater importance than t1e probl+em ot determ n.
ing the labor c upt on capacity o! ~ US1 products,
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Proceeding on this as sumption the price list of refined
steel products 1a been drawn up in a totally different way than
the price lints of ordinary steel products. The price of each and
every grade of refined steel has been determined separately for
rods of standard profile and thickness. The prices of other as-
sortme?ata were detex~nined through the surcharge and rebate system.
The surcharge and discount rates as expressed in percent of the
price of the standard, type-size or In zlotys per kilogram (this
more rarely) are to cover the difference between the processing
costs of the given type size and, the processing costs of the stand-
ard type'$ize.
Let us take for instance the ingots rolled from 1ow>a11oy
tool steel. Their price is thus determineds the price of the
standard type-size as specified in the price list for the given
grade of steel is decreased by a 30% discount. On the other hand,
for instance, the price of a strip cold-rolled frcan low-alloy tool
steel, 15 to 60 mm wide and 0.10 to 0.16 mm thick, is calculated
by adng a i60% surcharge to the price of the standard type.'size
produced from that grade of steel.
It is also necessary to explain the method used for deter-
mining the 1956 prices of standard type sizes produced tram indi-
victual grades of refined steel, and the foundations on which the
rates of the surcharge and discount tables have been bass.
The prices of standard type-sixes were calculated on the
basis of the planned or resultant prime costa of the production of
related grades of steels< Next certain corrections were carried
out in cases when! owing to diverse transitory reasons, the calcu-
lations indicated excessively high prime costs of the prcductios
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of steels that are lesa valuable fain the vievpoint of the content
of allccomponeta, ae caned with the prime costs of the more
valuable ateele, On the other Naiad the normin,g cf the prime coats
of the production of individual steel grades wee ignored. The thus
adopted t thod o? price dctermir at~.on iu justified, trite enough, by
the fact that the ca~plicated technological process of the produc'
tion of reed steels ana the absence 'of tecbnological normo agw
grravate the computing of norned costs . Nonetheless, even in actual
condit:.0a13, this method. cannot be regarded as correct. This i>s beu
cause the height of the reau1tant or even planned price coato of
reined ateela affected considerably (eapect'lly awing to the
incomplete maatering of the. technolo r of production of certain
grades ) by factors of an accidental nature ? The adc ted method of
price Bete ination will doubtless lead to conside able variations
in the profitability of` steel plants in measure with the eventual
progrresa in maateri the tecbnology of production of it4ividua3.
grades of steels, in the event that the range and variety of output
be altered because the ratio oprime coat to price rill differ
for each grade of steel This may exert an undesirable and adverse
influence on the readiness of steel plants to undertakes the produc-
tion of some grades of retioed steels. Hence it appears tbat the
prices of 4ividuai steel grades should be also based. on nouning
calculations, even if only on the basis of provisionally cc uted
tecbnological norms ate' material canaumptian and of hurl and me-
chcal labor productivity. This goal io difficult but is doubte
0
leo w x l]-y reaiietic
The be:14ht o surcbar4a discounts o uld be
cified in the price list of utile waste. hia group includes alao
defective products oi" ferrometallurgy such as rada, fittinga, and
pipes of correct length but di~aplaying auri'ace or material defects
which disqua.U y theta, and. aheets which cannot be cut wring to
their area or surface and material defects.
The third group of
ware scrap ixic1ude$ the rod, fitting,
pipe, and sheet wastes found in the production process outside the
ferrcinetallurgical industry, provided that they are not shorter,
nor 3aave a smaller area (with respect to aheets), than the minimal
length or area specified in the price list of utie waste.
The fourth group co nprises all other kinds of utile hardware
scrap. It may inciude rode from the first group which are shorter
than the minimal length fixed for that group. It may also include
demo ed steam boilers, pieces of broken chains, and the like.
The above characteristics of each hardware-scrap group were
taken into account when detex,dxiing the prices of such s crap
The first hardware-scrap price list was introduced in No.
vember l95 . Previous ly there were only the price lists of certain
rolled prtxlucts specifying the prices (usually in the fora of a
percentile discount frc~n sales price) of the production waste found
in the ferrcietaUurgi,cal industry. In addition there were several
looee applied of "i c l prices, among othera * (a) prices o atand>
aid, bmrdware scrap ~btaioed frcm dismantling ;purchased by stones
of the Sales Bureau of the Central Board of Steel rketi (these
prices were fixed at, the tuitfoxin level of ' 6o alotre a. to
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(b ) prices of mi1z'oad car axles obtained f the dis ting of
obsolete rolling stock of the Polish State Bailra; and (c) prices
of depreciated. railroaa wheel, hoops.
A complete price list of hardware scrap c?uld be drawn up
only after determining the classification of that scrals and the
general principles for its utilization >- this took place as late
as in mid?19511..
The original price 1ist was based on the following postulates
I. Prices of hardware scrap in the second, group should be
comprised in the price lists of the rolled products of ferrometal~
lurgical industry. The prices of production haste specified in
these price lists should be acknowledged as the prices of hardware
scrap in the second group.
. Prices of hardware scrap in the second group should be
determined on the basis of the same criteria as the prices of de-
fective pig iron.
This principle was established in order that, on the one hand,
the properly law prices would encourage purchasers to use detective
pig . iron and, on the other, these prices should not be lower than
the coots of charge material., because otherwise the eelling steel,
plant would rather prefer to use auch pig iron in its awn blast
furnace charge.
me pricea of such imate should not be 1q-er th~a. the ices
of pig iron or ordinary scrap. I th+. price o p1 iroa is low,cr
than. -to . prime coat (this having taken phade to 1955 ), the prices
of har .vaxe scrap in Group 2 eh ,d not be 'ixed at a level below
e
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the prime cost of pig iron. Otherwise steel plamta would find it
more profitable to remelt productian waste in their steel ,kin
departments than to sell it as hardware scrap.
fever there prices should take into account the cir um,.
stance that the purcheslers using Group 2 hardware scrap ray austaj~
aamewwhat higher costs thorn when using full-value materials in the
maxaufacture of their prvducta. Therefore in a majority of cases,
the prices of Group 2 hardware scrap are 20% lower than the prices
of analogous full-value products R This discount is r on the one
hand, high enough to discourage steel plants from manufacturing
defective and belaw~stanc.,~ecu3ion rolled products and, on
the other hand, low eIough to make it more profitable to steel
plants to sell their production waste and rejects than to resmelt
the s
However it is to be emp1al~sized that there also exist types
of waste that .-. if coneidered as hardware scrap .> would have to
wait years for purchasers. Zn view of the great shortage of ordi<
nary scrap metal, it would be more expedient to causign such waste
to ordinary scrap,
I general it may be expo'znded that production waste of steel
plants and other industrial plants should be caasidered as utile
hardware scrap only whenever it is to be expected that such waste
can be 80d1d Lthin a relatively bri ei period of title.
3? The prices of hardware scrap in Group one should blower
than the analogous prices in Group 2 r s is because hardware scrap
in cxrt~p 2 has a much higher ut le value, even w . its length or
area are smaller t jnGroup oe.
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Can prcductiOa waste is purchaa . fr+n a steel p t~ the
p haler kno 4s what g de o steel such waste derives r zu ? nce
i1 is also possible to kair the mechanical pro rtiee of euch waate
and this is of great ; ortance tea its reuse b prouctiCn N On the
other hand it ie not p sib1e to 1uow the grade of steel in Group
One haxhware scrap which is acquired, for instance, through c -
ratting. ?threore the application of the latter scrap is more
listed, and, is this connection its prices have been fixed at the
level of 7cr; of the prices oT at aiogous fu11
The prices of Grasp 3 haware scrip ~rere fixed at a laver
level than the ara1ogous prices of Group On scrap. True enough,
the resu1t~0ng price differ mce nov high enough to encouxa e
purtaeers to acquire Group 3 hardwai e scrap (nearly an purchasers
tried to obtaiia chiefly Group One scrap ), but it was not poa 1e
to incr e that difference, unlesa ixithtatria1 plants were to sell
such ecrap at ordinary scrap prices or at even lower prices.
` fixinlg oi' t prey of Group 3 hawaree ecra~a at a too
. lot level would be sex aeleas because t1 n tbC pr+~ductiOf p)21e,
ithere such wastes are obtains, would not tiM it profitable enough
to sort it out of ordina17 ecra.
I, AccQrdi to the prise fiat Grop k ., acrap e1ta3d
eoiid at prices d be 'ee purveyor a p rc) r,
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the minims price should be 270 zlotys a teal while the ciirnzm price
should be about 7c of the price of till~value product, The price
of 270 zlotys a ton is higher by 20 xlotya thaxa the price receivable
by purveyor for the most expensive (light) nonauoy steel, scrap if
he wrere to sell it to a socialized scrap warehouse.
The upper limit of tie prices of Group 4 hardware scrap h
not been specified in absolute figures, because ?M as noted before
this group may also ccmprise dismantled or damaged equipment the
value of w'bich canna be appraised in advance.
Devise it was not possible to establish the principle 0f
selling Group !. hardware scrap at a fixed ratio (e.g., 7Q, 60, or
50%) to the price of full-value product. This is because sciietines
the purchaser must accept the risk that the hardware in the group
w prove unsuitable for proceaaing and will have to be resold at
the price of ordinary scrap. All such cases must be individually
cansideredi therefore it waae necessary to confer same flexibility
on the prices payable for Group 4 acrap hardware.
The 1956 price list of hardware scrap has been partially
modified. Owing to the raising of the prices of rolled products
there occurred s c zcottant Increase in the prices of the produce
tionl waete and rejects of ferranetall urgical industry, although
the percentile rat os of discount from prices of full-value prow
ducts remained nearly unchanged.
The prices of Group One hardware Bcrap have increaeed upon
preserving the principle of the 70% far the price of full-value
product.
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on the other band, the prices of Group 3 scrap were main-
tained unchanged and ao was the principle that the prices of Group 4
hardware scrap should be deter~ained between the purchaser and the
producer themselves.
The maintenance of unchanged prices of Group 3 hardware scrap
was designed to create a high enough difference between the prices
of that scrap and the analogous prices of Group One scrap.
They low prices of Group 3 scrap (in eoiiue cases amountixag to
as little as 25% 0f the prices of full .value products ) should con-
stitute sufficient attraction for many purchasers. By utilizing
hardware scrap fran that group they can reduce substantially the
prime casts of their production in relation to the costs they would
have sustained if using hardware scrap fran other groups or fran
other groups or from full-value rolled products.
There is n0 doubt that such a determination of hardware
scrap prices will contribute to increasing the demand for and use
of hardware scrap in general and this should effect a considerable
reduction in the shortage of rolled products,
OIL OF NC 1 Rt N~AL$
1 Pr oee 'O1?. s of Z Ofl Met4is
Principal kinds vf' area of nonferrous metala. Deter>
mine the formula prices (prices depending on t1 content
of pure metal in ore) Znt uenoe of variable (fog )
pricee ones on the pro itebility of nonterro are des.
Prices c.' nonferrous ores and the econ4c profitability o?
mine.
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When speaking of the price of a given material or a means of
production we usually refer to the specific monetary amount which
the purchaser is to pay for a natural unit of such material. There-
fore the price list expreeses prices most often io emauzts of
zlotys per k~.logrem, per ton, per linear meter, square meter,
cubic meter, liter, piece, etc. The prices of wholly replaceable
assortments of products are determined in the game way, even when
the principle of equivalent relationship is adopted as the basis.
liovever the official pricing system for metallurgical industry
applies other solutions, too. this section will use the prices of
the ores of nonferrous metals as an example to show hoer in certain
circumstancesS(when the prices should be fixed according to the
principles of equivalent relationship) it is possible and expedient
to determine each and every time the value of the delivery of a
given material according to appropriate formula and not to list
prices.
In the Polish output of nonferrous metals the principal role
is occupied by ores of zinc, lead, and copper. mctensive deposits
of zinc ores
zincblende and calamine -- occur in Upper Silesia
and in the vicinity of Qlkuaz in Poland. Zinc-ore deposits are
usually accompanied by ),sad-ore ones in the form of galena] there-
fore they are together referred to as zinc lead. ores when deter-
mining their .priees?
view of the contiu U0 s ounce of sine snd lead ores
ad their _high content of gang, the extracted tiiw.lead, ores are
subjected to various concentration processes resultiZ in the aepa~
ration of alena fra zinc ores the elimination of the ccns1der-
g
able con's of clay, silica, and other impurities: What renaiB
152 .>
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to the so9called concentrates of zinc and lead, distinguished by
their much higher content of pure metal. Depending a the quaxntjty
? Qf pure metal in a ton of raw ore and on the type, method, and m~an-
r~er of conducting the concentrating processes (e.g., flotation,
roasting, or elntering) the concentrates obtained vary in their
content of pure metal end in their chemical conpoaition (zinc sul-
fides and oxides, and lead aides). Aa a result the processing costs
and the consumption of concentrates in the metallurgy of nonferrous
metals per ton of given pure metal (zinc, lead, etc) fluctuate cort-
siderably depending on the content of pure metal and chemical com.
position of the concentrate,
The above staatemen.ts concerning zinc~1ead ores are equally
applicable to copper and aluminum (which iiizst undergo the concentra-
tion process ) and to other "ores of nonferrous metaic.
-~ l th;:',h the.
vQl we yield and thel processing costs per ton.
of pure metal depend considerably on the degree of modernity of
metallurgical facilities and production methods See Not7, the
chemical capoeition of a concentrate and ita content of pure
a metal are here always the factors of primary importance. The
sre of material costs in the total prime cost of the production
of pure metal is, as a rule, very considerable and scetimea it
would even be greater if the price of ore were to take into acs
count the complete costs of its extraction and concentration.
(L!ot T For instance the prime cost of the production of a
ton of electrolytic zinc is much lower than the prime cost of the
production ?of' a ton of metallurgicai x n.c, although electrolytic
zinc ie Of much I her quality. )
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As noted before, there are many reasons (to be mentioned
later) why the mining of the ores of nonferrous metals cannot arrays
be financially profitable
In view of the great fluctuations in the pure.aetal content
of an ore delivered in inetaaltnents throughout a prolonged period
of time (even if such ore derives frog one and the same mine), it
3s necessary to solve this problem; which branch of industry should.
be selected for eliminating therein the fluctuations in profitability
caused by the varying chetnica1 composition of ore, the nonferrous
ore mining industry or the nonferrous metals industry? A number of
reasons prevail in favor of making the evolution of prime costs
and profitability in the nonferrous metals industry independent
from the often accidental changes in the quality of the deliver
ores and their concentrates. It appears tb~t the folloving are
among such principal reasons.
(l) The concentrates of a given ore are interchangeable but
the volume of their consumption per ton of finished products depends
on the content of pure metal in the given concentrate.
(2) The quality of the delivered ore concentrate and
vhat is very important a< the percentile content of metal therein
are in no way subject to the purchaser's influence; they are largely
dependent on the manner of the process of ore ccu ?centration applied
by the ore mine, and on the thoroughness of that process.
(3 ) In the nonferrous ore mining industry the proble a of
profitability (to be discussed later) cannot aM a &1d tot occ
as faportant a place as it does in the metallurgil a otlvpr
branches of industry where the f financial JI Lt bl11t an cuter
prise is one of the principal iodexco of ita worth .as 4 oao~amic use<
fultess
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M1 theca circulmata eea speak to favor of detexmining the prices
of nonferrous ores accorrdin to the prii ciplea of equivalent rela-
tionship. The price of a tan of the pure metal should, be adopted
as the basis of that relationship, while the equivalency index
ahauld consist Of the percentile content of pure metal in ore, in
ore concentrate, in serf i.nished product, or in the waste arising
during the process of the production of nonferrous metals. On the
other hand the specific character of that relationship conaists in
that, in ad&i.tion to the above mentioned values, the calculations
should also take into account the coats of separating Prow a given
ore (or concentrate, semirinished product, or waste) the pure metal,
and the losses of metal occurring during the production process.
This is because the percentile content of pure metal in an are does
not in itself express the ratio of the utile value of are to the
utile value o?' the obtained pure metal. The index of equivalent re>
lationship should equal 1.0 because it would not be expedient to fix
ore prices at a level that would assure aarlitional profits to the
nonerresus metals industry (if the index is legs than l.0) or cause
the nonprofitability of that branch of industry (if the index is
higher than 1.0 -? when the equivalent relationship index equals
exactly 1.0 it can be generally ignored when ietermining prices).
ever there arises the question whether it is pertinent
to cote in advance the price of each and every mad of ors, con -
true or other me-terial yieldiug ingote metal vith varying
com a of pure metal? Such crnputig is generally rued as
wnneceesaary, especially as a price list prepare. in this way would
cantaih a great number of items, because even minute dti'terences in.
the content of pure meta. (expreesed in i'ractione ut a ; rceut) exec
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a considerable difference on the utile value of a given ore aax%
the height of its price.
An additional diff3.cu1ty is that scene ores contain 2 or more
metallic elemcnts.
There is hence no price list specifying the sales prices of
these raw materia U . Instead there are formulas used for calculating
individual sales prices according to the results of the so-called.
"analysis" of a certain ore, concentrate, seemfinished product, or
waste.
The formulas drafted t!or the year 1956 take into account the
following parra~eters serving to determine the price8 of products:
(~) price of the metal contained in a given product, cores
responding to the sales price fixed for the given metal in 1igot
form (designated by symbol P iz the c mu1a);
(b) analytic percentile content of metal in product, i.e.,
percentage indicated by laboratory examination (designated by symbol
in the f ormula)j
100
(c ) percentile cutout of metal agreed upon periodically be-
tween producer and purcbassr, for accounting purposes (calculated
by deducint units of metal lass T~ caused by ? further processing of
product ~- f r xi the mean analytic percentile content of metal during
a given period of time - aymbol s )
lOQ
(d) cuts caused by further processing of the give product
into pure ingot metal, as expressed in the form of a decimal frac~
tion of the price o pure ingot metal (saoi : x P )
.156.
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Ce) additiona1 coefficients represented in the fora of a
given deeima]. fraction Ceymbo1: 1 ), and expressing tecYnaological
value in relation to other similar product (e.g., technological
value of?roaated eM sintered zincblende in relation to such zinc
concentrRtea V uttic xincblende aril aintered zinc oxide), i'or
vhicb t!N bfic price fo1V11I1$ has been determined.
Accoiding]y the over?ail ~chome oi' the foxnula for determin-
price of a specific nonferrous ore, concentrate, semi-
d product, or taste play be expressed au follawre s
OT
IOQx tpx~ ?x.l~x P) _pQQ
This does not two that these oocpr*asions are applicable in
all formulasf in certal ceases a fotxrui& e~cpreaoes the specific
trattg aoh a glvui product or tole comdittena pf its processing in a
fora different frao the above overall ICbriNs.
Regardin the prcducte, vhose furtl*r i oaeseing viii yield
not one but several metals other sxprslalaas brave bees introduced
in the formulas so ae to facilitate th1 appxniaal of each of these
mttala and thereb~r the camputxn~ +od the price of the multiple~etal'
product. such productal are, as oth rs, rear slue-lead ore, argen-
titero%&I foam 5L*nJ, bra/? e~sbrs sn a number of others.
Accord1 g to the reguidtians for the a 1956 (aM subse-
quent reare ) ter analytic percentile ccettent of etai in the pro-
duct sold. t agreed upon periodically. betveen. purveyor and. purchaser
on the bania of an exc1*nge of anayaea as ds by th r respective
laboratories. ti$s war tr y c jlicated aaiculafons for
each delirr are odered unneceaeary,
M
*l57
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The extent of metal losaea adopted for computing the contrac-
tua1. percentile content of metal in a given product does not have
to be determined anew every tie the purveyor and the purchaser
settle their eccOunts,
:npirica1 data were used ac the basis on which to determine
for every individua3. product a definite extent of metal loss during
the concentrating or metallurgical process. This extent was adopted
ae a Canstant value and introduced as such into the fonaula. If,
however, after a period of time during which the formula ie applied,
it is found that the achieved technological indexes of yield neces>
sitate a revision of the said extent of metal losa (as postulated
in the foxnulas), then bath the purveyors and the purchasers are
entitled to request the State conomic Planning Commission for in-
trod.ucing proper modifications in the formulas.
Generally speaking it may be stated that the system of formula
prices of ores of nonferrous metals insures the profitability of
the productiOD of pure ingot metals and, if the prices of the proc--
eased products of nonferrous metals iodUStry take into account the
costs of proceas9ng departments, tbia will also insure the profita'
bility of that industry as a whole.
on the other hand, the matter is quite different so far as
the nonferrous ore mining industry is concerned. Geological comldi-
tions and other objective reasons may cause such phenomena as a
decline in the metal content of an ore and. a concurrent ease
in t coats of its extraction. Converse cases may also occur.
htvever these occur more rsxely because, with the present trend
or insuring Pod with the Moat poBaible qiantit~of ferrous
meta, extracting oration are naw ceded also to hose mica
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which were once considered by eapita1jats~ as nonprofitable an as
such, abandoned or flooded.
The desire for obtaining the greatest possible yield of metal
in the concentrate caussea the applicatjon of often expensive chean-
icalla in the ore concentration processes (flotation, for example )
whereby the concentration costs are increased. In this connection
it may be found that the value o~ the metal. (as per the formula
after concentration will not cover the increased costs of that
process. However this does not meet that in such a case these
methods of productjon should. be generally abandoned. Aside fraan
the problem of financial profitability the problem of economic
profitability is of much greater in~aortance with respect to the
nonferrous ore mining industry.
This is because the fullest possible utilization of the do-
mestic base of natural resources will allow national econaamy to be
supplied with a greater quantity of nonferrous metals, which are
indispensable to modern industry, especially to machine building,
electrical engineering, power, and chemical industries. Thus the
uses of nonferrous metals in the national. econsmiy are extremely
variegated.
Accordingly the pricing system for nonferrous metals must
fulfils, a ec~aewbat different role in relation to the nonferrous ore
minting i:iduetry timu doer the pricing system in other branches of
industry. The prices and the degree of profitability achied should
not affect coaaide~ably the selection of metlode, types, and sites
of the extract icn of noaferro~a ores For instance if the copper
ore mines austajz h her loses than the z c.lead ore mine, tbic
may not be a rasa for abs Monj the + plojtatjon of cater ore
?' l59 .
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nonferrOU8 jugOt PriCiU eyetem for
Caice~t
metals as an cenltive for ec~ their uae.
ncerra~ the Vices '
Relate 1T83?LC t3 s c nouterrouS
Prior C+ NcalDt~rrQ~ua ~sct k6
.. i64 ~-
mines ? Ljiezb a if one of the d,epo it seams car taiUs a smaller per-
Cente content of metal, its extract~.of may not be abandoned it
creased profitability' Also the higher costs of
spate Qf its de
certait ore concentration methods should not be a reason for
abandoning their aPplicatian, if such methods cause a co siderab1e
c1d of metal and if they do not require the use
itcrease in the yi
of s carce ited chemicals ;
The prices at which the nonferrous ore mining industry seals
its :products should not be of too great an tmportance< Aside from
the fact that they fulfill a certain role as a factor ii settling accounts with the nonferrous metals industry, the formula prices of
nonferrous metals industry have only one other econcx4c task to
fulf il,l they should protect steel piante f rcE receiving ores or
~
concentrates containing excessive percentage of gane?
The a rp riate economic authorities should., however, be
~ p
vigilant avert cases in which the pricing systeml in the nonvigilant to lust r~1ght follow economically undesirable
roue ore minim i 7
trend that isa when certain enterprises of that industry, being
;
desirous to improve their financial profitability, might attempt
instead. of increasing their labor productivity? utilizing materials
more and reducbg their itistrative costs ?< to op"
es on an unsound quickpxa'it baais and to reduce
erate their m
extr tiO in certat mines or deposit s -s.
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metals. Determining the prices of domo tic and imported
raw materials according to their actual purchaee prices.
Purchase pricea off' nonferrous metal scrap. Sales prices
o: nonferrous metal scrap.
The previously discussed problem of preserving a proper re-
lat.4n among the prices of products ufactured, fran diverse raw
materials pertained to products that are wholly or partially rew
placeable. Uowever there are cases when it is necessary to de-
termine the relation among prices of product$ that are hardly or
not at all replaceable. The prices uf` certain kinds of nonferroue
igot metals may serve as an example.
Nonf rrous ingot metals are metals in a pure (hcnogeneous )
state and in the form of recteaagular or rounded ingots . Sometimes
these ingots also have the form of a breadloaf and are colloquially
termed "wjrebars . " Nonf errous ingot metals are divided into kinds
aM ?- considering the content of the pure element -? grades. The
number of kinds of nonferrous ingot metals nearly correaponds (be-
cause iron is not among the') to the number of metals as the nical
elements.
The importance of nonferrous metals to national ecpnomy b
a1read been metnioned.. Mention has also been made of the scarcity .
oaf these metals and. the necessity to save tbem. Mere it a1 ould be
added tbat the pricing aystem sb uld be among the factors moat ens
c g the entet'es to cave noferrous metals. HVe"e" this
a stein must be so arranged as to encourage the replace ot certain
accfsaeible mule. With ?
meta:.a 1 i phaatica or by ct1sr m? ea8i2y
respect to z tal~ tit a bath it placeable scarce in the
.. i6l M
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? ?
national economy, the pricing sy3tem should stimulate purclmsers to
consume such metals as thriftily as posstblet
ing the prices of nonferro a ingot metals; they should be based on
economic policies in such a way that even if the prices of the al-
latiexsb.1p of paces would be preserved. This is because nonferrous
? 4eta11urgical zinc has been selected as the typical or stand'-
acrd Polish nonferrous ingot metal, as Poland is one of the vorld' e
greatest zinc producers. The price of metallurgical zinc was fixed
at a level similar to that of its prime cost. However this does
In order to realize the above described postulates, the 1956
prices of nonferrous ingot metals were thw determined.
.
not appear to be quite justified. This is because in certain cases
it is feasible to replace zinc by steel, and conversely. The zinc
. production costs in Poland are relatively loan and therefore the
price of that metal, as based on its pride cost, is too low espe.'
? cially vhen compared with the price of ordinary carbon steel.
These postulates should be taken into account when determin -
? The world market price of zinc is 14. Or 5 timeS as high as
the price of that steel (see Gepner, Jozef, ?a1 n we, el a son"
? Ferrous Metai9J ,19514, Polskie Wyc awnictva GospOtarCze Publ shing
House, page 76 ), whereas in Pola n it is on y 2 or 3 t ea ao high,
.
>nd forged products from these metals be
toys and rolled, stamped,
?
fixed at the level of prime costs the economically correct interre'
ingot metals constitute the charge for the manufacture of these pro-
ducts, and in this case the price of charge is of decisive importance
to the height of prime coat.
err it be c idered that zinc, being a metal steer tban etee3., is
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more easily machinable, it is clear why certai. products, such as
keys, paper clips, etc, are manufactured from zinc rather than from
steel r
It has been found that even the price rationing of zinc a8 a
nonferrous metal is not always effective and in certain cases the
use of zirsc is not justified by axay actual mead. True enough Poland
is among the world's greatest zinc producers; nonetheless it i,s
necessary to apply reatrictians in the consumption of that metal
because it is a valuable and scarce metal, very much sought after
on the world, markets ? Its use hold be permissible only ~enever
it is truly necessary or whenever it can replace other, still more
scarce nonferrous metals. However ordinary carbon steel should. in
no case be replaced with zinc.
There is no doubt that the too low difference betveen the
price of zinc and that of steel reflects adversely on the saving of
zinc in national econorrny. Besides the low level of zinc prices may
also reflect adversely on the relations betweeri the prices of other
nonferrow metals and. the price of ordinary carbon steel. This is
because the prices of the other nonferrous ingot metals (with a few
exceptions) have been related to the price of metallurgical zinc.
The price of electrolytic zinc as well has been determined on the
basis of that relation because the prise coat of electrolytic zinc
(as the cost of the moat modem method of zinc production) is much
lower then the prime coats of metaUuicsi zincR on the other
0 hand the pushy of electrolytic zinc is much l4gher tban that of
metallurgical zinc. If in this case pricea were to be interrelated
accord to their prime caste, the purchaeera wo*lt1 d nd el+ectro-
C lytic zinc may, wha ecov.omic considerate dictate the prod ic-
ticm of both electrolytic and metallu gic . zincce.
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Likewise the prices of other uiotals had to be related to
the price off metafurgical zinc. Uawever this task proved more
difficult. For instance ghat criterion should be applied for cc
paring the utile values of zinc and aluminum, zinc and lead, and
so forth?
The cc nparisan of the utile values of copper and a1im muss
is much easier o Namely one could co pare the property for ccQaduct '
ing electrical current as displayed in both metals and, tin taking
into account their specific weight, determine the length of the wire
which would be manufactured fram a ton of aluminum if that wire is
to have the same electrical conductivity as a specific length of
wire uanufactured from a tan of copper. The ratio of the lengths
of both these wires will correspond to the ratio of the utile values
of a to of capper and a ton of altmainum,
This method of ccmparin~ utile values is, of course, scnevhat
oversimplified; nonetheless it suffices for determining the basis
for interrelating the prices This does not signify that the vela.
tionship between the prices oboth these metals should correspond
exactly to the numerical ratio of their utile values as calculated
in the above described manner. If copper is a more scarce metal
than alinupm, the numerical ratio of the price of capper to that
of aluminum should be higher than might be concluded from a com-
pariscn of their utile values, and cce~versely.
The above principle does not, however, solve he problem of
the ratio of the price of alu a'+mi to that of zinc. The use of a
co risoi of their reepectlva production costa as the basis for
calculations would not be pertinent in this case. in practice
(while dram the i6 price list) the oolution applied was first
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to determine the indexes of rmlationalp which should apply between
the prices of individual nonferrous ingot metals and the price of
einc. Ir thia connection use was made of the Soviet method of
price interrelating, upon adapting it to the specific Polish con-
ditions. In thia way tbrough interrelating the prices of various
not erroua ingot metals with the price of metallurgical zinc, it
was possible to determine alao the price level of the former.
However the Bing of uric prices at a too low level er tailed
also the low pricing of certain nol ferroua ingot metals, such as
lead, which in Poland is a scarce material. The price of lead on
the world market is 5.3 times an high as the price of ordinary carp
bon steel in undressed state, whereas in Poland it is only I i,6 tames
an high.
With respect to certain imported metals, their prices Could
not alway be related to the price of metallurgical zinc. Bence it
was necessary to find another interrelation, namely, the prime costa
of the production of the cc w odities which Poland must earmark for
export in order to buy abroad a ton of a given metal were ccmtputed,
and the price of the imported metal was fixed at the level of such
combined prime coats. For instance (arbitrary figures): the Poles
receive l2 fry abroad for every ton of coal they export. Now
the purchase of a ton of X material frc abroad costs $120. They
prime coat of a tan of coeL amounts to 50 zlotys. Accordingly, in
order to buy a ton of X material from abroad, Poland mgt sell 10 t
o:` coal. The prime costa of 10 t of coal total 500 zlotys. There-
fore the pure of a ton ae X material from abroad costs Poland ' s
econa r 500 zlotys, and the sales price of X material` woulCl be
fixed at the seine amount, if it is a supply or investment m~ter'ial.
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When nonferrous ingot mete are diacuesed, meatiCn roust be
also made of nonferrous metal scrap, which is partly used instead
of ingot metals in the nonferrous metals rolling mills, and partly
servea to obtain (upon refining) ingot mewls.
There are the following different purchase prices of non.
ferrous metal scrape prices payable to private owners, prices pay-
able to soon i organizations, prices payable to socialized ware.
houses, and prices payable to aociaiized industrial plaits.
The prices payable to the public and to socialized ware-
houses were determined on the game prsncipies as the steel scrap
prices. However they were aaum w] at modified in accordapce with
specific econcnic policies at the state ors this uector.
The prices payable to industrial plants, for nonferrous
metal scrap, were approximated to the level of scrap sales prices
(provided that the classification of scrap be fury preserved and
impurities be avoided), and thus were made quite attractive. In
?
this case the question was not so much to stimulate the plants to
deliver their scrap (this is governed by very rigorous laws) as to
encourage ti to deliver scrap in the purest possible and properly
classified form. This is of enormous tec1anical?production impor-
tance to the nonferrous metals industry, which receives that scrap.
Prices A
P
lied
in Nonferrous Metals Process
Indust
General cbaracteristicsl of the processing of nonferrous
metals- Price interrelationship in the processing industry.
When prices are det fined according to the principles c
direct relationohip, it often happene thrrrt thle range and variety of
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forms of a given product is very extensive< Hence the computing
of the prime costs every individual form would require ubuaaally
great labora ? On the other hand the absence of technolcagical norms
of labor productivity and yield ;ekes it iuposaible to formulate
norrned costs in a more aimplf iet manner a A situation of this
kind has appeared when determining prices in the rioriferrous metals
p'ocesaing industry.
Proceaaing of nonferrous metals comprises casting of alwoyi
of nonferroua metalag plastic procesaing oi' these metals thro;h
rolling, forging and, atamping, and the z ufactu *e of ietai powders
As noted before the poblen of a proper interrelatiri of the
prices of individual kinda of nonferrous metals has been expresaed
in the detexr~ination of the prices of nonferrous iri~ot metals 9 T e
prices of the products of nonferrous metals procesaing industry
should, therefore, be determined according to the principles of dim
rect relationship.
The 1956 prices of individual type-sizes of rolled, drawn,
and forged products were fixed upon determining the prime costs of
production of selected "repreeentativee f ? in each given pup of
type'eizes ion the basin of the level of coats in the standard
plant ), and the pries of these "representatives" were determined
on the same level as that of their prime coats o Next, through in
ter latio= tip prices of the other type sizes were determined.
Prices of
Prices From
Product ~-
r 8entative"
I, te, ol~t
(1) 10 nmi th4,ek
214 zlatye a
(2) 15 mm hick
20 ziaty8 a k~
(3) 20 u n hoick
16 rya a kg
(Ii) 25 mm thick
12 zlotys a
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Norw ng calculations were got used because no data were
available concerning the labor productivity and yield involved in
individual products.
The correctness of that method is saiierhat undermined by
the foilowiaag (speculations
(a) Is it right to adopt planned cost instead of nonmed
cost? (Plannied coat may include diverse nonatandard circumstances
reaultirng, e.g
hated tt~ a minister other the the minister to whom the producer
o! a given product is subordinated, the needy fized price shou 4 be
also agreed upon with the principal distributor.
These regulations purport to exclude cases when prices would
be fixed for a narrowly conceived benefit off' the producer, without
tang into account the attitude of the purchaser
The likelihood o? fixiug prices at too high a levee, is also
prevex ted by the provisions coirbai ned in appz'apriate ordinanc of
t chains of the Mate Ecoic lannin Caeeion tdeting
pric,e'ixix]g pera in to niiu tes ?), which obligate Individual minis
tens to revise the t~ew1y4ixed prices after a quarterly period, or
b+ 'ore the ela~ae oct 7 moaaths if they vere t ed on they basis of
price coats 8udi dons are eructed the basin rea-u~,t
ant calcuhmt;s d .
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'1 Flag the pricey of certain navel products is not
among the pourers of individua1 xai iatera r This perta~,nns to pro.
ducts whose prices affect decisive.ly the level of costs and the
value off' o ztput, with the level of the prig being connected to a
defnite econcadc policy of the government ? I the Ministry of
Metallurgy such products originate frcn ores of iron and. xx nferw
rous metala, nonferrous ? at neta1a, all wads ox" scrape, pis ir?np
cast ateelg sc ifinishedL rollcri roducts y a d steel ;tracturez o
CO VIIJS ION
Until recei tly certain economists expou t ied the theory that
in the coditions oaa p1r Fled 1mteriai economy and a cexit bl ized
aistribtrtion of sui Iy and inve$trnent materials, price bec es
merely an aecountixg props while the height of price or the rela
titans among t1 prices of different materials are of no grit Lm<
portance to aocialized . enterprises o
1t gust be adx fitted that t]iis vie q of ?t conts,ns a grain of
t.~uth. But the essence the prob1e n wars ncrt a &Lminutian in the
importance of price in the condJtinns of a planned socialist economy
where state enterprisea inay ar4 should. es entiai1y receive their
1ater181a on the basis of ration aasignmments. What happened was
that the pricing system could not ful!LU its role adequately be-
cause the problem of reducing prime costs a increasing the profit.
ability of enterprises was not a center attention to certain eco
nt is aativista ? The otrug1e was ccncentrated am the eectaor +c at~
taining the proper volume of autput, witblOUt coueid~riz g boy much
it w34 cvet and what .v 1ue wood it actuary repot, ,y
euterp a anal atte sted to obtain greater auezmsuta o~
terials Lt1OUt devoting auficient attebi~n, to their 'h ft cc
etupt ,on A .
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At present such situation ba been overccne to great degree
AU enterprises, with a few exceptions, devote iracreasi attentid l
to the > tr rte for the reduction o?' prime coats and ; roveznent of
ftancial results f Doubtleea thi,a was atimulated by, among cathers~
the application of ecoviomic incentivea such as the introduction of
the punt Lund and of borjuaes for reduction of p:e cost. Qf
great isnportar!ce alao was the increase in the political awau +ecs
of plant creva , mad the active participation of aocial arganizaticis
in the stru ,,1e for reduction of prime cost m, In thitt connectic
there also occurred an increase in interest in the problem of the
prices of means of production because of its cioae relation to tI
evolution of prime costs.
I i3 to be expected that the decis ions concerning the prices
of jeans of production Will cause a more efficient anagement of
so-
cialized enterrprises. This is because individual exiterprise?a, iz
their deairc to reduce their prime costs, will have to take care
to use the cheapest raw and other materials and to observe and cara-
aiatextIy reduce the riorsna of material ccnsuinptio r In these ctm?
ditions the role a ; artance of econanic accounting will also
increase, especially considering that the price syatem will exert
a greater influence not only on purcbaseerrs but also on producers
As noted previously, it is &L ficult to incJ.ine ;f uatrial
plants to fuifll their plana s t range and variety of output when.
the price eyatem exbibita a contrary trend lae output of aomie
goods t ld, then asaure high pro ita, and tI*t of others >? xnuch
ari*1ler aroftts if nct even knees. Such occurrences u~y be coos.'
i cierably averted though ae;l ectiug a proper ; ce4ix1g method.
Wirer iii the connection ecine att+ ttc i should be tad to the
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poiasiblity of transferring the aufacture of c;ertatn more exen
eive aeaortrmente to plates ' hiCh can perforan it more cheaply.
When dete aintn the re32 tiofns among the prices of individual
a43so2 rcenta belor ing in a sin&ee comity gip, attention s1 u34
be alao turned to the possibility that certain 1ri+ to coald spe.'
cialize not on1yy in the production of speciftc c odity grs
but also of specific products comprised within a given group In
such caees the prices off' imUVL ..ua1 product inclu.ed in a specific
commodity group should be baseu on the costs oC` the plants pe>
ci izir3g in the manufacture of a given product, and. not on the
means ighted costs or standarti plant costs.
The in" ce system also occupies a mmc jor role in the struggle
for raising the quality of production. Casea still happen when of-
ficial. price lists do not provide a price discount for sect aclans
goods a This is because the price list were based on the as st up*
tion that products should be o of a firrstpc1ass nature, and that
othexwiae they have no utile va3.ue (fcrr the purpose for ich they
were nufactured) . however this is not always correct ? A pur-
chaser who has no opportunities for acquiring a given product from
another ente rise must sc inet3mes kept a product of inadequate
quality. X, additicn, the given product ie of an ecaot~micftUy
ecarce character, and the pa'oducer can be certain of aiwaya finding
a pur'chaaer for it, t1e absence ads a fixed diec t price for the
secca-o ce duct is dpebtleas a factor wing the stgle
for raising the quaiity of productiion.
The height at the diet price four eecc c1ass producto
ahou also be constde ed. en enterpriae finds it relatively
tabs to mwufacture a given product, r bapeii t1~at even
3178 ..
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if a di3coux3t )C O 10 or . ~ et i'or aeccad ciaa; i'onns of
the prctructa, the prime coca O ' rO'LUCticB) still will be covered.
Ii) auch a ce the pricing ayatem i lea efffec"cWe as a fact
rising the quality of production a T appears viaabie to intro.
duce the principle that the discount rate for eecand c1aaa pro& ctz
ahould be 1o~rer thxi the pr:thie costs of their productlax: (in this
place only auppiy and investient goads are referred to, as their
dales prices do not include turnover tai).
M increase in the ; portence of the prici f,. y tem for supply
and imrestc1uent coda involves ass iLcr se in the xpcrtonce of the
proper deterxnination of the price 1 eI a .46+apr r1y deg fOer! 3.i x
prices of ect ~ as was often emp ixed