But we believe, sir, this bill is designed to permit us to support those political and social issues throughout the world that have merit and deserve our support without injuring ourselves economically and militarily more than the one we bring such action against and that is why we stand in favor of the bill. Thank you very much, sir. PRESENTATION OF E. F. ANDREWS, VICE PRESIDENT-PURCHASES, ALLEGHENY LUD- As one who spends a major portion of his waking hours concerned with the problems of materials supplies for this country, I am quite naturally interested in any legislation that has as its purpose the protection of such supplies. The United States is very much a negative nation in regards to the availability of strategic raw materials. It has been reported that, of the 30 strategic metals, so defined by the Office of Emergency Preparedness, 25 must be imported by the United States in order to supply the needs of important American industries. For this reason, we strongly supported the Boggs' Amendment establishing a Materials Policy Commission so that we, as a nation, could start officially addressing ourselves to the long-range problems of critical material shortages and hopefully adopt laws and enunciate policies that will protect and provide for the nation's future material needs. S. 1404 is in harmony with the purpose of that commission in that it would be established to prevent the unilateral action of one segment of government from interrupting the flow of vital and strategic materials to our shores regardless of how meritorious the intent of such action may be. It reduces the danger of unwise and unnecessary injury to this country while not preventing suport of the issues involved. It already has been said in these hearings that the Rhodesian sanctions and their effect on the chrome situation are a perfect case in point. As a major consumer of chrome, we are quite familiar with the effects of those sanctions on the economy of the United States, the Specialty Steel Industry, and its employees. The importance of chrome to industrial America cannot be overstated. While steel rema.ns the most useful, most versatile, and most reasonably priced metal in modern industrial civilization, specialty steels-developed and manufactured by a large group of relatively small companies in the United States-not only have those three principal characteristics but, in addition, in their latest forms and new specifications, have made possible not only our nation's aerospace program but also its advanced communications, improved power generation and distribution, its growing Chemical Industry, greater comfort and efficiency at home and at work, and continuing progress in such advancing sciences as oceanology, ecology, surgery, medicine and health care, and atomic particle physics. From the last named will come not only new sources of energy but great new strides in scientific progress in virtually every field. Thus, gentlemen, when we speak of alloying elements-and chrome of course is an important one of these we are talking about no ordinary commodity. It goes to the root of our industrial civilization. In fact, by definition, stainless steel is a corrosion resistant, ferrous alloy containing 11% chrome or more. In other words, broadly speaking, there is no substitute for chromium insofar as corrosion resistant or stainless steel is concerned. Nearly 70% of the world's known metallurgical chrome reserves (see Attachment 1) are found in Rhodesia. To our knowledge, there has not been a new find of chrome reserves since World War II, and there are no known competitive deposits in the Western Hemisphere. Prior to sanctions, Rhodesia was our largest supplier of metallurgical, high-grade chrome ore. Due to the sanctions, this has diminished to zero, with the main benefactor of this attractive and profitable volume of business being the Soviet Union. In fact, according to the United States Bureau of Mines' data, in 1970, of the 363,840 short tons of chromium contained in ore, with a chrome content of 46% or better, 224,877 short tons, or better than 60%, were imported from the Soviet Union. In spite of the fact that the world price of chrome ore had dropped from 1956 through 1966, the Russians, acting in a highly “capitalistic” manner, increased their price to us more than 100% since the sanctions were imposed (see Attachments 2 and 3). As evidence of the fact that this rise is substantially greater than inflation during this period of time, when one examines the years 1967 through 1970, we cite the following cost increases which were incurred for various commodities consumed by the Steel Industry : But now, looking at the impact of the rise in chrome ore prices during this time, we see ferrochrome silicon up 80% and high carbon ferrochrome up 67% (see Attachments 4 and 5). In fact, if we examine Attachment 4, the dotted line shows the price rise of silicon in ferrochrome silicon over the past four years, and the solid line shows the rise in the cost of chrome contained in this product over the same period of time. The situation would undoubtedly have been worse had it not been for sizable disposals from the Federal Government stockpile during this time. It is estimated that, during 1969, 31% of the metallurgical chrome consumed in this country came from the stockpile, and something over 20% in 1970. In order to provide this material to industry, the O.E.P. has seen fit to continually drop the stockpile objectives, thus making material available. This action is deemed by some members of the Congress as being unwise because of chrome's strategic importance and the zero production in the United States. Over 900,000 tons of material have been sold out of the stockpile since 1966. However, the availability of high-grade, metallurgical chrome ore from this source will someday run out; therefore, we must not count upon this as a long-range answer to our problems. Reduction to the new objective of 1,500,000 tons of ore will take us to below a two-year supply. As we said earlier, Russia has been the major source of supply; but if you will look again at Attachment 1, you will see that the Bureau of Mines estimates that Russia possesses only 5.6% of the world's supply of chrome-yet this is now our major source. Russia is now selling us chromite limited to 450,000 tons per year at ever-increasing prices. It is our understanding that they are now requesting customers to take one ton of fines with each ton of good material. Is this, by policy, to hold up the price or is it all they have to sell us? We are at the bottom of this barrel also. One could rightfully ask the question—are we buying Russian material at inflated prices while they supply their needs with Rhodesian material at lower prices? As stated above, the stockpile is our second source. This will also run out in time, and good grade metallurgical lump is low at this time. In fact, a large part of the Government's stockpile is unsuitable for metallurgical use. Turkey is our third source. According to the United States Bureau of Mines, Turkey has only 2% of the world supply. Turkish output of ore is just under 500,000 tons per year, of which approximately 250,000 tons per year are exported, almost entirely to the United States. According to the April 12, 1971, issue of Metals Week, the Japanese have just completed an arrangement with the Turkish producers to take 100,000 tons of this material per year on a long-term contract. Thus, our three sources-Russia, 50-60% of our needs; the stockpile, 20-30%; and Turkey, 10-15%-present a bleak picture of our major sources of supply. The outlook for chrome can only be for tightening availability and rising prices, so long as we deny ourselves access to the 70% of the world's supply in Rhodesia. South Africa is a fourth source and is limited in its metallurgical suitability. But even here, there are those who desire to extend the sanctions to that country. While denying ourselves this major and vital raw material, one needs only to visit Southern Rhodesia to realize that its chrome ore has been finding its way into the world markets. There is little ore seen above ground although they work the mines seven days a week. As we know, they were unable to ship but a mere 15% of the 150,000 tons approved many months ago for import. The United Nations has itself offered the best evidence of the sanctions' failure. In the third report of the United Nations Security Council Sanctions Committee, published in June 1970, it was estimated that Rhodesian exports were running at approximately 70% of their pre-sanctions levels. Twenty-one complaints of violations were investigated by the U.N. involving chrome ore from Rhodesia to France, Japan, Netherlands, Italy, Spain, and West Germany. It is generally admitted that we and Britain are the only ones seriously abiding by the sanctions. We realize that the Government has made a noble effort to try and prove conclusively that this material is flowing into the hands of members of the United Nations in the free world. Indications are that it is not flowing directly from Rhodesia to these nations but is probably being trans-shipped when repackaged. This we do know-the mines are operating in Rhodesia, and there is no ore being stockpiled there. The free world would probably have run out of chrome a long time ago if the major supplies from Rhodesia were totally cut off from the free world market. Thus, many reliable sources indicate that substantial quantities of this material are flowing into the hands of foreign specialty steel producers, undoubtedly substantially aiding foreign producers of specialty steels in moving into and capturing large segments of the American market for specialty steels, producing a chaotic price situation here, bringing about unemployment and affecting the profitability of small American companies to the point where there is serious question about their economic viability. A question has been raised as to the impact of the cost of chrome on stainless steel. Neither time nor space here will permit complete detail of the effect on all the multiple grades of specialty steels produced, but let us suggest the following example that would cover the majority of the tonnage. There are approximately 400 pounds of chrome contained per ton of 18-8 stainless steel. Thus, a 1¢ price increase in chrome would increase the cost per ingot ton by $4.00. With a 50% yield factor, the cost per finished product would thus be $8.00 per ton. Since the Rhodesian embargoes, the cost of low carbon ferrochrome, for example, has risen 14¢. Thus, the cost per ton of stainless steel would be $112 per ton. Last year, approximately 900,000 tons were produced. Thus, the industry impact would have been a $100 million cost increase. Also, markets have been sufficiently encroached upon that we are beginning to see cutbacks in vital programs. Foreign producers of specialty steel, who are beneficiaries of the Rhodesian sanctions, have penetrated the American market for specialty steels, at the end of four months of 1971, at an all-time high, exceeding 22%. For individual specialty steel products, the penetration is even greater: some 35% of stainless steel cold rolled sheets, 68% of the market for stainless steel wire rods; 54% of the market for stainless steel wire. One can rightfully ask how much embargoed Rhodesian ore is contained in this imported stainless steel coming into this country, adding insult to the injury of the unemployed or about-to-be-unemployed American steel worker. We are able to identify Rhodesian chrome ore coming into this country as ore, but there is no known way to identify it if it is contained in stainless steel sheet. I am sure that the unemployed steelworker wonders who is being helped and who is being hurt by these sanctions. Fortune magazine reported in April that the Rhodesian growth in real GNP was better than 4% per year, substantially more solid than either the United States or Britain. France, Japan, and Germany are reportedly continuing to trade. A visit to Rhodesia reveals a very stable, busy, growing country, with Toyotas and Renaults very much in evidence. Chrome is but one example of what could happen in many other vital materials if similar unilateral actions are taken. For example, there was a proposal before the United Nations to extend these sanctions to Portugal and South Africa. To have extended them to South Africa would have cut us off from 90% of the world's mettalurgical chrome. It would have also placed us in an emergency situation with regard to vanadium supplies. A similar sanction against the Congo would cut off our cobalt; against Canada, our nickel; against Mexico, our fluorspar; and against Brazil, our iron ore. Were it not for the substantial American stockpile, we would now be dependent upon Red China for tungsten. The list could go on and on. S-1404, we believe, is designed to permit us to support those political and social issues throughout the world that have merit and deserve our support without injuring ourselves economically and militarily more than the one we bring such action against. We therefore urge your immediate and enthusiastic support of this resolution. Thank you very much, Mr. Chairman. 67-134-71-7 |