GOVERNMENT
Metals Industry Eyes Stockpile Surplus Sale of lead and molybdenum would ease supply crisis; House subcommittee approves bills Lead and molybdenum are in extremely short supply and the situation is rapidly becoming critical. Immediate sale of some of the Government's stockpile of these materials would ease the shortage and halt the trend of rising prices. This was the testimony of witnesses at hearings before a subcommittee of the House Armed Services Committee. The committee is considering two bills which would permit the immediate sale of lead and molybdenum, surplus to stockpile objectives, by waiving the six-month statutory waiting period before sales can be made. H.R. 11257 would permit the sale of 50,000 short tons of lead and H.R. 11235 would permit the sale of 11 million pounds of molybdenum. Impressed by the testimony, the subcommittee approved the bills at the close of hearings. Lead Problems. For more than two years, consumption of lead has exceeded supply. As a result, stocks of lead at primary refineries have been drawn to cover the deficit. According to committee chairman Rep. Philip J. Philbin (D.-Mass.), stocks of refined pig lead have declined 163,000 tons in this period; from 198,000 tons on Jan. 1, 1962, to 35,000 tons on May 1, 1964. "It is doubtful whether stocks can be drawn down much further without causing serious market disruptions," he says. General Services Administration supports the proposed sale, Maurice J. Connell, commissioner of CSA's defense materials service, told the committee. Because of the supply-demand situation, circumstances for the orderly disposal of lead surpluses are more favorable than they have been in recent years; 50,000 tons of surplus lead could be sold without any disruption of the market, he says. Since the stockpile objective for lead was reduced to zero last year, all the lead in government stockpiles (1.4 million tons) has been declared surplus. Continuing shortages of lead with resulting price increases could have a
Simon D. Strauss Supports sale of 50,000 tons of lead
serious anticompetitive effect on producers of tetraethyllead, Robert C. Barnard of Du Pont told the committee. Mr. Barnard represented the four U.S. producers of TEL. Highoctane gasoline can be made without adding TEL by changing the refining process. This means that T E L will be used only as long as it is the least expensive way to get this result. A sharp increase in lead prices could cut TEL out of this market, he says. Higher lead prices caused by shortages could also cut TEL exports, Mr. Barnard says. Foreign producers of antiknock compound can buy lead on the world market at prices somewhat lower than U.S. lead prices. If the U.S. lead shortage is aggravated, a significant differential could develop with serious effects on exports of TEL, he says. The American Mining Congress somewhat grudgingly endorses the proposed sale. "Under the circumstances, we do not believe the release of 50,000 tons of lead from the stockpile would adversely affect the market or prove unduly disruptive," AMC representative Simon D. Strauss says. He is vice president of American Smelting and Refining Co. This sale may help
maintain long-run uses of lead that might otherwise be subjected to the substitution of other materials, he says. However, AMC fears that the proposed sale may be the opening wedge in a disposal program for the 1.4 million tons of lead now declared surplus to stockpile needs. "We are uneasy over the implications of stockpile disposal," Mr. Strauss says. He points out that if the entire quantity of surplus lead were put on the market, it would be equivalent to about tw7o year's requirements of newly mined metal. The mining industry is astonished at the Administration's decision not to stockpile lead, Mr. Strauss says. In his opinion, the stockpile should be kept intact; it is not intended to protect the country against the probabilities of conventional war but against the improbable. "We remain unconvinced of the Administration thesis that no stockpile of lead is required in the event of conventional war," he says. Molybdenum. The present objective for molybdenum in the national stockpile is 68 million pounds. Inventory is 79 million pounds. Thus, the proposed sale of 11 million pounds would dispose of all the surplus molybdenum in the stockpile. The current shortage of molybdenum is becoming more critical each day, Thomas F. Shannon told the committee. He represents the Tool and Stainless Steel Industry Committee, a group of 17 specialty steel producers. The situation is so serious that steel producers' orders for molybdenum for June delivery have been cut 30% by producers, he says. He urges immediate passage of the bill to relieve the shortage. The use of molybdenum is expected to increase substantially in future years. However, planned expansions in domestic production should take care of future needs, William N. Lawrence of the Office of Emergency Planning told the committee. Climax Molybdenum, which produces 60% of the U.S. supply, has a $31 million expansion program under way which should add 7 million pounds of molybdenum annually to the U.S. supply by 1967 and 15 million pounds annually by 1969, Mr. Lawrence says. In addition, other sources of supply are being expanded. With the increased supply in view, OEP feels that it is justified in selling its surplus molybdenum. JUNE
2 9, 1964
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