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On this same point of price, Mr. Chairman, I am sure that this committee will recall that in 1956 when Public Law 733 was enacted, a price of $47.50 had closed or was closing every independent domestic acid-grade fluorspar producer. Public Law 733 provided for a price of $53 per ton. Since the enactment of Public Law 733 most companies have granted two wage increases, and some are committed to a third increase under their labor contracts. Prior to the enactment of Public Law 733, no wage increases had been granted for 2 years, labor had cooperated in an effort to keep the mines operating. Furthermore, under the proposed legislation we will as producers have added cost of drying the material and hauling it to either railroad or barge. So with increased labor costs, added drying and hauling costs, we could hardly be expected to operate at the $48 per ton level proposed by the Secretary of Interior, especially since a price of $47.50 was forcing us to close even though we had at that time cheaper operating costs.
I should like at this point to say, Mr. Chairman, that not one independent domestic fluorspar prdoucer has approved the prices suggested by the Secretary or indicated that they could even operate under the $53 per ton price and $13 stabilization payment in S. 4036. Furthermore, not one of these producers was consulted beforehand by the Department of Interior on a price or stabilization payment. It is my further understanding that captive mines have expressed no desire to participate in the program. A captive mine being one that does not produce and sell on the market but rather sends its output to its consuming owner, thus being assured of a market.
Turning now to metallurgical-grade fluorspar. Metallurgical-grade fluorspar is ordinarily produced by use of heavy media separation. Every integrated operation produces both metallurgical-grade and acid-grade fluorspar, as this gives the most efficient operation. For several years substantially all domestic metallurgical-grade fluorspar has gone to the Government. There is no captive production. These mines stopped several years ago producing metallurgical grade and turned principally to cheap foreign imports. Domestic producers have been wholly unable to compete with cheap foreign imports.
The Office of Defense Mobilization in 1954 authorized the procurement of metallurgical grade fluorspar for the stockpile at market prices. So far as I am aware no production was achieved because published prices reflected the price of imported material with which the domestic material could not compete. Subsequently a price increase was authorized by ODM. This new price of $34.50 for 60 percent effective and $38.50 for 70 percent effective has resulted in some domestic production.
Recently the domestic metallurgical-grade fluorspar producers were advised by the Office of Defense Mobilization that no new contracts would be awarded. This simply means that domestic production will cease this year at the end of delivery schedules. The Secretary of Interior has stated that he was unaware of this situation (p. 962 Senate Interior Committee hearings on long-range minerals program) and promised to examine it. It should be pointed out that if metallurgical-grade fluorspar is included in this legislation, as we most urgently request, any further future stockpile sales that might be made would be deducted from the authorized annual tonnage, through the operation of section 102 (b) of S. 4036 or section 502 (b) of H. R. 13280. It further appears, on the same page of the hearings, that the Office of Defense Mobilization had recommended to the Senate Interior Committee the maintenance of a certain level of domestic production of metallurgical-grade fluorspar as a part of the mobilization base. If purchases for stockpile are to end shortly, as we are advised, domestic production can only be maintained by making provisions in the stabilization program for metallurgical-grade fluorspar, and to include metallurgical grade would seem to be the safe course to pursue.
I should here like to point out that on page 47 of the Minerals and Metals Commodity Data Summaries, Bureau of Mines, February 1958, United States Department of Interior, the statement is made that: “Preference is given to domestic metallurgical-grade fluorspar producers for supplying to the stockpile Inventories for metallurgical-grade fluorspar do not meet the pro curement priority level.” Well, somewhere along the line we were sidetracked, as has been our experience in the past. For now we are advised, barter contracts were negotiated with our foreign competitors for 100,000 tons of metallurgical-grade fluorspar which undoubtedly will be transferred by Commodity Credit Corporation to the national stockpile, perhaps meeting the priority level. Delivery on these contracts will be over the next 12 months. Thus while we may have to close down, our foreign competitors are allowed to produce another 100,000 tons over and above the 230,000 tons they shipped into our markets in 1957.
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The price, I might add, of imported metallurgical-grade fluorspar, is $20 to $21 per ton duty paid at the border points. Freight to consumers is from $5.50 to $10 per ton, giving a delivered price of from $25.50 to $31 per ton. The delivered price of domestic metallurgical-grade fluorspar, to the same consumers, will range from $42 to $48 per ton, using prices currently authorized by the Office of Defense Mobilization.
I strongly urge this committee to include metallurgical-grade fluorspar in the stabilization program. The price which is currently being paid by General Services Administration for domestic metallurgical-grade fluorspar is provided in the pending legislation, would result in about the same level of domestic production as we currently have. Provided, however, that there is also an adequate stabilization payment. That stabilization payment should closely approximate the one for acid-grade fluorspar. Whether the resulting rate production would be sufficient to meet the Office of Defense Mobilization's recommended level of domestic production for national security, I do not know. But I do know that with the end of procurement for stockpile, domestic production of metallurgical-grade fluorspar will cease, unless it is included in the pending legislation.
One further observation I would like to make, Mr. Chairman, and that is the matter of quarterly limitations on production. This affects, in the case of fluorspar, the method of sale, which is different in our case, I believe,, from the other minerals in the legislation. Practically all fluorspar sales are made through contracts of at least 1 year and often 2, 3, or more years, but these longer contracts have an annual price review provision. But the minimum contract is for 1 year. A delivery schedule is agreed upon, and in the case of metallurgical-grade fluorspar practically no deliveries are made between November 1 and March 1 because of weather conditions and the use of open cars or barges. It will be most difficult as well as hazardous for a producer to enter into an annual contract under the proposed legislation. Through no fault of his, but due entirely to the action of other producers, stabilization payments might be suspended for 1 or 2 quarters, yet the producer would be committed to a delivery on his contract. I believe in the case of fluorspar, annual tonnages should be assigned producers.
Furthermore with this situation of annual sales contracts existing, our industry will not be able to obtain a market until after next January, when the majority of the present contracts expire and the balance of the annual contracts would expire in midsummer of 1959. So that we could well have a situation where domestic producers, even though the stabilization program were enacted, would be unable to sell on the market until sometime next year. For that reason it becomes most essential that Public Law 733 be extended by enactment of S. 3186. If we are to avoid shutdowns and effect an orderly transition from sales to the Government to sales to consuming industry, this law must be extended. This is even more necessary if the Colorado producers are to continue operation, for in my opinion the economics of the new program will probably result in Illinois and Kentucky producers getting in the market first. No expansion of tonnage or increase in price is necessary, just an extension of time.
In addition, and on this same point, the Secretary should be directed to observe the normal sales procedures and give effect to historical sales practices in the fluorspar industry.
In summary, Mr. Chairman, if the stabilization program proposed by the Secretary of Interior is to benefit domestic fluorspar producers, and certainly I believe that is what the Secretary intended, the following changes must be made:
1. The price for acid-grade fluorspar must be increased above the presently proposed $53 per ton, only by an amount sufficient to offset our increased costs. The industry believes that it should be $56.50.
2. The stabilization payment must exceed $13 per ton if domestic acid-grade fluorspar producers are to obtain any significant part of the 180,000 tons. The industry feels that the bare minimum should be $20.
3. Metallurgical grade fluorspar should be included in the program in sufficient tonnage to meet national security needs and at prices presently authorized by the Office of Defense Mobilization. The stabilization payment for domestic metallurgical grade fluorspar must, to be effective, closely follow that for acid-grade fluorspar.
4. Provision must be made in the possible quarterly limitations to provide for the annual type of sales contracts employed in the fluorspar industry, which differs from the other industries.
5. The termination date in Public Law 733 must be extended for year if we are to avoid shutdowns in the fluorspar industry while we attempt to make the transition from Government sales to sales to consuming industry. No increase in tonnage or price will be required. Additionally such sales as would be made under Public Law 733 would be deducted from the 180,000 annual limit in Secretary Seaton's program.
Mr. Chairman, we as an industry have long maintained that quotas are the best and most equitable means of maintaining a fair share of the domestic fluorspar market for domestic fluorspar producers. Such legislation does not seem at all possible now. The program proposed by the Secretary of Interior is the only other alternative for us if we are to continue to have domestic fluorspar production. But the changes and additions I have suggested must be made in the Secretary's proposed program if the domestic fluorspar producers are to operate. I do not believe that the Secretary's program as presented would result in the sale of 1 ton of domestic acid-grade fluorspar, and certainly no domestic metallurgical grade fluorspar production.
That concludes my prepared statement, Mr. Chairman. I wish to thank you and the members of this committee for the time you have given me to present the views of the domestic fluorspar industry on this minerals stabilization legislation. If there are any questions which the committee has I will attempt to answer them; if you wish any further information on our industry I will do my best to provide it for you.
Mr. FLYNN. My name is Clyde L. Flynn, Jr., I am vice president of the Hicks Creek Fluorspar Mining Co. My address is Elizabethtown, Ill.
I am also here as a representative of the Independent Fluorspar Producers Association. We produce about 75 percent of all the fluorspar produced in this country.
There are two captive operators producing today. Practically all of the independent production of fluorspar of all grades is presently going to the Government, and without those programs we will be out of business; and those programs will end this year.
Now, the Secretary had proposed a price of $48 per ton f. o. b. Rosiclare, Ill., for acid-grade fluorspar. There was a maximum stabilization payment of $8 per ton proposed by the Secretary.
In my statement what I did was to try to show the consuming centers for fluorspar, the price for which imported fluorspar can be obtained at those centers, and the difference between the price of imported material and domestic material, and the price at which the domestic producer would have to sell at in order to be competitive. Then I gave some representative cost figures for the domestic industry.
Mr. Chairman, it is just simply impossible for us to operate under a $48 a ton and $8 a ton differential. We cannot do it.
The Illinois producers might possibly produce and sell some 20,000 tons under the $53 and the $13 differential as proposed by the Senate, but there would not be any western production, and principally Colorado production, under the $53 and the $13 figure. They just simply cannot reach any of their market with a $13 a ton differential.
I would like to point this out, Mr. Chairman: That the price of $53 a ton is the price that the Government has been paying for the last 2 years for acid-grade fluorspar.
In connection with the costs which I had given in this statement, Mr. Cloonan, from the Northgate operation in Colorado, had intended to appear here today with me and go into some deail as to their costs at Northgate. Mr. Cloonan died on the way to the hearing, so I will
have to get that information from the company and put it in the record to show what the Colorado costs are.
I know for the first 6 months of this year their costs were $48 a ton, but they have just concluded a new labor agreement and I do not know how much of an increase they will have. That is what Mr. Cloonan intended to show the committee.
There is one other thing I would like to point out to the committee, Mr. Chairman, and that is the fact, so far as I have been able to find out, no one in the industry, unless it might have been 1 of the 2 captive producers, was consulted in any way by the Department of the Interior as to the price, the differential, or the tonnage.
If there are any questions, I would be glad to answer them.
Mr. ROGERS. Without objection, Mr. Flynn, the figures you desire to gather together will be inserted in the record if you will furnish those figures.
Mr. FLYNN. Yes, I will. (The information follows:) Colorado mining costs, as a result of new wage increases, will be increased from the present $48 per ton to just over $50 per ton.
Mr. ROGERS. The gentleman from California.
Mr. Flynn. Acid grade comes from Mexico, Italy, Spain, Germany, Sardinia, and we did get some from Canada but they have been unable to compete with the European and Mexican ore for the past year. They do not produce now. The Canadian producers have requested a tariff of $10 per ton.
As a matter of fact, Dr. Miller, last year imports of acid-grade fluorspar were almost a hundred thousand tons in excess of consumption.
Dr. MILLER. What would be the average price of the imported material ?
Mr. Flynn. Last year the average price was about $47 or $48. Dr. MILLER. Delivered ?
Mr. FLYNN. Yes, sir; to the east coast, the gulf coast, and to Cleveland. Then they also used the inland waterway system for transport.
But recently the Italian producers have reduced the price of their ore to $35 a ton. That was done early this year. There is about a hundred thousand tons of that ore available at a price of $35 a ton.
Now, the Mexicans have a capacity of something in the neighborhood of 170,000 tons, and their delivered price is $40 at the border, duty paid at the border.
Some of that ore is going into a barter contract, but that will be concluded early in 1959. I think April is the last delivery date for it.
Dr. MILLER. And it is your conclusion that the domestic industry is not able to exist with the prices suggested by the Department of the Interior ?
Mr. FLYNN. Yes, sir.
Three years ago, Dr. Miller, a price of $47.50 was closing or had closed every mine in the country. Since that time we have had some wage increases which have increased our costs above that. So it is obvious we cannot operate at $48.
Dr. MILLER. Have you gone to the Tariff Commission!
Mr. ASPINALL. Mr. Flynn, what is the value of your company's investment in its operation?
Mr. Flynn. My company and its affiliate have an investment now of a little over $500,000 in Illinois.
Mr. ASPINALL. How many people are employed ?
Mr. Flynn. We employ about 120 people in our own operations, and we purchase all of the output from 3 other mines, which we process through our own mill, and they have a combined employment of possibly a hundred people in those three.
Mr. ASPINALL. Do you know what the combined employment in the production and processing activities of the fluorspar industry is in the United States ?
Mr. Flynn. About 1,500 people, Mr. Aspinall.
Mr. ROGERS. The gentleman from Pennsylvania, Mr. Saylor. Does he have any questions?
Mr. SAYLOR. Yes; I have some questions.
First, can you divide the domestic production as far as percentage is concerned into the three classes of fluorspar?
Mr. FLYNN. Into the three classes?
Mr. FLYNN. Acid grade is about 55 percent of domestic production. Ceramic grade, about 10 to 15 percent, and metallurgical last year was roughly 30 to 40 percent.
Mr. SAYLOR. Now, the firms you say you represent, and you are the Independent Domestic Fluorspar Producers Association representative, do they produce for the open market or do they produce for specific companies?
Mr. Flynn. The reason we used the term "independent" is that we produce for anyone who wants to buy.
Mr. SAYLOR. In other words, none of the members of the Independent Domestic Fluorspar Producers Association are so-called captive mines?
Mr. Flynn. No, sir. There are only two captives in operation today, Mr. Saylor.
Mr. SAYLOR. Will they be covered by this bill?
Mr. Flynn. I do not know. I think the Secretary indicated that he felt they would be. Under the definition that is in the bill of a "producer," there is some question in my mind as to whether they would be.
Mr. SAYLOR. If they are, if the output of the so-called captive mines is included in computing the 180,000 tons, so that no further payment would be made, what would be the effect on the program?
Mr. FLYNN. If you include the captives, it would have the effect of limiting the number of independents who could participate in it.