levels, indicates that in order to get the production level which is stated to be needed for lead, the domestic production level of over 300,000 tons of lead, in 1964 we would have to bring the price of lead up to 15 cents according to Mr. Romney's testimony; and in order to meet the production level of over 600,000 tons of zinc in 1964 we would have to bring the zinc price up to over 14 cents, somewhere between 14 and 15 cents on zinc, indicating that we would have to have a 50-percent increase, approximately, in both the lead and zinc prices in the United States to meet the production levels you state you would be counting on from American industry as a base for a conventional war effort. Do you see anything wrong with that statement? I am taking it from the exhibit you just handed to me. You would have to bring the price up to 15 cents for lead to get 303,000 tons of lead, and you would have to bring the price of zinc up to 14 cents to get 571,000 tons and 15 cents to get 659,000 tons, or between 14 and 15 cents would be your zinc price to get the zinc level up to the production figure you have told us you are counting on, 600,000 tons. Is that correct? Mr. O'LEARY. I would have two comments. First of all, your percentage might be high. I think the present price of zinc is 12 cents and the present price of lead is approximately 11 cents. Secondly, it seems to me that going on that past period, that a period of strong demand, which is one of the assumptions here, would result in prices somewhat along this line. Mr. EDMONDSON. I think that is a fair comment. Another fair comment is that this was a 1960 estimate by Mr. Romney and if he were asked to comment on it now he might vary it up or down. So with those two qualifications I think it speaks for itself. If there is no objection, there will be inserted in the record at this point the excerpt from Mr. Romney's testimony before the Tariff Commission on January 12, 1960. Mr. SAYLOR. Reserving the right to object, I will not object but I wonder if it might not be advisable to write to Mr. Romney and ask if he would not update his report to June 30, 1963-that is 3% years later considering the increase in the cost of labor, the increase in the cost of machinery, and other elements that go in the cost of producing lead and zinc. Mr. EDMONDSON. I think that is an excellent idea. Mr. SAYLOR. I withdraw my reservation. Mr. EDMONDSON. Without objection, the two exhibits will be made a part of the record at this point. (The matter referred to follows:) In public hearings before the Tariff Commission on January 12, 1960, Mr. Miles P. Romney, chairman, Emergency Lead-Zinc Committee, presented the following exhibit. (Subsequently the committee wrote to Mr. Clark Wilson, who succeeded Mr. Romney as Chairman of the Emergency Lead-Zinc Committee, and received the following reply :) Hon. ED EDMONDSON, Chairman, Subcommittee on Mines and Mining, JULY 16, 1963. DEAR MR. EDMONDSON: This will acknowledge your letter of July 12 and your inquiry regarding lead-zinc statistical information submitted to the U.S. Tariff Commission by Mr. Miles P. Romney, during a public hearing on January 12, 1960. I am enclosing a reproduction of table 33 from the Tariff Commission report summarizing this statistical information. On the top headings under each year, 1960-64, we have typed in the combined average lead-zinc price per pound to compare with the average combined price during mid-1959 of 23 cents per pound. The notes at the bottom of the table indicate in the second paragraph some qualifications in making these estimates. One item not indicated there is that the producers making this report should indicate any production that will come out either at a profit or loss. Comparing actual production statistics for the years 1960 through 1962 with actual prices would indicate that the estimates presented by Mr. Romney do not agree with actual experience; but there are factors involved that do explain these discrepancies. In the first place, for the levels of production actually experienced during these years it was assumed that prices would be at a level that would result in profitable operation. From the price schedule quoted, you will note that there has been some fluctuation, both above and below the mid-1959 level. Testimony presented during the hearings before your subcommittee by the industry was to the effect that probably no lead-zinc mine as such is making a profit and much of the production is actually being produced at a loss. The obvious reasons are some mines are a part of an integrated mining, milling, smelting, and refining operation, and the mine must operate to provide a supply of ores or concentrates. Also, the investment in some mines is so great, and shutdown charges would be so high, that it is more practical to continue operation even at a loss figure. One other item discussed during the hearing was the general agreement that exploration and development have definitely suffered a decline due to loss of profits and funds available for this type of operation. It would be possible to point out particular segments of U.S. lead mines or zinc mines and perhaps say that the table 33 figures are pessimistic; however, considering the entire domestic lead-zinc mining industry, it is my opinion that these estimates under normal operating conditions are still valid. Based on this opinion, we believe it very important that any lead and zinc in the U.S. stockpiles be maintained, particularly until data has been calculated for lead-zinc requirements in case of a nuclear war. It has been our experience that, as we enter an emergency, the Government immediately and naturally asks and expects increased domestic production. This applies great pressure on the physical ability to produce additional metal from the standpoint of operating equipment, manpower, capital, and ore reserves. It also generally means a reduction in the necessary exploration and development. Based on these figures and our past experience, we can logically expect that estimated prices for necessary tonnage will be increased by at least 50 percent above normal rates. I hope that this information will answer your inquiry. If not, we will be pleased to look into it further. With best wishes, I am, Very truly yours, CLARK L. WILSON, Chairman. REPORT TO THE CONGRESS ON INVESTIGATION NO. 332-26 (SUPPLEMENTAL) UNDER SECTION 332 OF THE TARIFF ACT OF 1930, MADE PURSUANT TO SENATE RESOLUTION 162, 86TH CONGRESS, ADOPTED AUGUST 21, 1959 TABLE 33.-Estimated U.S. mine production of lead and zinc at various U.S. prices, 1960-64 NOTE. The estimates of recoverable lead and zinc that could be produced at the specified prices are summaries of estimates provided by 51 producers in response to questionnaires mailed in the spring of 1959 by the Emergency Lead-Zinc Committee and returned to the public accounting firm of Lybrand, Ross Bros. & Montgomery, New York City, which tabulated the individual returns. In making estimates of producible tonnages, the producers were asked to assume that (1) the specified market prices will be average prices beginning in mid-1959 and will prevail throughout the period 1960-64 with only minor fluctuations, (2) costs would increase due to inflation but that such cost increases should not be assumed to increase by more than 3 percent per year, and (3) normal development and exploration work would be continued. According to the Lead-Zinc Emergency Committee, the 51 mining companies that provided the estimates shown on this table accounted for more than 90 percent of the domestic lead-zinc mining production. Source: Exhibit No. 10 presented by Mr. Miles P. Romney, Chairman, Emergency Lead-Zine Committee, at the public hearings before the U.S. Tariff Commission on Jan. 12, 1960. 20-705-63-18 APPENDIXES APPENDIX A Hon. ED EDMONDSON, EMERGENCY LEAD-ZINC COMMITTEE, Chairman, Subcommittee on Mines and Mining, Committee on Interior and Insular Affairs, House of Representatives, Washington, D.C. DEAR MR. EDMONDSON: During the hearing conducted by your subcommittee on June 13 and 14, 1963, to consider the conditions in the domestic lead-zine mining industry, the Emergency Lead-Zinc Committee presented a discussion of provisions of H.R. 6269, introduced by Mr. Aspinall, and H.R. 6371, introduced by you, together with similar bills of 19 other Congressmen. This is a flexible quota bill with a provision that whenever the market price of lead or zinc exceeds 13.5 cents per pound for either metal. an import quota would be determined for the metal concerned, based on the difference between domestic supply and domestic consumption. Below this price level absolute import quotas would apply. In the discussion that followed this presentation, you pointed out that while 13.5 cents per pound for lead and zinc may represent at the present time the logical level above which the flexible quota provided in the bills should operate and below which the absolute quotas shall be effective, it is to be expected that production costs will continue to increase in the future and this price figure will become obsolete. The result would again be ineffective quotas that would not insure adequate domestic mine production at profitable prices. In the discussion of this situation that followed with industry representatives, it was agreed that the principle of relating the peril point level of 13.5 cents per pound to some index to reflect increasing costs was logical and acceptable, provided the proper index could be determined. An analysis of mining expenses always indicates that labor is the greater percentage of total production costs. This is true of the mining operation itself and in the supplies that are consumed in the operations. The Emergency Lead-Zine Committee, therefore, suggests that the bill be amended to provide an anual adjustment of the peril point price of 13.5 cents per pound based on an index computed by the U.S. Department of Labor, titled "Gross and Spendable Average Weekly Earnings in Selected Industries in Current and 1957-1959 Dollars," applying the change of index in 1957-59 dollars supplied for the mining industry. This can be done by adding two sections to the proposed flexible quota legislation that would be numbered section 104 for lead and section 204 for zinc. A copy of the proposed amendments is enclosed. You will note that the amendment proposes November as the month for the index calculation with the index to be effective on December 1. This is necessary to coincide in the case of lead with the language on page 3, lines 10 through 15, and in the case of zinc, with the language on page 6, lines 7 through 12, in the bill as printed for Members of the House of Representatives. This particular definition of the "first 3 of the 4 calendar months preceding the quarter" actually takes a calculation for the first quarter of any one year back to December 1 of the preceding year. We will appreciate having this suggestion included in the report of your committee. Very truly yours, CLARK L. WILSON, Chairman. 259 |