SPECIALTY STEEL INDUSTRY FRIDAY, APRIL 7, 1972 U.S. SENATE, SUBCOMMITTEE ON GENERAL LEGISLATION OF THE COMMITTEE ON ARMED SERVICES, The subcommittee met, pursuant to notice, at 9:30 a.m., in room 212, Old Senate Office Building, Senator Harry F. Byrd, Jr., of Virginia (chairman). Present: Senators Byrd, Jr. (presiding), Bentsen, and Schweiker. Also present: L. R. Garcia, counsel, and Mary Keough, staff aide. Senator BYRD. The committee will come to order. We meet today for the purpose of discussing the essentiality of specialty steels to national security. These hearings are being undertaken at the suggestion of Senator Richard S. Schweiker, of Pennsylvania, who is a distinguished member of this subcommittee. Without objection, I would like to include in the record a copy of Senator Schweiker's letter to me expressing his views. (The letter follows:) Hon. HARRY F. BYRD, Jr., Committee on Armed Services, U.S. Senate, U.S. SENATE, COMMITTEE ON ARMED SERVICES, DEAR SENATOR BYRD: As you know from our previous conversations, I have been seriously concerned for some time about the declining strength of the specialty steel industry in this country, particularly because of the national security implications involved. I am enclosing herewith a memorandum which will provide you with a summary of the relationship of this industry to the national security, and background information as to the reasons behind the difficult position this industry finds itself in today. The specialty steel industry is a vital cog in our national defense system and the industry cannot be allowed to continue to deteriorate to the point where it cannot be relied upon to furnish us with critically-needed products. It is important to point out that foreign producers are not yet making most of the specific products which are used in the defense area. However, it is clear that if the industry continues to decline generally, it will not be able to provide the defense system with the products it needs. The industry cannot survive producing only goods related to the national defense. I have consulted with leaders of the specialty steel industry and they have indicated their willingness to come to Washington to testify before the Armed Services Committee on the essentiality of specialty steels to the national security. Since the Armed Services Committee has jurisdiction over "strategic and critical matters necessary for the common defense", I believe this clearly is an appropriate subject for hearings by the Committee. I think it would also be helpful to invite representatives of the Department of Defense, Department of Commerce, and the Office of Emergency Preparedness to present their views on (1) this important problem. Of course, should you decide to schedule hearings, I will be happy to assist you in any way I can. Thank you for your consideration. Sincerely, Enclosure. U.S. Senator. RICHARD S. SCHWEIKER, SPECIALTY STEEL AND THE NATIONAL DEFENSE Specialty steels account for less than 2 percent of total industry tonnage production but more than 7 percent of industry dollar sales, the reason for this disparity can be traced to man-hour requirements for production and the use of expensive alloys in most specialty products. Stainless steel prices, for example, average more than $1,200 per ton or 7.5 times higher than the average for carbon steel. Some high-temperature alloys sell for $5 per pound and more. Because of their high cost and sophisticated applications, specialty steels are frequently produced to the specific requirements of individual customers, especially the Department of Defense. Modern defense is impossible without a healthy specialty steel industry. The industry is a key to weapon reliability, to weapon improvement through technology advance, and to economical production of parts for weapons. The industry is vital to the production of all defense equipment produced by metal-cutting machine tools. If it were not for the advances which the specialty steel industry has made in recent years in the manufacture of tool steels, highly automated machine tools in the U.S. would have to operate at much slower speeds and with less precision, thereby greately increasing the cost of manufacture of military equipment. The logistics of defense-movement of material-depend on specialty steel industry metals in the bearings which keep trains and trucks rolling. The market in the U.S. for the products from the U.S. specialty steel industry has been declining since 1966-68. The main factor in the decline is the rapidly rising share of the U.S. market taken by specialty steel producers in Europe and Japan. The 18.3 million tons of steel imported into the U.S. in 1971 is the largest amount of imports in history. The potentially disastrous effect of this loss of market on U.S. defense comes in these two areas: 1. Continued declining sales endangers the ability of the industry to finance new technology which is required for the advance of weaponry. 2. Continued loss of employment means that the highly skilled workers in the specialty steel plants will phase out of the industry and not be available at need to produce the metals necessary to national defense. To be available for the national defense, the U.S. industry also needs the maintenance of its U.S. civilian market; otherwise it cannot maintain the stability which defense requires. Foreign producers do not provide us with the materials needed by the military. Government efforts in 1969, 1970, and 1971 to restrict imports by a voluntary non-legislative arrangement failed. The 18.3 million tons of imports of 1971 of all steels-carbon and specialty-amounted to a 20 percent overrun on the voluntary limitation. The voluntary quota was 15.4 million tons. The main target industry of the violators was the U.S. specialty industry. The products sell for more. In a voluntary agreement limiting tons of imports, the exporters to the U.S. emphasized the high-priced tons-specialty steel. The voluntary agreement proved to be unenforceable. MILITARY APPLICATIONS OF SPECIALTY STEEL Approximately 10 percent of total United States industry shipments of stainless and other specialty steels go to direct defense applications. Among these are: Army: Proximity fuses for artillery shells; Anti-spike innersoles for combat boots; Gears, bearings and engine components for combat vehicles; Gun breaches and cartridge cases; and Mobile missile launching platforms. Navy: Seamless tubing for nuclear power plants; Structural parts and engine assemblied for Poseidon missiles; Bearings, gears and power-transfer assemblies; and Gun carriage assemblies. Air Force: Aircraft turbine blades; High-strength landing gear assemblies; High-temperature bearings for jet engines; Majoral structural and engine parts for Minuteman missiles; Rapid-fire cannons. General Military Application: Manufacture and transportation of nitric and sulphuric acid ; Power generation equipment; Contact switches, electric motors, integrated circuits and electronic instrumentation devices; and Machine tools for weapons fabrication. One of the most important applications of specialty steels of direct defense impact is power generation. There is not a single major power plant in the country that does not depend upon specialty steels for rotors, bearings, shafts, transformer tubing or gears. Similarly, the nation's telephone switching equipment utilized millions of integrated circuits employing large amounts of controlled expansion alloys. In summary, the specialty steel industry is in serious trouble. There is hardly a specialty steel plant in the country running at more than 60 percent capacity. It is vital for national security reasons that this industry be preserved. Senator BYRD. I have also received a letter from Senator McIntyre, who has expressed regrets for his inability to be present at these hearings, also a letter from Senator Saxbe, and I would like to include these letters in the record as well. (The letters follow :) Hon. HARRY F. BYRD, Jr., U.S. SENATE, Washington, D.C., April 7, 1972. Chairman, General Legislation Subcommittee, Senate Armed Services Committee, Senate Office Building, Washington, D.C. DEAR MR. CHAIRMAN: I regret that I am unable to be ppresent at the Subcommittee's important hearings today. I would appreciate it if, in my absence, you would include this letter as part of the record of the hearings. As Chairman of the Ad Hoc Subcommittee on Research and Development of the Senate Armed Services Committee, I am aware of the importance of our nation's tool and stainless steel industry to the national defense effort. We should carefully consider the importance of preserving the viability of the specialty steel industry so that the national defense program can have this industry available for research and development activities. This industry has worked to maintain what I believe is a good domestic specialty steel-making capacity which can be of value to our national security needs. The activities of groups such as the Tool and Stainless Steel Industry Committee have been important factors in this effort. They have facts and figures to present which I feel should be given careful consideration. I am sure your hearings will provide important information which will be of value to the work of the Congress. Sincerely, THOMAS J. MCINTYRE, U.S. SENATE, COMMITTEE ON ARMED SERVICES, Washington, D.C., April 7, 1972. Hon. HARRY F. BYRD, U.S. Senator, Senate Committee on Armed Services, Senate Office Building, Washington, D.C. DEAR SENATOR BYRD: I would like to take this opportunity to express my views concerning the essentiality of the specialty metals industry in the United States to the national security. Members of the specialty steel industry, and in particular Republic Steel Corporation and Armco Steel Corporation who have large installations within the State of Ohio, have expressed to me on many occasions the peril of increased imports of steel mill products and its resulting effect on the capability of this industry to develop and produce high performance materials necessary to our defense posture. If the primary economic base of commercial products is erroded, then there is no way that these companies can sustain their research and development capability necessary to this country. In a relatively short span of three years, imports have reduced the domestic share of the market for high volume specialty steels to the point where the industry can no longer adequately support the development of critical defense materials. Plants have closed and more closings are being considered. Workers are being layed off and jobs eliminated, research and development capabilities are being weakened as large programs are being curtailed. It is time that our Committee and the Congress do something about this problem to restore a healthy economic base to this industry. The need for a healthy primary specialty materials industry is in the best interest of the American government. I hope that we can find some solution by which we can immediately slow down the unbridled flow of specialty steel into the United States. I respectfuly request that this letter be made part of the record. Sincerely, WILLIAM B. SAXBE, U.S. Senator. Senator BYRD. Testimony will be heard from representatives of the executive branch and industry. Congressman John Dent, of Pennsylvania, I am pleased to notice here today, and I would like to say at this point that Congressman Dent took a leading and important part in the enactment of legislation which ended the U.S. dependence on Russia for a strategic material, namely, chrome. I note some folks from Pennsylvania here today. I remember that night of September 23, I believe it was, when the matter came before the House of Representatives and I can see Congressman Dent now arguing before the House to try to save the jobs of the people of his congressional district. And I admire the way he handled that matter and his strong presentation of the case to permit the importation of chrome from countries other than Russia, specifically from Rhodesia. His strong presentation of the case led to the House of Representatives approving that legislation by a vote of 251 to 100, and I might say that this hearing to some extent results from the experience the United States has had in the last 5 or 6 years, in being dependent on Russia for strategic materials. It seemed to me very illogical for the United States and the Congress to appropriate, as we have in recent years, some $77 billion for national defense with the potential aggressor being the Soviet Union, and yet simultaneously being dependent on Russia for a strategic material. That situation went on from 1966 until this past January 1, when the legislation which was passed by the Senate, supported strongly by Senator Schweiker, and passed the House of Representatives supported strongly by Congressman Dent, was signed into law by the President and became effective January 1. That seemed to focus attention on this whole matter of steel, because chrome is involved in that, the importance of steel to national defense. That along with Senator Schweiker's strong views led to this meeting here today. It is our plan to complete these hearings today, but if there are others who wish to contribute, they may file statements for the record and for that purpose the record will remain open for a reasonable period. In that connection I will point out to the committee that the Under Secretary of State will present a statement for the record detailing the progress of his negotiations. He came to my office yesterday afternoon and I, of course, invited him to submit for the record any statement which he cares to make. He went into some detail yesterday which I will not attempt to do here but will let his statement speak for itself. It is the desire of industry that their witnesses be heard in advance of the Government witnesses. It is their view that the testimony of the Government witnesses will be better understood after the industry presentation. I regret to advise that Mr. William M. Lawrence, of the Office of Emergency Preparedness, was taken ill suddenly yesterday and is hospitalized. However, Mr. Edward Saunders, Deputy Assistant Director for Resource Evaluation Office of Emergency Preparedness, is here and will read Mr. Lawrence's statement for the record. I take this opportunity to welcome all of you. We have with us Mr. Roger Ahlbrandt of Allegheny-Lundlum Industry who will be the principal spokesman for the Specialty Steels Industry and he is accompanied by Mr. Eugene March of Colt Industries, Inc.; Mr. George Zipf of Babcock & Wilcox; Mr. William Verity of Armco Steel Co. and Mr. Marshall Schober of Latrobe Steel. The Government witnesses are in a position to tell us what the industry has done in the past and what it can do in a period of national emergency. Witnesses for the Government are Vice Adm. Eli T. Reich, who will represent the Department of Defense; Mr. Hudson Drake of the Department of Commerce; and Mr. Edward Saunders of the Office of Emergency Preparedness. In a statement some weeks ago I noted that the subcommittee will confine its hearings to defense essentially and the importance of this unique industry to the national security. I want to emphasize that it is not our responsibility here to invade the jurisdiction of other committees which deal with such matters as import quotas and tariffs. The purpose of this hearing is to go into the national defense aspect of the specialty steel industry to our national defense. I would hope that we would stay away from the question of quotas and tariffs. That is a jurisdiction that belongs to the Finance Committee. Being the only Member of the Senate who is a member of both the Finance Committee and the Armed Services Committee I am anxious that we don't get crossed up in our jurisdictional matters. Before calling on the listed witnesses, I would like to recognize the distinguished Senator from Pennsylvania, Mr. Schweiker. Senator, will you proceed. |