in the Labrador deposits as the Iron Ore Co. of Canada. This company is a joint venture in which the Hanna Ore Co., Republic Steel Corp., American Rolling Mill Co., Youngstown Sheet & Tube Co., National Steel Corp., and Wheeling Steel Corp. are partners. These Labrador deposits have been extensively drilled, and nearly 400,000,000 tons of usable ore have been proved up to the present time. Production from them is not anticipated for several years. Other areas were mentioned by witnesses as possible future sources of supply. Mr. Ernest T. Weir, president of National Steel Corp., in his statement to the subcommittee, asserted that as iron is the fourth most abundant element, comprising about 5 percent of the earth's crust, iron-bearing materials are known to exist all over the world, in extremely large and rich deposits. As an illustration, Mr. Weir cited recent information communicated to him by Eugene R. Black, president of the International Bank for Reconstruction and Development, to the effect that the Damodar River Valley of India, in addition to 15.5 billion tons of coal, has an estimated 8 billion tons of high-grade iron ore. It is not indicated whether any development of this deposit is in process or in prospect. 1. Costs of development Commissioner Mead, in his prepared statement, discussed some features of this question. He differentiated between the discovery of potential foreign sources of ore and the problems of mining and transportation of the product to the United States. According to the Commissioner, both the Labrador and Venezuelan deposits are located far from established means of transport: In Labrador it would be necessary to build a railroad some hundreds of miles long and to provide an extensive port development and other utilities. The investment required to develop the mines and the necessary facilities to ship Labrador ore has been estimated to exceed $200,000,000. About 5 years may elapse before ore appears at the proposed St. Lawrence port. The Venezuelan situation also appears to present difficult transportation problems involving costly ocean carriers, port developments, river improvements, and railway construction.23 of Mr. C. M. White, president of Republic Steel Corp., testified with respect to the Labrador deposits that drilling had proved, by the end of 1949, reserves of over 350,000,000 tons of open-pit ore in this area, substantially higher quality than the domestic Minnesota ore. Preparation for production might now proceed, assuming favorable conditions, so that by 5 or 7 years from the present time, a 350-mile railroad could be built, loading, and dock facilities could have been constructed at Seven Islands, a community created for a working force, and an annual production of 10,000,000 tons of ore be undertaken. The initial cost of development, apart from the St. Lawrence seaway, would be in the neighborhood of $300,000,000. In the cases of both the Labrador and Venezuelan deposits, as in the case of the Liberian deposit, Mr. White stated that the construction of rail lines from the ore fields to ports of shipment, while costly, is not an insuperable problem. A more serious problem exists in the long water hauls necessary to bring ores to the seaports of the United States. From the standpoint of national defense, such long water hauls are vulnerable in time of war. Even in peacetime such long transport lines will present additional cost problems to the steel industry. The completion of the St. Lawrence seaway is desirable, according to Mr. White, from both points of view. The necessity of the St. Lawrence seaway was likewise emphasized by Secretary Chapman. The chairman, Representative Celler, asked Mr. White whether the transportation of ore from Liberia, Labrador, and Venezuela would have a tendency to increase the costs of manufacture of steel. Mr. White stated that in the case of Liberian ore, the metallurgical benefit from its high iron content, and the lesser amount of coke needed to make a ton of steel, would probably offset the additional freight. In the case of Venezuelan ore, Mr. White stated that the effect would depend upon where the ore is used, to what extent, and freight costs. Mr. White did not believe it possible at this time to say what the ultimate outcome would be. Mr. Fairless, president of United States Steel Corp., estimated that the development of the Venezuelan ore deposits would require "many more millions of additional investment." Elsewhere the Venezuelan development is characterized as a "tremendous undertaking". In information furnished to the subcommittee by the United States Steel Corp., the following considerations concerning the corporation's Venezuelan ore program are set forth: (a) Proven ore as of January 1, 1950, estimated at 415,000,000 gross tons. (b) Gross investment per books $6,307,578 as of January 1, 1950. (c) Projected investment undetermined, but will require large capital expenditures, in excess of $100,000,000, for a development of the character mentioned in the next paragraph. (d) No production facilities at this time. Depending upon future conditions, capacity to produce 10 to 15 million tons per year by 1960 may be developed. (e) There have been no actual shipments from this project in Venezuela. (f) The size of the development will depend upon the actual competitive market available to these ores when production gets under way. It is hoped a market may be found for a sizable quantity of ore for sale annually, exclusive of United States Steel's requirements. Mr. Fairless, in the course of response to questions, stated that it is anticipated that the ore brought from Venezuela would be cheaper in certain respects than ore coming from the Mesabi Range and Alabama. Although he could not conjecture the price of Venezuelan ore, because the necessary facilities have not yet been built, and because freight rates at the time such ore becomes available are not known, he indicated that it might be relatively cheaper for the corporation to use. He stated: * * * there is a limitation on where the Venezuelan ores can be used in this country. I do not, for example, have any idea that Venezuelan ores can be used in the Chicago district in competition with Labrador ores or Lake Superior -ores. But, by the same token, if all cost factors remain as they are today, ores from Venezuela, according to our projected costs, will be cheaper laid down on the eastern seaboard of the United States, and to a certain portion inland, perhaps as far west as Pittsburgh, at least competitive, and in some cases with an advantage costwise over existing ores.24 Another subject of importance is the contractual relationships involved in the development of foreign ore deposits by American companies. In the course of testimony by Secretary Chapman, questions were raised as to whether the Department of Interior had received copies of the contracts between the United States Steel Corp. and the Venezuelan Government. The Secretary replied that the Department had not, and in response to questions by Representative Wilson stated that there is no legal requirement that such contracts be made available to the Department. The Secretary indicated that he, as an individual, had opportunity to see the contract but not to study it at length. In response to further query by the chairman, the Secretary specified that the contract was between the United States Steel Corp. and a "semigovernmental" corporation controlled by the Venezuelan Government. In his testimony and in response to questions, Mr. Fairless stated that the contracts were made directly with the Venezuelan Government, that there was no law, according to the corporation's attorneys, requiring the deposit of these contracts with the State Department or other branches of Government, and that the story of the negotiation of the agreements had been communicated to all interested Government officials. Negotiations as to rights-of-way, waterways, and dock construction are still in process. The totals of prospective additions to annual ore supplies of the American steel industry, from foreign sources expected to be available at the end of the decade 1950-60, may be summarized from the statements of the various witnesses: 1. From Liberia-2 million tons or more per year. 2. From Labrador-10 million tons per year. 3. From Venezuelan deposits developed by United States Steel-10 to 15 million tons per year. 4. From other Venezuelan deposits developed by Bethlehem Steel-2 to 3 million tons per year. 5. From sources now providing some imported ores, such as Canada, Chile, Sweden, Cuba, and other regions-7 to 8 million tons per year. The active foreign iron-ore interests of American steel companies. at the present time, including several deposits which were not discussed in the testimony, are set forth in a table submitted by the Director of the Bureau of Mines in exhibit S-5, Steel Exhibits, page 4. III. SUMMARY OF PROPOSALS TO MEET SHORTAGES OF RAW MATERIALS Testimony of witnesses and questioning by members of the subcommittee with respect to the present and future supplies of iron ore for the steel industry provided a number of recommendations designed to maintain and increase the ore reserves available to the United States. Some of the recommendations represent measures already in process of application, some concern advisable or feasible policies or practices upon the part of Government and industry to foster efforts to increase ore supplies, and some are suggestions regarding technical phases of ore production and utilization. In his testimony, Secretary of the Interior Chapman stated that the work of the Geological Survey and of the Bureau of Mines in mapping iron ore regions, and in conducting research in mining and metallurgy is being intensified and will be oriented to permit more extensive effort in the field of iron ore. Because processing of lowgrade ores and taconites will require substantial amounts of electric power, the Secretary asserted, it is the policy of the Department of the Interior to favor the development of large blocks of low-cost The Secretary also stated that the Department will encourage the development of existing and additional foreign sources of iron ore where it can do so. The Department further urges the construction of the St. Lawrence seaway to provide transportation for ore from Labrador to the lower Great Lakes. Endorsing the opening statement of the chairman, Representative Celler, concerning the necessity of free and competitive enterprise in the steel industry, the Secretary stated that in approaching the associated problems of competition and expansion in the steel industry, new investment in the industry should be encouraged. If shifts or dispersion should occur in the location of centers of steel production, the Secretary suggested that all steps necessary be taken to protect interests of national defense, the investor, labor, and the American economy." 25 Representative Keating asked the Secretary what should be done if, given ample raw materials, the steel industry did not expand as rapidly as some persons thought it should. The Secretary replied that if the industry did not expand rapidly enough to meet the demands of the country as a whole, then some encouragement by the Federal Government should be given to competition entering the field. The testimony continues on this point as follows: Mr. KEATING. Then, that is the time when the Government should start in building steel plants? Mr. CHAPMAN. No; not necessarily at all. You will find private capital willing to build when you find that situation. You will find private capital ready to build into it when they have an assured supply of raw materials. Mr. KEATING. So that there should come no time when the Government need contemplate building steel plants? Mr. CHAPMAN. Except through RFC, they should make loans as they have to every existing steel company today.26 Mr. KEATING. However, that is the only extent to which the Government should consider the building of steel plants, through the making of loans; is that right? Mr. CHAPMAN. Let us try that first and see if we need any more. I would not say that you would probably need any more. I think private capital would enter the field if supply of raw materials was assured.27 The Director of the Bureau of Mines, Dr. Boyd, in stating his conclusions on iron-ore reserves, stated that, as plants for the processing of taconite by known methods require heavy capital investments, assistance may be necessary for the development and exploitation of foreign deposits, especially those available to the Great Lakes areas, and that this should be encouraged and expedited. Representative Blatnik likewise commented upon the large power requirements, increased labor and other costs of processing taconites, stating that large amounts of venture capital are required for production of ore from taconites. Small companies, said Representative Blatnik, do not have the capital to invest in the plant and equipment necessary, which then will not produce for from 5 to 8 years sufficient quantities of ore to assure a return on the investment. The Representative recommended some type of long-term loans, perhaps 40 years, to enable small companies to enter this field.28 At later points in his testimony, Dr. Boyd replied to questions by Representative Michener, by Representative Celler, the chairman, and 25 Hearings, p. 73. 26 It should be stated here that Mr. Ernest T. Weir, president of National Steel Co., stated that National has had no loans from the Government. 27 Hearings, p. 84. 18 THE IRON AND STEEL INDUSTRY by Representative Wilson to the effect that it is necessary to encourage Mr. C. M. White, president of Republic Steel Corp., offered several although prospects of iron-ore supply have materially improved The problem of tax relief, said Mr. White, is neither new nor limited to iron ore as a measure to encourage the discovery, development, and production of minerals. The National Minerals Advisory Board to the Department of the Interior has placed this suggestion before the Ways and Means Committee. In view of the precarious state of world affairs, Mr. White believes it is important that the tax situation be brought to the attention of the Congress. The tax structure as it affects the development of domestic reserves, if changed to permit adequate return on investment, will encourage the expenditure of the necessary sums. This recommendation is not a request for subsidies, which Mr. White opposes, but an approach to the solution of a problem of national importance.20 In the course of this testimony, Mr. Benjamin Fairless, president of the United States Steel Corp., advanced certain recommendations respecting the assurance of adequate future supplies of iron ore. Primarily, these suggestions apply to the policies of the steel companies. Because of the necessity of foresight to alleviate the impact of a too sudden shift from the use of present ores to the use of taconites in the future, Mr. Fairless stated that the industry should take certain steps. In his view of the problem, Mr. Fairless said: Now, it is our theory that the American steel industry should do three things, and they are being done; that is, to develop, make certain that we have developed, all the available iron ores in this country of the highest quality. Likewise, we should move forward with the development of methods in order to use our taconites; and in order to supplement both of those measures, we should develop outside sources of ore, and obviously, in order to be competitive, those outside sources must be high-grade ore.30 Representative Blatnik, of Minnesota, in his statement presented before the subcommittee, recommended that, in addition to the strengthening and increased enforcement of the antitrust laws: * * * the Government should do everything possible to encourage the beneficiating of low-grade ores and the development of commercially feasible processes for the utilization of vast amounts of deposits of low-grade ore and taconite. I should mention that we have unlimited deposits of low-grade ore and 29 Hearings, pp. 219–220. 30 Hearings, p. 547. |