Mr. PICKENS. No.

Mr. STEED. Of their own?

Mr. PICKENS. No, they have none.

Mr. YATES. Is yours the only plant?

Mr. PICKENS. Õurs is the only extrusion plant in Puerto Rico. The reason they consider it so important is that it is a core industry. We supply two other groups of plants there.

Right now there are 12 new plants planning to come to Puerto Rico. There are presently seven sizable users of extrusions in Puerto Rico. So that the market is there.

The Government is most anxious to get our plant started, so that they can better their economy by letting us supply these 20 or 22 plants that will be there.

Mr. YATES. You mean the Puerto Rican government?

Mr. PICKENS. That is correct, the industrial development committee, headed by Mr. Moscosso.

Mr. STEED. Where are they getting their extrusions now?

Mr. PICKENS. They are buying them from Reynolds, Kaiser, Alcoa, and possibly some from England. I know they have purchased some from England.

Mr. YATES. Are there any other questions, gentlemen?

Mr. PICKENS. One company, and I would rather not say which, went so far as to send a letter to one of the customers to the effect, Do not buy from Commonwealth, because they cannot get any metal. We can supply you, but Commonwealth cannot.

Mr. YATES. They sent that message to one of your customers? Mr. PICKENS. One of our potential customers. It was in the form of a letter. I saw that.

Mr. YATES. Are there any further questions?

Mr. PICKENS. This thing could get rough.

Mr. YATES. I imagine it could.

Mr. PICKENS. But we are sitting down there twofold; one, with our invested money; and with a staff that we have trained, primarily of Puerto Rican boys, all of them college graduates, that we sent to Texas and have trained. And we are sitting down there with no possible chance of operating the thing.

At the same time the Government is interested. This core industry can mean many jobs to Puerto Rico. We only employ about 125 as it stands now, but the other industries coming to Puerto Rico could increase that to 1,000 or 1,500 or 2,000 employees. They realize that very much.

Mr. YATES. It looks like you will have to get your own pot; does it not?

Mr. PICKENS. It surely does. Of course, it is a great expense to run a reduction plant. It has to be confined to a large substantial industry.

Mr. YATES. Either that, or you will have to invent one of these "Do it yourself" as they did in the extrusion part.

Mr. PICKENS. Yes, sir.

Mr. YATES. Thank you very much.

Mr. PICKENS. Thank you.

Mr. YATES. We have one more witness.

We will next hear from Mr. Carl Burton. Will you state your name for the record?

STATEMENT OF CARL H. BURTON, SECRETARY, ALUMINUM SMELTERS RESEARCH INSTITUTE, CHICAGO, ILL.

Mr. BURTON. Mr. Chairman and gentlemen of the committee, my name is Carl H. Burton. I am secretary of the Aluminum Smelters Research Institute, 20 North Wacker Drive, Chicago. I have been so employed for the past 12 years, before which I was chief of the Reclamation and Inventory Branch of the Aluminum and Magnesium Division, War Production Board.

Aluminum Smelters Research Institute is the trade association of the aluminum smelting industry, and has so functioned for the past 26 years. Based on reports of the Bureau of Mines for the entire industry, the members of the ASRI ship a large percentage of the products of the aluminum smelting industry. Practically all aluminum smelters fall within the category of small business.

The aluminum industry is a dual producing industry with two distinct sources of supply. That of the virgin aluminum producers is mainly ore (bauxite), that of the aluminum smelting industry is primarily aluminum scrap.

The aluminum smelting industry's major interest is supplying casting alloys to the 2,500 or more aluminum foundries and diecasters; in fact, 80 percent of the smelters shipments go to foundries and diecasters. The balance of smelter ingot goes mainly to the steel industry for use in production of steel.

Historically the major portion of overall tonnage of aluminumcastings production comes from smelters or secondary alloys. In 1954, the ratio was 60.6 percent established from the aluminum smelters casting ingot shipments as reported by the Bureau of Mines factored against aluminum-castings shipments reported by the Bureau of Census.

Diecasters have stated that they rely on smelters for 85 percent of the aluminum they cast.

Aluminum scrap constitutes almost 20 percent of our entire aluminum supply, including substantial imports. In 1954 the total aluminum metal supply was approximately 4,100 million pounds. 770 million pounds of this was scrap.

The basic raw material of aluminum smelters and their customers is aluminum-alloy scrap purchased in the open market. To this scrap, the smelter adds varying amounts of pure aluminum and other metals in producing the alloys required by his customer-but the principle raw material is aluminum scrap.

Smelters consume approximately 70 to 72 percent of aluminum scrap according to the Bureau of Mines.

While smelters are not engaged in either the production of virgin aluminum or in the wrought products field, the fact that most of the aluminum scrap consumed by smelters comes from the fabrication of wrought products, and wrought products generally are produced from virgin aluminum, makes it imperative for smelters to have cognizance of the activities and potentials of those segments in order to adequately plan the course of their own operations.

Since the several segments of the aluminum industry are thus intertwined, it appears fitting to here make brief comment on the primary aluminum situation, as we see it, but to permit the development of

details thereon to come from other, and probably, on that subject, more competent witnesses who undoubtedly have or will appear before you. Government reports for 1954 indicate that domestic virgin aluminum production of 2,921 million pounds was adequate to take care of the shipment of 2,100 million pounds of wrought products and 425.7 million pounds of "ingot other than secondary"-I might say those quotes are there because the BDSA has used that characterization in their analyses-and leave a reasonable amount in excess. That excess, plus a tonnage equal to the total virgin imports was available for stockpiling.

Another factor bearing on this phase is that from December 31, 1953, to December 31, 1954, stocks of ingot at reduction plants declined by 36.5 million, thus adding to the amount of virgin metal circulated in 1954.

My calculations for 1955 based on those facts which are now matters of record, are that domestic production will be just about adequate to cover domestic primary demand if stockpile purchases, or commitments to stockpile, are reasonable.

It seems quite evident that one or the other, or both, were not realistic in 1954, resulting in the confusion which has existed this year and which brought about the recent cutback of 150 million pounds of shipments intended for stockpile during the first half of this year.

Projection of my calculations to and including 1958 all domestic production plus 150.0 million pounds of imports will be required by industry. Stockpiling will then, in my opinion, either continue to compete with industry for the inadequate metal supply or rely completely on stepped up imports and/or increased domestic production. The cutback of 150.0 million pounds from shipments to stockpile is, of course, helpful in the overall, freeing just that much metal from sterility. In fact, it was positively essential to abate the confusion and prevent utter chaos.

However, it could not possibly have lived up to "its billing" as relief insofar as small foundries and smelters are concerned. It does not supply the entire solution to the problem. I propose to discuss this subject in more detail a little later in this testimony.

Bearing in mind as outlined above, that foundries rely upon smelters for the bulk of their casting ingot, and that smelters use 70 percent of the scrap consumed, I propose to dwell on the scrap phase of the aluminum system. I shall attempt to do this with a minimum of confusing figures, particularly since much of the scrap supply and foundry ingot problem is not too complex, and rather simple of solution. It is my hope that by sketching several major factors in rather broad relief, the committee members will ask such questions as will develop for them, the details required for their complete understanding.

SCRAP SUPPLY AND DEMAND

The United States has never been self-sufficient in aluminum scrap any more than it has been self-sufficient in total aluminum except for a very few occasions, and those were of very short duration. We have always been substantial importers of scrap. This has repeatedly been recognized by a succession of Congresses which, year after year, have

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extended laws exempting aluminum scrap from import duties to stimulate its flow.

I do not foresee any important alteration in this situation, now or in the next several years. My projections continue to show a very delicate state of balance between domestic demand and domestic scrap supply plus possible imports.

Statements have been made in the press and otherwise that foundries have not been able to get ingot. That may be quite true with respect to virgin ingot, but it has not been true up to this time with respect to ingot from smelters.

I do not know of nor have I been able to find, one single case where any foundryman or diecaster has been unable to get ingot from smelters if he was willing to pay the quoted market price which the smelter is required to charge by reason of the high cost of scrap which, in turn, is brought about by the necessity of meeting the price which foreign buyers are willing to pay.

Market prices for smelters ingot are not arbitrary figures picked out of the air, but are determined mainly by the cost of scrap. Scrap prices are determined by the law of supply and demand. Over the past 9 or 10 months demand for scrap has been aggravated by abnormal pressures from export markets.

These pressures have forced smelters alloys to points substantially above the posted prices of virgin producers for comparable alloys, whereas their normal relationship is at, or slightly below, producers quotations.

We do most deeply sympathize with a foundryman caught between rising metal costs on one hand and his customers' resistance to rising castings cost on the other, and have repeatedly pled with the Government authorities to recognize the threat and take steps to correct the situation. While deploring the necessity for the higher prices, they have been forced to adopt by virtue of the need to meet export prices for scrap, smelters appear to have deemed it better to have ingot for delivery to their customers, regardless of price, than to have a lower price quotation with no ingot to assist customers in keeping their foundries running.

EFFECT ON FOUNDRIES AND DIECASTERS OF RECENT CUTBACK FROM STOCKPILE SHIPMENTS

In the historical pattern of distribution of virgin aluminum by the producers, from the figures available to me, it appears that only 8 to 10 percent of their production of metal is shipped to foundries-including captive.

It is logical to expect that any extra metal inherited, such as relief from stockpile shipments, would be distributed on the historical pattern. It is also logical to expect that in a competitive field each beneficiary of the additional metal would dispense his historical percentage to his regular customers. That is completely understandable and is mentioned as an economic fact-not in any way as criticism.

However, the fact is that generally speaking, it has been the larger foundries and diecasters, buying in large quantities, who have had a history of being "on the producers books," not the multitude of small foundries and diecasters who cannot, and do not, buy in large quantities, and who do not normally appear "on the producers' books."

The "little fellow" and the new venture are consequently not eligible to share to any great degree in the "inheritance." They must, therefore, as always, rely upon smelters for their supply.

As I have shown, the share-8 to 10 percent of all foundries and diecasters in the 150 million pound cutback on an historical basis, could be expected to amount to not more than 15 million pounds of additional metal over the first 6 months of this year-or 2.5 million pounds per month. This is in the face of a monthly casting production figure now running at about 65 million pounds.

Release of these comparatively small additional amounts to those foundries having a history of being "on the producers' books" actually gives those foundries an unfair advantage over others who were not "on the producers' books."

The same situation would hold true if later and greater releases of stockpile shipments were made in sufficient quantities to permit producers to invade the small foundry field and ship to "new" customers or to those whose "historical pattern" has always been reliance upon smelters.

This would actually constitute a realinement of customers by Government fiat, pricing the smelting industry out of business unless at the same time the smelting industry were to be freed from the inflationary push on scrap prices caused by export demand, which would permit their products to be priced competitively with those of the virgin producers.

It is this pressure of export prices which constitutes the barb on the hood of the problem of foundry ingot supply at prices comparable to the quotations of the virgin producers.

Mr. YATES. The bells indicate that we must answer a quorum call. We have to go to the floor to answer it.

We will come back at 1:30 to complete your testimony. I am sorry that this interruption took place in the middle of your statement. Mr. BURTON. That is all right.

Mr. YATES. We will now recess until 1:30 o'clock. Thank you, Mr. Burton.

(Whereupon, at 12: 15 p. m., the committee recessed, to reconvene at 1:30 p. m., of the same day.)

AFTERNOON SESSION

Mr. YATES. The hearing will come to order.

Mr. ARNOLD. The committee has received a statement from James W. Wolfe, executive secretary of the Non-Ferrous Founders' Society, Inc., Chicago, Ill., which will appear in the record at this point. (The statement referred to is as follows:)

STATEMENT BY JAMES W. WOLFE, EXECUTIVE SECRETARY OF THE NON-FERROUS FOUNDERS' SOCIETY, INC., CHICAGO, ILL.

My name is James W. Wolfe. I am the executive secretary of the Non-Ferrous Founders' Society, a national organization of foundries producing copper base, aluminum base, and magnesium base alloy castings. The membership of this society represents approximately 70 percent of the total production of jobbing foundries. I have held this position for 10 years and am intimately acquainted with past and present conditions.

The industry we represent consists of approximately 2,500 independent companies, in most cases, owner or partnership operated. According to the latest