strates our continuing endeavor to supply a large share of the market for primary metal to the nonintegrated users.

I have attached to my statement a chart showing the primary pig, ingot, and billet sales of our company to nonintegrated users for each year since we started business.

(The chart referred to is as follows:)

KAISER SHIPMENTS OF PRIME PIG, INGOT & BILLET
TO NON-INTEGRATED USERS

Mr. RHOADES. The chart appears over there on the easel in a larger form if the committee would like to view it from their positions.

I would like to point out that the amount of metal sold to nonintegrated users each year has increased substantially. Based on the present level of stockpile deliveries, our primary sales to nonintegrated users this year will be 210 million pounds compared to 13612 million pounds for the year 1954.

I have also included a chart showing the billet sales by our company to extruders for each year. I should like to point out that since the commencement of our supply contracts in 1952 our sales of billets to extruders have increased from approximately 33 million pounds to an estimated 98 million pounds for this year.

In addition to billets, we will this year deliver 37 million pounds of primary pig to extruders. This will increase total sales to extruders this year to 135 million pounds compared with 1952 total billet and pig sales to extruders of 37.5 million pounds.

Domestic primary production is setting new record highs almost monthly and the availability of prime metal to nonintegrated users and to processors of semifabricated products alike is due in a large measure to the foresight of those who conceived, planned and executed the supply contracts covering the 1,300 million pound expansion program effected since 1951.

(The chart referred to follows:)

The cooperation of all Government agencies in the administration ofthese contracts has enabled Kaiser Aluminum to maintain a steadily increasing flow of metal to nonintegrated users and users of semifabricated products and to supply on a current basis requested quantities of primary metal to the Government stockpile.

The magnitude and duration of the current record high consumption rate plus the high stockpile requirements has created an unbalance between supply and demand. While all sections of the industry are operated at record highs there are those who request still more metal and the temporary unbalance thus created requires the producers to exercise control over their sales to avoid exploitation by speculators and by those who would compound the problem by building abnormal inventories.

There are also many nonintegrated users who depend upon primary metal as a major source of their supply as contrasted with others who normally use scrap and secondary metal as their principal source and who purchase primary metal only when the price of primary metal is favorable. In times of shortage, proper consideration must be given to these facts.

The difficult responsibility of making the judgments necessary to control such matters represents a challenge which has been met by Kaiser Aluminum, and in our opinion by the entire primary industry. We further believe the percentage of error and volume of complaints have been relatively small and that intelligent review and cooperation between the Government, the producers, and the nonintegrated users will clearly indicate a solution satisfactory to all.

In the matter of stockpile relief, Kaiser Aluminum was notified on March 1, 1955, that its second quarter stockpile would be reduced approximately 18 million pounds. On March 24 further notice was given of an additional reduction of approximately 35 million pounds.

In each, Kaiser was booking orders for pig, ingot, and billet in anticipation of the relief and in an effort to maintain maximum uniform flow of metal to nonintegrated users as a group.

We are supplying 53 million pounds more prime metal to nonintegrated users during the first two quarters of 1955, the period of the present stockpile call, than would have been possible without this relief.

We did not after the March 1 announcement, nor after the March 24 announcement, designate certain orders as being from the stockpile reduction since we consider it more equitable to our customers to pool the quantity thus made available with the quantity which we would otherwise be able to deliver. If we so designated the orders, it might be considered we were classifying our customers between those whom we considered as permanent and those whom we considered we were selling only on a temporary and special basis.

We have at all times exceeded our obligations to supply nonintegrated users under our supply contracts.

With the tremendous number of orders received it is always possible some inequities may have resulted in individual cases. We will be very glad to meet with representatives of this committee and have previously agreed with BDSA to review any complaints received with respect to furnishing metal to any of our customers and to endeavor to adjust inequities if such exist.

May I remind this committee again that the aluminum industry is currently operating at the highest levels in history and that there is today more aluminum available to more people than ever before. Notwithstanding this fact, our company, and we understand other companies, are actively at work planning additional aluminum-reduction capacity.

Mr. YATES. Thank you for your statement, Mr. Rhoades.

May I refer your attention to page 4, where you state:

In each case Kaiser was booking orders for pig, ingot, and billet in anticipation of the relief, and in an effort to maintain a maximum uniform flow of metal to nonintegrated users as a group.

How did you know that the relief was going to be given? You say "in anticipation of the relief."

Mr. RHOADES. That is correct. Under our supply contracts there is a provision which reads as follows:

If, after receiving the notice from the Government of the amount of aluminum it elects to purchase as provided in subparagraph A hereof, the contractor finds that the quantity ordered by the Government for any 6 months' period is such that it may be impossible for the contractor to fulfill its prior commitments to such other customers as are nonintegrated users, contractor may advise the Administrator of such fact. The Administrator shall thereupon review the quantity ordered by the Government, and if under all the circumstances the Administrator considers it advisable, he may reduce the quantity ordered by the Government.

That is part of the reason.

Mr. RHOADES We discussed that very matter with the Administrator.

Mr. YATES. When you say "the administrator," whom do you mean? The administrator of what?

Mr. RHOADES. We discussed that matter in February with Mr. Flemming of ODM.

Now, here is a little more background for you. On January 28 we had discussions with BDSA with respect to stockpile relief. In other words, this matter was under discussion with governmental agencies at that time.

On January 31, 1955, we were informally advised by the ODM staff that the BDSA committee recommendations were being forwarded to Flemming for his consideration.

Now in those BDSA meeting recommendations, it was recommended by the industry advisory committee that some reduction in stockpile be made, along with an extension of the time for delivery of the first quarter allocation for stockpile, the extension to 60 days of the time necessary to deliver the first 3 months of 1955.

In other words, we had 5 months to deliver the 3-month call.

On February 7 we were given the additional, officially given the additional 30-day extension. As I mentioned before, on February 16 we had a meeting with Dr. Flemming, and he indicated in that meeting the possibility of relief under the circumstances that existed.

Mr. YATES. At that meeting did he tell you that the Government was going to defer delivery of 25,000 tons to the stockpile?

Mr. RHOADES. We discussed 50 million tons, and also discussed the 75 million pounds, but I do not recall his having made a positive statement at that time that that would be a fact.

On February 19 we did, however, receive a letter from ODM advising that action had been taken as a result of the February 16 meeting with Flemming with respect to the stockpile call.

On March 1 we were informed further that the revised second quarter contract would be reduced by 18 million pounds insofar as we were concerned, that was our portion of the 50 million pounds.

On March 11 we were issued a contract covering the second quarter call for a given amount.

On March 24, a press release was issued by ODM stating that 150 million pounds reduction in stockpile requirements for the first two quarters of 1955 had been granted.

Now, that is all prior to our official notice that was continued in a letter of, I think, April 7, whereby the Government requested us to ship an additional amount over and above what we had previously been shipping, which was substantially over our obligations under the

contract.

Mr. YATES. You mean to non-integrated users?

Mr. RHOADES. I am talking about the nonintegrated users, yes.

So you can see that we had clear indication-not entirely clear, but we took some risk in here we thought it would be to the benefit of these nonintegrated users to have this metal. We had some metal in inventory that we were glad to give these people to try to satisfy this demand.

Now Mr. Yates, we could have withheld that metal and adhered very closely to our legal obligations under the contract, and then released that metal later. But we didn't do it. We didn't feel that it was fair under the circumstances whereby we had leased substantial quantities of metal over and above our legal obligations and from our inventories that the Government superimposed upon our releases an additional amount that was relieved from the stockpile.

Actually we had official notification with respect to the first 18 million pounds on March 1, and they came out with a letter on April

1

7 and asked us—and included the 18 million pounds that we had been formerly relieved of originally, and incorporated that in the 53 million pounds of relief, which was our portion, in the letter of April 7. We could not comply with that.

Now insofar as the stockpile release is concerned, every single pound of that has gone to the nonintegrated users, we have not used 1 pound of it ourselves. I think the best proof of that is the simple fact that if we are not formally relieved of this obligation to the stockpile, we are going to have to put this metal in the stockpile, and that metal will have to come from the metal that we are furnishing to the nonintegrated users today.

Mr. YATES. The portion of the stockpile that you were supposed to deliver to the Government and which was diverted was 53 million pounds?

Mr. RHOADES. That is correct.

Mr. YATES. Were your deliveries to nonintegrated users prior to this notice an amount over and above the 53 million pounds?

Mr. RHOADES. Yes; these figures might help you, Mr. ChairmanMr. YATES. You see, in our mind this is the question-at least in my mind-much of this depends on timing. You had made certain commitments to nonintegrated users before you got the notice from Dr. Flemming to make available 53 million more pounds to the nonintegrated users.

Mr. RHOADES. Correct.

Mr. YATES. Did you make available 53 million more pounds to the nonintegrated users than you had previously committed yourself to do?

Mr. RHOADES. No; our commitment under our supply contract, as a result of the 150 million reduction in call, or 53 million pounds insofar as we were concerned, for the 6-month period, the 2 quarters, is approximately 70 million pounds, that is, after the reduction. We were delivered during this period 104 million pounds. So after Dr. Flemming's reduction in the stockpile, as I said, we had an obligation to deliver 70 million.

We are, however, delivering 104 million during those 2 quarters. So we not only delivered the 53 million reduction in stockpile but an additional 34 million.

Mr. YATES. For the next two quarters of 1955 you have already scheduled deliveries to nonintegrated users, have you not?

Mr. RHOADES. Yes.

Mr. YATES. Can you tell this committee aproximately what that amount is?

Mr. RHOADES. I think that we furnished certain information requested in answer to questions 6 and 7, and I think that sets forth there the amount of commitments that we had during those quarters. Possibly it didn't extend through the two quarters you have reference to, I don't recall now.

Mr. YATES. The schedule that we have shows bookings through September.

Mr. RHOADES. Yes.

Mr. YATES. Does this mean that you don't know what your orders for the quarter will be?

Mr. RHOADES. What do you mean by last quarter?

Mr. YATES. October, November, and December of 1955.