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to Japan than it is to ship it by rail from Baltimore to Pittsburgh. According to an ICC 1963 study of average freight rates, scrap stood at 123 and pig iron at 114 compared to the base year 100.

Scrap has absorbed almost every ex parte rate increase allowed in the past 30 years. Pig iron is going to market at the direct expense of iron and steel scrap. Congressional interest in this matter would undoubtedly spur the study of this problem which we have urged on the Department of Commerce.

The Congress has already taken action to alleviate the freight car shortage. I would like to point out how the shortage affects the move. ment of auto and other scrap, thus contributing to the backlog of old cars.

Scrap is shipped in open top gondola cars. In the past 10 years an average of 6,000 gondolas a year have gone off the rails, and not been replaced. Scrap is essentially a rail-bound commodity. It is clear that the lack of gondolas prevents the flow of scrap to mills, clogs yards, and prevents them from taking in new raw material,

6. The great increase in urban renewal programs and vast city and metropolitan area plans, financed mostly by Federal funds, has also posed a problem for this industry. Few city planners or redevelopment agencies have an understanding or appreciation for the work the scrap processor does in controlling unsightliness by providing a solid waste disposal service--and at no cost to the taxpayer.

Serap yards forced to relocate are seldom given adequate assistance in finding new sites, and indeed, many of our members get the feeling the public agencies would just as soon see them go out of business.

Since the Federal Government does supply the bulk of funds for these projects, we suggest some means be provided beyond the present legal provisions, for requiring local redevelopment and planning agencies to make full and adequate provision for the relocation of scrap processors. As you know once a local plan is approved no Federal agency will change it.

We suggest that before approval is given the Federal agency make absolutely certain scrap yards are relocated so they can continue to render their service to industry and the general public.

In these specific cases, we feel there is a definite need and place for Federal action and cooperation with private industry. We ask help because the members of our industry are small businessmen, willing but unable to do by themselves what needs to be done.

Of the 1,300 member firms of the institute, less than half a dozen are publicly owned. Most of them are family businesses now in their second and third generation. They have built their businesses with their own energy and initiative and with their own money. They have never sought and do not now seek direct public subsidy.

In considering the problem of the disposal of junked cars and beautification I wish to repeat once again; the American scrap processing industry has at this very moment because of its own improved technology, the capacity to process as scrap every available car in this country today.

There is absolutely no need for the expenditure of the public's money to construct scrap processing plans or subsidize processors in the belief that private industry does not have now the capability to undertake this function.

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Thank you.

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Senator MUSKIE. Thank you, Mr. Story. Of course you are in a sense advocating subsidy in your first proposal, the tax incentive proposal.

Mr. Story. Not for ourselves, Mr. Chairman. We are asking really that the consumers be given the incentive. We are also asking that the railroads be given an opportunity to cover some of the costs. This in effect is an indirect subsidy in that the consumers would pass back part of this to us.

What we are primarily concerned with in the matter of subsidy is the application of Federal funds for the construction of processing facilities or for the construction of processing facilities by cities, States, and countries.

Senator MuskIE. You are not really objecting to the principle of subsidy. You are objecting to its application or proposed application under the Douglas bill? Mr. STORY. Yes.

Senator Mtskie. The tax proposal of course is something that this committee does not have jurisdiction to consider. The Douglas bill proposes four possible implementations of the President's authority to which you referred. I take it from the bill that the President would not be limited to these four applications but these are included.

First, to make payments to individuals, corporations or other business entities to develop and facilitate the processing of old and wrecked automobiles into usable scrap for the making of steel. Do you object to that? Mr. STORY. Yes, sir.

Senator MUSKIE. Second, to increase the market for iron and steel scrap by initiating a program for the purchase, storage, and resale of the use of this scrap proposed from old and wrecked automobiles upon such terms and conditions including resale at a loss as the President determines will carry out the purposes of this section.

Do you object to that? Mr. Story. Yes, sir. Senator MUSKIE. Third, to initiate and conduct research and development programs to improve processing techniques for such scrap and for alternative use of such scrap, provided that not to exceed 5 percent of the funds appropriated to carry out this act may be expended for such research and development projects. I take it that you support that except for the limitation on funds? Mr. Story. That is right.

Senator MUSKIE. Fourth, to make grants to any State or locality upon application therefor for the payment of part of the cost of

practical programs for the disposal of older wrecked automobiles if he makes certain determinations which are listed in the bill. Do you support that?

Mr. Story. We would oppose that. We feel that the work which Mr. Gilbertson's office is doing in studying this whole area is adequate for the time being. It is much too early to jump into a program of providing funds to the States. We also feel that there are many developments taking place in our own industry today which over the long term will serve to cut down the impact of the old automobile on the vision of the public and would serve to speed up the old automobile as processed scrap to the steel mills and foundries.

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Senator MUSKIE. So that really the only part of the Douglas bill that you support is the research provision?

Mr. STORY. Yes, sir.
Senator MUSKIE. Well, that is support with faint praise, is it not?

Mr. STORY. We are most appreciative of Senator Douglas' interest here. But we cannot as an industry, at the moment, support his specific proposals.

Senator MUSKIE. Do you know if the steel industry is reluctant to purchase scrap due to an excessive capacity for making pig iron?

Mr. STORY. That is a most difficult question to ansver, Ir. Chairman. The steel industry has a good capacity to make pig iren. I would say it is not excessive. Looking at it from where I sit I would say it is not excessive either.

The problem is that there have been some new advances in steel making temiques which have serrel to reduce the percentage of scrap charged into the steelmaking furnaces.

This has led "ally to the overfiow of okl car: in the past few years. In adlition, we have setiered about the countryside what is left of the old cu's not consumed during the period of the late fifties when the steel industry operated at least at less than 100 million tons a year.

Vill demands for seren were reluced and we had a backlog built at that time. We are catching up with this backlog. We did so laut year and if steel operations were to continue this year, next year, and the year after, coupled with developments in steelmaking, and developments in our own industry. I believe that we would have this problem unler very effective control.

Senator MUSKIE. As I recall Mr. Gilbertson's testimony, and my l'ecollection may be in error, he said that only half of the cars discarded each year are now being used as scrap.

This would not suggest that we are catching up on the backlog buit are addingtoit.

Mr. STORY. I am in agreement with most of Mr. Gilberton's testimony but I could not agree with him in that particular statement. We know from the statisties that over 6 million tons of No. 2 baudos were consumed by the steel mills last year, close to 7 million tons actually.

Vest of these bundles came from automobiles. We also know that through the installation of haulin guillotine shears in the scrap industry in the past 5 yeurs, mur of these shears being devoted to handlinmay omobiles exclusively, that the amount of Yo. 2 heavy melting steel and foundry grade steel from the automobile has increaserl. Unfortunately, we don't have any statistics to support this.

We also know that with the addition of the new type automobile shredding plant that, I would say, dose to 750,000 tons of automobiles were consumed last year.

You add all figures up, Ir. Chairman, and you will find that this exceeds the number of cars which became available for scrapping last year. It does not exceed the number of cars which might become available 5 years from now but we would hope that technology would catch up and keep up with this.

Senator VÍUSKIE. I think it would be useful for the record if you could submit an analysis of this point. I will ask Mr. Gilbertson to do the same so that we can understand the basis for reaching your

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estimates and compare them. It is a wide discrepancy. I don't know how many cars we are discarding each year. But it is several million.

Mr. STORY. Five or six million, Mr. Chairman. Senator NTSKIE. We are talking about a discrepancy of 3 million cars in your estimate.

Jr. STORY. I will be glad to confer with Mr. Gilbertson and later present to the committee my own outline of what took place in the past year. I am sure that Mr. Gilbertson's opinion and views are based on statistics of a few years ago and the technology is evolving so rapidly that the statistics of a vear or two ago are no longer meaningful, to my way of thinking

(Subsequently the following memorandum was received from Ir. Gilbertson :)




(VIITTEE, JUNE 30, 1966 In response to a request from Chairman Edmund S. Ju-kie for additional data concerning the rates of utilization by steel mills and foundries of sirap iron and steel derived irom automotive vehicles in comparison with the rates of junking of such vehicles, the following information is provided.


It is not possible to obtain accurate figures on the amount of iron and steel drap derisul from automotive vehicles which is utilized in steal-making. Sereral problems exist. One of the most important deficiencies is due to the absence of separate reporting of auto serap use by steel mills and fouadries.

Auto scrap (including truck and buses) is reporiel lumped together with certain other sirap iron and steel sirap in a classification “No. 2 and other bundes." It is therefore necessary to base an analysis on an assumption derived from industry experience that approximately 70% of the total of Number 2 bundles of scrap consumed each year consists of automobile bundles. It would be desirable to establish a more definitive reporting classification. Other types of data that are necessary to accuraie analysis include:

(a) Information on the proportions of (ars, trucks, and buses which are scrapped and processed whole irito No. 2 bundles, as distinguished from those Hilch are processed after separating the frames from the bodies. (The frames are classified differently when separated).

(b) Information on the average sirup yield per car, truck, and bus.

Top Information on amounts of auto silip processed by new-process facilities which fragmentize the auio lulks. During the course of current re-evaluation of the rate of utilization of automobile scrap in steel-making, advice was received from a representative of the Bureau of lines, Department of Interior, that inadvertent erroneous reporting by one of the steel companies caused the published totals of No. 2 bundles (and thus of automobile scrap) utilized to be significantly higher than the actual amounts used. The discrepancies extend hack over an indefinite period of seva eral years. The amount of error in 1965 was between 1.5 million and 1.8 million tons, which is between 25% and 30% of the total. A review is currently underway to revise these figures.



In the absence of accurate data from official sources, it has been necessary, in order to comply with the request, to use a variety of data sources, and to suppilement such information with assumptions. As indicated above, it is assumeil that 70% of the amounts of iron and steel scrap classified as "No. 2 and other bundles" each year is derived from auto serap.

A further assumption is made that the amounts of auto seran reportedly processed by new-process fragmentizers and by shearing operations are separate

from No. 2 bundle usage reported by steel companies and from exported scrap.

Further, in making the analysis, it is necessary to convert the figures for automotive vehicles into average weights of scrap iron and steel. The scrap industry uses an average conversion figure of one ton per vehicle. Three sets of exact weights have been obtained, as follows:

Bureau of Mines : 1956 Buick (excluding cast iron and stainless steel) ---- 2, 117
Chrysler Corp:
1966 Dodge (excluding cast iron).

2,098 1966 Plymouth (excluding cast iron and stainless steel)

2, 146 Average--

2, 131 Until the amount and period of time affected by the reporting error can be determined, an assumption must be made on the extent of adjustment. For purposes of the following analysis, a 25% reduction has been assumed in the total of scrap consumed by steel mills and foundries.


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B. Auto scrap

(a) Tonnage of No. 2 and all other bundles consumed by steel mills and foundries; correction for error; calculation of amount from automotive vehicle sources at 70%.

(In thousands of short tons]

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1 Source: U.S. Bureau of Mines.
? This correction is based on best available information at time of report.

(b) Estimated amounts of shredded and sheared auto scrap, thousands of short tons (Institute of Scrap Iron and Steel):

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1 Not available.
2 Estimated.
(c) Export of auto scrap in No. 2 bundles, thousands of short tons:

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