The price of manganese, per pound, is cheaper than, let us say, lead, copper, or zinc ores?

Secretary CHAPMAN. Yes.

Senator SCHOEPPEL. Now, do I understand that you have sufficient authority in your Department, or your related departments, through your recommendations to them, if you do not have it specifically within your own Department, to proceed to develop these known resources within our own country?

Secretary CHAPMAN. At the moment we have.

Senator SCHOEPPEL. Now, I am wondering if your Department has considered establishing a price per pound on the manganese within our own country, say within these 27 States, in order to meet this short supply that we are having difficulty in obtaining from sources abroad, and whether that wouldn't be a practical approach to it on a long-range program of as near self-sufficiency within our country as possible?

Secretary CHAPMAN. Senator, I think that question cuts right to the heart of this whole mineral program, and I would like to answer that for you.

First, the situation would vary somewhat from area to area, probably, as to price. Second, I like to use another ore as an example of the problem you would be faced with on a subsidy question. We have just worked out a program on tungsten, for which I think we are paying some $63 a unit. Now, that is across the board, and that means the high-cost producer as well as the low-cost producer. We had to do that because of the necessity of the commodity that was so vital to us in terms of defense needs. We had to do it, we used every incentive at our command, almost, to force out the production of tungsten.

The same thing could possibly apply to manganese because that is equally as important; we have to have it.

Now, the question is, Shall we work on a program across the board for subsidies for that kind of commodity, or shall we pin point it and do it on a selective basis? We have not yet worked that program out where we have fully agreed on a policy as yet. That is being worked on now.

Senator SCHOEPPEL. Do you have in your judgment sufficient authority under the original act, or the proposed amendment, to do that?

Secretary CHAPMAN. I think we have the authority under the present act to do that. I think we have the authority sufficient for that, Senator, and the amendment that Senator Capehart was referring to, in citing the word "maintenance", was urged because someone else raised doubt and I was fearful that we would be caught at a later date with a tremendous backlog of cases where we want to continue production, and for some reason somebody would throw a legal road block in our way, and we were trying to keep it clear.

One question here whether we are going straight across the board with guaranteed floor prices on a given commodity, and pay the lowcost producer the same as the high cost producer, which would be a windfall in some cases, we still have to weigh the value and necessity of the commodity in question, how vital is it, and how much are we willing to make the taxpayers pay to get that commodity out.

Second, how far and how long can you hold the line on price stabilization if you have to break it here and there in order to get the essential commodities.

I think first we must weigh the vital necessity of the commodity, and then if we have to have it, we have to try and work out the very best deal we can to get that commodity in.

Senator SCHOEPPEL. That is sound in my judgment, but I am also looking further down the line, namely, if we have to go to these lengths to get that supply, then if we develop it as nearly as we can within the confines of our own country, we have a capital outlay here that we can build upon, and it would be different than if we were going into some of these foreign countries and paying a cash price for it. Secretary CHAPMAN. I agree 100 percent. I think it is totally to our interest, and necessity for our security, even though it may sound expensive to us in some instances. I think it is to our benefit and the security of this country to develop every possible source of domestic production of manganese, because we realize that we have had to rely in past years on approximately one-third of our manganese coming from Russia. Now that has been cut down. We have had to make it up in different places. We have made up some of it in this country. I think it is vital that we spend every dollar we feel we can afford to spend to develop deposits of manganese in this country, and even though it may sound high to us, and we may be paying a premium price in order to get it out, I believe we have to do it as a matter of security.

I think that same principle, Senator, applies to any one of these strategic metals. There are some which can be gotten in certain foreign markets, some can be gotten here, but I think we have to weigh the source of supply, the amount that is available in this country, and what are the requirements and needs, and how vital is the particular commodity.

You touched on one of the most important of all in manganese, and I think that we may just have to pay the price to get it.

Senator BRICKER. You are getting about 97 percent of your manganese from abroad?

Secretary CHAPMAN. Ninety percent abroad.

Senator BRICKER. And that comes from India and South Africa? Secretary CHAPMAN. Principally.

Senator BRICKER. How much of our domestic production-how much could you increase domestic production in manganese?

Secretary CHAPMAN. Senator, I do not believe anyone could give a complete answer to that other than to say this: You would not know until your mining engineers have made fuller exploration of a lot of these reported deposits that people have indicated to us from time to time.

Senator BRICKER. Have you any figures on the relative cost of domestic production and foreign supply?

Secretary CHAPMAN. Yes, sir; we have them available, Senator. I do not have them with me, but we could have those comparative costs. Senator BRICKER. Take tungsten, for instance. What percentage of that comes from abroad?

Mr. BOYD. At one time, Senator, virtually all our tungsten came from abroad, and domestic production is high cost. Largely that

came from China, which has been virtually cut off from us now. We are having to drill our own tungsten at a higher price, two or three times what we used to pay for tungsten before, and then we have to get it in South America, Portugal, Spain, and so forth.

Senator BRICKER. You have been getting some of that from Thailand, haven't you?

Mr. BOYD. Yes.

Senator BRICKER. Is that cut off now, or do you still have that source of supply?

Mr. BOYD. The world price situation has given trouble in recent months. We were not getting any at all for a few months, because of the rapid increase in the world price situation. That is now improving, and we are getting more in from various parts.

Senator DIRKSEN. Mr. Secretary, you operate under two lines of authority in present law, under section 303. First you have authority to purchase or to commit for purchase the necessary metals and minerals and raw materials, including liquid fuels for Government use, or for resale?

Secretary CHAPMAN. That is right.

Senator DIRKSEN. That is your first authority?
Secretary CHAPMAN. Yes.

Senator DIRKSEN. Now, are you actually using that by purchasing for Government account, and then reselling to industry?

Secretary CHAPMAN. No; what we would do in those cases would be to recommend such purchases to the General Services Administration, which agency actually makes the purchase.

Senator DIRKSEN. Do they make the contract, or do you make it? Secretary CHAPMAN. They make the contract.

Senator DIRKSEN. Do you have anything to do at all under that provision of section 303?

Secretary CHAPMAN. Yes, we do. Our people, in working out any one of these purchase contracts for any of these commodities work in close collaboration with General Services Administration in working up the contract. They work actually with our own men in the Defense Minerals Administration.

Senator DIRKSEN. Are you generally familiar with the type of contract that they make?

Secretary CHAPMAN. Not too much, Senator.

Senator DIRKSEN. Are you, Mr. Boyd?

Mr. BoYD. Yes.

Senator DIRKSEN. Let us take one metal, tungsten, steel, aluminum, bauxite, or whatever it is, and tell the committee just a little about the contract you make through GSA.

Mr. BOYD. These contracts, Senator, have a wide variety of form. I think probably the most generally known ones are the aluminum contracts. The aluminum contracts were made at a current market price of 1912 cents, guaranteeing the companies the market for that aluminum for a period

Senator DIRKSEN. All companies?

Mr. BOYD. The five companies certified originally. One has dropped out. Three companies have completed their contracts, and are building their plants. It guarantees them a net price for a period of 5 years, cancelable at the end of 3 years; if the Government did not wish to

buy it would be cheaper to cancel the contract rather than buy the aluminum over the 5-year period.

Senator DIRKSEN. What is the quantity?

Mr. BOYD. 446,000 tons a year in that original program.

Senator DIRKSEN. For all companies?

Mr. BOYD. For all five; yes, sir.

Senator CAPEHART. That is not the total output of the five companies.

Mr. BOYD. Just the expanded plants.

Secretary CHAPMAN. That is the amount that is certified to, Senator, and in answer to one further part, one of the requirements is that we must indicate that the proposed expansion is necessary to the defense program before they begin negotiations.

Senator DIRKSEN. Let us just stay on the beam here for a moment. GSA makes a contract for 446,000 tons of aluminum for a 5-year period at 1912 cents a pound?

Mr. BOYD. That is correct, sir.

Senator DIRKSEN. That is what proportion of total production of aluminum?

Mr. BOYD. The present production is 750,000 tons, so that would be a ratio of 446,000 to 750,000.

Senator DIRKSEN. All right, you contract for 60 percent of the aluminum supply?

Mr. BOYD. That is correct, sir.

Senator DIRKSEN. What do they get for the rest of the aluminum they sell?

Mr. BOYD. The same price, 1912 cents.

Senator DIRKSEN. So you have virtually fixed a price for aluminum? Mr. BOYD. We have put a floor under it.

Senator DIRKSEN. What is the cost, is that above the price of aluminum as of June 27, 1950?

Mr. BOYD. We do not have access to the detailed cost, but according to the testimony of one of the companies, the cost of producing ingot aluminum is just slightly below the present price. They make about 1.6 cents per pound, the way I understand it, in one of the companies, and they are about comparable. It is very close.

Senator DIRKSEN. Now let us take tungsten which is the one you talked about a moment ago. You said a contract was made across the board with all kinds of producers, low-cost and high-cost?

Mr. BOYD. Not individual contracts. GSA has announced that it will buy up to a limit of a million and a half units all the tungsten that will come on the market which cannot be sold at $63, thereby supporting the price for 5 years.

Senator DIRKSEN. And what do they do with it?

Secretary CHAPMAN. It goes into the market, in the normal channels. It is not bought and resold.

Senator DIRKSEN. Suppose the price goes down?

Mr. BoYD. Then GSA will have to buy that that comes on the market and cannot be sold at $63.

Senator DIRKSEN. And they will put it in a stockpile?

Mr. BOYD. Put it in stockpile.

Senator DIRKSEN. And how will they designate the money used for that purpose, subsidy money?

Mr. BOYD. It has been set aside under the Defense Production Act. Senator DIRKSEN. How does the price of $63 a unit compare with the lowest cost producer in the United States?

Mr. BOYD. Before Korea, there were three companies running on $28 per unit, per short-ton unit.

Senator DIRKSEN. Was that the market price?

Mr. BOYD. That is what they were contracting for then. That was the high-grade parts of their mines. When we went into it very thoroughly with all the existing companies, we found they could expand their production by going into the lower grades on the side, but that would take a higher price, and this figure of $63 was set on our estimate from the information we had available what it would take to bring tungsten down to 0.4 percent so as to get as much tungsten as we could. Those mines were working on the narrow portions of their deposits at $28, but now spread their mines out to mine greater quantities of lower grade material.

Senator DIRKSEN. But both on the product that is derived from expanded operation, as well as the tungsten they produced heretofore, they do get $63 a ton?

Mr. BOYD. That is correct, sir. We could not see how we could differentiate between which was new and which was old production. Senator DIRKSEN. So on regular production, Uncle Sam stakes them a subsidy of $35 a ton, the difference between $28 they got heretofore. and you have guaranteed $63 on their whole production? Mr. BOYD. That is correct, sir.

Senator DIRKSEN. So that is really subsidy money, is it not?

Mr. BOYD. The Government will not be paying out any money, we do not think, because the demand is so enormous it is unlikely that any of it will ever come on the market for sale to the Government. It is really given support so they can open their mines and have some assurance that the price will exist over that period of time. During the last war they had partial assurance, at the end of the war they lost money on it when it was cut off.

Senator DIRKSEN. So low-cost producers get the high-cost price? Mr. BOYD. Yes, sir, they do, but we are working closely with the only three producers.

We are working with those companies, and we know that all can be expanded to the low-grade materials, which will encourage them to mine their low-grade material and get more tungsten. They will be going out and working new ore in the same mine at a lower grade in order to get more tungsten, and for that reason would have to sell at a higher price anyway. It is only really an encouragement for them to expand their production by going to the lower grade ore. Senator DIRKSEN. In the case of what other minerals are you doing that?

Mr. BOYD. We have not proposed any other program on that basis, because that was a small industry, the total amount of funds is not large for that kind of commitment, in proportion, and the vital necessity of getting that quickly, because the cost of tungsten is a very insignificant part of the cost of the end product, and we would lose more by not getting the tungsten than we would by paying a higher price for it. We have not advocated that it be done on any other metal at the moment.