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U.S. House of Representatives Committee on Banking, Finance and Urban Affairs

Subcommittee on Economic

Stabilization

Hearing on Briefing on the DP Act
March 2, 1983

EXPANSION OF INDUSTRIAL CAPACITY: PRIORITY NEEDS FOR MOBILIZATION

ALUMINUM (REDUCTION AND PLATE FACILITIES)

The aluminum basic reduction capacity in the United States has reached its peak. Barring a major technical breakthrough and massive capital investment the U.S. reduction capacity will decline over future years. Increased power, construction and operational costs are causing new plants to be built overseas either in low cost power areas or nearer to the source of raw materials. Even when operating at peak capacity U.S. facilities could not fill all of the peacetime requirements. Mobilization requirements for aluminum increase by more than 60 percent over domestic capacity. Additionally, the U.S. imports more than 90 percent of the raw materials required to produce aluminum. Tapered sheet and plate as well as heavy plate are among the forms of aluminum most needed in a mobilization for aircraft and selected weapons systems.

BASIC METAL SMELTERS AND REFINERIES (LEAD, ZINC, COPPER)

Losses in smelting and refining capacity have resulted in greater U.S. import reliance and a weakening of the industrial mobilization base. FEMA is concerned over the protential costly increases that will occur in the stockpile goals as a result of this trend. For example, if other factors remain constant, the closing of the Bunker Hill smelter in Idaho will increase the stockpile goal for lead to 1.4 million tons from 1.1 million tons at present. In addition the stockpile goal for zinc will increase from 1,425,000 tons to 1,550,000 tons. Similary, the closing of the 200,000 tons smelter of Anacanda in Montana would increase the copper goal from 1 million tons to 1.6 million tons. At current prices, the added cost of copper purchases would total 1 billion. Besides this large increase in cost, however, the lost wartime flexibility and weakened industrial posture pose a threat to our resource security in time of war.

COBALT

Cobalt is a strategically vital metal without substitutes in many military and industrial applications. The primary use of cobalt is in the manufacture of aircraft engines and parts, which accounts for 45 percent of 1980 U.S. demand for this material. Although jet aircraft engines represent the major end use of cobalt, an estimated 60 percent to 80 percent of super alloy consumption within this use goes into the production of jet engine spare parts. The remaining major uses of cobalt in 1980 were electrical applications (15 percent), metal cutting and mining tool bit production (15 percent), chemical catalysts (10 percent), and chemical driers (10 percent). In each of these areas there are instances where cobalt is an essential (i.e. nonsubstitutable) input to products and processes which are critical to the maintenance or achievement of desired military and technological capability levels.

The U.S. is the world's largest user of cobalt, consuming about one-third of world production. Approximately 70 percent of this consumption is in the form of high purity metal.

Peacetime military demand for cobalt is expected to grow at an average annual rate of 19 percent from 1981 to 1985 and account for approximately 25 percent of total U.S. consumption. Aircraft and parts account for about two-thirds of peacetime defense requirements for cobalt. In wartime, it is estimated that direct defense requirements for cobalt would double.

Trends toward higher thrust-to-weight ratio engines and their use on short haul aircraft will lead to a significant increase in the use of "cobalt rich" spare parts. If high purity cobalt became entirely unavailable today, approximately 25 percent of the U.S. military and commercial air fleet would become inoperable each year. As the new generation of higher thrust-to-weight cobalt rich engines on short haul aircraft arrives, the airfleet survival time would shorter.

There is no domestic primary cobalt production. Secondary recovery fulfills approximately 7 percent of normal requirements, requiring 93 percent to be imported. Further, three-quarters of these supplies originate in the central African nations of Zaire and Zambia. Because of regional political instabilities and a growing Soviet influence, these supplies are considered to be highly vulnerable to disruption. Such a disruption would have serious consequenses for U.S. military and industrial production capability.

FERROALLOY

A recent Department of Commerce report concludes "in an emergency, the United States will have neither the lead-time provided by stockpiled ferroalloys nor the domestic capacity to convert ores to necessary forms for steelmaking." Continued deterioration of the U.S. ferroalloy capacity due to economic conditions in the steel industry and low priced imports has created a potential mobilization problem. Imports now constitute over 70 percent and almost 90 percent respectively of our annual consumption of high carbon ferrochromium and high carbon ferromanganese.

Ferroalloys are used in all steels, but most heavily in stainless and high strength alloy steels. The requirements for these ferroalloys during mobiliation nearly double thus far exceeding our domestic capacity to produce. The resulting lack of critical materials constitutes an impairment to our national security preparedness.

FOUNDRIES

Foundries have been experiencing low rates of capacity utilization due to the shift overseas of automotive production and the reduction in weight per unit produced. Numerous foundry closings continue to be reported due to economic conditions.

Castings are necessary components of most capital goods products including transportation, machine tools and weapons systems. A recent limitation on tank production was the restricted capacity to produce castings for turrets.

GUAYU LE

Natural rubber is used in many applications that require important properties of low heat buildup, tackiness, and tear resistance. Car, truck, aircraft, and large off-the-road tires are importatnt items that utilize natural rubber alone or in blends. Other products containing natural include medical and mechanical goods.

The United States is 100 percent import dependent on natural rubber. Over 90 percent of the world's natural rubber production is centered in Southeast Asia where Malaysia and Indonesia are the two major producers of the material. Stockpile purchases are limited by Federal regulations that prohibit stockpile acquisitions from unduly disrupting the usual markets of producers, processors, and consumers of natural rubber. Unless alternative sources of natural rubber are developed, there is little possibility of attaining the desired stockpile goal of 850,000 LT within a reasonable time period.

MACHINE TOOLS

In past mobilization experiences, machine tool programs were very helpful to both government and industry. Although not used during the Vietnam conflict, these programs proved very effective during World War II and Korean War emergencies. Figure 1 illustrates the vast increase in demand for metal cutting machine tools during mobilization periods.

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The dollar value of machine tools needed for mobilization is estimated at $1.5 billion.

Machining centers, turning lathes, and metal forming tools constitute 62% of the estimated total dollar value. The total dollar estimates of these and five other categories of machine tools are illustrated in Figure 2. (on the following page) National capability to mobilize industry to produce essential materials and equipment for military and civilian needs during a national emergency is vital to the credibility of our national strategic policy and ability to respond to national security emergencies.

Figure 2

Dollar Estimate for Each Major
Type of Machine Tool

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One program designed to improve the capability of the United States to meet mobilization requirements is the Machine Tool Trigger Order Program. The program, which began in August 1982, is a government/industry cooperative effort to cut mobilization lead-times by speeding delivery of machine tools essential to defense production. The program employs standby purchase agreements with machine tool industry members for anticipated mobilization capital equipment needs.

METAL MATRIX COMPOSITES

Metal matrix composites range from the older graphite - epoxy types to boron aluminides, from fiber-reinforced composites to particle - reinforced composites, from single layer to multi-layer, from random orientation to preferred orientation. These materials are finding new uses in aerospace, aviation, transportation and weapons systems. New types and combinations are being developed currently with emphasis on high strength to weight capabilities. However, technology for these materials has been experiencing some growing pains. The basic materials properties for these materials are good but little is known of the properties in the as- joined, as - welded, as fastened condition.

Very little coordination has been done on compilation of property data, differences in method of manufacture, sources of materials, and processing techniques. Additionally, very little is known about total requirements, processing technology and capacities or test results. The development of these materials is in a stage comparable to the micro clip industry of the 1970's. Metal matrix composites are becoming more and more a factor in defense applications and need a coordinated review to provide for an accurate assessment of mobilization needs.

METAL WORKING EQUIPMENT (FORGING EQUIPMENT)

In a mobilization emergency of the type assumed in determining stockpile goals, FEMA projects sharp increases in requipments for forgings. Because of the current slack capacity available in both industries (ferrous and nonferrous forging). It is estimated that existing capacity would be sufficient in iron and steel forgings to meet requirements in the initial mobilization buildup period. However, it would be necessary to operate at 94% of practical capacity to meet all requirements and industry has not operated at such a high level of capacity utilization for many years. Nonferrous forgings present a more serious problem. Practical capacity fall 20% short of total requirements during the initial mobilization period. Shortfalls will exist for both types of forgings if the emergency continues beyond the period of rising tensions. Only massive expansions of forging capacity could overcome the continuing and worsening projected deficits. Such expansions would require time and would have little effect on the mobilization period and only limited effect for at least one year beyond that.

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