guaranties are made, commercial banks grant the loans at interest rates not to exceed 5 percent.

To date, 167 companies have participated in the guaranteed loan programs, receiving a total of $128 million in such loans, mainly for working capital.

Long-term procurement contracts and stand-by purchase commitments.Through long-term guaranteed purchase contracts, the Government agrees to purchase specified amounts of a producer's output for periods as long as 5 years. This is particularly important in the case of mining, where marginal high-cost shafts can often be brought into production only on the basis of such assurances. A large portion of the $600 million has been used to establish revolving funds for the import of tin and crude natural ruber and for purchases of aluminum, tungsten, castor beans, and oxygen-free copper. Other projects have included the development of tin resources and the establishment of a fund for a machine-tool "pool" to facilitate maximum machine-tool production.

Installation of Government-owned equipment and plant extensions.-Where increased production of certain kinds of materials or equipment is essential, the Defense Department utilizes procurement funds to finance plant extensions or the installation of special equipment in private plants. The equipment or facilities are used on a lease basis, with title remaining in the Government. If the equipment is used for work other than on Government contracts, a rental is paid to the Government.

As the result of both private and Government effort, the demand for new plant and equipment is expected to increase from about $18.5 billion in 1950 to almost $24 billion in 1951.

During the coming months, before expansion in each critical field can catch up with need, shortages must be met by the use of controls over production and distribution.

The priority system is the basic control device used to channel materials and industrial capacity into direct defense production. Under this system, authorized agencies assign "DC" (defense order) ratings to their contracts. The prime contractors in turn issue DO-rated orders to their subcontractors. Unlike the priority system used early in World War II, the pesent system is a "singleband" structure, with no degree of preference among the rated orders.

To make specific materials available for priority orders, as well as to divert materials from less essential to essential civilian needs, other types of controls are employed. The following are the most important:

1. Limitation orders, which limit the amount of material producers may use for nondefense production.

2. Simplification and standardization orders, which cut down or prohibit "frills," or reduce the variety, sizes, models, or styles of products.

3. Prohibition orders, which prohibit the use of scarce material in specified end products or specified projects.

4. Inventory controls, which limit the amounts of specified items which companies may keep on hand at any given time.

5. Distribution orders, which require individual concerns to maintain a specified pattern of distribution of scarce materials or products which they supply. The National Production Authority and the Defense Minerals Administration have thus far found it necessary to apply controls of these types to the following materials, products, or activities:

In addition, the NPA has issued certain broad regulations applying to all critical materials and production.

A preliminary inventory control regulation limited the quantities of a specified list of materials that could be received or delivered and provided criminal penalties for any unreasonable accumulation of materials by any individual or busi

ness concern.

Another regulation seeks to assure all establishments in the United Stateswarehouses, factories, service shops, schools-necessary supplies for maintenance, repair, and operation. This directive was issued in recognition of the fact that a few pounds of metal today to keep a machine running is better than several tons of metal tomorrow to replace that same machine. The regulation gave each establishment the right to issue DO-rated orders for supplies for maintenance, repair, and operation.

Finally, directives are issued to individual companies when necessary to meet emergency situations, break bottlenecks, aid essential industries, assist hardship cases, or otherwise provide exceptions to the general orders and regulations. These directives require a specific company to make delivery of a specified amount of material to another company. Through March, over 650 have been issued. The freight-car construction program and the Great Lakes cargo-vessel program are being made effective through such directives.

CONSUMER-GOODS PRODUCTION WILL REMAIN HIGH

Up to now, the consuming public has scarcely felt the impact of Government controls over production and distribution. Production of most consumer items during the first quarter of 1951 actually exceeded production during the same period of 1950.

Because defense orders have been placed in large quantities only in recent months and time is required to organize production, output of civilian goods has held to these very high levels.. NPA orders have restricted the use of scarce materials for civilian consumption only to the extent that they were immediately required by the military, defense-supporting, and stockpiling programs.

While the production of the major consumer durables-radios, televisions, automobiles, refrigerators, and washing machines-will fall in 1951 below the all-time high of 1950, there will remain substantial output of these items. The accompanying charts show the comparison of 1951 production estimates with the output in recent years for certain key products. During the remainder of 1951, scarce materials going into nondefense production will be increasingly restricted, with the greatest over-all restrictions, under present schedules, occurring late in 1951 and early in 1952.

In the allocation of scarce materials, provision is being made to maintain balanced production, including the continuation of lower-priced and medium-priced lines and models in due proportion to total production.

Weapons and production lines are made from metals. In a period of great military and industrial expansion, the availablity of metals sets the scope and the pace.

As indicated below, many of the important metals now are or will be in short supply. To overcome these shortages and to hasten the time when an adequate defense, together with a normal civilian economy, can be supported, great efforts are being made to expand the supply of metals.

This includes efforts to bring domestic production and imports to a maximum and, for the longer run, a widespread exploration program.

Steel. During the last 3 months military requirements took 12 percent of total steel production. The proportion will approach 20 percent by the end of the year. To make steel available for military and essential civilian purposes, the new control orders will limit the amount of steel which can be incorporated in consumer durable goods during April-June to 80 percent of the average in the first half of 1950.

The shortage of steel has developed despite the highest rate of production in our history. In 1940, the steel ingot capacity of the Nation was 81 million tons. The war expansion boosted capacity to 95 million tons by 1945. Last June the figure was 100 millions, and today it is 105 millions.

Yet when the Korean crisis struck, there was no excess capacity. The demand for steel exceeded all previous peacetime records. With the demands of defense superimposed on this civilian demand, the effect could be nothing other than an acute shortage.

The steel industry has thus been first in the Government's program of expansion, as reflected in the granting of tax amortization certificates and other finan82354-52--21

cial aid. Current plans call for a capacity of 117 million tons by early 1953or 22 million tons more than at the peak of World War II.

The expansion of steel capacity illustrates one of the fundamental problems of the mobilization program-the very act of expansion adds to the shortages that the expansion is designed in the long run to alleviate. Thus the increase in steel capacity necessitates building of plants and production of more freight cars, cargo vessels, and mining facilities—all of which require large quantities of steel and thus aggravate the shortage.

The effect of expansion programs on existing shortages has to be weighed in determining the scope of each program that is approved.

Within the steel industry, other shortages may appear. Coke-oven capacity and the supply of refractories are being expanded to prevent shortages. The availability of steel scrap is declining, which throws an additional burden on our limited iron-ore supply. New iron-ore sources in Labrador and Venezuela are being developed to supplement our declining domestic sources. In the case of the former, construction of the St. Lawrence seaway is needed to bring the new ore in. Several of the metals used in production of certain steel alloys-such as columbium, cobalt, nickel, tungsten and molybdenum--are critically scarce and under control. Programs to increase supplies of these metals are under way.

Copper.-Defense production now consumes 12 percent of our total supply of refined copper. This proportion will increase to over 20 percent by the end of the year. Additional strains will be thrown on available supply by the high level of defense-supporting industrial activity.

To make supplies available, the use of copper in nonpriority activities will be cut during the April-June period to 75 percent of the average use in the first half of 1950-compared to 80 percent in March. Restrictions also will continue on the use of copper in less essential items and for unnecessary purposes.

As in the case of steel, the beginning of the defense program found the country's existing copper mines and processing plants operating at near capacity. Domestic production, which accounts for two-thirds of our total supply, exceeded in 1950 any previous years except the peak years of World War II. Neverthe

less, demand exceeded production by 15 percent, and was satisfied only through reduction of inventories. Domestic stocks are now very low.

Plans for the expansion of copper supply are directed at boosting production in foreign countries and, where possible, opening new deposits in the United States. Increases from these sources will not be felt, for the most part, until after 1951, and not then from foreign sources unless the tariff is removed. Aluminum.-The aluminum industry is undergoing an expansion program which by the end of 1952 will add roughly 60 percent to the primary capacity existing in June 1950.

The industry's pig capacity of 750,000 tons in June 1950, which was adequate to meet demand at that time, had increased by March 1951 to 800,000 tons and by 1953 should reach 1,300,000.

During World War II, military production accounted for approximately 90 percent of total aluminum consumption and use of aluminum for civilian production was severely restricted.

Military requirements for aluminum this year are expected to be 25 percent of total supply.

The military demands, together with increased usage by supporting industries, necessitated a cut in the nondefense use of aluminum during February and March to 75 percent of the average monthly use in the first half of 1950. For the April-June quarter the permitted use is restricted to 65 percent.

Increase in supply may make it possible to relax these controls in 12 to 18 months.

A controlled-materials plan.-As the defense program moves into a period requiring tighter regulation, more direct control of the flow of certain metals will prove necessary.

For that reason, a form of controlled materials plan which will channel these metals to essential uses will be placed into effect later in the year.

Planning for the introduction of the additional controls has been under way for some time, in order that they may take effect smoothly when they become

necessary.

Tin. In normal years the United States consumes more than two-fifths of the world's total output of tin, virtually all of which is supplied from foreign

sources.

Our position is now more comfortable than at the outbreak of World War II. Nearly a third of annual requirements can now be covered by the output of the Government-owned smelter at Texas City, which operates on concentrates chiefly from Bolivia.