Senator DwORSHAK. Senator, before you do that will you let me explain why I was not cosponsor of that copper bill?

I was advised by Mr. Redwine of the staff, that such a bill was being drafted for introduction and I was requested to cosponsor it. I said that in protest against the procedure we have followed before this committee-I am not critical of the chairman in any way of dealing with these minerals separately that we were failing to accomplish anything worthwhile and that you probably have heard me time and again before this committee stress the importance of dealing with all minerals on the basis that the domestic mining industry is a very vital part of our national preparedness.

It seems unwise to me to continue as we have for several years to deal with copper or to deal with lead and zinc, or to deal with various minerals separately because it has been demonstrated unless we can close our ranks and recognize a long-range overall program beneficial to the entire industry, we can expect to make little headway. Therefore, I did not cosponsor the bill.

I want to commend you, though, as a representative of the great copper industry in your State, you have been very persistent in your efforts to relieve the distress, the desperate plight of the copper industry.

Senator GOLDWATER. I might say to my distinguished friend from Idaho that I am perfectly aware of his feelings. In fact, I am in sympathy with his feelings as I have told him time and again.

I have known of his fight to the minerals in his own State that are peculiar to his own State and I might understand why he might feel that the other western Senators were not completely aware of the plight of the metals in his State.

But it is my feeling, and I have discussed this with you, Senator, that if we tried to take the tariff approach on all minerals at the same time that we would probably meet with failure, where, if we took the biggest ore that we have and produced in the West, and we met with success on that, certainly we could expect to move to the other minerals.

I am speaking only of the tariff approach and it is the junior Senator's opinion from Arizona that we representatives have fallen down in our historic duty of protecting industry in this country by proper tariffs.

Senator DWORSHAK. Not only the representatives, but the entire Congress.

Senator GOLDWATER. Let us put the blame where we used to accept and stand up for the blame.

Senator DWARSILAK. We have had free trade for more than 20 years. Senator GOLDWATER. If we can get rid of that we will do the country a lot of good.

I feel if we can take another approach to minerals which can come from the Department of the Interior, then I certainly stand with the Senator in demanding that all the minerals produced in the West be included in any comprehensive mineral program that this administration might take.

Now, Mr. Chairman, I want to introduce at this time two witnesses from Arizona who come from a great distance to assist the committee in its deliberations.

First I would like to introduce Mr. Arthur B. Parsons. Mr. Parsons is a consulting engineer and outstanding authority on copper produc

tion and he will appear on the question of the copper tariff. He will be the representative of the Arizona Copper Tariff Board, the Arizona Small Mine Operators Association, and the Arizona copper industry. Another Arizonian in the room is Mr. Frank P. Knight. Mr. Knight comes from a long line of mining Knights in Arizona. He is the director of the Arizona Department of Mineral Resources and he will testify on problems bearing upon other strategic metals such as lead, zinc, and manganese.

Now, in Arizona, on the vast acreage of the San Carlos Indian Reservation, are two Apache reservations. We have what I consider to be in my layman's knowledge, the largest and best deposit of asbestos in the United States, probably one of the greatest in this

continent.

To appear before you today is Jess Stevens, who is chief of the tribal council. Jess has come here from the central part of Arizona. And Mr. Ed Town of the American Fiber, and Mr. Jagway of Regal Asbestos and Mr. Jack Neal of the Metade Asbestos.

These gentlemen are all here from Arizona to testify on copper, lead, zinc, manganese, and asbestos and probably other minerals.

I want to thank you again for the privilege of being here, and for these men and for the whole State of Arizona, to thank you for your constant interest in this problem.

The CHAIRMAN. I thank you, Senator, for the fine cooperation you have always given this committee. I am very glad to have you here this morning, and we welcome your friends from Arizona. We shall be very glad to hear them.

Mr. REDWINE. Mr. Chairman, I have just consulted with Senator Goldwater. He has graciously agreed to permit Mr. Knoerr, editor in chief of the Engineering and Mining Journal, to testify ahead of the Arizona witnesses. Mr. Knoerr is from New York and was originally scheduled for last Monday.

Senator GOLDWATER. Arizonians are noted for their patience. It took us a long time to become a State. It has taken a long time to have the people recognize the need for a tariff. These men do not mind waiting.

Mr. REDWINE. Mr. Knoerr will add something to the picture, Senator, that will be very helpful.

Senator GOLDWATER. I am sure he will.

The CHAIRMAN. The next witness, then, will be Mr. Alvin Knoerr, editor in chief of the Engineering and Mining Journal.

Senator DWORSHAK. Mr. Chairman, I must apologize for leaving the committee hearing in a few minutes because Secretary Seaton is testifying before the Appropriations Subcommittee on the Interior Budget and I feel it necessary to be there. I regret I cannot remain here.

The CHAIRMAN. We very much regret that you find it necessary to leave the committee at this time. You have been of great assistance

to us.

Senator DwORSHAK. I shall try to be back a little later.

The CHAIRMAN. I am sure you will be back as soon as possible. You may state your name and anything you wish to appear in the record in reference to your testimony here this morning.

STATEMENT OF ALVIN KNOERR, EDITOR IN CHIEF, ENGINEERING AND MINING JOURNAL

Mr. KNOERR. My name is Alvin W. Knoerr. I am editor of the Engineering and Mining Journal, and have been on that staff since

1944.

Prior to that time I was a mining engineer and mine plant designer for the Sunshine Mining Co. and the Idarodo Mining Co.

Prior to that time I was an instructor in mining and ore dressing and am a graduate of the Missouri School of Mines and started out as a miner, mucker, chute, blaster, and timberman in the mines of Colorado and Idaho.

The CHAIRMAN. I am glad to hear that. I was a mucker, myself, about 60 years ago.

Mr. KNOERR. It certainly will give a person a sympathetic attitude. In this prepared statement I am going to refer to the Mineral Economics Factbook.

I am sorry I do not have enough to pass out to all the gentlemen here.

If you would care to introduce any of that into the record, you are at liberty to do so.

The CHAIRMAN. The document will be filed with the committee. The staff or committee members may wish to print excerpts from it. Mr. KNOERR. Thank you.

Mr. Chairman, the purpose of these comments is to analyze the factors which have caused the domestic mining industry to go through 3 distress periods during the past 10 years, and have caused some of the small and medium high cost, but necessary producers, to shut down their mines.

Comments are based upon the close relationship that exists between the domestic mining industry and the international mining industry. It is hoped that this analysis may assist in the formulation of policies and practices by industry and Government that will lead to a stronger domestic mining industry, and a less erratic international mining industry.

Reasons for distress in domestic mining industry:

1. Cyclic plunges of metal prices to subeconomic levels.

As shown on page 1 of the Mineral Economics Factbook, the prices of base metals has dropped to seriously low levels 3 times during the past 10 years. The index shown is based on the prices of copper, lead, zinc, aluminum, tin, mercury, and silver, weighted according to their relative importance to industry. These low levels occurred in 1949, 1952-53, and again in 1957-58.

It is during these periods that marginal producers are forced to curtail production or shut down completely. If we can determine the causes of these price dips, we will arrive at one approach to the establishment of a stronger domestic mining industry. The causes have been as follows:

A. Inability of the world metal producers to adjust their output to the inevitable swings that take place in the United States and world economy.

On page 3 we show one industry on which the mining industry depends heavily.

Notice the pattern of the automobile industry on page 3 of the Factbook. Since this industry used about 17.8 percent of the total United States consumption of steel; 7.1 percent of the copper; 42.4 percent of the lead; 28.2 percent of the zinc, and 13.6 percent of the nickel, it is obvious that changes in this industry from year to year will have a profound effect on the metal consumption of this country. Likewise, the hard-goods production curve on the bottom of page 2 of the Factbook shows substantial swings in demand.

Failure of domestic and foreign producers of copper, lead, and zinc to adjust their production to decreases in demand causes overproduction and inevitably plunging prices.

The aluminum and steel industries are more fully integrated and, therefore, are more able to curtail output to conform to demand, and their price patterns for the past 10 years show this clearly.

B. Overproduction: Major mining companies virtually agree that the cause of the present crisis in the metals industry is a slight, but persistent overproduction by mines all over the world.

The charts pertaining to world consumption and world production of copper, lead, and zinc from American Smelting & Refining Co.'s annual report for 1957 show that the surplus metal production during the past 10 years has not been large, but that the effects of modest imbalances have a profound effect on prices.

And I am referring to the 1957 report of the American Smelting & Refining Co. which shows bar charts indicating a comparison of world consumption and world production.

There has been only a modest overproduction. Note the following statement in the 1957 annual report of the Phelps Dodge Corp., which

states:

The continued decline in price resulted from the fact that since the middle of 1956 world production has been in excess of consumption. The difficulty has been due to increases in production, for free world consumption of copper was again at record level in 1957. Percentagewise, the excess has been small. But the excess has been a continuing one and its inevitable effect has been a progressively weaker market and lower prices.

Three charts in the Mineral Factbook show at a glance how continued overproduction of metal causes price drops.

A. Copper: On page 8 of the Mineral Factbook we have a chart which shows production and prices and consumption. This copper chart on the bottom of page 8 shows how world refined stocks in the hands of producers started to rise in 1956.

This indicated overproduction. When the stocks in the hands of producers rise and rise persistently, we know that we are overproducing.

This overproduction on a month-by-month basis persisted throughout the balance of 1956 and all of 1957 with the result that both world and domestic prices tumbled from above 45 cents to the present levels of 20.5 to 25 cents.

This is shown in greater detail in the copper price chart in the middle of page 8 in the Mineral Factbook. The chart on production and stocks does not show what went to Government stockpile, but if these amounts had been added to producers' stocks, the serious extent of overproduction would have been much more apparent.

(b) We have lead charts also on page 8, which contain the same information: The position of stocks in the hands of producers, the

domestic prices and the month-by-month production, and also what went to stockpile in the form of a dotted line at the bottom of the chart which indicates that somewhere between five and ten thousand tons went to stockpile for most of 1954, 1955, 1956, 1957.

There were some points there where the Government did not buy. Here we see in 1953, and again in 1957, persistent accumulations of stocks in the hands of producers, which indicated overproduction and in these years lead prices either plunged or bumped along bottom at uneconomic levels.

(c) We have a similar chart for zinc at the top of page 11, showing the same facts. They clearly show how rising stocks in the hands of producers in 1953 and 1954, and again in 1956 and 1957, indicated persistent, but small overproduction and signaled price drops.

The three charts just mentioned show that the copper, lead, and zinc producers are slow in reacting to changing demands for their metals, and as a result, prices swing to extremes which are harmful to producers and metal consumers alike.

Experienced market men say that when metal stocks in the hands of producers rise above 45 to 60 days' production and continue to rise each month, metal prices are likely to start a decline.

The swings in demand in the zinc industry to which producers must learn to adjust their output more readily are shown at the bottom of page 11 of the Factbook.

Another cause of the low prices is excessive imports:

C. Excessive imports: The two charts on lead and zinc in the 1957 annual report of St. Joseph Lead Co. to employees indicates quite clearly that the excess of lead supply over consumption in the United States has been principally due to excessive imports.

This appears in this report to the employees of the St. Joseph Lead Co.

Owing to an inadvertent error in the preparation of the charts the surplus of lead over consumption levels should have been 219,000 tons for lead for 1957, and 110,000 tons for 1956.

The surplus of zinc over consumption levels should have been 355,000 tons for 1957, and 271,000 tons for 1956.

This error was due to the subtraction instead of addition of increases in stocks in the hands of producers which were available for consumption. Nevertheless, these changes do not detract from the clear evidence that excessive imports have been responsible for our troubles in the domestic industry."

These charts also show that when the domestic mining industry asks to have measures that will protect its level of production over, say, the past 5 years, it is not asking for anything at all unreasonable. Certainly if the domestic consumer of lead and zinc is to be protected against price squeezes in the future, our domestic lead industry ought to be allowed to produce at about a level of 400,000 tons a year, and the zinc industry at 400,000 to 500,000 tons of metal per year.

That is shown in a band here at the bottom of these two charts which shows that we are not asking very much when we want to protect that amount of production in the United States.

What aggravates the situation is the fact that virtually all of the world's surplus production of lead and zinc has sought outlet in the United States. One would think that some of the surplus would move