THE TITANIUM INDUSTRY: A CASE STUDY IN OLIGOPOLY AND PUBLIC POLICY DISSERTATION Presented in Partial Fulfillment of the Requirements for the Degree Doctor of Philosophy In the Graduate School of the Ohio State University by FRANCIS GEORGE MASSON, B.A., M.A. The Ohio State University 1 9 5 k Content* L £MR I. INTRODUCTION............................................................................................... 1 II. THE PRODUCT AND ITS APPLICATIONS...................................... 9 Consumption and Uses ................................. 9 Properties ........................................................ ...... 16 III. INDUSTRY STRUCTURE................................................................................ 28 Definition of the I n d u s t r y ............................................ 28 Financial Structure. ..••••••.••. 32 Alloys and Carbide Branch. ........................... 3 k Pigment Branch .............................................................................. 35 Primary Metal Branch ................................. 1*0 Fabrication Branch ................................. $0 IT. INDUSTRY STRUCTURE - CONTINUED............................................. $2 Introduction ................................ $2 World Production and Resources ................................. $3 Nature of the Demand for Ram Materials . $8 Ores and Concentrates Branch. ••••••• 65 Summary.................................................................. 70 V. TAXATION. ANTITRUST AND TARIFF POLICY............................. 72 Depletion Allowances 72 The Pigment Case •••••.••••••.. 81* Tariffs.................................................................................................... 89 VI. PUBLIC POLICY AND NATIONAL DEFENSE....................... 93 Mobilization Experience in World War II. 93 Mobilization Experience in the Korean War and Following ......................................................................... 100 Implementation of Expansion Goals. • . • • • 103 Strategic Stockpile. ................................ 113 Summary...................................... Ill* VII. MARKET BEHAVIOR AND STRATEGY........................................ 117 Introduction ................................................................................. 117 Ores and Concentrates. .... ............................ 117 Alloys. 121 Pigments . ......................................................................... 127 Titanium Sponge. 132 Ingot and Mill Products. Other Products 33 Summary 151 Appendix - A Visit to the Crane Co., a New Producer ............................ .......... 151* Contents (Continued) it Page VIII. PERFORMANCE OF THE INDUSTRY............................................................l6 l P ric e s ......................................................................................................... l6 l Nature of Economic Development ..•••••• 166 Policy Alternatives in the Primary lietal Branch ......................................................................... ..... 175 IX. SUMMARY AND CONCLUSIONS.......................................................................186 Summary ................................................. 186 Conclusions. 191 BIBLIOGRAPHY.........................................................................................................................19$ AUTOBIOGRAPHY...................................................................................................................198 I. INTRODUCTION1 * This dissertation was prepared in cooperation with the U* S. Bureau of Mines simultaneously with the preparation of the Materials Survey - Titanium for the Office of Defense Mobilization* The Materials Survey "volume contains technical and economic information on the geology, mining and processing of titanium ores and the manufacture and marketing of titanium tetrachloride, sponge, ingot, sheet, mill products, alloys and miscellaneous chemical, metallur­ gical and ceramic products* Over $0 intensive interviews were con­ ducted by the author with policy-making officials in private indus­ try and Government, in the preparation of these two documents; and extensive use was made of the National Archives and other facilities of the Federal Government* The views presented herein are those of the author and do not, of course, represent those of the Bureau of Mines* The following case study attempts to trace a number of institu­ tional and technological changes in the titanium industry, and to assess the significance of their various roles in the process of economic development* I t was written in the course of preparation by an agency of the Federal Government of an encyclopedic compila­ tion of information regarding basic raw materials, derived inter- 2 mediate products and finished products containing titanium* The industry is involved in the production of ilmenite, rutile and titanium slag (ores and concentrates branch); ferrotitanium and other alloying and metallurgical products, and titanium carbide (alloys and carbide branch); pure and extended titanium dioxide (pigment branch^ titanium sponge and high-purity ductile titanium metal (primary metal branch); titanium and titanium alloy ingot and mill products (fabrication branch)* What follows will be an attempt to describe, to an extent which is not possible even within the broad limits established for the 1 2 Materials Survey, a number of Instances of scientific Innovations and policy developments from their diverse origins in Government and business to their impact upon the structure of the titanium industry. The economic changes in these pages are recent and contemporary. In numerous instances, the material has had to be revised in the course of preparation as a result of events in the industry, or of changes in policies of the Federal Government. Virtually none of it extends back beyond World War I. Whatever conclusions which may be drawn from this #ork should therefore be considered as tentative* Another reason ier resisting the tendency to generalize from historical experience in this one industry, other than that the "returns'* are not a ll in, is immediately apparent. The development and growth of the world economy can be viewed properly only as an integrated and interdependent process, involving many simultaneous tendencies and a complex interaction of events. Like a motion picture composed of a series of frames, it may assume an entirely different appearance when observed a picture a t a time*^ ^ The phenomenon of economic growth encompasses at least the following aspects: (1) the development of fundamental science; (2) the application of science to economic ends; (3) the accep­ tance of Innovations by consuming and producing units; (I*) the tendency to seek xaaterial advance; (5) the propensity to consume; (6) population growth. — See Rostov, W.W., The Process of Economic Growth , W. W. Norton and Co., New York, 1952. Growth and development in various segments of the American economy has been influenced by activities of private institutions for 3 research, and of the universities and the Federal Government* The requirements of modem warfare have led scientific inquiry into such fields as aviation, ordnance, atomic energy, communications and shipping, which have accounted for more than three-fourths of the two billion dollars expended on research by the Federal Government during the five fiscal years 19U0-Ui*^ Whereas before the war private ^ Subcommittee Report No. $ , The Governments Wartime Research and Development, 19U0—Ul*; Report of""the" Subcommittee on War Mobiliza­ tion to the Senate Committee on Military Affairs, 79th Cong., 1st Sess., part I. industry financed about two-thirds of the nation*s research, with about one-sixth coming from Government and one-sixth, from universities and research foundations, in the fiscal year 19UU the Government was financing more than three-quarters of all research, the total annual expenditure of which was at least doubled. The research functions of the Federal Government in that year engaged some 36,000 civilian employees, of whom at least 20,000 were scientists and technicians.^ 5 Department of Justice, Investigation of Government Patent Practices and Policies! Government Printing Of/ice, Washington, 1). C., 19h7. Whether or not this proves to be the pattern of postwar research, Federal contribution to outside organizations and activities within Government laboratories on a large scale seem certain. (Scrutiny of departmental appropriations in Federal budgets for recent years failed to turn up a satisfactory measure of total expenditures on research by the Government since the above figures were compiled and published.) More than a dozen Federal departments and agencies regularly conduct or finance an appreciable amount of research and development work in science and technology as a part of th eir normal functions. The most important agencies in this respect are the Departments of Defense, Agriculture, Interior and Commerce. During World War II, temporary agencies such as the Office of Scientific Research and Development, and the wartime subsidiaries of the Reconstruction Finance Corporation also sponsored considerable research in significant fields. Hiese agencies have called upon and will continue to utilize the private and institutional labora­ tories to an ever increasing degree. Hie cost of the experiments and the p ilo t plant developments; the knowledge, experience and information that must be accumulated and correlated; and the financial