THE 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 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 , sponge, ingot, sheet, mill products, alloys and miscellaneous chemical, metallur­ gical and 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 , and titanium slag (ores and concentrates branch); ferrotitanium and other alloying and metallurgical products, and (alloys and carbide branch); pure and extended (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 risks involved are such that private industry will in the future be unable to carry the burden by its e lf .

The technological adaptation of basic inventions has been con­ ditioned in recent years by other policies of the Federal Govern­ ment. Mobilization for war from 191*1 to 191*5 and from 1950 to the present time has involved price stabilization and allocation of supplies by public agencies; establishment and implementation of expansion programs; and public purchase of raw materials for stock­ piling. The war emergency also led to a great expansion in the productive equipment of the country, largely with Federal funds, and to tax relief for specific projects by means of accelerated amortization certificates* 5

In other instances, the search for new sources of raw materials and the procurement of raw materials in this country and abroad has been directly and indirectly influenced by the Office of Production

Management, the Metals Reserve Co., the War Production Board and the

Bureau of Mines during World War II; and by these agencies and their successors during the so-called Cold War. Government scientists and engineers have initiated far-reaching changes by discovering new ore bodies and developing new production methods and uses for end products. Business organization and business policy has been affected by the Defense Materials Procurement Agency (u n til its termination) and the General Services Administration, which negoti­ ated production contracts with a variety of business firms. The

G.S.A. has also assumed the banking and risk-taking function for these firms in many instances.

Because these phenomena bulk large in influencing behavior in the industry, the method of approach followed in this case study must be adjusted accordingly. The difference is perhaps best il­ lustrated by reference to recent observations by Joseph Schumpeter.

Professor Schumpeter's conclusions are as follows:

1) The growth of a cap italistic economy results from a "process of creative destruction," which continually replaces old forms of production and consumption with new.

2) This evolutionary process is affected by external changes, like war and revolution; semi-automatic changes, like popu­ lation growth and capital accumulation. Its essence is, however, to be found in an inherent tendency toward "innova­ tion," consisting in the Introduction of new products, im­ provements in the quality of old products, the development of methods of production which lower costs, the development of new materials and new sources of supply for old materials, and changes in the form of business organization and consequent changes in methods of buying and selling. 6

3) Effective competition involves both the development of these innovations and their utilization by firms to obtain a decisive cost or product advantage over their rivals*

U) The tendency toward "creative destruction" originates within industries in which production is concentrated in a few firms rather than "conventionally competitive" industries*

£) Activities of the state in the economic field are charac­ terized as "govern*nt interference." These activities interfere in the sense that they "hamper and paralyze the private engine of production," and are unsuccessful even in , increasing the efficiency of existing productive facilities.

^ Schumpeter, Joseph A., Capitalism, Socialism and Democracy, 3rd ed.: Harper it Bros., New fork, 1950, Chapters V-VIII*

Market structure in this industry possesses numerous points of similarity with those upon which Schumpeter's analysis centers*

Textbook treatment of concentrated (oligopolistic) markets focusses, as he points out, on the interdependence among sellers, i.e ., the fact that policies of each firm affect to a perceptible degree the revenue of other firms in the industry. The oligopolist's attempt to maximize his income is thus conditioned by a new element of un­ certainty, although this is often reduced by such devices as basing- point systems, which tend to ensure uniform price quotations by all sellers. Under these circumstances, it is necessary to lay primary emphasis in securing a competitive advantage on non-price strategy, such as advertising, technical services and technological innovations.

The essence of market behavior and strategy, and the nature of economic development in these industries, is therefore to be found in "non- price" competition, rather than in the pattern of price—cost relations prevailing over a period of time. 7

Although it might be argued that in rejecting a close scrutiny of the price-cost nexus, Schumpeter could be throwing out the baby with the bath , the precise point of difference with his theories lies in the fact that Schumpeter deliberately treats innovations as a manifestation of competition. The titanium industry does not fit his analytical framework because innovations of major significance, as well as much of the general pattern of competition in the industry today, were imposed in large measure from the outside upon the mechanism of private industry. In many cases, it is not possible to categorize among the different aspects of a technological change or a policy development as belonging to the "public sphere" (i.e., the Federal

Government) or the "private sphere" (private business).

Professor Schumpeter, whose investigations were conducted before

World War II, has omitted cases such as this one from his analysis of the process of economic growth and development. The omission represents a significant gap in his analysis. Hiis study may be regarded as an illustration of the diverse princiDles upon which scientific infants, left on the doorstep of the industrial world of today, get taken in and cared for. A thoroughgoing reformulation of

Schumpeter1s theory regarding the role of innovations in the process of "creative destruction" is left to scholars with wider experiences.

Chapter II of this study will be devoted to a broad survey of the properties of the major titanium products and the outstanding facts regarding their consumption pattern. The physical and financial structure of the industry and the characteristics of each of its 8 five branches are discussed in Chapters III and IV. Various aspects of taxation, tariff and antitrust policy, and of industrial mobiliza­ tion for war, are summarized in Chapters V and VI. Chapter VII describes the behavior and strategy within the industry with reference to prices and output, as it has been affected by this general pattern of public controls. In Chapter VIII, there is a general analysis of the performance of the industry and a summary of the issues of policy raised throughout this study.

This dissertation will deal only incidentally with the debate over the effectiveness of the antitrust laws and antitrust prose­ cutions which has for many years been a point of extensive dis­ agreement among economists; with macro— (national income) economics and other broader issues of economic policy which have from time to time affected the titanium industry. Adjustment of the various branches of the industry to social control and regulation, and to the requirements of defense and war production, tends to parallel experience in a variety of other industries. It is possible that the criteria suggested in this study for defining public policy, in terms of military considerations, economic welfare and economic growth will have some applications in other industries of this type; and it i3 the author*s hope that he may in the future be in a position to reclaim these materials and use them again as one panel in a work of larger scope. II. TOE PRODUCT AMD ITS APFLICATIOMS

Consumption and Uses

The role of titanium in chemical and metallurgical applica­

tions is a varied one. It is a source of white pigments and an

essential ingredient in a number of other industrial chemicals; it

is employed in the production of iron, and other metals; and

it is becoming an important structural metal in its own right*

Although titanium metal Is now attracting considerable attention,

titanium pigments continue to be the basis of demand for titanium

ores. Titanium compounds are playing a large and ever-increasing

role in our industrial economy.

The domestic consumption and uses of a ll titanium concentrates

in 1952, expressed as estimated titanium dioxide content of ilmenite

and ru tile, were as shown in Table 1*

TABLE 1* United States consumption of titanium concentrates, by uses, 1952 (U.S. Bureau of Mines")

Estimated Percent Ti02 content of Use (short tons) to tal

Titanium dioxide (pigment) 3*i3,l $9 93.1 Welding rod coatings 13,U23 3.6 Nontitaniuim-base alloys and carbide 8,621 2.3 , fiber glass, metal, titanium- base alloys, chemical and other 3,703 1.0

Total 368,906 100.0

Figures on the domestic consumption of titanium concentrates

or their titanium dioxide content are divided into two categories:

9 1 0

(1) ilmenite and (2) ru tile . This practice is followed because the

two minerals, for the most part, are used for the manufacture of different products. Ilmenite contributed 95.3 percent of the total estimated titanium dioxide tonnage consumed in 1952 and is used

almost entirely as a source of manufactured titanium dioxide while

rutile (contributing only 1±.7 percent of the total estimated titanium

dioxide tonnage in 1952) is used primarily for the manufacture of welding rod coatings and secondarily for the manufacture of a variety of miscellaneous items including titanium metal and alloys,

and nontitanium-base alloys. A small amount of slag, obtained by

electric furnace reduction of ilmenite, was also consumed in 1952

for titanium pigments, welding rod coatings and experimental purposes.

The quantity of ilmenite and rutile consumed in end products

in 1952, by tonnage of estimated titanium dioxide content and by

the percent of each use, is shown in Table 2.

TABLE 2. United States consumption of ilmenite and of rutile, by uses, 1952 (U.S. Bureau of Mines)

Ilmenite Rutile

Use Short tons Percent Short tons Percent Total

Titanium dioxide (pigment) 3U3,159 100 0 0 3U3,159 Welding rod coatings 2,625 19.5 10,798 60.5 13,U23 Nontitanium-base alloys and carbide 5,763 6 6 .9 2,858 33.1 8,621 Ceramics, fiber glass, titaniuifr-base alloys, metal, chemical and other 6 0.2 3,697 99.8 3*702

Total 351,553 95.3 17,353 h .7 368,906 TABLE 3 .. - Unitad Statoa conaunBtlon of llaanlta concantrataa. iron wight

(II. 3. Bureau of Hnee)

Average Kanufacturad TiOo Waldinc-rod eoatlnca Allora Total porcont Pinanta VeldlniLroda (froa illnnlta) and aarblda Xlacallanaot eonraaption aatlaatod Tear (abort tona) TiOj Short tonal/ Pareont Short tonal/ Pareont Short tona Pareont Short tona Parent Short tone Par

1941 275,106 54,9 264,864 96.3 3,080 1.1 58 (2) y 7,104 2.6

1942 257,535 54.9 235,589 91.5 8,876 3.4 56 (2) 11,802 4.6 V 1,212 1943 302,822 47.2 278,519 92.0 12,054 4.0 194 (2) 10,583 3.5 y 1,472 1944 360,941 48.6 341,511 94.5 7,994 2.2 148 (2) 10,174 3.0 y i,iu • 1945 381,178 49.2 367,U0 96.3 4,581 1.2 ,U5 (2) 8,611 2.1 y 76i

1946 404,283 50.1 397,174 98.2 1,868 0.5 105 (2) 4,685 1.2 y 451

1947 479,524 52.3 470,758 98.3 2,396 0.5 144 (2) 5,972 1.2 254

1943 565,000 53.2 555,939 98.5 2,509 0.4 145 (2) 6,377 1.1 30

1949 510,608 52.5 503,375 98.6 2,057 0.4 165 (2) 4,969 1.0 42

1950 H 679,244 51.8 668,557 98.5 2,778 0.4 210 (2) 7,666 1.1 33

1951 y 713,363 52.3 699,684 98.1 3,384 0.5 258 (2) 10,024 1.4 13 1952 y 6/ 682,850 51.5 666,538 97.7 4,291 0.6 719 (2) 11,293 1.7 2/ 9

1953

1954

1955

1/ Determined froa p ari/ ratioa of flgaroa for titaniw aoatint finn In Ublo 1-2. 2/ Lou thu 0,10 paraant. y Alloy* only. y Conaliti of llanlto uaed aa a ateel flu , y Include* • aixed product containing altered ilaaalte, lenawene ud retile uod to uko plpanta and u til. 6/ A total of 24,236 abort tow (16,746 tana of TiOj) of titu iw 'lag n i conivMd In 1952 for titaniw pl^uta, wlding-rod coating* and axperiaental parpoua. ]/ Include* } ahort tana of earoalea. TABLE y United Statee oon*uwtlon of llunite concentrate*. eetliated tltinlw dioxide e

(U. 3, Bureau of Mine*)

Manufactured TiO? Eatiiated Keldinwod coating* Ti°2 Pimenti Weldinjr-rod coating* (fro* ilienite) Alloy* and carbide Miecellaneou* Year content Short t(»i* Percent Short ton* Percent Short ton* Percent Short ton* Percent Short tom Perce

1941 150,966 146,205 96*9 1,700 1.1 30 (1) y 3,031 2.0 _ —

1942 141,412 130,064 91.9 4,900 3.5 28 (1) 5,899 4.2 y 521 0.1

1943 142,866 131,699 92.2 5,700 4.0 113 (1) 4,546 3.2 y 8io C.(

1944 175,475 166,616 94.9 3,900 2.2 82 (1) 4,401 2.6 y 474 0.]

19*5 187,580 180,937 96.5 2,258 1.2 62 (1) 3,976 2.1 y 347 0.2

1946 202,663 199,414 98.4 938 0,5 57 (1) 2,025 1.0 y 229 0.]

1947 250,859 246,974 98,5 1,257 0.5 74 (1) 2,431 1.0 123 (1)

1946 300,408 296,390 98.7 1,338 0.4 72 (1) 2,591 0.9 17 (1]

1949 268,000 264,772 98.8 1,082 0.4 85 (1) 2,037 0.8 24 (1)

1950 y 351,675 346,308 98.6 1,439 0.4 106 (1) 3,803 1.0 19 (1) 1951 y 373,037 366,167 98.2 1,770 0.5 130 (1) 4,962 1.3 8 (1) 1952 y y 351,553 343,159 97.7 2,209 0,7 416 (1) 5,763 1.6 y 6 (1)

1953

1954

1955

1/ Leu than 0*10 percent* 2/ Alloy* only. ]j Coniieti of ilienite need u etwl flux. y Inelniei a ilxed product containing altered ilienite, leucoxene and rutile uied to ■ako pigpente and *etal« y k total of 24,236 ihort tone (16,746 torn of TiOj) of tltaniun elag «i conraed in 1932 for titaniw piponti, welding-rod coating* and experimental purpoiei* 6/ Include* 3 short ton* for eeraiiu. 13

TABLE 5 • - Unltad Stataa con caution of rutUa. gross walght

(U. S. Buraau of Hinas)

Araraga Nontitaniia bait Total parcant conniption astinatad V*ldiiue-rod coatinia allora and carhida CarandLea Klacallanaoua Taar abort tons Ti02 Short tons Parcant Short tons Parcant Short tona Parcant Short tons Para

1941 6,361 94.1 5,461 85.9 709 1/ 11.1 172 2.7 2/ 19 0, 1942 10,616 93.7 8,857 83.4 1,652 15.6 92 0.9 y 15 o.: 1943 17,634 93.3 12,358 70.1 5,221 29.6 21 0.1 y 34 0. 1944 14,813 93.4 10,747 72,6 4,014 27.1 20 0.1 y 32 0. 1945 9,791 93.4 7,813 79.9 1,923 19.6 34 0.3 y 21 0.

1946 7,134 93.5 5,990 84.0 1,035 14.5 75 1.0 y 34 0.

1947 7,692 92.1 6,425 83.6 1,131 14.7 102 1.3 34 0. 1948 10,230 92,7 7,885 77.1 952 9.3 175 1.7 1,218 11. 1949 }J 11,888 91.4 6,399 53.8 660 5.6 143 1.2 y 4,686 39. 1950 11,721 92.7 9,218 78.6 1,454 12.4 195 1.7 854 7, 1951 17,227 93.0 11,708 68.1 2,939 17.0 265 1.5 il 2,315 13.

1952 18,317 94.7 11,418 62.3 2,997 16.4 281 1.5 y 3,621 19. 1953 1954 1955

1/ Alloy* only. y Coniiiti of rutll* uiad In iup oloetrodo ooitln|i tad ti i itaal daoiidiiar. ]j Includes t niied product containing iltorod ilnaoita, lsieoxant tad rutll* usad to naks pipants tad Mttl. y Inoludot ritila uiod to *tki plpanta and Mtal and a lixad produet containing altorod ilnonito and lsnoauna. y InelulH natal and fibarglaaa. TIBU 6.. - Dnltad Statai ccmmrtlon of ratila. tltanivm dioxidi contmt

(1). S. Bnraan of Kinoi)

Eatliatad tatitaala ban TiOj contant Valdiu-rod coatinxi allon and carblda Caraidci Macallan MM Taar abort tona Short tooa Panant Short tona Partant Short tona Pareant Short tona Parcan

1941 5,9tt 5,133 85.8 II 673 11.2 162 2.7 2/ 18 0.3 1942 9,952 8,326 83.7 1,526 15.3 86 0.9 2/ 14 0,1

1943 16,451 11,617 70.6 4,782 29.1 20 0.1 2/ 32 0.2

1944 13,837 10,103 73.1 3,683 26.6 20 0.1 2/ 31 0.2

1945 9,144 7,344 80.4 1,750 19.1 30 0.3 2/ 20 0.2 1946 6,670 5,600 84.0 966 14.5 72 1.0 2/ 32 0.5 1947 7,083 5,907 83.4 1,050 14.9 95 1.3 31 0.4

1941 9,488 7,289 76.8 889 9.4 166 1.7 1,144 12.1

1949 2/ 10,863 5,904 54.3 619 5.7 136 1.3 2/4,204 38.7 1950 10,869 8,516 78.3 1,366 12.6 185 1.7 102 7.4

1951 16,016 10,834 67.7 2,752 17.2 248 1.5 5/2,104 13.6

1952 17,353 10,798 62.2 2,858 16.5 265 1.5 5/3,432 19.8 1953 1954 1955

1/ Alloys only, 2j Cofliiiti of nttilo uaad in lup nlactroda eoatinga and aa a atnl daoxidiaar. ]} Includaa a mixed product containing altorod ilianita, laucoxana and ratila wad to-aaka pignant* and Mtal. y Inelodti ratila wad to naka pipanta and natal and a nixad product containing altarad ilaanita and laucoxana. y Includaa natal and fibarglaaa. 1 5 Tables 3 and !*, respectively, show on a gross tonnage and estimated titanium dioxide content basis the total annual domestic consumption and also domestic consumption by uses of ilmenite from

191*1 to 1952* Tables 5 and 6 show similar items for rutile* Tables 7 and 8 are partial recapitulations of Tables 1* and 6 and show the estimated titanium dioxide content of ilmenite and rutile domestically consumed in the manufacture of (1) welding rod coatings and (2) nontitanium-base alloys and carbide*

TABLE 7* United States consumption of ilmenite and rutile concentrates for the manufacture of welding rod coatings, estimated titanium dioxide content (U.S. Bureau of Mines)

Fromrutile From ilmenite

Tear Short tona Percent Short tons Percent Total

191*1 5,133 7lt.8 1,730 25.2 6,86>. 19l*2 8,326 62.8 1*,928 37.2 13,251* 191*3 11,617 66.6 5,813 33.1* 17,1*30 191*1* 10,103 71,7 3,982 28.3 11*, 085 191*5 7,31*1* 76.0 2,320 21*.0 9,661* 191*6 5,600 81*.9 995 15.1 6,595 191*7 5,907 81.6 1,331 18.1* -7,238 191*8 7,289 83.8 1,1*10 16.2 8,699 191*9 5,901* 83.5 1,167 16.5 7,071 1950 8,516 81*.6 1,51*5 15.1* 10,061 1951 10,831* 85.1 1,900 11*.9 12,731* 1952 10,798 80.1* 2,625 19.6 13,1*23 1953 1951* 1955 1 6

TABLE 8* United States consumption of ilmenite and rutile concentrates for the manufacture of nontitanium-base alloys and carbide, esti­ mated titanium dioxide content (tf.S. Bureau of Mines)

From rutile From ilmenite

Year Short tons Percent Short tons Percent Total

191*1 673 18.2 3,031 81.8 3,701* 191*2 1,526 20.6 5,899 79.1* 7,1*25 191*3 1**782 51.3 i*,5i*6 1*8.7 9,328 191*1* 3,683 1*5.6 1*,1*01 51**1* 8,081* 191*5 1,750 30.6 3,976 69. U 5,726 191*6 966 32.3 2,025 67.7 2,991 191*7 1,050 30.2 2,1*31 69.8 3,1*81 191*8 889 25.U 2,591 71*.6 3 , 1*80 191*9 619 23.3 2,037 76.7 2,656 1950 1,366 26.1* 3,803 73.6 5,169 1951 2,752 35.7 1**962 61*.3 7,711* 1952 2,858 33.2 5,763 66.8 8,621 1953 1951* 1955

Properties

Pigments

The most important domestic use of titanium minerals is in the manufacture of pigments* Titanium dioxide is manufactured and sold as "straight" or unextended pigments, and as "composite" or ex­ tended pigments (in combination with barium or sulfate)*

There are no universally accepted standard grades, incorporating such factors as specific gravity, hiding power, tinting strength, particle size, chemical inactivity, etc*

"Rutile" and "" are crystal modifications of titanium 17 dioxide. The anatase crystal type was manufactured exclusively until 191*1 when rutile-type pigments were placed on the market.

Both are sold as extended and unextended pigments, but the ru tile- type pigments have replaced the older varieties to a large extent.

A comparison of the hiding power, tinting strength, specific gravity and refractive index of some commonly used white pigments is 3hown in Table 9.

TABLE 9. Specific gravity, hiding power, tinting strength and refractive index of some common white pigments

Specific Hiding Tinting Refractive gravity power! strength2' index^

Titanium dioxide (ru tile) k .2 0 220 1 ,6 5 0 2 .5 2 Titanium dioxide (anatase) 3 .9 0 170 1 ,2 7 5 2 .7 1 Zinc sulfide a . 00 180 850 2 .3 7 Titanium dioxide - calcium sulfate (rutile) 3 .2 5 100 600 1 .9 8 Titanium dioxide - calcium sulfate (anatase) 3 .1 3 Ik 1*70 ____ Titanium dioxide - barium sulfate (anatase) a . 21* 58 1*1*0 Lithopone ( regular) 1*.30 1*3 280 1 . 8a Zinc 5 .6 5 28 170 1 .9 9 - 2 .0 2 White (regular) 6.1*0 20 11*0 1 .9 3 - 2 .0 9

Square feet per pound 2 As determined by the Reynolds constant volume method 3 Average

SOURCE: Adapted from Reynolds, C. E., Am. Ink Maker, 1936, ll*, p. 21, Barksdale, Jelks, Titanium: Ronald Press Co., New York, 19U9, pp. 378 and 381; an3 "Titanium Pigment Corp., Titanox Pig­ ments, New York, 19U9, p. 13*

Since the introduction of manufactured titanium dioxide in

1916, i t has found a steady market in the production of paints,

varnishes and lacquers; paper; floor coverings; rubber; coated 1 8 fabrics and textiles; and miscellaneous other products. The percentage distribution of titanium dioxide pigment shipments from

1935 to 1952 is shown in Table 10.

TABLE 10. Percentage distribution of titanium pigment shipments, by use, United

§ t s 5 s ; T 9 35- 5 ? ~ ------(titanium dioxide content)

Coated Paints, Floor fabrics & var­ coverings textiles Print­ nishes (linoleum (oil cloth, ing and & fe lt shade cloth, ink Year lacquers base) e tc .) Rubber Paper Other Total

1935 61*.8 3 .5 1*.8 i*.2 9.U 2.0 11.3 100 1936 66.7 3 .8 6.2 3 .6 10.6 2.1 7 .0 100 1937 6 9 .1 3 .7 1*.9 3 .9 9 .8 1.8 7.8 100 193Q 65.9 1*.7 U.3 1**2 1 3 .1 2.0 5 .8 100 1939 6 6 .5 5 .3 1*-1 U.3 11.1 1 .9 6.8 100 19U0 66.7 5 .3 3 .3 3 .7 10.1* 1 .7 8 .9 100 1 9 U 70.8 l*.l* 3 .3 3 .5 9 .2 1 .7 7 .1 100 19U2 71.3 3 .6 3 .5 1.0 7 .6 l.U 11.6 10 0 191*3 6 9 .5 3 .1 2.6 1.1 9 .5 1 .7 12.5 100 191*1* 71.9 2 .7 2.1* 1.0 8.6 l.U 12.0 100 191*5 73.1* 2 .5 2.0 1.6 9 .3 l.U 9 .8 100 191*6 71.9 3 .1 2 .3 2.8 8.6 1 .5 9 .8 100 191*7 71*.3 U.7 2.6 3.U 7 .8 1 .5 5 .7 100 191*8 69.9 5.9 2.7 3 .2 7.1* l.U 9 .5 100 191*9 6 7 .5 5 .8 2.1 3 .9 9 .6 l.U 9 .7 100 1950 6 6 .9 5 .2 2.0 3 .9 9 .1 l.U 11.5 100 1951 61*. 9 5 .7 2.1 3.U 8 .9 1.8 13.2 100 1952 62.9 5 .6 2 .9 3 .6 10. U 1.6 13.0 100

SOURCE: Bureau of Mines, Minerals Yearbook, Washington, D.C.: Government Printing Office.

The relatively high hiding power and tinting strength of

titanium dioxide pigments are perhaps the primary factors affecting

the rapid adoption of titanium dioxide in the manufacture of paints, 19 varnishes and lacquers. Specific gravity, which affects the rate of settling, is also important in some applications*

Chemical inactivity is another important characteristic of the compound. It may be used with practically all types of reactive vehicles; it is not discolored by any gases likely to be present in the atmosphere, such as and ammonia; i t does not discolor on exposure to sunlight; and i t is unaffected by extremes of temperature. Titanium dioxide is resistant to alkaline, acid and saline solutions and may be used as the pigment in chemical— resistant paints of many types* It is compatible with other white and colored pigments and may be used In combination with any of them*

The high opacity and chemical inertness of titanium dioxide make it possible to use the compound in almost every variety of plastic material, resin and molding powder except urea and thiourea mixtures* Its resistance to erosion by lactic and make it particularly desirable for use in plastics of the celluloid type, which are often treated with the latter, and casein, which usually contains residual lactic acid*'*' When used as a rubber pigment, a

^ Zinc oxide and lithopone would be attacked, thus impairing the appearance of the finish*

small quantity of titanium dioxide gives a high degree of whitening, with the result that the desirable natural properties of the rubber

can be maintained to the greatest extent* Titanium dioxide, because of its high index of refraction, low specific gravity, fine particle s ize and chemical stab ility , fulfills the requirements for a filler and opacifier in the manu­ facture of paper and textiles. As an opacifier in paper, the pig­ ment is about ten times as effective as the ordinary fille rs , and improves the color, brightness and printing surface at the same time. These properties have also caused i t to be used extensively as a delustrant in the production of rayon*

Metallurgical Applications

The use of titanium in metallurgy stems from its powerful affinity at high temperatures for nitrogen, , phosphorus and * As a deoxidizer, ferrotitanium is more effective than most other scavengers in removing gases and inclusions from molten iron and steel and in counteracting the formation of blowholes and of pipe* Owing to the internal soundness and density produced, as well as to a reduction in the injurious effect of sulfur and phos­ phorus, so deoxidized have a higher elastic limit and greater toughness generally. Because of its high cost, i t is generally used for a final scavenging after ferromanganese or ferrosilicon have done most of the work.

For alloying purposes, the cost of titanium is such as to restrict its use to a few special types such as stainless, nitrid- ing and age-hardening steels. Amounts up to 1*5 percent are added to stainless steels to prevent the precipitation of chromium-rich and so to reduce the susceptibility to weld decay. The 2 1 element is beneficial in sheets for galvanizing, while its presence in nitriding steels to a less brittle case of greater depth*

Titanium materials are also added to iron, copper, bronze, mag­ nesium and other metals*

The following principal forms of the product are manufactured and shipped:

High-carbon ferrotitanium Titanium 15-18$ Carbon 6 - 8$ Iron balance

Medium-carbon ferrotitanium HftanTum 17-21$ Carbon 3-1*. 5$ Iron balance

Low—carbon ferrotitanium Titanium 20-25$ Carbon 0.10$ (max*) Iron balanc e

Nickel-titanium Titanium 25- 28$ Iron 2-5$ Aluminum 6-9$ Carbon 0 . 03 - 0 . 1$ Silicon 2-1*$ approx. balance

Silicon—titanium Titanium UW*7$ Silicon U2-J*5$ Iron 3.5-14$ Carbon 0 . 03-0 . 1$ Aluminum 1.5-3$

Manganese-titanium Titanium 25- 28$ Carbon 0 . 03-0 . 1$ Silicon 1 .5 -3 .5 $ Aluminum 8- 10$ Iron 20-25$ Manganese approx. balance 22

Titanium Metal

Titanium is a low-density, silver-white metal, between silver and stainless steel in color* Metallic titanium owes its importance to an unusual combination of properties - lightness, strength, and resistance to * The density of titanium is 0*16 pound per cubic inch, 60 percent heavier than aluminum but only 56 percent as heavy as . Titanium alloys are much stronger than aluminum alloys, having tensile strength and hardness approach­ ing that of many alloy steels* The strength:weight ratio at ordinary temperatures exceeds that of either aluminum or stainless steel* Titanium alloys also have unusual resistance to fatigue and great impact strength* Titanium metal is more resistant to corrosion than aluminum and is as resistant as stainless steels; it is particu­ larly resistant to sea—water corrosion and marine atmospheric weathering*

The chief disadvantages are high cost, difficulties of fabrica­ tion and its excessive reactivity at high temperatures* Although the of titanium - 3,l50°F-is extremely high, it ab­ sorbs oxygen and nitrogen and becomes b rittle above 1,000°F*

Reports and studies up to now indicate that titanium w ill find use in the following fields:

1. Aircraft and Jet Engines*

This is expected to be one of the largest military markets*

The Air Force is vitally interested in titanium because its strength and lightness can increase maneuverability and performance in 23 military planes# Its performance in operating temperatures up to

800°F means lighter jet engines with resultant decrease in fuel consumption. It is anticipated that in the near future titanium will be used for holding turbine blades in the compressor stage of

the engine# Titanium has withstood tests in the engine firewalls,

shrouds, baffles, complete compressor sections, after burners, and diaphrams#

Producers of civilian aircraft are also interested in the use

of titanium in many of the same applications where the metal can be

advantageously employed in military craft# The wider use of jet- powered, high-speed commercial transport planes will provide a

ready market for titanium alloys#

2. Other Aircraft Uses#

As speeds increase a ir frames must be stronger and operate at

higher temperatures. In addition to the use of titanium for leading

edges of wing and tail surfaces other applications have been suggested

as heater wheels, light-weight armor plate, cables, structural

braces and internal structural members*

3# Ordnance*

The Aimy is particularly interested in titanium for use in

ordnance equipment of the future which is pointing more and more

towards air transportability and for reduction of the over-all

weight of equipment which the foot soldier must carry into battle*

Substituting titanium for alloy steel armor plate, of equal thick­

ness, on tanks and other military vehicles would substantially reduce 2 k the weight# An example of prototypes that have been developed and tested is the mortar base plate. Using titanium only one plate of

21*. pounds is required instead of the two 2l*-pound pieces previously used, thus eliminating the need for the third man who carries this extra piece#

1*# Marine

The Navy is primarily interested in titanium’s resistance to salt water corrosion which would prolong the useful life of naval equipment# Possibilities exist for light-weight piping systems handling salt water, condenser tubes operating at high speed, pump rods, rotor shafts, water-lubricated bearings, and snorkel tubes#

5# Chemical Equipment

Because of its corrosion resistance, particularly to oxidizing, chlorine and chloride reagents, there is a definite opportunity for titanium to be used effectively in the chemical processing in- distry for such items as vessels, plumbing, piping and valve parts#

6, Low-Titanium Alloys

A number of iron and nonferrous alloys use titanium in per­ centages from 0.1 to percent# The use of high purity metal in

these alloys would enable producers to get cleaner and stronger alloys with greater regularity#

7* Pyrotechnics

Titanium powder bums in air with intense heat* The fast burning quality may make titanium useful in rockets and in the detonating fuse of explosives# 2 $

8. Other Uses

The outstanding characteristics of titanium suggest numerous other uses* Among these are surgical instruments, orthopedic appliances, portable machine tools, sporting equipment (such as light-freight noncorroding golf clubs, tennis rackets and fishing rods), food handling and processing equipment, X-ray tube targets and textile machinery*

Welding Rod Coatings

The effect of titanium and its compounds in stabilizing an electric arc and reducing sputtering and flickering has resulted in their application in the manufacture of fluxes and coatings for electric welding rods* Titanium dioxide reduces the viscosity of the slag formed, and greatly reduces the surface tension of the metal droplets on the electrodes, thus causing more satisfactory welds*

Miscellaneous Minor Uses

Small quantities of titanium compounds are reported to be in use throughout the economy* Electrical applications include electron discharge tube and thermocouple parts, resistance heating units, insulators and dielectrics* The higher grades of rutile are used to impart a yellowish cast to porcelain and other ware, and are added in small quantities to enamels, v itrified ware, glass and refractory products* Other special applications, in insignificant quantities, include artificial gems, fiberglass, artificial smoke, and chemicals for water purification* As these uses involve ex­ tremely small anounts of titanium, ceramics and'fiberglass producers 26 are the only miscellaneous minor users which report consumption

statistics to government agencies*

Flow Chart

A flow chart showing the basic raw materials, intermediate products, and final products is shown in figure 1* This use pattern is characterized by the following features, which will be developed in later chapters: (1) the diverse applications of the product, some of which are sold in a variety of heterogeneous forms;

(2) the substitutability of certain forms for a variety of non-

titanium-base products, as well as for each other; (3) the paramount importance of technical superiority over cost as a factor condition­ ing the adaptation of some of the newer forms, e.g*, the use of

titanium metal in preference to steel or aluminum in military air­ craft* 27

Figure X e Biaic raw materials, intermediate products and final produus containing titanium

MSI" MW YATJP.IAL3 Titanium slag Dmenite y Rutile

Crude titanium

INTEWttDIATS PRODUCTS Manufactured Titanium Tltanii* titanium tetrachloride iodide dioxide

Uel I / Weter- in* Hiseel Flber- Arti- T1U- proofing High- TiUnlua Titanium Fbsed .ura- 'rod inneeus glass ficial nli* agent* purity ponder carbide crystal ales coatii!’ qhemicals smoke sponge metal materials Alloying 4 Metallurgical iroducts t (non-ductile)

Titanium Weld- TlUnlun FINAL pigments l%»ter Abiesivea Cutting Jewel- Optics Dielec- ing Alum- Steel titanium Titanium PRODUCTS (pure and alloys tools ry trie s rods inum Ingot extended)

Research Hill products uses

\ ✓ / \ \ V ^ * Rail­ Indus­ Sport­ floor ' Surgical / road tr ia l in'’ Paints Plasti Cover- Coated Rubber Paper Inks Cos­ A ircraft Ordnance Con- and Auto- Ship- euuip- equlp- equip­ ings fabrics metics tainers orthopedic notive i ment ment ment usee

- — 1 ■ Actual uses. ------fctential uses. 1/ Includes a mixed product containing M ile, altered ilaenite and leucoxene.

1 I I I . INDUSTRY STRUCTURE

Definition of the Industry

An industry is ordinarily defined in terms of the relation

between groups of products: Within an industry there are relatively

high cross-elastic!ties of demand for products, as compared with

relatively low cross-elasticities outside the industry.* As

^■For extended treatment of this theoretical matter, see Triffin, Robert, Monopolistic Competition and General Equilibrium Theory: Harvard Press, Cambridge, Mass., 19^0.

indicated in the flow chart in Chapter II, there is a high degree

of substitutability among the various raw materials and derived

intermediate products. Small amounts of manufactured titanium

dioxide, ferroalloys and metal are interchangeable in a few specific

uses, although a complete statistical picture is unobtainable. (A

certain amount of titanium sponge and titanium metal scrap, for

instance, presently finds its way into iron and steel making, powder

metallurgy, pyrotechnics, etc., and may be said to compete with

ferrotitanium, titanium powder and metallurgical or alloying com­

pounds made from manufactured titanium dioxide, ilmenite or rutile.)

These possibilities may be said to provide an umbrella of

substitution possibilities under which the titanium industry can in

general be defined. (It would be extremely difficult to state whether a titanium product or a nontitanium product might be the

best substitute for an item in a given application. So far as

28 29 relative prices are concerned, the problem of estimating actual cross-elasticities of demand is made vastly more difficult by the peculiarities of oligopoly pricing - regarding which much appears in a later chapter.) Such a logically elegant definition of the industry is, however, supported by commonsense considerations: The obvious tie of common raw materials employed in the manuf acture of many products, the grouping of their production in the same firms

(and in some cases within the same division of a firm), the frequent reassignment of technical and managerial personnel to different titanium products, and the character of clientele rela­ tions with Government agencies including reporting of s ta tis tic s , technical assistance and wartime controls.

The industry can in this sense be located in the fifty

American and f if ty foreign firms producing ilm enite, ru tile 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 pigments

(pigment branch); titanium sponge and high-purlty ductile titanium metal (primary metal branch); titanium and titanium alloy ingot and mill products (fabrication branch). A blurring of the boundaries of the industry appears inevitable in view of the difficulty of obtaining statistical verification. Producers of 3uch products as

ilmenite and rutile—coated welding rods, ceramic products, fiber­

glass, miscellaneous chemicals employing titanium compounds in their manufacture, and a number of users of s e n d -fabricated titanium and 30 titanium alloy m ill products are in a somewhat ambiguous position vis a vis the industry; but may, rather arbitrarily, be classified as users of manufactured titanium rather than producers of titanium products*

None of the 26 domestic producers of ceramics produces titanium minerals or other titanium products and only one of the 29 domestic producers of coated welding rods reporting use of titanium products, the Uetal and Thermit Corporation, owns a mining property# (Hobart

Manufacturing Company operates a mine in cooperation with the Florida

Ore Processing Company.) Firms involved in the five branches of the industry listed above frequently use titanium in some of the minor applications mentioned in Chapter II. These firms in some cases also market compounds for use in the production of welding rods, ceramic products, etc* Some of the larger firms involved at some stage in the production of alloys, pigments or metal are not, on the other hand, primarily concerned with titanium products* The degree of participation in the industry of four major producers is summarized in table 11* 31

TABLE 11* Revenue from titanium products of four large firms, 15^2 (Percent of total sales by the firm)

National Lead Company

Revenue from ilmenite^- 0 - 1 Revenue from ferrotitanium , etc. 0 - 1 Revenue from titanium pigments 10 - 25 Revenue from titanium metal* 1 - 5

Total revenue from titanium 25 - 30

E. I* du Pont de Nemours and Company, Inc.

Revenue from titanium pigments 2 Revenue from titanium sponge 0 —1 Revenue from titanium metal3 1 —2

Total revenue from titanium 1 - 5

American Cyanamid Company

Revenue from titanium pigments 1 - 5

Tot al revenue from titanium 1 —5

Glidden Company

Revenue from titanium pigments 1 - 5

Total revenue from titanium 1 - 5

^ Sale of ilmenite was discontinued Oct* 2, 1952* For reasons to be explained, this revenue should probably not be included under sales* 2 Based on estimated sales of Titanium Uetals Corp* of America, owned on a $0—50 basis with Allegheny Ludlum Steel Co*, at estimated price of $35,000 per ton.

Based on estimated sales of Rem-Cru Titanium, Inc*, owned jointly by Remington Arms (in which DuPont owns a 60 percent equity) and Crucible Steel Co., at estimated price of $35*000 per ton* This figure as well as the one to which reference is made in footnote 2 should presumably be prorated among (between) the owners*

Source: Light Metals Branch, U- S. Bureau of Mines* Financial Structure

The major producers operate more than one plant and are af­ filia te d with numerous subsidiaries* Thus, E. I* du Pont de

Nemours engages in mining operations, produces pigments, titanium tetrachloride and titanium sponge; and (through its subsidiary,

Remington Arms Company) owns a part in terest in Rero-Cru Titanium,

Incorporated, which manufactures and sells titanium ingot and titanium mill products. These operations are conducted in five states in this country and in India. National Lead Company pro­ duces and sells ilmenite ore, titanium tetrachloride and other chemicals and compounds, ferrotitanium and titanium pigments.

Through i ts subsidiaries, the Titan Company, A/S and the Rutile

Mining Company of Florida, it produces ilmenite and rutile; through

Titangesellschaft, m.b.H., Canadian Titanium Pigments and Titaan N—V, it produces and sells titanium pigments, and through the Titanium

Metals Corporation of America, it produces and sells titanium sponge, ingot and mill products. Producing plants are located in Tahawus and Niagara Falls, New York; Sayreville and South Amboy, New Jersey;

East St. Louis, Missouri; Jacksonville, Florida; and Henderson,

Nevada; and in Norway and Germany. Allegheny-Ludlum Steel Corpora­ tion, co-owner of T.M.C.A., finishes and fabricates titanium metal products in its plants at Brackenridge and West Leechburg, Penn­ sylvania, and Dunkirk and W atervliet, New York.

The industry is characterized by a high degree of vertical integration, from minerals to pigment or titanium sponge, ingot and mill products and ferrotitanium. Thus, of the ten domestic companies 33 with facilities for production of titanium sponge on a pilot or commercial scale, both d irectly and through subsidiaries and a f f ili­ ates, three produce titanium minerals and three produce mill products.

Two domestic producers and one foreign producer of titanium sponge also manufacture titanium pigments. Foreign firms are considerably less diversified: Of the 11 foreign producers of titanium pigments, none produce titanium minerals and only one each is producing titanium sponge or ferrotitanium.

A third important characteristic of the industry, and particular­ ly of the primary metal branch, is the merging of companies in pairs.

Although reasons for this are perhaps not the same in all cases, the partners usually supplement each other in an important area of research, production or marketing. The Titanium Metals Corporation of America results from a Joint venture by National Lead Company and Allegheny Ludlum Steel Corporation. National Lead's interest stems from its Titanium Division and its Titanium Alloy Manufacturing

Division (created following the absorption in 191*8 of the Titanium

Alloy Manufacturing Company), which mine ilmenite and rutile ore and produce pigments, alloys and chemicals, including titanium tetrachloride. Allegheny Ludlum is a leading fabricator of steel.

Rem-Cru Titanium, Incorporated, results from a merger of assets by Remington Arms (in which E. I . du Pont de Nemours owns a 60 per­ cent equity) and Crucible Steel Company which produces alloy,

stainless and tool steels. The P. R. Mallory Company has an interest

in the development and production of titanium and titanium alloys.

Sharon Steel Company and its subsidiaries manufacture hot and cold 3U rolled steels; hence, the Joint effort in the form of Mallory-

Sharon Titanium Corporation* The Kennecott Copper Corporation is experienced in mining, smelting, refining and fabricating copper.

In addition, it has at its disposal large capital resources. New

Jersey Zinc Company with a similar background in the zinc industry entered into a Joint enterprise with Kennecott, the Quebec Iron and

Titanium Corporation, to produce titaniferous slag and pig iron.

In Britain, Henry Gardner and Company, Ltd., an importer and dis­ trib u to r of titanium metal and allo y s, formed a subsidiary, Titanium

Metal and Alloys, L td ., in association with Samuel Osborn and Com­ pany, Ltd., a manufacturer of special steels.

Alloys and Carbide Branch

In 1790, William Gregor discovered the element titanium in the black magnetic sands of Cornwall, England; but it was almost

100 years before commercial utilization received serious attention.

By 1070, titanium had come into use in the purification of Bessemer rail steel and its employment as a scavenger and deoxidizer of steel slowly became established. Since individual firms use relatively small quantities in this fashion, it is difficult to estimate the number of these firms or the quantity of titanium thus consumed.

Coincident with advances in metallurgy during this century, alloys of titanium with iron and steel, nickel, copper, aluminum and carbon were manufactured in increasing volume. As early as 1906, the Titanium Alloy Manufacturing Company constructed a plant at 3 5

Niagara Falls, New York, to produce ferrocarbotitanium. This plant, acquired in 19ii8 by the National Lead Company, continues to be the major supplier of titanium alloy materials for the American steel industry*

Titanium alloys and carbide are produced by 1 $ companies in the United States. Only two of these firms, National Lead Company and Corporation of America, produce over 1,000 short tons of products per year* Nine produce ferroalloys; three are in the light metals industry; and four produce titanium carbide for use in abrasives and cutting tools* Domestic production statistics, even as aggregates, are considered to be proprietary information and no statistics of foreign production are available* As the process of production is relatively simple, the problem of patents and patent licensing has not arisen in this branch of the industry*

Pigment Branch

Extensive commercial use of titanium ultim ately resulted from the development of a process for producing titanium dioxide pigments*

In 1916, the Titanium Pigment Company incorporated the results of research in this area in a plant, also at Niagara Falls, for produc­ ing titanium dioxide pigments. The Titan Company, A/S commenced operations simultaneously at Fredrikstad, Norway. By 1930, the

National Lead Company had purchased a controlling interest in these companies*

In Germany, an agreement between National Lead and I. G.

Farben resulted in the organization of Titangesellschaft, m.b.H., 36 which built a titanium pigment plant at Leverkusen in 1926. This

plant was acquired by National Lead in 1952# A similar agreement

in 1933 with Imperial Chemical Industries, Ltd., created B ritish

Titan Products Company, Ltd., which constructed a plant at Billing-

ham, England. Canadian, Japanese and French a ffilia te s were also

added to this group. Each of the conq>anies had a capital tieup with

National Lead, was licensed to use patents controlled by the parent

company and was assigned a marketing territory in some portion of

the world.

The Titanium Pigment Company thus acquired the North American

market (until this was disturbed by the entry of other American

firms); British Titan remained undisturbed throughout the British

Commonwealth and Empire (with the exception of Canada); and

Titangesellschaft was allotted the balance of Europe and Asia. An

agreement in 1920, renewed a t frequent intervals as new firms

entered the cartel, provided that each new company was to be given

certain territory in which it would have the exclusive right to

manufacture and se ll titanium pigments and compounds free from any

exports into said territory by the National Lead Company. Detailed

provision was made for exchange of copies of applications for patents

filed by the parties to the agreement or their other licensees, and

for the filing and payment of expenses incidental to the prosecution

of such applications and maintenance of patents in territories

outside the territory of each. It was agreed that neither party

would ever question or contest the validity of any patent of the

other under which i t was licensed. A second group of titanium pigment companies emerged during the thirties. These were also tied together by patent licensing agreements of this type. (The agreements, submitted as evidence in a later antitrust case in the United States, amounted to 7 printed volumes of approximately 300 pages each.) Some ties of stock ownership, chiefly by DuPont, were discernible within the second group, which also succeeded in suppressing the individual interests of each of its members by arriving at mutual agreement with regard to marketing territories and the exploitation of patents. This group included the Societe de Produits Chimiques des Terres Rares and the Fabrique de Produits Chimiques de Thann et Mulhouse, which acquired the market and patent rights in France and its colonies; Verein fur Chemische und Metallurgische Produktion in Germany; S. A. Titanium (Montecatini) in Italy ; and Commercial

Pigments Company in the United States*

The latter firm operated a plant at Baltimore, Maryland, which was soon taken over by the Krebs Pigment and Color Corporation.

Krebs was absorbed by DuPont in 19U3* In that year, the American 2 market was shared by DuPont and National Lead in these proportions:

2 District Court of the United States for the Southern District of New York, Findings of Fact and Conclusions of Law in the Case of United States of America against National Lead Company, Titan Com- pany, Incorporated and E. I . du Pont de Nemours and Company, Civil 26-258, October 2, 19 U5. 38

Extended Pure titanium pigments dioxide ( percent) (percent)

DuPont • • . 23*5 h S . 1 National Lead 76.5 1x6,6

Total 100.0 91.7

The output of this new group of firms was readily absorbed by

the world economy as i t emerged from the Great Depression of the

th irtie s . The American Corporation, which opened a plant at Baltimore, Maryland, in 193U under a license agreement with the

Dupont Company which compelled the company to lim it production to

3,000 3hort tons per year and pay a royalty of 2 percent on the price of all pigments shipped, was successful three years later in

having its quota raised to 6,000 tons. In 19U1, the agreement was

amended once more to permit the production of 9,000 short tons per

year and additional equipment was installed within the year to

implement the new agreement. Production in the United States

increased from 100 short tons in 1920 to 128,000 in 191*1.'

3 See footnote 2*

A few small independent producers were reported throughout the world during the thirties, although the majority were soon induced

to join one or the other cartel groups. Such firms included the

Travancore Company which before World War II operated a titanium

pigment plant in France using ilmenite separated from monazite sands

Titan Products, Ltd., which operated two titanium pigment plants at Brooklyn, Victoria, Australia; Van der Lande, which operated a titanium pigment plant in Holland, u tilizin g ilmenite obtained as a byproduct in the mining and concentrating of placer tin ores in the

East Indies; S. E, Goldschmidt and Sons, which operated a plant in

Germany and marketed a composite pigment under the trade name of

Titanal; the Shai Industrial Chemical Company and the Dai—Nippon

Artificial Fertilizer Company which operated three small titanium pigment plants in Japan, None of these firms have reported produc­ tion since the war, and may be presumed to have ceased operations or to have merged with the major producers. Production outside the

United States was only 28,000 short tons in 1938

^ See footnote 2,

Before World War II, the leading American manufacturers of titanium pigments obtained their supplies of ilmenite from India,

From Aiigust 19ii2 to October 1952, th e ir supplies came mainly from a deposit at Tahawus, New York, owned by National Lead, National Lead invested more than $10 million in this enterprise and offered participation in the project to each of the other producers of titanium pigments in the United States, transporting the material on a railroad built for this purpose by the Government, The arrangement was planned by the Office of Production Management and is described in Chapter VI, MPublic Policy and National Defense,*

DuPont allcwed a ten-year purchase contract to expire in 1952 and

since then has relied mainly on its recently opened mines in Florida, Uo

The domestic titanium plgmsnt industry today includes li companies which own 8 plants and 5 mines. These plants are concentrated

along the Atlantic seaboard; and their aggregate capacity in 1953 was

370.000 short tons per year. (Capacity in 19U0 was 150,000 to

200.000 short tons.) Although no statistics of foreign production

are available, foreign capacity is probably not less than 100,000

nor more than 1$0,000 short tons per year. Domestic production

statistics, even combined as aggregates, are considered to be c proprietary information. The U domestic companies are liste d in

For an indication of the relative importance of titanium, lead and zinc pigments prior to 1935, see Chapter VIII, HPerforaance of the Industry." Titanium pigment producers which also manufacture other white pigments are indicated in table 12*

table 12 in order of magnitude* The 13 foreign companies producing

titanium pigments are listed in alphabetical order.

Primary Metal Branch

In 1910, Matthew Hunter produced m etallic titanium by reduction

of titanium tetrachloride with sodium in an airtight container*

Further experimental progress was reported in 1925 when two Dutch

metallurgists, Van Arkel and De Boer, produced a metal of extremely

high purity by an iodide process. This involves vaporizing titanium

iodide and depositing metallic titanium on a hot filament, the

iodine being driven off as a gas* The process makes a very pure

metal but it is expensive and only low recoveries are possible. It 1 4

TABLE 12 • - Domestic tad ftfin tr*ni" titanium Pilots. 1953

Capacity, abort tons Han* of f i n Location of plants Products ahipped par year Imariu P°—tic Rational Lead Co. Sayreville, R. J. Titaniu dioxide, anataae Manufactures required sulfkrlc acid. St. Louis, Mo. and rutile grades Use llmsnite mined at Taheuua, R .I.,y Tltani* calcium and compos­ and laported from India 1/tad Mar- ite pipaents 1/250,000-500,000 way 2/. E. 1. DuPont Edge Moor, Del. Titaniun dioxide, anataae Use llmsnite and a mixture of ilmenite, Rewport, Del. and rutile grades 1/ tita- rutile and leucoxaae mined at Trail Curtis Bay, Md. niia ealclta p ilots 1/. i/100,000-250,000 Udge, Fla., and ilmenite imported from India. V y American Cyxnanld Co. Pin ay River, Ta. Titanium dioxide, anataae Use ilmenite from a nine at Piney Gloucester City, R.J.y and rutile grades }J 1/ 25,000-50,000 River, Va. ]J Savannah, Ga. 6/ Glidden Co. Baltlaore, Md. Titanium dioxide, anataae and rutile grades 10,000-25,000 Uses ilmenite and tltanita slag. forelm Accial Marathon, Milan, Italy (V) 5,512 Subsidiary of MonUeatlnl - uses S. p. A. llmsnite. Australian Titan Bumie, Tasmania Tltaniw dioxide, rutile A,4B0 Subsidiary of British Titan Products - Products, Pty. grade uses llmsnite from India. J. G. Beyer Merits Leverkusen, Germany l y y Usee ilmenite frcm Romey. British Titaniun Bllllnghan, U. I. ( 1/) 44,B00 Uses Ilmenite from Homy and India. Products Co., Ltd. Orlnsby, U. K. ( if) 26,BOO Uses rutile from Australia. Iahlhara 3angyo, I.E. Yokkalehl, Japan ( y) 3,968-5,291 Processes and nethods licensed from the GUddsn Co. Laporte Titaniun, Ltd. Luton, U. K. Tltanla dioxide, anataae,

2/ Company also produces white lead, a competing idilte pigment. y Company cessed production and sale of llthepone, a competing white pignent, on February 28, 1954* y This plant will be turned over to Raw Jersey Zinc Co. after the Savannah plant la completed. Raw Jersey Zinc Co. produces line oxide, leaded line oxide, and llthopone pl^enta. Rot available. y Plant is to be completed in 1955 and will have a capacity of 50,000-100,000 short tons per year.

SOURCE* Ccnplled from data supplied by Light Metals Branch, Bureau of Hines and Commercial IntelH g-nc- Division, Bureau of Foreign Coemeree. Ji2 is used today mainly to supply laboratory workers with a high grade product for research*

The basic process for commercial production of titanium metal was developed by Dr. Wilhelm Kroll in Luxembourg in the th irtie s .

Dr. Kroll's experimentation with this process in Germany until 1939 resulted in i ts adoption by Degussa and Osram, two large German manufacturing firms. Degussa produced titanium in its Frankfurt am/Main plant from 1938 to 191*2, reaching a miximum output of i*7l* kgs. in 19111. The Osram plant a t Berlin produced approximately 30 kgs. per month from 191*2 to 19l*l*. Neither firm has reported pro­ duction of titanium since Worlo War II.

Prior to the war, Dr. Kroll visited a number of potential producers in the United States, including the Union Carbide and

Carbon Company and Kennecott Copper Corporation, but failed to interest them in his new process. He then was employed by the U.S.

Bureau of Mines. In 191*6, the Bureau issued Information Circular

7381, "Metallurgy of Titanium and Its Alloys" and began operating a pilot plant using the Kroll process, distributing samples of titanium to industry for research purposes. This development launched the titanium metal branch of the industry.

The Kroll process, involving the reduction of the chloride with magnesium, was applied to the production of zirconium for the

Atomic Energy Program. Dr. Kroll developed a method of separating the from the zirconium chips produced in the reaction by vacuum distillation at elevated temperatures. This was U3 later applied to the production of titanium. Methods of melting zirconium into ingots developed at this time In the Bureau of Mines form the basis for titanium melting processes in commercial use today.

In 19U8, DuPont and its subsidiaries took an active interest in

titanium. A pilot plant for producing titanium sponge was constructed

at Newport, Delaware. A subsidiary, Remington Arms Company, began a

research program on melting, alloying and fabricating. The pilot

units were expanded through successive stages until by 1952 DuPont was producing 2 -1/2 short tons of titanium sponge per day. Pro­

duction of ingot and mill products was assigned to Rem-Cru Titanium,

Incorporated, which is jointly owned by Remington Arms and Crucible

Steel Company. Government aid, in the form of a contract with the

Defense Materials Procurement Administration, encouraged the current

program which w ill expand DuPont*s capacity to 3*600 ihort tons per

year by mid-1951u

The National Lead Company was another early entrant into the

new field. Pilot plants were constructed in 191*9 and 1951 at

Sayreville, New Jersey, and Niagara Falls, New York; National Lead

operated the Bureau of Mines pilot plant from November 1950 to

January 1952, in order to familiarize its personnel with the new

techniques involved. Taking advantage of low rates for Government-

produced electric power in the Hoover Dam area, the company leased

a Government-built magnesium plant at Henderson, Nevada. With the

aid of a purchase contract with the Government, the company prepared

to go into commercial production. The contract between D.M.P.A. and i*a

the Titanium Metals Corporation of America, a subsidiary of

National Lead and Allegheny Ludlum Steel Corporation, is discussed

in Chapter VI, "Public Policy and National Defense." The contract

sets a goal of 3,600 short tons of titanium sponge per year by the

middle of 1953J but T.M.C.A. has been unable to produce this much

metal to date*

In the years 1950 and 1951 the rush was on to enter the industry.

Titanium organizations formed in these years include the Titanium

Metals Corporation of America, Rem-Cru Titanium, Incorporated,

Mallory-Sharon Titanium Corporation, Horizons Titanium Corporation,

Cramet, Incorporated, and others* As indicated below, Titanium

Metals Corporation and Cramet announced plans for going into produc­

tion with the Kroll process irhile others are attempting to develop a

continuous method for producing titanium metal. A number of other

companies in the chemical and basic metallurgical industries have

shown an interest in titanium metal production.

Cramet, Incorporated, a wholly-owned subsidiary of the Crane

Company, contracted in 1953 to produce titanium. A plant is under

construction at Chattanooga, Tennessee. Production is expected

to begin in 195U. It is expected that a large part of the initial

output will go directly or indirectly toward military requirements*

The company foresees the use of titanium in valves and fittings of

its own manufacture and for use under highly corrosive conditions*

The company has secured rights to mineral deposits in several

locations which it believes can furnish a large part of the titanium

dioxide requirements of the titanium plant* us

Because of the uncertain future market for the metal and the

imminent danger of equipment obsolescence, there have been no large

expenditures of risk capital in plant expansion. Instead, Govern­

ment financing, purchase agreements and arrangements for accelerated

tax amortization have provided the chief impetus to commercial produc­

tion. The present structure of the industry indicates numerous ties with agencies of the Government; policy considerations since the

Korean crisis have assumed a decided military slant. The range of

operations of industry and Government is further amplified in

Chapters IV and V,

In 1953, two companies accounted for virtually all of the

domestic production of titanium sponge. These were E. I. du Pont

de Nemours at Newport, Delaware, and the Titanium Metals Corporation

of America at Henderson, Nevada. The U. S. Bureau of Mines produced

a small amount Tor research purposes which was assigned to the

Ordnance Corps of the Army, Watertown Arsenal, Watertown, Massa­

chusetts, and thus did not enter into competition with private

industry.

Production of primary titanium metal and reported production

schedules through 1956 are shown in figure 2. The expansion goal for

titanium sponge announced by the Office of Defense Mobilization does

not specify the Kroll production process; i t is at least possible

that a portion of the gap between the expansion goals and production

schedules may be closed by the development of other processes.

Domestic and foreign companies in production or experimenting on a 1 i i u,

A tj If: A A 3 I il i l l I a

wl *'61 il

■1

n

CJ O \ACh H * r

O d ri <7 « ri \ if U7 pilot plant basis are listed in alphabetical order in tablel3.

The basic process for producing titanium, by reducing titanium tetrachloride with magnesium in an inert atmosphere, was patented in

Germany by Dr. Wilhelm Kroll in 1938* and in the United States in

19h0. The patents were assigned to Siemens and Halske, A. G., a

German corporation and vested in the Office of Alien Property,

U. S. Department of Justice in 191*3 and 19U8 under authority of the Trading with the Enemy Act*

Contract rights under the American patent were the subject of a lawsuit brought by Dr. Kroll against the Attorney General, In 1951 the case was decided in favor of the Attorney General. The decision provided for equal sharing by the two parties of the royalties from licensing the patent, and for licensing of the patent at rates agree­ able both to Dr. Kroll and the Attorney General,

Recent licensing agreements, included in contracts negotiated by the Defense Materials Procurement Agency and the General Services

Administration have provided for the following per annum royalties on the Kroll process:

1. Five percent of the gross sales price* of the 50,000 pounds

* i.e., the price irrespective of all discounts,

of titanium in sponge, powder and ingot form.

2m Three percent of the gross sales price of the next 50,000 pounds of titanium.

3, One percent of the gross sales price on all titanium in excess of 100,000 pounds, so produced. 1*8

TABLE 13 • - Companies producing titanium or experimenting on a pilot-pknti scale, » of torch 19%

Capacity, short tons lompany Location per year Remarks

Domestic Crane Co. Chicago, 111. 3.3 Kroll process or modifications thereof, pilot plant. Crsmet, Inc. Chattanooga, Tenn. — Kroll process or unifications thereof. Wholly owned subsidiary of the Crane Co. Plant undei construction will have a capacity of 6,000 short tons when completed. Operations will include chlorination of ore—company is couitted to use either titanivm ores or slag—and electrolytic recovery of magnesiui and chlorine,

E. I. DuPont Newport, Del. 3,000 Kroll process or modifications thereof. When current expansion is eaipleied, (approx.) capacity will be 3,600 short tons. Foote Mineral Co. Exton, P*. 0.15 Iodide process. Produces high-purity (99*9 percent) metel for research purposes. Horizons Titanium Cleveland, Ohio 9 Electrolytic process; pilot plant. Subsidiary of Horizons, Inc. (80 percent) and Corp. the Ferro Corp. Kennecott Copper Columbus, Ohio 36 Iodide process; pilot plant constructed by Bettelle Memorial Institute. Corp. National Research Laboratories at Dayton, Ohio, and Cambridge, Mass. Companies hare applied to GSA Co. and Monsanto — for a contract under which they would construct s titanium metal plant employing Chemieal Co. an electrolytic process. New Jersey Zinc Co. Palmerton, Pa. 1-10 Iodide process. Produces high-purity metal for researchpurposes.

Titanlun Metals Kroll process or modifications thereof. Operations include chlorination of ore Corp. of Aierica Henderson, Nev, 3,600 and electrolytic recovery of magnesium and chlorine. Union Carbide and Niagara Falls, Sodium reduction process, pilot plant. Carbon Corp. N. Y. United Interna­ Long Island City, tional Research N. Y. 1.5 - 2.5 Electrolytic process, pilot plant. Foreign Dominion Magnesium, Haley, Ont., Less than Thermic process, pilot plant. Subsidiary of Ventures, Ltd. Ltd. Canada 100 Imperial Chemical Widness, U. K. 168 Kroll proces? or modifications thereof. Plant under construction will have a Industries, Ltd. capacity o* 1,680 short tons per year. 10

I

TABLE 1 } . - Companies producing titanium or experimenting on a pilot-plant scale, as of March 1954

Capacity, short tons Company Location per year Remarks

Foreign (cont.)

Nippon Metal Tita­ nium Refining Tokyo, Japan 13?.3 Electrolytic process to product titanium powder from manufactured titanium Co., Ltd. dioxide.

Nippon Electro­ metallurgical Kanaiawa, Japan 132.3 Kroll process or modifications thereof. Estimated total for 1954: 71.7-73.9 Co., Ltd. short tons. Subsidiary of Kobe Steel Co. This plant reportedly could expand within 6 months to a capacity of 661 short tons.

Mitsui Mining & Hibi, Japan 0.3-0.6 Kroll process or modifications thereof. Estimated to ta l during 1954: 11.1-12.0 Smelting Co. short tons.

Nippon Soda Co., Takaoka, Japan 39.6 Kroll process or modifications thereof. Estimated to ta l during 1954 : 72.6-120.2 Ltd. short tons. Subsidiary of Mitsui Mining and Smelting Co., Ltd.

Osaka Titan Osaka, Japan 105.6 Kroll process or modifications thereof. Estimated to tal during 1954 : 467.2 to Seijo, K. K. 500.4 short tons. Subsidiary of Sumitomo Metal Industry Co., Ltd. When current expansion program is completed, capacity w ill be 661 short tons.

Shawinigan Chemi­ Shawinigan Falls, Less than Pilot plant, process unknown. Subsidiary of Shawinigan Water 4 Power Co. cals, Ltd. Quebec, Canada 100

Toho Titanium, Chlgssakl, Japan 132.3 Kroll process or modifications thereof. Estimated to tal during 1954: 253*5 to K. K., Ltd. 352.7 short tons. Bussan Kaisha is in charge of sales.

Sakai Chemical Sakai, Japan 13.2 Process unknown. Estimated to tal during 1954: 9,9 short tons, Industrial Co., Lto. Soc. Terres Haies Thann, France n.a. Kroll process or modifications thereof. Subsidiary of Pechiney Aluminum Co.

SOURCE: Compiled from data supplied by the Light Metals Branch, Bureau of Minas; CoBBercisl Intelligence Division, Bureau of Foreign Comerce; and Department of State. Sponge, powder and ingot products transferred intracompany for use by the company and not for resale as sponge, powder or ingot

shal.7 be accountable for payment of royalty* Where ingot metal is

fabricated, the royalty due shall be paid on the basis of the sales price of the resulting fabricated metal,^

^ It is reported that T.M.C.A. and Cramet, Inc, have arranged to pay royalties as provided in this schedule* DuPont has negotiated a separate arrangement with Dr, Kroll*

Fabrication Branch

Four companies account for v irtu a lly a ll of the domestically produced titanium and titanium alloy ingot and m ill products (sheets,

strip, plate, bars, wire and forging billets)* Final fabrication

is usually carried on within the using plant. It would be difficult

to say how many manufacturing companies have su fficien t experience with titanium metal to be classed as fabricators* With increasing

output, titanium fabrication and use could easily spread to 2,000

companies in the next four years*

The four semifabricators are Allegheny Ludlum Steel Corporation,

Mallory—Sharon Titanium Corporation, Republic Steel Corporation and

Rev—Cru Titanium, Incorporated* The latter three purchase sponge

fro a E. I, du Pont, ( Rem—Cru is owned in part by Remington Arms

Company, a subsidiary of DuPont.) Allegheny Ludlum processes products

from the Titanium Metals Corporation of America, which it owns 51

jointly with the National Lead Company, These products are in turn

sold by T.M.C.A. 7

7 1 For a discussion of the use pattern and market potential for the product, see Chapter II, "The Product and Ita Applications” and Chapter VII, "Market Behavior and Strategy.” For a review of tech­ nological developments and prospects for the future, see Chapter VIII, "Performance of the Industry." IV . INDUSTRY STRUCTURE ( CONTHIUED)

Introductlon

The industrial importance of the titanium minerals has increased

more rapidly over the past three decades than that of any other

group of minerals excepting uranium. Since their utilization on a

relatively large scale is new, considerable experimentation and

development is s t i l l going on with the resu lt that the consumption

pattern is far from stable.

Titanium minerals comprise about two percent of domestic com­ mercial sand deposits and ilmenite ranges from 16 to 30 percent

titanium dioxide in commercial rock deposits. Both sand and rock

deposits require beneficiation (mechanical, electrostatic or mag­

netic) to produce titanium concentrates for commercial use. Com­

mercial grades of ilmenite concentrates vary from U5 to 60 percent

TiOg and rutile concentrates contain about 92 percent Ti02» In

some instances, the ilmenite and the iron oxide minerals occur as

discrete grains, so that a substantially complete ore-dressing

separation of the two is possible* In other cases, particularly with titaniferous hematites, the minerals have formed a solid solu­

tion and cannot be separated by any degree of grinding. If the

ilmenite is intimately crystallized with the associated iron oxide

minerals it is then necessary to employ a chemical or pyrometal—

lurgical process in which the titania is recovered as a titani—

ferous slag.

The exploration, development and expansion of domestic mining

properties during the past fifteen years has proceeded at a rapid 52 pace* The major problem in supporting a vastly expanded output of

titanium metal would be the production of electrical energy rather

than exhaustion of domestic reserves of ilmenite* Rutile is not

available from any source to support such an expansion* Ilmenite or

manufactured titanium dioxide can be substituted at extra cost in

virtually all of the present applications of rutile and the remainder

can be supplied by domestic producers. The United States is the

world’s largest producer and user of ilmenite* The domestic ores

and concentrates branch of the industry is dominated by the two

largest producers. Roughly two-fifth of the world production of

ilmenite and rutile is produced by five foreign firms*

World Production and Resources

Estimated world production of ilmenite and rutile from 19U8

to 1952 is shown in table li** The tonnage of ilmenite and rutile imported by the United States for the years 1 9hS to 19$2 and the

ratio of imports to consumption for ilmenite and rutile is shown in

tables 15 and 16* India is the main foreign source of ilmenite.

Relatively small quantities have been imported from Norway, Canada, and Brazil. Australia has provided the greater part of the imports of rutile since 19Uh., substantial quantities being contained in

zirconium concentrates, and 100 percent of imports since 19ii9* TABU lit*-*or Id production of titaiiiua concentrates (11aanite and rutile).

by countries, 191*0- 5 2 , in aatric tonal/

(Coapilad by Lh S. Petersen)

r ...... ' t 1 * ■ • Country 191*8 r 191*9 1950 1951 1952

I la e n it e

Australia?/ ...... 1 1 ,7 5 6 9,881* 12,1*17 1 2 ,0 9 1 n r a s il ...... i*/7 ,9 0 0 650 a n e d a ...... ” 1**029 1*90 5 /3 ,1 7 7 5 /1 9 ,2 3 5 y 3 ^ 2 7 6 v* y p t...... 1 ,6 0 1 635 260 317 .e d ia ...... 233,098 3 1 3 ,1 2 6 216 ,0 7 6 223 ,0 9 2 j ? Malaya ...... 1 2 ,9 0 9 20,031* 25,315 y1* 1*, 191 U/22f7 0 ii6 Norway.* ...... 9 0 ,0 1 7 9 9 ,0 1 3 105 ,1 5 0 1 0 5 ,1 5 0 1 1 8 ,2 7 0 P o rtu g a l ...... 155 919 66 169 75 S e n e g a l...... 3 ,690 8 ,3 3 8 51*0 2 ,5 0 0 1**622 Spain...... l 8 l 376 637 837 1 ,1 1 0 "nited States...... 31*8,126 361*.989 1*21*, 851 1*86,099 1*79. 521* Total ilaenite 7 1 3 ,5 0 0 819,170 788,000 8 9 3 ,0 0 0 6 /8 9 3 ,0 0 0

R u tile

Australia?/ ...... 15,31.8 1 3 ,9 5 8 1 7 ,9 8 5 35,531* B r a s il ...... 8 / Krench Caaarnon...... 576 1*03 25 106 271. Krench Equatorial A frica.... 6 In d ia ...... 129 Norway...... 16 ^ 3 S e n e g a l ...... United States ...... 6 ,6 9 5 1 0 ,8 7 5 ?/ ??/ % Total rutile 22,71*8 25,500 j 25,300 1*2,000 6/1*7,000

1/ This table incorporates a nuaber of revisions of data published in previous titaniua chapters* ?/ Estieated ilaenite content of all ilnenite-bearing concentrates* "3/ Oats not available; astiaate by author of chapter included in total. £/ Exports. *>/ Includes titanion slag containing approximately 70 percent T102! see Canada under World Review. %/ E stim a te . 7/ Estimated rutile content of all rutile-bearlng concentrates. 5/ Kigure withheld in order to avoid disclosure of U.S. production by differences* see ~ footnote nine. •* j Kigure withheld in order to avoid disclosure of individual eowpany operation.

fore L»!n Minerals S tatistics Unit* Region IX* Bureau of Mines* May 13, 1953 5 5

TABLE 15* Importsi, consumption and : ratio of imports to consumption of ilmenite, United States, 191*5-52 A

19l*5 19U6 191*7 191*8 191*9 1950 1951 1952

Impo rts (1,000 short tons) 210 21*2 301 21*2 321* 216 189 181*

Consumption (1,000 short tons) 381 1*01* 1*80 565 511 679 713 683

Imports/Consump­ tion 0.55 0 .6 0 0.63 0.1*3 0 .6 3 0.32 0.27 0.27

TABLE 16. Importsi, consumption and i ratio of imports to consumption of rutile, United States, 191*5—52-1-

191*5 19 U6 191*7 191*8 191*9 1950 1951 1952

Imports (1,000 short tons) 11 6 13 9 1* 5 11 20

Consumption (1,000 short tons) 10 7 8 10 12 12 17 18

Imports/Consump­ tion 1 .1 0 0.86 1 .62 0.90 0.33 0.1*2 0.65 1 .1 1

^ Prepared in the Light Metals Branch, Bureau of Mines

Titanium resources which are minable at a p ro fit, assuming present prices, will last for a considerable time* The number of years which available ore reserves, estimated on this basis, will last is shown in table 17* This table does not include estimates from incomplete geological reports* 56

TABLE 17. P o te n tia l supply titanium ores (economic ore dep0B~ts in various geographical are*8/

iliniaiim Potential reserves supply (thousands o f (years)2 abort t o n s )

Continental United States .... Ui,58U 121

North America...... 82j133 223

Western Hemisphere...... 8 6 ,6 7 3 235

"Free World"^ ...... 601,306 1,630

^ For source, see table 19•

^ 1952 rate of titanium dioxide consusption

^ Excludes U.S.S.R. and China

Production of 100,000 short tons of titanium metal*1 per year

*- With current processing losses, this would represent no more than 65,000 tons of semifabricated metal Ung°t, billet, sheet, etc.) by the Kroll process would require iiO0*OOO tons of titanium te tra ­

chloride. Assuming th a t magnesium ^ c h lo r in e could be recycled

a t, respectively, 90 and 80 percent e ffic ie n c y , the titanium metal

industry would require th e annual amounts o f raw materials and power

shown in table 18, 57

TABLE 18. Estimated raw material and power requirements to y production of 100>006 snort tons o t ~ titanium metal per year by the Kroll process1

Raw materials Short tons

Titanium dioxide for chlorination ...... 170,000

Chlorine • • 60,000 (plus recycled chlorine)* ...... 21*0,000

Magnesium...... 12,000 (plus recycled magnesium) ...... 111,000

Power (kw ,-hr.)

Vacuum furnace ...... 600,000,000

Equipment operation ...... * ...... 600,000,000

Chlorine production ...... 150,000,000

Magnesium production ...... 200,000,000

Electrolysis of magnesium chloride,*..«,*,.1,800,000,000

Total...... 3,350,000,000

^ Computed from data made available by the Light Metals Branch, U.S. Bureau of Mines*

Although ru tile is used by the Titanium Metals Corp* of America for producing titanium metal, it is not available from any source in sufficient quantty to support an expanding titanium metal industry,

E. I, du Pont is using a mixture of titanium minerals obtained from working old beach sands in Florida* Any major expansion of titanium metal production must be premised on the use of ilmenite or titanium slag. The major problem in such an expansion would appear to be a bottleneck in the production of electrical energy rather than ex­ haustion of domestic reserves of these m aterials. 58

Table 19 shows the political control of known titanium reserves*

These reserve estimates are subject to the following qualifications:

(1) many estimates are inferred; (2) reserve data are lacking for

some of the large deposits, especially in the U.S.S.R.; (3) not all of the contained titanium in a given deposit may be recoverable under actual mining conditions; (li) an increase in the price of ore would increase the reserves by some corresponding amount. Some of these difficulties in estimating ore reserves are due to the

relatively short period in which these materials have been economical­ ly significant.

The only large deposits outside the free world are in the U.S.S.R.

Tonnage estimates of ore reserves shown in table 19 vary between wide limits. The larger figure would give the U.S.S.R. a greater

reserve potential than the United States. The smaller indicates that

only 1.2 percent of world reserves lie inside the Communist bloc

of nations.

Nature of the Demand for Raw Materials

Ilmenite, rutile, leucoxene, titanium dioxide slag and various

mixtures thereof, are marketed for use in a variety of end products.

The differences in desirable characteristics for titaniferous raw

materials, as used in different end products, have the effect of 2 dividing the market into a number of noncompeting groups. The

2 i.e., so long as current prices are maintained. TABLE 19 - Political control of titanium reserves*

Titaniferoua material Contained titanium dioxide ^ (thousands of short ions) (thousands of short tons) (percent) Free World: United States ...... 383,679 - 389,129 1*1*,581* - 1*7,589 7.3 B ritish Comnonwealth: Colonies and Protectorates: Tanganyika 1,3W*,000 170,688 27.9 Dominions: A ustralia...... Hi,579 5,311 0.9 Canada ...... 120,111 - 208,111 37,51*9 - 71,709 6.1 Ceylon ...... 6,1*00 2,800 0.5 India 5l,H*3 6,136 1.0 New Zealand ...... 21*7, 1*35 U,627 0.8 Union of South A fric a ,... 2,1*15,068 302,151 - 1*82,111 1*9.5 Total B ritish Commonwealth,...... 1*,198,736 * 1*,286,756 529,262 - 71*3,382 86*7 Other Free World: Madagascar ...... 3,887 1,01*5 0.2 Korea...... 2,535 507 0.1 Japan 1*1,632 3,539 0.6 Norway...... 5h,288 - 59,800 6,732 - 7,1*16 1.1 Sweden ...... 21*8,017 16,700 2.7 Finland 11,023 - 55,115 1,323 - 8,267 0.2 Total Other Free World ...... 361,382 - 1*10.986 29,81*6 - 37,1*71* 1*.9 Total ftee World ...... I*.91*3,797 - 5.087.151 ______603.692 -428,1*1*5 9t.f U.S.S.R. and Satellites: . Russia...... 100,890 - 1*1*1,677 7,195 - 66,792 1.2 China ...... 21*3 27 0.0 Total U.S.S.R. and S a te llite 101,133 - 1*1*1,920 7.222 - 66,819 1.2 Total World Reserves ...... /.V ...... ; F.fliCTO - 5,53,071 ...... "SIETO - Bgfoa* ------1TO.P a. these estimates of reserves exclude Malaya, Senegal, French Cameroon, French West A frica, b ra iil, Egypt, Portugal, and Spain, which in 1952 reported production of ilaenite and/or rutile. Reserve estimates are nob available for these countried, b. Estimated from smaller figure in each case. c. Difference due to roundiig SOURCE: Compiled by the U.S. Geological Survey in January 1951* for the "Materials Survey-Titanium." 60 nature of these markets is best illustrated by listing the desirable properties for ores and concentrates for use in the manufacture of

titanium tetrachloride, pigments, alloys and carbides, and welding * rod coatings*

Use in titanium tetrachloride

Titanium tetrachloride is manufactured by passing chlorine

through a mixture of finely ground ore and a carbon reductant such as coal or coke* Production of titanium metal excepted, the major uses to which the commercial titanium tetrachloride is put do not require purification. Iron, vanadium and similar impurities may be precipi­

tated from this product by treating with hydrogen sulfide at 100°C*

The concentration of silicon tetrachloride and other light gases can be reduced to less than 0.01 percent by means of fractional distillation. Silicon content, which has a significant effect upon the ductility of titanium metal, cannot be completely controlled by any known physical or chemical method. Nonvolatile impurities are easily removed by distillation*

A few producers of titanium metal have indicated that they could process either high-titania slag or ilmenite to produce titanium tetrachloride; however, except for one company using a mixture of ilmenite, leucoxene and rutile, the others are basing present production plans on rutile. The technology for use of rutile is known. The price differential between ilmenite at $18 to $20 per ton and rutile at $100 per ton is only a small factor in the present 61 production cost of titanium metal. Producers undoubtedly prefer to start with a higher-grade raw material, thereby bypassing the addition of a new problem to the many already involved in the production of a new metal.

The major requirements for a titanium mineral to be used in producing titanium tetrachloride may be summarized as follows:

1. Ease in grinding. While not eliminating any

commercial sources, this does place Sorel slag and other

materials at a definite economic disadvantage. Diffi­

culties have been encountered by at least one firm in

grinding Sorel slag*

2. Low silicon content. While not actually eliminating

any commercial sources, i t does place a burden on the user.

3* Low iron-titanium dioxide ratio. This eliminates the

Canadian ores (but not the Sorel slag) and places many mineral

deposits in the submarginal class. Rutile is for this reason

especially desirable since separation of large quantities of

ferric chloride, obtained by chlorinating minerals with high

iron content, poses a number of engineering problems. The

byproduct does not at present find a large market or command a

satisfactory price, as shown in table 20. 62

TABLE 20. Production, ahlpmentsj value a n d estimated average price of* f% B arrlc i chloride, Uni tea States, 1 ^ 5 0 —1 9 5 2

Production Shipments Average price Tear (short tons) (short tons) Value per ton^

1950 20,358 19,1*32 $1,1*89,000 $9.92

1951 21,210 20,1*73 1,536,000 9.92

1952 25,71*1 21*, 812 2,067,000 9.92

Bureau of the Census, Facts for Industry, R e p t . M-19-A. Inorganic Chemicals and Gases: Government mnting u m c e , Washington, D.l’., 1352.

Estimated by dividing "value" by "shipments” *

Use in Pigments

The oxide pigment results from a process w iiich employs an acid solution of titanium sulfate. Minerals used f o r pigment manufacture by the sulfate process, currently employed by a l l the manufacturers of titanium pigments, must therefore be s o lu b le in sulfuric a c id .

Futile and leucoxene are insoluble in sulfuric acid and therefore unusable for sulfate titanium pigment manufae t u r e .

The sulfuric acid used in dissolving th e -titanium also dissolves the iron present in the titanium mineral. Th® second step in manu­ facture is the reduction of ferric iron to f e r r o u s iron to perm it removal by recrystallization of ferrous sulfa-fce* Reduction i s ac­ complished by adding scrap iron, which goes i n t o solution, increas­ ing the iron content of the solution above t h e level directly ob­ tained from the mineral. 63

The amount of titanium sulfate, ferrous sulfate, and combina­

tions of the two which may be held in sulfuric acid solution is

limited. There is also a minimum concentration of titanium sulfate

below which the titanium is unstable and will separate, ruining the

solution for pigment manufacture. With a limit to total titanium

and iron and approximately equal recovery of the two

metals from minerals to solution, the level of titanium concentra­

tion is therefore determined by the iron present in the mineral.

Some portion of all commercial titanium minerals is insoluble

in sulfuric acid. This insoluble gangue must be completely separated

from the solution of titanium sulfate, so as not to discolor the white pigment precipitated from the solution. The titanium sulfate which wets the gangue must be separated with a minimum of acid wash­

ing so as to avoid loss of valuable titanium. A necessary charac­

teristic of the titanium mineral is that i t be low in gangue content

and that the physical characteristics of the gangue minerals be such

that they separate readily from the titanium-iron sulfate solutions.

The presence of soluble salts of chromium, vanadium or other

elements may of itse lf make a mineral unsuitable for pigment produc­

tion. These discolor the pigment and make i t unsalable.

The major requirements for a titanium mineral to be used in producing titanium pigments may be summarized as follows:

1. Solubility in sulfuric acid. This eliminates rutile

and leucoxene.

2. Low iron-titanium dioxide ratio. This eliminates the

Canadian ores (but not the Sorel slag) and certain 6k

sands such as the New Zealand, and places many minerals in a

submarginal class*

3* Low gangue content* While not actually eliminating any

commercial sources* it does place a burden on the user*

Low content of chromium* vanadium and other soluble

impurities* The high-chromium content of Australian ilmenite

stakes i t unsuitable for pigment use*

Use in alloys

High-carbon ferroalloys are produced in an electric furnace from a mixture of ilmenite* rutile and steel scrap* The major barrier against the use of ilmenite in preference to rutile is the additional cost of reducing the iron contained in the ilmenite*

While technically possible* substitution of ilmenite would entail a cost increase in the neighborhood of $0 to 75 percent*

Rutile is currently used for producing low-carbon ferroalloys, nickel titanium and titanium carbides. Pigment-grade titanium dioxide could* however* supplant rutile in these uses* It is estimated that the substitution would roughly quadruple the raw material cost* which represents more than 25 percent of the total*

Hence* this would represent a minimum increase in total cost of

75 percent* Rutile is an essential ingredient of aluminum alloys* although the quantity used in this manner is insignificant*

Use in welding rod coatings

In general* rutile* ilmenite or other natural minerals* such 6$

as calcium titanium silicate and calcium , are employed as

a source of titanium because of low cost; but there are some applica­

tions which demand an arc stabilizer of a fineness attainable only

by the use of the chemically precipitated oxide* Of the impurities

normally present in rutile, only phosphorus and sulfur are likely to

give trouble, and their proportions are well within the limits of

most specifications. Measurements have shown that 1 percent of the

sulfur and 6 percent of the phosphorus contained in the original

composition are lost in the arcing process. Calcium titanium

silicate furnishes an economical source of titanium dioxide, and

preliminary tests indicate that it will give a quieter arc and a

more brittle and easily fusible slag, although rutile remains the

principal raw material for this purpose*

Each manufacturer develops his own particular formula for

flux coatings, which is generally not made available to the industry.

Specifications for titanium minerals to be used in welding rod

coatings are therefore not readily available*

Ores and Concentrates Branch

Nine domestic firms produce ilmenite and/or rutile or titani-

fercus slags in commercial quantities. Five of these operate within the continental United States: Baumhoff-Marshall, Incorporated,

Ada County, Idaho; E. I. du Pont de Nemours and Company, Bradford

County, Florida; National Lead Company, Essex County, New fork, and

Duval County, Florida; Continental Mineral Processing Company, Brevard County, Floridaj and American Cyanamid Company, Nelson County,

Virginia. All of these except Baumhoff-Marshall and Continental

Mineral Processing are large users of ilmenite and rutile.

The six American firms with foreign properties all operate

through subsidiaries. These include Kennecott Copper Corporation and

New Jersey Zinc Company (Quebec Iron and Titanium Corporation,

Canada); Metal and Thermit Corporation (International Titanium

Corporation, Australia); National Lead Company (Titan Company,

A/S, Norway; and Titanium Alloy Manufacturing Company, Pty., Ltd.,

Australia); Yuba Consolidated Gold Fields (Portuguese-American Tin

Company, Portugal); and E. I. du Pont (Travancore Minerals Company,

Ltd., India).

Two firms, National Lead Company and E. I. du Pont de Nemours, produce approximately 65 percent of the annual domestic mine produc­

tion of ilmenite and more than 90 percent of the annual domestic mine production of rutile. The six domestic producers are listed in table 21 in the order of their 1952 production.

Between 30 and U0 foreign firms produce titanium minerals.

Only six of these have an annual capacity of more than 10,000 metric

tons of ilmenite concentrates and/or rutile; Hopkins and Williams,

Ltd., (India); New South Wales Rutile Company, Pty., Ltd. (Australia)

F. X. Pereira and Sons (India); the Titanium Corporation of South

Africa, Ltd. (Union of South Africa); Travancore Minerals Concerns

(India); and Otanmaki Oy (Finland - commenced operations in 1953).

A large Ilmenite mine in Norway is owned and operated by Titan TABLE 21 - Domestic producers of titanium minerals

Capaoity Reserves (short tons of (short tons of concentrates titanium Producer Location of property per year) contained) Remarks National Lead Co, Tahawus, Essex Co., 21*0,000 (ilm .) 2,1L0,000 Mine, m ill and H*Y, plant. E. I . du Pont da Starke, Bradford Co., 100,000-500,OOO1 5,2ao,ooo Worked by Humphrey Nemours Fla* Gold Corp* Rutile Mining Co, Jacksonville. Duval Co., 10,000-50,000 (ilm.) of Florida Fla. 5,000-10,000 (rutile) 550,000 Subsidiary of Nation­ al Lead Co* Addi­ tional reserves have been explored with government assistance. American Cyunamid Piney River, Nelson Co., 10, 000- 50,000 (ilm .) 2,2(00,000 Co, Va. Yadkin & Caldwell Co., N. C* 10, 000- 50,000 (ilm .) n. a. Mine closed in Ilmenite Co* October 1952 Baumho ff-Ma ra ha ll, Cascade, Ada Co., Idaho 10,000-50,000 (ilm.) n* a* Inc* TABLE 21 - (continued) « Capacity Reserves (short tons of (short tons of concentrates titanium Producer Location of property per year) contained) Remarks Florida Ore Vero Beach, Brevard Co., 1,000-10,000 (ilm.) 26,000 Operated by conti­ Processing Co. Fla. 1-1,000 (rutile) nental Mineral Processing Co. and Hobart Mfg. Co. Separation plant is at Melbourne, Fla. Idaho Titanium Weiser, Washington Co., n. a. n. a. Obtains concentrates Co. Idaho from the A & D Dredging Go. American Mining & S t. Augustine, Fla. p ilo t only n. a. Holds mineral leases Development Co. along 100 miles of Florida Coast. n. a* not available, * Produces a mixture of ilmenite and altered ilaenite, rutile and leucoxene. SOURCE: See Table 19 end Turkanis, U. M. "Titanium Reserves and Resources" Lynn, Mass.: General Electric Co., 1953*

Os OD 69

Company, A/s, a subsidiary of the National Lead Company. Estimated

production in 1952 of the first five of these is shown in table 22*

TABLE 22* Estimated production of five large foreign producers of1 ilmenite and rutile in thousands of short tons and as a percent of estimated world production, 1952*

Company Ilmenite Percent Rutile Percent

Hopkins and Williams (India).. 158 16.0 0 0 N.S.W. Rutile Mining Co* (Australia)...... 20 3.0 LO 77.8 F*X. PeieiI'd (India) *...«...** 80 8.1 0 0 Titanium Corp* of S. Africa... 17 1.8 1 2.6 Travancore Minerals Concerns ( India) ...... 161 16.3 _0 0

Total...... ii36 Ui.3* la 80.1( World total ...... 981: 100.0 52 100.0

* Difference due to rounding Source: Compiled in Light Metals Branch, U. S. Bureau of Mines

Three mining firms operating abroad are known to be incorporated in countries other than the United States or the country where their

operations are located, or owned in part by nationals of other

countries. These are Hopkins and Williams, Ltd., incorporated in

Great Britain and operating in India; Consolidated Zinc Corporation,

Ltd., incorporated in Great Britain and operating a subsidiary in

Australia, Titanium and Zirconium Industries, Pty., Ltd.; and

Ventures, Ltd., incorporated in Canada and operating a subsidiary in Australia, the International Titanium Corporation. The latter is owned jointly with the American Rutile Corporation*

Exploitation of a new ore body in central Florida is notable as an example of recent Government policy in promoting the exploration 70

and development of raw materials• Investigation and drilling by the

U.S. Bureau of Mines in 19^8 outlined a deposit of ilmenite and a

mixed product containing altered ilmenite, leucoxene and rutile near

Starke, Bradford County, in north-central Florida. In the follow­

ing year, the DuPont Co* leased six square miles from the state of

Florida and engaged the Humphreys Gold Corporation to erect a dredge*

The firs t shipment of ore was made in 19U9. In September 1953 i t was

announced that DuPont would erect a second plant near Lawtey, Brad­

ford County, Florida. The schedule calls for commencing dredging

operations by early 1955* (Participation of the Defense Minerals

Exploration Administration in the exploration of sand deposits in nearby Duval County, Florida, is described in Chapter VI, ”Public

Policy and National Defense").

The present structure of the industry results both from a con­

solidation of independent producers and the development of new products within the various departments of a small number of large

integrated firms* The history of the pigment branch of the industry

shows a particularly large number of consolidations* Separate treat­ ment of the organization of each of the five component branches

should not obscure the fact that the same firms or their subsidiaries are preeminent in more than one branch* None of these, with the possible exception of the fabrication branch, shows any real prospect of entry by a large number of firms, which could provide the structural basis for "traditional competition". The fabrication branch, which exhibits the greatest growth potential, is at present dominated by four semifabricators. The two largest semifabricators are affiliated with the two largest domestic producers of ores and concentrates and of pigments, one of which is also the largest producer of alloys. V. TAXATION, ANTITRUST AND TARIFF POLICY

Depletion Allowances

The Problem

The term Mpercentage depletion" refers to provisions of state

and federal income tax laws which allow special exemptions to

mining and oil companies, by way of compensating for the destruc­

tion of their underground assets in the process of production.

The federal statute provides that owners of such "wasting asset"

enterprises have the option of (a) setting up depletion schedules

on the basis of the cost of the mine or oil well (which is the way

the tax base is defined in all other industry) or (b) deducting a

flat percentage of their annual gross income as a depletion allow­

ance, Percentage depletion is allowed under the Federal Internal

Revenue Code as follows: gas and oil lands, 27-1/2 percent per 1 2 year; metal mines and 33 additional minerals, 15 percent}

1 Dates from R even u e Act of 1926 (PL 20, 69th Congress, 1st sess.), o Dates from Revenue Act of 1932 (PL 15U, 72nd Congress, 1st sess,)*

coal and 8 other minerals, 10 percent;^sulphur, 23 p e r c e n t ; ^

3 See footnote2 (and see below)* ** See footnote3.

13 additional nonmetallics, 5 percent,'*

^Three nonmetallics were removed from the 5 percent bracket by Revenue Act of 19U2 (PL 75>3> 77th Cong., 2d sess,); ten more, by Revenue Act of 19U3 ( f t 235, 78th Cong,, 2d sess.); and ten, by An Ac7'to terminate

72 73

Certain Tax Provisions, 19U7 (PL 381*, 80th Cong., 1st sess#)# All of these exceptions were at the rate of 15 percent# Under the Revenue Act of 1951 (PL 183, 82nd Cong., 1st sess.) the rate for coal and certain nonmetallies was raised from 5 percent to 10 percent. About 50 minerals are covered at the present time; but depletion is al­ lowed only for the use specified. Ilmenite would receive, for example, an allowance of 15 percent, 5 percent, or nothing if used in the production of titanium metal, as gravel, or in the manufacture of pigments, respectively. Under House Resolution 8300, passed in Uarch 1951*, metal mines would receive the full 15 percent except if the product is used in concrete aggregates, road material, ballast, rubble, rip-rap "or for similar purposes."

If the percentage-depletion option is chosen, the allowance may not exceed 50 percent of net income before depletion in any one year; but it may be deducted as long as a property yields income, even though the owner may have received, tax-free, several times the amount of his original investment or its discovery value. Taxes on the balance of net income may be avoided by reinvesting in "develop­ ment" operations - i.e ., drilling holes, sinking shafts, and extract­ ing ore - and offsetting these expenses against income. This privi­ lege is enjoyed only by investors in mines and oilfields who are allowed to "expense" their outlays on mineral development against income from any source whatever. All other business must charge ex­ penditures, made during a year for assets which have useful lives extending beyond the year, to a capital account pertaining to the specific asset in question# Such a capital expenditure may not be offset against current income but is to be recovered over the life of the asset by amortisation schedules established by statute,^

^ Internal Revenue Code, sec, 29 (Commerce Clearing House, Chicago, I1T75 7U

The importance of these tax advantages is greatly enhanced by two other aspects of our federal tax structure. The first is that during World War IX and the Korean War the extractive industries were

sheltered from the effects of the excess profits tax. This was ac­ complished in four ways: (1) by exempting income derived from sale of a mineral which is declared to be strategic by appropriate de­ fense agencies - a total of 27 items at the end of 1951 (2) by partially exempting all Government subsidy and bonus payments to extractive industries; (3) by partially exempting income "from in­ creased output;" (4*) by partially exempting the income of "new, reactivated, or submarginal properties. n Internal Revenue Code, secs, 4*50-i*f>3 (as amended by Excess Profits Tax Act of 1950, See also Eldridge, D. H., "Extractive industries and the Excess Profits Tax* National Tax Journal, Lancaster, Penna,, XVI, No, ii, December 1951* The fixcess Profits fax was in effect from June 30, 194*2 to Dec, 31, 194*7 and from June 30, 1950 to Dec, 31, 1953.

The third important tax benefit received by miners and oil­ men stems from the fact that such a large share of production is undertaken not for the purpose of obtaining high current dividends for stockholders, but rather in the hope of increasing the value of tiie stock so that i t may be sold for profit. Informed miners would place this motive at the head of all incentives for developing metal- mining properties, except in the case of the very largest concerns.

And earnings from the sale of stock, even after the deduction of carried-forward losses, are taxed at the maximum long-term rate, o only 2$ percent of the net gain* This is of minor importance to 75

O Internal Revenue Code, sec, 33, the large integrated concerns responsible for the greater part of titanium minerals output; but i t may be important if the industry continues to grow.

With today's high corporate-income taxes, i t is important to bear in mind the powerful effect of tax differentials in attract­ ing capital into an industry. High depletion allowances and other incentives have the effect of supplementing or substituting for the o invisible hand of the price mechanism. National and state tax

^ Eldrldge, D. H., "Tax Incentives for Mineral Enterprise,* The Journal of Political Economy, XXXII, No, 2, June 1950, pp, 226-229, policies now greatly affect both the differential rates of growth of various industries and the economic development of different regions within the United States, In the metal-mining areas of the

Mountain West and in the oil- and sulphur-rich Gulf Coast States, industries receiving depletion allowances pay over half the state and local taxes’^ and support a large amount of subsidiary economic activity,

^ In Texas, Oklahoma and Louisiana, for example, the petroleum in­ dustry alone carries from 50 percent to 61 percent of the state budget, in addition to its contributions to local government.

The depletion-allowance question is obviously a crucial one to a majority of the people in these areas. A healthy skepticism regarding percentage-depletion rates might be expected from all other taxpayers, particularly persons receiving income from manufacturing and commercial enterprises.

The loss of revenue to the Treasury through this channel has un­ doubtedly resulted in higher rates on everyone e lse ,^ Criticism of

At today's rates, the Treasury estimates this loss to be $U00- ♦500,000,000 annually, (Statement by Secretary Snyder before the House Committee on Ways and Keans, Revenue Revision of 1950, Hearings - 8lst Congress, 2d sess.) p, lb, 6tKer estimates of the difference in taxes which corporations and individuals would have to pay if percentage depletion were not available to them are sub­ stantially higher, (See The President's Materials Policy Commission, Government Printing Office, Washington, D,C*, Resources for Freedom: Vol. V, June 1952, p, lii. See also House Interstate Commerce Com- mittee, 83rd Cong,, 1st sess., 1953- The latter study shows the 1952 write-offs in a few specific cases: Phillips Petroleum, $33*033,000; Standard Oil of California, $61*,328,000; Socony-Vacuum and two affiliates, $U5*l81*,000; and Humble, $88,U80,000,) Such figures are not available for all firms affected by depletion allow­ ances, Without access to financial records it would be impossible to compute the effect on the titanium industry. excessively high depletion allowances can also be made from the economic point of view. It would be wasteful to develop mineral deposits at a faster rate than is consistent with the development of an integrated national economy, as defined by price-cost relations in different fields of endeavor. It is in the national interest to allow minerals to lie in the ground if they can be imported more cheaply than they can be extracted, and it is better to develop 12 low-cost ore deposits and oil pools first and high-cost ones later.

The national security aspects of this point of view are discussed in the Report (See footnote 11, pp. 137-1U9 and elsewhere). The only 77 presumption which may be firmly maintained in this respect is that with regard to use and development of resources, the practice of economy is particularly necessary under the conditions of total war.

Pressure Groups and Policies

In his special tax message to Congress on January 23, 195)0,

President Truman noted that:

. . excise taxes are s till at substantially their wartime levels. Some are depressing certain lines of business. Some burden consumption and fa ll with particular weight on low- income groups. S till others add to the cost of living by increasing business costs ... I recommend that excise taxes be reduced to the extent, and only to the extent, that the result­ ing loss in revenue is replaced by revenue obtained from clos­ ing loopholes in the present tax laws."^

^ S. Doc. No* h$1, 8lst Cong. 2nd sess. p. 2.

In the message the President made a strong case for lowering the depletion exemptions. "I know of no other loophole in the tax laws so inequitable," he said. In support of Mr. Truman's message,

Secretary Snyder and other Treasury officials devoted many hours of testimony in February 1950 before the House Ways and Means Committee and the Senate Finance Committee. The opposition of the Treasury

Department to exceptional depletion provisions is a long-standing one, dating from at least 1930.^ In 1950, Secretary Snyder

^ Joint Committee on Internal Revenue Taxation, Depletion of Mines, Hearings (71st Cong. 3rd sess. 1930) pp. 10l|ffj House Committee on Ways and Means, Tax Evasion and Evaders, Hearings (75th Cong., 1st Sess. 1937) P« 5; Mouse Committee on Ways and Means, Revenue Revision of 191*2. Hearings (77th Cong., 2nd Sess.) p. 7ffj Senate Finance Committee, Revenue Act of 19^3> Hearings (78th Cong., 1st sess. pp. 66-68). 78 testified in favor of cutting depletion for oil, gas and sulphur to 1? percent, and for nonmetallic minerals to 5 percent. He also suggested that the deduction of capital costs from income be stopped."^ The Committee, after hearing much testimony from oil

^ House Committee on Ways and Means, Revenue Revision of 1950 Hearings (8lst Cong. 2nd seas.) p. 18. producers and politicians from the South and West, reported un­ favorably on the suggested changes*^

House Committee on Ways and Means, Revenue Bill of 1950* Report* I t is of interest that the only testimony heard at that time against depletion allowances, with the exception of Treasury personnel, was a one-page communication from the National Fanners Union.

The President expressed his dissatisfaction with the depletion provisions of the revenue b ill as he signed it into law.^? The next

The Kew York Times, Apr. 13, 19f>0. The concessions of the 1951 Act also left him disappointed - see Engineering and Mining Journal (New York, November 1951) P* 108. year the fight was renewed by the Treasury to obtain a reduction in X8 depletion allowances. The pressure on Congress by oil and mining

1® Secretary Snyder before the House Committee on Ways and Means, Revenue Revision of 1951* Hearings p. 13« See also the Presidentfs Message on Increased Taxation (H. Doc. no. 53* 82nd Cong. 1st sess.) Jan. 5, 1952, p. U. interest^ at that time led to a greater amount of publicity} but 79

See Congressional Record LXXXVIII - 191*2 (77th Cong, 2nd Sess.) pp. 8017f f •

but the Treasury's proposals were not incorporated in the

Committee's report. One pamphlet by Senator Hubert Humphrey, former

Executive Secretary of Americans for Democratic Action, has had 20 wide circulation. Time published a story on actors and actresses

Humphrey, Hubert, "Tax Loopholes” (Preface by Senator Paul Douglas, public Affairs Institute, Washington, D. C., 1952),

in high income brackets who had become operators of oil and gas 21 wells in order to avoid payment of income taxes on their salaries,

^ Time, ”The Hollywood Wildcats”: LVI, October 1951* PP# 93-9U.

The Republican Administration has not officially stated its views

on the matter.

Conclusions

The earliest tax law under the Federal Income Tax Amendment provided for a "reasonable allowance, not to exceed $ percent of 22 gross income, for wasting mineral assets,” The allowance has

22 Revenue Act of 1913 (PL $8 62nd Cong. 2nd sess,). been increased in some cases to over five times this amount. The 80 United States Supreme Court has decided that:

"The deduction is to be regarded as a return of capital, not as a special bonus for enterprise and willingness to assume risks."^3

^ U.S. Reports, United States v. Ludley: Vol. 2Jk, p. 295. The litigation concerning depletion allowances covers many volumes.

The contribution, in effect, of half a billion dollars per year to these industries is nevertheless a powerful incentive for the move­ ment of resources into primary mineral production. In addition, * wealthy individuals have been furnished with a ready means for avoid­ ing their share of the tax burden. The New Republic has been un­ comfortably explicit on this point:

" It's fun these days to watch America discovering that i t has a fabulous new crop of Morgans, Rockefellers and Camegies — the oil primitives of Texas. Nearly every day some newspaper starts another series about them. McCarthy—loving H. L. Hunt and his "Facts Forum" put them on the map. Hunt is supposed to be the richest man in America, and is n 't even in "Who's Who." These oil barons are the offspring of the tax loophole, the so-called depreciation allowance that lets them pile up their tens of millions of profits with favorable Treasury treatment. For 25 years every Secretary of the Treasury— until the present Administration—has asked that this loophole be plugged. But the oil power in Congress is enormous: i t contributes heavily to campaign chests, i t helps swing Texas to the Republicans, i t gets its reward in quick passage of the off-shore oil b ill, backed by Eisenhower. Does the present Administration oppose the oil depletion allowance? I t doesn't know; it is making an investigation; tell you after the election."

2k New Republic, Mar. 1, 195b* p. 2.

In view of these far-reaching consequences of the present provisions for depletable property, it should be remembered that they have grown out of a series of ad hoc measures, reflecting

strong pressures on Congress* Serious issues of fact have yet to

be faced by lawmakers and by the public* In the first place, the

type of inexpert and undoubtedly partisan testimony heard in

Congressional committee hearings does not tell us how the per­

centages allowed have in the past compared with actual depletion

of ore and petroleum reserves in different mineral industries*

In the second place, the Committee hearings have been focussed

solely upon the discovery and exploitation of exhaustible resources, with little attention being paid to other practicable means of

improving the national mineral position* Depletion allowances do

not ensure more complete recovery of the product from the crude

mineral; they do not facilitate efforts at reclamation and

secondary use; and they in no way promote the development of direct

and indirect substitutes for minerals*

The obvious direct substitutions— coal for natural gas, magnesium for aluminum, etc* - do not begin to solve the problem*

Improvements in petroleum refining, tin plating, and steel alloy­

ing have resulted in large savings in crude oil, tin, and iron con­

sumed; and there are numerous technical possibilities at this stage*

Indirect substitutes run the entire gamut of our industrial life:

more efficient automobile engines, oil burners, and insulation

for homes are just as important in this respect as expanded

petroleum reserves* The development of the titanium metal branch

of the industry, relieving the strain on critical iron and

reserves, is a clear case in point* Finally, there has been no attempt to integrate and graduate

special incentives for production according to the urgency of defense requirements. Reconsideration of special tax treatment with the aim of discovering criteria for setting percentages to be allowed is clearly necessary. Excessively high allowances, which stimulate mineral extraction in preference to all other phases of processing and fabrication, should be reduced.

Recommendations

In order to carry on rate revision under conditions as free as possible from political pressure, it will very likely be necessary for Congress to delegate this power to an administrative agency.

The enabling act might provide for escape clause relief to produc­ ers whose profit position would be seriously affected during the period of adjustment. A more attractive alternative would be to authorize the commission to grant temporary subsidies in such cases.

The agency might also grant subsidies to producers of minerals in critically short supply, although the Defense Minerals Exploration

Administration is also active in this connection.^

_ , , . „ .. The D.M.E.A. was established in November 1951* Its purpose is to encourage exploration for indicated or undeveloped sources of critical minerals by furnishing financial aid to private enterprise on a participating basis of either 50 or 75 percent of the costs of an approved exploration project, depending upon the mineral sought. As of Feb. 28, 195U* a total of 2,078 applications had been received from the mining industry and 627 of these had resulted in exploration contracts for projects in 31 states and Alaska in­ volving a search for 28 different minerals. Government participa­ tion in these contracts totals $l8,Ult3>29lt as against industry participation of $11,72U«9U5* 83

The arguments for such a change appear to be overwhelming*

How, for example, is a body of legislators to decide upon such questions as the difference between the depletion of small, vein-

type metal mines and open-pit operations which are blocked out and planned for 2$ years or more in advance? The two are treated equally under present lawsj and uniformity of treatment is obviously what is not needed* Under what circumstances is i t advisable to encourage or subsidize the production of natural gas in view of

the possibility of gasification or liquefication of bituminous

coal; under what circumstances is a policy of importing and/or

stockpiling to be pursued at the expense of long-range exploration and development at home? In which cases are the obstacles to utilization of plentiful low-grade resources in the preliminary extractive stages and in which, in metallurgical processes and later stages of production?

Congress could perform no greater service than to abandon the field in favor of an organization charged with continuous re­ appraisal of the situation on an industry-by-industry and even a mine-by-mine basis* From an administrative point of view, this agency would probably function most efficiently as a branch of the 26 Bureau of Internal Revenue in the Treasury Department,

25------For a more comprehensive discussion of proposals for such an organization, see Uasson, Francis G., The Premium Price Plan (Unpublished thesis, Ohio State University, Columbus, Ohio and Washington State Institute of Technology, Pullman, Washington, 1951) PP. 117-139. 8U

The Pigment Case

The Problem

The United States Department of Justice brought suit in 19hli against the National Lead Company, its wholly—owned subsidiary, the Titan Co., Inc., and E. I* duPont de Nemours and Co. Seventeen foreign corporations were named as co-conspirators; but they were not made defendants. In its Statement of Complaints, the Government attacked the method employed by the two pigment cartels of control­ ling the use and development of patents, alleging that this led to a direct restraint on trade by making i t impossible for new firms to compete on equal terms with the two cartels. The Govern­ ment asked for divestiture by National Lead, Titan Co. and DuPont of all patents which they controlled; and divestiture by National

Lead and Titan Co. of their financial interests in British Titan

Products Co., Ltd., Canadian Titanium Pigments, Ltd., Titangesell- schaft, m.b.H., and Titan Kogyo, K*K. The case, limited in scope and well prepared, was decided within less than a year and brought through the Supreme Court in 19ii7.

The patent aspect of the case caused relatively little diffi­ culty, although the defendants denied all charges. The situation was shown to have developed as follows: Several important patents on processes for manufacturing titanium pigments were taken out before 1920 by A. J. Rossi, L. E. Barton and others in the United

States. At approximately the same time, Gustav Jebsen, a Nor­ wegian chemist, had perfected similar processes and patented them 85 in Norway, the United States, England, Germany and other countries*

The patents on which National Lead's titanium business - and that of the cartel which i t headed - was founded were Barton-Rossi and

Jebsen patents*

In 1922, Joseph Blumenfeld, a chemist and managing director of Societe de Produits Chimique3 des Terres Rares, obtained patents relating to the manufacture of titanium compounds which he took out in a number of countries and assigned to Terres Rares. The

Blumenfeld patents issued in the United States and were licensed to the Commercial Pigments Co. and later to DuPont*

In 19Uli, at the time of the antitrust action by the United

States Department of Justice, patents were distributed among the major domestic pigment producers as follows

Patents and Patents owned or controlled applications ______which Co. is U.S* U.S. patent Foreign patents licensed to use patents applications & applications

National Lead 2 kS 75 28 3 Krebs — 30 2k - DuPont 123 17U 32 10k

27 Source: Compiled from Findings of Fact and Conclusions of Law: Civil No. 26—258, District Court of the tfn£ted States for the Southern D istrict of New York, Oct* 2, 19U5*

These patents did actually cover all phases of ore processing and pigment manufacture} and i t is difficult to imagine any firm operating in the field without the danger of some sort of infringe­ ment* In the language of the Court: 86

"The defendants National Lead and DuPont secured a monopoly on technical information relating to the manufacture and use of titanium pigments and certain apparatus and equip­ ment necessary to the manufacture of certain titanium pig­ ments, to the exclusion and detriment of other producers now engaged in the titanium pigment business in the United States; when National Lead and DuPont ceased exchanging technical information the titanium pigment business was a mature industry."28

See footnote 27. Italics the author's.

In tht final decree, the court ordered each of the defendants

(National Lead Co.; Titan Co., Inc.; and E. I. DuPont de Nemours)

to:

"Grant to any applicant therefore, incloding any defendant or co-conspirator, a nonexclusive license under any or all of the patents as herein defined^9 at a uniform, reasonable royalty. Such grant may, at the option of the licensor, be conditioned upon the reciprocal grant of a license by the applicant, at a reasonable royalty, under any and all patents covering titanium pigments or their manufacture, now issued or pending, or issued within five years from the date of this decree, if any, owned or controlled by the applicant . . . the Court reserves jurisdiction to pass upon the reasonableness of any royalty or charge herein directed to be reasonable."30

29 I.e., "The letters patent and patent applications listed (referring to the above-mentioned patents owned or controlled by the defendants); all divisions, continuations, or re-issue of any of the foregoing patents and applications; all patents issued upon such applications; all patents which cover any titanium pigments or any process for the manufacture of titanium pigments issued to any of the defendants within five years of this decree (i.e ., until Oct. 11, 1950); all such patents which any of the defendants acquires within such five years, and all such patents of which any of the defendants becomes the exclusive licensee within such five years with power to sublicense."

Final Decree: Civil No. 26-258, District Court of the United States for the Southern District of New York, Oct. 11, 19U5* 87

The court had ample precedent for such action In the

Hartford-Emplre and United Shoe Machinery cases, which were cited in the decision handed down by the Supreme Court in 191*7* (63 Fed*

Supp. 513 and 332 U. S. Reports 319) Supervision of patent licen­

sing, in the manner described above, was returned to the New York district court* All privileges (such as limiting the production or preventing the exportation of titanium pigments as a condition for granting a license) have been forbidden. In a recent interview with an official of DuPont, he was heard to preface a remark with

"Back in the days when we had patents, ..."

The Government received less satisfaction from the Supreme

Court with regard to the divestitute proceedings. National Lead and Titan Co., Inc., were compelled to sell their entire stock interest in British Titan Products and Titan Kogyo. Shares of stock

in the British firm were accordingly sold on January 5, 19U8, to

Imperial Smelting Corp., Ltd., Goodlass Wall and Lead Industries,

Ltd., and R. W. Greeff and Co., Ltd. None of these firms were at

that time producing titanium pigments* Equity in the Japanese firm was disposed of in February 1953» to Japanese companies.

National Lead requested permission to purchase the remaining

in terest of Canadian Industries, Ltd., in Canadian Titanium Pig­

ments, Ltd. As National Lead already owned a portion of this firm,

th is would give 100 percent ownership and control. Permission was,

however, granted ; and this was accomplished in January 191*8* The

firm does not manufacture pigments but markets them throughout

Canada. National Lead also successfully defended its right to retain

the $ 0 percent interest which Titan Co., had in Titangesellschaft.

In August 1951, seven years after the case was first brought into court* National Lead succeeded in obtaining the permission of the court to purchase the SO percent interest of I, G. Farben in Titan­

gesellschaft, thus achieving control over the Leverkusen plant.

Although production statistics are a trade secret; i t is known that

Titangesellschaft is by far the largest producer outside the United

States.

Conclusions

The case had only a minor effect with regard to lessening the

degree of industrial concentration in the world economy; but there was some change within the United States. New entrants in 19lil* were the Glidden Co.; which purchased National Lead's interest in

the American Zirconium Corp.; and the American Cyanamid Co., which purchased a plant at Piney River, Va., from the Virginia Chemical

Corp. This plant had been producing titanium pigments since 1937

and selling its entire output to the Interchemical Corp. American

Cyanamid is now building a new plant at Savannah; Ga., which when

completed in 1955 will have a capacity of 50;000 to 100,0 0 0 short

tons of pigment per year.

In March 195U it was announced that the New Jersey Zinc Co. would purchase American Cyanamid's Gloucester City, N. J., plant.

The plant will be turned over some time in 1955, after the Savannah plant has been completed and put into operation. (A certificate of necessity was issued to New Jersey Zinc in February 1953 to build a titanium pigment plant at Palmerton, Pa. There is no record that construction was actually initiated.) Market shares in the American industry should in 1955 be approximately as shown in table 23, This should be compared with the market shares made public in 19 Ui*, which are shown in Chapter III, "Industry Structure".

Table 23. Market shares in the pigment branch of the titanium Industry, 1952 andI955 (percent of shipments, gross weight)!

1952 19552

DuPont 10 - 20 10 - 20 National Lead 70 - 100 50 - 100 Glidden 1-10 1-10 American Cyanamid 1 - 10 20 - 30 New Jersey Zinc 0 1-10

Total 100 100

^ Excludes pigments used by National Lead and DuPont within their own plants.

^ Assumes that sales of the first three firms remain unchanged, and that sales of American Cyanamid Co. increase by 100,000 short tons per year, less the 1952 output of the Gloucester City, N. J*, plant. Source: Light Metals Branch, U. S. Bureau of Mines.

Tariffs

Commodities included under Tariff Paragraph 39, as established 30 in the Tariff Act of 1930 are "titanium potassium oxalate, and

^ PL. No. 361, 71st Cong., 2nd sess. All Tariff Paragraphs listed below were established by this Act. all compounds and mixtures containing titanium." These were dutiable 90 under the Act at 30 percent ad valorem. The tariff on all items included under this paragraph was reduced to 15 percent ad valorem in negotiation with Benelux, at the General Agreement on Tariffs and Trade in Geneva, October 30, 19U7* The reduction became ef­ fective January 1, 19U&*

Imports of titanium compounds have been insignificant compared with domestic production. The Netherlands has been the chief source of imports of titanium pigments; France, Germany and the United

Kingdom have been the principal foreign suppliers of titanium com­ pounds other than pigments. Statistics cannot be released*

Ferrotitanium is one of the commodities included under Tariff

Paragraph 302-m, dutiable under the Act at 25 percent ad valorem*

Under two bilateral trade agreements with Canada, the tariff on these items was reduced to 15 percent. The reduction became ef­ fective January 1, 1936, for ferrotitanium.

At the General Agreement on Tariffs and Trade in Geneva the rate was reduced to 12-1/2 per cent ad valorem in negotiations with

Canada* The reduction became effective January 1, 19U8*

Prewar imports were highly variable both in total quantity and in source; but in no year were they of much importance. Imports in the years following World War II greatly exceeded the prewar volume and originated almost entirely in Canada*

Titanium metal, and alloys with aluminum, chromium, , copper, manganese, nickel or silicon, are included under Tariff

Paragraph 302-n, dutiable under the Act at 25 percent ad valorem* 91

At the General Agreement on Tariffs and Trade in Torquay, the following rates were established:

(1) alloys of two or more of the following metals: titanium,

barium, boron, columbium or , strontium, tantalum,

, vanadium, zirconium, calcium and uranium;

(a) containing uranium but not containing columbium,

niobium or tantalum, 25 percent ad valorem.

4 (b) other, 12-1/2 percent ad valorem,

(2) alloys of one or more of the above-named metals with one

or more of the metals aluminum, chromium, cobalt, copper,

manganese, nickel or silicon;

(a) containing uranium, 25 percent ad valorem,

(b) other, 20 percent ad valorem#

^ 1 ^ J f ^ (*vt ^ * it 3 ^ P £ i / - ** - u vl \ rt ‘ ■ Negotiations in this instance were with Canada. The new rates became effective June 6, 1991# Prewar inports of titanium metal were smaller than the volume of domestic production. Imports of titanium alloys listed above were, since World War II, all from

Canada. There were produced largely by manufacturers affiliated with domestic producers. Statistics are not available.

The Japanese firms producing titanium metal have announced their intention of increasing production and exporting to the United

States. This new industry is greatly hampered by the 20 percent

■al import duty imposed by the United States on titanium metal.' Our

From a letter by the President of Daiichi Bussan Kaisha, Ltd., Mr. Yasutaro Niizeki, to the Foreign Operations Administration, dated Feb* 26, 195U* 92 import duty on titanium metal is higher than that of Great Britain,

Canada, Sweden, West Germany, France or Italy, Export of titanium metal to the United States would no doubt be a valuable source of dollars to the Japanese economy; but under these circumstances it is likely that most of the product will be sold instead to Western

Europe,

Titanium ores and concentrates, crude, or not advanced in value or condition, which were free from duty under the Tariff Act of

1922, are free of duty also under the Tariff Act of 1930 (Tariff

Paragraph 1719) as "minerals, crude, or not advanced in value or condition by refining or grinding, or by other process of manufacture, n,s*p*f," The duty-free status of titanium ores and concentrates

(except ilmenite and ilmenite sand) was bound in the G,A,T,T, at

Geneva, in negotiations with Brazil, The effective date of binding was January 1, 19 U8,

Basic slag, ground or unground, is also on the free list (Tariff

Paragraph 1685)*

Conclusions

It is apparent that the development of the domestic industry has not been greatly influenced by the relatively high American tariffs in effect during the thirties for certain products containing titanium. The domestic primary metal and fabrication branches might be affected by competition with the Japanese industry, although this would not pose a serious threat to the earnings of domestic firms under present structural arrangements. VI. PUBLIC POLICY AND NATIONAL DEFENSE

Mobilization Experience in World War II

Following the outbreak of war in Europe, demands for welding rods, titanium pigments and alloys, supported in large part by defense spending, soon rose to record heights. In late 191*0, a foreign procurement program was initiated by the Metals Reserve

Company and rutile was included in an agreement with Brazil under which we purchased the entire exportable surplus of ten commodities*

Similar agreements with other Latin American countries resulted in securing for our use virtually the entire exportable mineral output of Latin America. Valuable shipments of Brazilian rutile were made during World War II under this program.

Shipping shortages prevented the continuation of large imports ilmenite from India and in 19i*2-U3, Canada superseded India as our chief foreign supplier. Rutile imports from Australia were sus­ tained to a considerable extent, as space was often available on vessels returning from delivery of military supplies. Control over Imports was necessary under these circumstances to direct the distribution of imported titanium minerals in the domestic economy.

It was not considered necessary to put rutile under direct allocation controls for the reason that the production and use of welding rods and the production of ferrotitanium and titanium cyanonitrite (used in the manufacture of smoke screen compounds) were controlled* 93 9k

On April 28, 191*2, the Office of Price Admini strati on issued the General Maximum Price Regulation. This regulation provided that the maximum price for any commodity not then under specific regu­ lation should be the highest price charged by the seller on a delivery of that commodity made during March 191*2 to a purchaser of the same class. Metalliferous ores and concentrates were specifically exempted from the regulation but rutile was not classified as me talliferous *

In order to provide a regulation adapted to the special problems in connection with a number of nonmetallic minerals, including il­ menite and rutile, the Office of Price Administration issued Maximum

Price Regulation Ho, 327. The regulation, which became effective on February 22, 191*3* removed these commodities from the control of

the General Maximum Price Regulation.

The new regulation retained the essential features of the older one, including the adjustment provision recently written into

the General Maximum Price Regulation for essential commodities.

This permitted the granting of relief to producers unable to main­

tain or expand production under existing maximum prices, in the event of a general shortage in the supply of an essential commodity, or when the loss of the seller's production would result in higher

prices to consumers.

In addition, MPR 327 provided that if a seller offers a new

grade or type of the same mineral, he must submit his proposed

price for such new grade or type for the approval of the Office of 9h

On April 28, 19i*2, the Office of Price Administration issued the General Maximum Price Regulation. This regulation provided that the maximum price for any commodity not then under specific regu­ lation should be the highest price charged by the seller on a delivery of that commodity made during March 19U2 to a purchaser of the same class. Metalliferous ores and concentrates were specifically exempted from the regulation but rutile was not classified as metalliferous*

In order to provide a regulation adapted to the special problems in connection with a number of nonmetallic minerals, including il- menite and rutile, the Office of Price Administration issued Maximum

Price Regulation No* 327. The regulation, which became effective on February 22, 19U3, removed these commodities from the control of

the General Maximum Price Regulation.

The new regulation retained the essential features of the

older one, including the adjustment provision recently written into

the General Maximum Price Regulation for essential commodities*

This permitted the granting of relief to producers unable to main­

tain or expand production under existing maximum prices, in the event

of a general shortage in the supply of an essential commodity, or when the loss of the seller’s production would result in higher

prices to consumers*

In addition, MPR 327 provided that if a seller offers a new

grade or type of the same mineral, he must submit his proposed

price for such new grade or type for the approval of the Office of 95

Price Administration. The new price would be determined whenever possible by the method of pricing used by the seL ler during March

191*2.

With regard to any product offered for sale for the first time after February 22, 19ii3» the maximum price was to be approved by the Office of Price Administration. Prices set by the seller with­ out approval in either of the above cases were subject to refunds in the event that the Office of Price Administration adjusted the proposed prices downward. Ilmenite and rutile prices were de­ controlled on July 26, 191*6 (Amendment 36, Supplementary Order 129 to the General Maximum Price Regulation).

The virtual cessation of ilmenite imports rendered necessary the development of a new domestic source of supply. Discussion between representatives of the Office of Production Management, the

Office of Price Administration and Civilian Supply, and all the manufacturers of titanium pigments in August 191*1 resulted in the following plan: (1) That an ore deposit at Sanford Lake, New York, already being developed by the National Lead Company for its own requirements, also be made available to other user3 of ilmenite;

(2) that the National Lead Company install additional units at

Sanford Lake and allocate the output of these units to companies desiring to participate in the project, the participating companies to pay their proportional share of the cost of thus adding to the productive capacity of the mine, plus the cost of extraction, treatment and transportation of the ore; (3) that the National Lead Company 96 make no additional charge, other than a nominal 20 cents per ton of concentrates for depletion of ore reserves; (1*) that all participants in the program and the Office of Production Management and the Department of Justice have the right to audit the books of

National Lead Company showing the costs of equipment and costs of extraction, maintenance and taxes; (5) that each participant have the rightto suspend or discontinue receipts of ore* The participant would have to continue to pay its share of the cost of development unless the capacity was otherwise used*

The Krebs Pigment and Chemical Division, E. I* du Pont de

Nemours and Company, Inc., accepted a 25 percent interest in the project on October 2, 19111- The agreement was to last for a period of ten years from the date of completion of the additional capacity

(October 5, 19h2)* By August 19li2 the mine, known as the MacIntyre

Development, had started production. Ultimate capacity was 26,000 short tons of ilmenite concentrates, equal to about 12,000 tons of titanium dioxide per month, 25 percent of which went to DuPont*

This, combined with other North American sources, ensured a sufficient

supply of raw materials for the pigment branch of the industry*

(The domestic production capacity at that time totalled 12,300

short tons of titanium pignents per month*)

Hie Defense Plant Corporation offered a five-year contract on July 6, 19U2, to the National Lead Company to provide a 33 mile

rail line connecting Tahawus, New York, with the Delaware and Hudson

railhead at North Creek, New York. Under the proposed contract, the

Defense Plant Corporation was to advance the sum of $3,208,575 to the 97 company, covering construction and other necessary costs. This offer was accepted and the railroad was completed in June 19l*l*.

Agreements between the Defense Plant Corporation, National

Lead Company and the Delaware and Hudson Railroad Corporation per­ mitted National Lead to lease the railroad from the United States

Government, The Delaware and Hudson Railroad Corporation operates the line for the transportation of ilmenite, magnetite and supplies between Tahawus and North Creek. National Lead Company pays the

Government a rental based on a fixed charge per ton for all com­ modities transported over this Government-owned railroad line.

The ilmenite situation was further relieved in 191*1* and 191*5 by the receipt of greatly increased supplies from India, increased shipping facilities having been made available during these years.

The Office of Production Management established an allocation program for titanium pigments on November 27, 19l*l> issuing General

Preference Order 11-1*1*. On January 21*, 191*2, an amendment to M-l*l* raised the pool to be set aside by producers of pigments for alloca­ tion from 20 percent, as provided in the order, to 25 percent. In the latter half of 191*2, only a fraction of the raw material supply and production capacity was actually required for the war effort and 11-1*1* was revoked on December 8, 191*2.

The Office of Price Administration acted on December 31, 191*1 to stem a proposed price increase for titanium pigments, requesting the stabilization of prices at levels of October 1, 191*1. On

January 2k, 191*2, the American Zirconium Corporation was permitted 98 to add 1 -1/2 cents per pound to these prices because of the high cost of production.^- The corporation was at that time developing

In 1939, the State of Maryland compelled the corporation to install an acid recovery unit which cost approximately 1300,000 and added to the cost of production. The corporation also experienced d iffi­ culty in the handling of domestic ores and reworking of materials to eliminate foreign matter. a new source of ilmenite in North Carolina. It was believed that this additional supply could be obtained by May 2, 191*2, at a cost

rhich would permit the corporation to sell titanium dioxide within the ceiling.

Price Schedule No. 98, issued February 5, 19U2, established dollar and cent maximum prices for titanium pigments. Subsequent amendments to the schedule permitted deliveries to be made on open invoice, after special permission had been obtained from the Office of Price Administration. Buyers and sellers could thus make long term contracts and agree to fix prices, no higher than the maximum prices then in effect, at the time of delivery. The American Zir­ conium Corporation was allowed to charge the higher price throughout the life of the schedule, which was terminated in November 19U£*

The increasing demand for titanium pigments during 19U3 resulted in disorderly distribution of titanium pigments and complaints from all parts of the country by civilian users of inability to get delivery on orders. The WPB conservation order, designated as M-35>3, was issued on December 6, 19U3. Although the order did not make any more pigment available for civilian use, it did arrange for an 99 orderly and equitable distribution of the commodity. After military orders had been filled among civilian users on their unrated orders, the order provided for sales by producers and other suppliers on the basis of past experience*

Although a specific expiration date was included in the original order, this was deleted February 29, 191U*. The order was amended

December 21*, 19U3* to include barium and calcium base extended titanium pigments and titanated lithopone*

The order was revoked on March 26, 19 U5* General Preference

Order M-3li0, which allowed the 'far Production Board to designate the specific used for chemicals and the users to which they would be delivered, was simultaneously amended to apply to titanium dioxide.

The order, M-3l»0, was revoked on September 30, 19U5*

Titanium dioxide was one of the selected group of materials listed on April U, 19U6, by the Civilian Production Administration for inclusion on Schedule 1 in Priorities Regulation 28. Manufactur­ ers of titanium pigments were assigned CC ratings, highest obtain­ able for civilian goods, to enable them to expand capacity by 20 percent by late 19U6. Expansion programs had been started by DuPont,

American Cyanamid, and the Titanium Pigment Corporation, but ran into difficulty because of the flood of orders facing equipment manufacturers and the shortage of raw materials*

The regulation provided for issuing "urgency certificates," to all companies producing titanium dioxide, giving them preference over other classes of buyers, if producers demonstrated their need for titanium ores to sustain or increase production. The National 1 0 0

Paint, Varnish and Lacquer Association had stated in December 19^5 that the shortage of titanium pigments was a contributing factor in preventing the industry from utilizing its full productive capacity. Manufacturers of building materials and other "critically scarce products" using titanium were granted a top priority for obtaining surplus materials held by the War Assets Administration.

Mobilization Experience In the Korean War and Following

Allocation Program

Regulation 1, issued by the National Production Authority on

Septenfoer 18, 1950, placed controls on inventories of materials in short supply. Among these were titanium sponge, semifabricated shapes, sheets, tubes, extrusions, titanium—bearing alloys, and titanium-base alloy scrap.

Basic rules of the priorities system authorized under Section

101 of the Defense Production Act of 1950, were announced by the

National Production Authority on October 3, 1950, in CMP Regulation 2.

Authority to allocate titanium ores under these basic rules was delegated to the Defense Materials Procurement Administration by NPA Delegation 5*

A list of materials classified as scarce and therefore subject to the Antihoarding provisions (Section 102 of the Defense Produc­ tion Act of 1950 was released on December 27* 1950, by the National

Production Authority. Appearing on this list were titanium sponge, semifaoricated shapes, sheets, tubes and extrusions, titanium^- bearing alloys and titanium-base alloy scrap* 101

Following the removal of these products from the designation

on June 18, 1953* the Office of Defense Mobilization Issued Defense

Production Order 1, Supplement 1 , on July 13, 1953> which authorized

the control of titanium sponge and titanium metal (ingot and mill products)*

The Business and Defense Services Administration issued Notice 1, authorizing control of the general distribution of titanium sponge

and titanium metal (ingot and mill products) on November 18, 1953*

Although authorized by B.D*S.A* Notice 1, a material order covering

titanium sponge, ingot and mill products has not been issued to date* In 1953* E. I. du Pont de Nemours and Company allocated its

output to three major fabricators, Rem-Cru Titanium, Incorporated,

Mallory-Sharon Titanium Corporation and Republic Steel Company on

the basis of their 1952 sales* Using this criterion, DuPont sent

the bulk of its sponge production to Rem-Cru. The entire output of the Titanium Metals Corporation of America is fabricated by

Allegheny-Ludlum, one of its two parent companies*

As titanium mill products came into commercial use almost exclusively in the production of military aircraft, it became apparent that priorities could not be established by a civilian agency* A cooperative working arrangement between the civilian

agencies to which the task had been originally delegated and the

Department of Defense came into effect in June 1953* The Aircraft

Production Resources Agency of the Department of Defense, represent­

ing the Air Force and the Navy's Bureau of Aeronautics, receives

mill schedules for titanium use in its office at Wright Field, 102

Dayton, Ohio. These are transmitted to the Materials Branch of the Staff Director for Production and Schedules, Assistant

Secretary for Supply and Logistics at Washington, D.C.

After approval in the Department of Defense, schedules are transmitted to B.D.S.A. with request for a directive. Deliveries of titanium mill products are then scheduled by means of monthly directives, freezing schedules to each consuming plant. Requests for delivery of titanium mill products abroad are made through the

Foreign Operations Administration and scheduled in the same manner by B.D.S.A. after defense rating is obtained from the Department of

Defense.

Price Stabilization Program

The General Ceiling Price Regulation (16 FR 808) originally

issued by the Office of Price Stabilization on January 26, 1951, held the price of rutile to a ceiling based on prices in effect

from December 19* 1950, through January 25, 1951* The effect of

this regulation was to stabilize the price of rutile at $100 per

ton, f.o.b. East Coast. The increased world demand for Australian

rutile raised the price to such an extent that United States concerns

could not negotiate for rutile with the ceiling price frozen at a much lower level.

General Overriding Regulation 9, Amendment 13, of the Office of Price Stabilization, effective January 18, 1952, exempted from price controls all sales of imported and domestic rutile ores and

concentrates, and the allied services of mining and processing such 103 materials. Rutile was removed from price control to permit domestic consumers and dealers to compete with those of other countries in obtaining this material, and to encourage domestic miners to continue production*

Stocks of rutile had declined from 8,329 short tons in 1990 to

6,395 in 1951} and following issuance of the overriding regulation, rose in 1952 to 13*815 short tons. Prices rose to $11*0 to $170 per

ton, but had fallen within a year to $100 to $1U0 per ton, f.o.b*

East Coast.

Implementation of Expansion Goals

The President was given the power to issue contracts for ex­

pansion of productive capacity and supply by Section 301 of the 2 Defense Production Act of 1950• Government aid in defense

2 Act of Sept* 6, 1950 (FL 77U 8lst Cong. 1st Sess.)* Last amended in Act of June 30, 1953 (PL 95 83rd Cong. 1st Sess.)* exploration projects involving a variety of minerals was authorized

in Section 303 of the Act. Negotiation of contracts for primary

titanium metal and their administration as to inspection, delivery,

purchase, storage and payment for production was delegated by execu­

tive order to the Defense Materials Procurement Agency on August 28,

1951* This authority was vested in the Expansion Branch, Emergency

Procurement Service, General Services Administration on August 15,

1953, by Executive Order No. 10U80*

The Government-sponsored expansion program for basic titanium 101* metal production is premised on the assumption that although the use of titanium in a number of military items will result in a superior product, expansion of production facilities by private industry, on the basis of past experience with new materials, will take considerable time. Consumption has been confined almost ex­ clusively to these items and estimates of requirements are based almost entirely on military considerations*

In June 1952, the Defense Supply Management Agency, Department of Defense, submitted an estimate of requirements to the Defense

Production Administration and recommended a goal of 30,000 short tons annual production of titanium sponge, to be reached in three years. Five percent of this would be required by the Navy's Bureau of Aeronautics; the remainder, with the exception of a small amount allocated to research purposes, in the production of end products for the Air Force. In early 1953 the Munitions Board, Department of Defense, estimated that overall requirements would be 35>000 short tons by 1955*

Expansion goals for rutile, titanium pigments and titanium sponge were issued and periodically revised by civilian agencies*

Changes in the goal for titanium sponge are summarized in table 2i**

T&BLE 21** Expansion Goals for Titanium Sponge

Date I sailing Agency Goal

March 1951 Defense Production Administration 7,200 short tons (no goal date specified) June 20, 1952 Defense Production Administration 10,000 short tons by 1955 October 13, 1952 Defense Production Administration 22,000 short tons by 1955 August 6, 1953 Office of Defense Mobilization 25,000 tons by 1955 fbgo 1 0 6 to bo looking in numbering only. Fllaod oo roooitod*

DVZTVRSITT MICROFILMS, nc« A committee to develop the Government program on titanium expansion was established in the Office of Defense Mobilization in

January 195U* This committee reports periodically to the Director of ODM, while the General Services Administration continues to negotiate on contracts up to the present 25,000 ton goal. Final expansion goals for basic titanium metal production will be established in June after the Office of Defense Mobilization has received the military requirements which the Defense Department will supply at that time.

In the event that an opportunity is presented to contract for production in excess of 25,000 tons, G*S,A, is authorized to do so.

The General Services Administration is also authorized to spend up to | 25, 000,000 to assist pilot plant tests on new processes which

In the opinion of a technical committee, acting on a confidential basis, appear technically feasible but are not being developed as vigorously as desired. It has been announced that $15,000,000 is allocated for assistance to various companies working on titanium processing* Of this amount, $13,000,000 is designated for federal assistance to the DuPont Company's research program.

Titanium sponge capacity for which Government contracts have now been let totals 12,300 short ton 3 annually, with 3,600 tons to Titanium Metals Corporation of America, 2,700 tons to DuPont, and

6,000 tons to Cramet (a subsidiary of the Crane Co,) Under the first three contracts, a Government loan, averaging slightly less than $1*,200 per annual ton of capacity, is made to each producer*

Repayment can be made by specified amounts per unit of production 107 or by payments to the Government in the form of products.-^ which amounts to a guaranteed purchase up to the amount of the Government

•a This provision was slightly altered in the Cramet contract, which is summarized in table 25. investment. Under the last three contracts, the contractors them­ selves supply the capital investment required. Government purchase contracts with the primary titanium metal producers are summarized in table 25*

TABLE 25* Contracts issued to implement expansion goals for titanium as of April 1$, 195U

Government Purchase Ultimate Location of Commitment Annual Date Contractor Property (short tons)(dollars) Capacity

7/25/$l Titanium Metals Henderson, 1500 15, 000,000 3600 Corp. of America Nevada

7/2U/52 E.I. Du Pont de Newport, 1U70 1U,700,000 2700 Nemours & Co. Delaware

7/31/53 Cramet, Inc. Chattanoogaj, 6000 50, 000,000 6000 Tennessee to be an­- Dow Chemical Midland, 1000 10,000,000 1800 nounced Company Michigan

* E.I. Du Pont de New Johnson- — 7200 Nemours & Co. ville, Tenn, ft

« Union Carbide & Ashtabula, ----- — 10,000 Carbon Corp. Ohio

Production schedules announced by these contractors are shown in figure 2. The T.M.C.A. contract provides for poundage payments of $0.i*7 par pound of sponge produced from the facilities, to continue

for 10 years from the date of completion, or until advances and 108 interest are paid* Payments are made quarterly in cash or sponge*

The government purchase price is the lower of #5 per pound or the average monthly market price for sponge; the price of sponge plus the average monthly market differential between sponge and ingot; the lowest price at which the contractor delivers each product to any other purchaser for sheet, wire and mill products. The contractor is obliged to have a capacity of 900 short tons by May 1, 1952; 1800 short tons by June 1, 1952; 2500 short tons by July 1, 1952; and 3600 short tons by September 1, 1952*

The firs t DuPont contract provides for poundage payments of

$0.61 per pound of sponge produced from the facilities, to continue until June 30, 1962, or until advances and interest are repaid.

Payments are made quarterly in cash and/or sponge. The purchase price is the lower of $5 per pound or the average monthly' market price. Annual capacity required by the contract, exclusive of capacity prior to the contract, is 2700 short tons by December 2U,

19 5U.

The Cramet contract provides for poundage payments of $0.52 per pound of sponge produced. Poundage payments may be recalculated after the firs t year of production to assure liquidation of advances and interest on the remainder of 30,000 short tons. They are made quarterly in cash. For sponge produced during the first year of production, the price is $5 per pound; for the remainder, i t is the higher of per pound or the average monthly market price.

The Dow Chemical, Union Carbide and Carbon and second DuPont contracts have not been signed. Under the proposed contract with Dow, 109 the Government's purchase obligation decreases with each sale other than to the Government* The proposed DuPont contract provides that each quarter year the Government shall pay the amortization component

(the cost of facilities divided by the anticipated life of the facilities, in years) per pound of production at capacity, multiplied by the difference between capacity production and the number of pounds produced that quarter* Maximum total government outlay, in the event that sales - 0 for 5 years, would be 90 percent of the cost of the plant ($35,000,000) plus reimbursement for costs of cancella­ tion of commitments for u tilitie s and raw materials, should the plant be shut down for lack of demand* The Government* s outlay is reduced (1) by every pound of titanium produced and sold; (2) if the plant is not shut down for lack of demand during the contract period*

Under the proposed Union Carbide and Carbon contract, the

Government would purchase the difference between actual sales and

8,000,000 pounds at $5 per pound. Maximum total government outlay would be 90 percent of the cost of the plant $35,000,000) plus the cost of purchasing the entire output during one year* The Government's lia b ility is reduced proportionately by the amount which the con­ tractor sells to industry.

Seventeen other firms are negotiating with the General Services

Administration for contracts to produce titanium metal* Details of these proposed contracts have not been disclosed; but i t is known that the following companies are studying proposals made by the G.S.A., or have themselves submitted proposals: Monsanto Chemical Company, 110

Horizon Titanium Corporation, Western Pyromet Corporation, Kennecott

Copper Corporation, Aero Metals, The Glidden Company, New Jersey

Zinc Company, United International Research, Eagle Picher Company,

Columbia Southern Chemical Company, and National Distillers Products

Corporation.

A limited amount of titanium sponge is also being produced in

government-owned facilities. Under a contract concluded with the

Defense Materials Procurement Agency on April 30, 1953* the Bureau

of Mines will endeavor to produce a maximum of 100 short tons of ductile titanium at a rate of 1,000 to 1,1*00 pounds per day in the

Bureau's pilot plant at Boulder City, Nevada. Production is

currently in the neighborhood of 1,100 pounds per day.

All of the contractors for titanium sponge, and some producers

of other titanium products were granted certificates of necessity

for accelerated tax amortization as provided in section 12U-A of

the Internal Revenue Code. These certificates are itemized in

table 26.

A revolving fund and resale program was established by the

General Services Administration in August 1951 to maintain capacity

operation of sponge manufacturing facilities during the development

of military applications* A fund of $5*000,000 was authorized to

purchase up to 1,000,000 pounds of titanium sponge at a price not to

exceed $5 per pound. The stockpile of titanium sponge thus estab­

lished was intended as a temporary reserve available for resale, and

was in no way connected with the Strategic Stockpile. DuPont sold

303 tons of titanium sponge to this stockpile during 1952 end 1953 I ll

Tubl«2t - Cer'incite* of neceisity luuad to iaplaaect expansion goal* for tltaniua n of January 31, 1934

Date Heciplent Location of proparty Cowodlty fox aaorti- Thx ucrti- utlon baaa utlon rate (dollar*} (parcant)

3/12/51 Tltaniua Natela Corp. Hecderaon, Nev. Sponge, ingot and alll 140,000,000 90 of iacrloa product* y 6/15/51 S. I* du font da fid^a teor and Newport, Sponge U,500,000 90 Neaoura an) Co. Dal. 4/9/53 Craaat, Inc. Ctettenoofk, ban. Sponga 25,740,500 90 4/5/52 R**>Cru tttaalsa, Inc, Midland, fo. Ingot (aalting faclllUaa) 450,000 75 11/6/51 y Haa-Cru Tltaniua, Inc. Mdland, fo. Ingot (rolling fee Hi tie*) 150,000 j>/ 65 4/13/51 Nilaa telling Mil Co. Nllea, Ohio Ingot (ailtlng faallitloa) 1,024,000 y 65 4/15/52 National Load Co. Uwood City, fo, y Tltaalui tetrachloride 76,S4D 65 2/4/52 Allndalphla teooae Iddlngtoo, fo. forglnga 77,143 65 and Braaa Corp. 2/29/52 tearloan CyuaMd Co. Savannah, Qa. Tltaniua dioxide, plgnant 13,*75,000 45 grade 3/21/52 (Hidden Co. Baltiaon, M. Tltaniua pigment 1,907,000 45 2/12/53 lew Jaraay Zinc Co. Wanton, fo. Titaalna plpant 15,000,000 9/21/51 Kaveckl Ctealoel Co. Boyartown, fo. fotaaalua tltaniua tetra- chloride 36,900 50 6/25/52 lawackl ChMlcalCo. Boyertovn, fo. fotaaalua tltaniua tetra­ 23,400 70 chloride 3/14/51 3tauffar Chaaloal Co. Itefara folia, N. I. fotaaalua tltaniua tetra- 5,155,000 50 chlorlda n,a, National Load Co. Uwood City, fo. Tltaniua cyanide 76,000 n.a. y Strip, ibMt, bar, win and otter flnichad product* of titanium ntal tod tltaniua alloy*. 1/ teondod 5/26/52 - aaaadad figure 1< ahown, y Subaldlaiy of Sharon Steal Co, y laandaent pending to rain ttala to H,917,000, y Rant, which alao produced ilrconiua tetrachloride, la not currently In production. n.a, Sot arailable 112 and this metal was subsequently resold to industry* The program, scheduled to expire at the end of 1953* was extended to June 30,

195U*

On September 18, 1952, DPA established an expansion goal for rutile of 25,000 short tons in 195U, calling for an increase of

6,000 tons over our 1951 production* A goal of 370,000 short tons of titanium pigments per year by January 1, 195

DPA on March 10, 1952* This represented an increase of 88,000 tons over domestic pigment capacity in 1950* Tax amortization certi­ ficates were issued to assist in the construction of added pigment

facilities*

On December 1, 1953# the following commodities were specified by the Office of Defense Mobilization as having open goals: Rutile

(100 percent subscribed) and titanium metal (50 percent subscribed)*

The addition of rutile and to Mineral Order 5 on

February U, 1952, authorized the Defense Minerals Exploration Ad­

ministration, Department of the Interior, to aid in financing the

cost of projects for exploration for unknown or undeveloped sources

of these materials* Two applications for such assistance were sub­

sequently received, totalling $58,^28.

The Defense Minerals Exploration Administration granted a

contract to the National Lead Company for exploration of sand deposits

in Duval County, Florida* The cost of the project was $20,900*

Government participation totalled 75 percent or $15,675* The explora­

tion was considered successful and the project was therefore certified

in January 1953• Rutile and brookite were removed from the program 113

on May 15, 1953 and restored on March 23, 195U# National Lead

D.M.E.A* Order 1, Amendment 2. also concluded a contract in July 1953 with the General Services

Administration, under which the company agreed to mine two tons of rutile ore in Hot Spring County, Ark, and experiment with this material at government expense as a possible substitute for imported rutile*

On February 10, 1951*, the Office of Defense Mobilization established an interim expansion goal of 37,500 short tons of titanium melting facilities to be reached by 1956, The industry had at that time a melting capacity of approximately 7,680 tons per year and the four melters were planning expansion to 1^,200 short tons per year#

Strategic Stockpile

The importance of a national stockpile of strategic minerals and materials was recognized by Congress as early as 1938# Rutile was not purchased for stockpiling during World War II, On July 23, 191*6, the Strategic and Critical Materials Stockpiling Act was passed, reaffirming the will of this Government to maintain a strategic t. stockpile#

^ P. L. 520, 79th Cong., 1st Sess#

A tentative procurement program was at once drawn up by the Army and

Navy Munitions Board and forwarded to the Treasury Department# m

Progress of the program since this date has depended upon Congression­ al appropriations. On November 1, 1953* i t was announced that less than 50 percent of the stated goal for rutile had been met.^

^ Joint Congressional Committee on Defense Production, Annual Report, 1953.

Rutile was included by the Board in Group A»

"Materials for which stockpiling is deemed the only satisfactory means oi' ensuring an adequate supply in the future."

Until July 23, 1950, the Munitions Board continued to lis t rutile as a:

"Material for which stockpiling is deemed necessary to ensure an adequate supply for a future emergency(a) because of a dependence on foreign sources of supply or (b) primarily because of the lack of the means for ob­ taining adequate domestic production to meet emergency needs*"

The commodity was transferred at that time to List II:

"Materials to be acquired only through transfer of Government—owned surpluses."

Summary

Price controls were in effect throughout World War II on i l ­ menite, rutile and titanium pigments. One minor producer of pigments was permitted to charge a price above the ceiling. End-use (alloca­ tion) controls for titanium pigments, imposed at the beginning of the emergency, were removed after 12 months. In December 19U3» i t was found necessary to issue a second allocation order controlling 1X5 the distribution of titanium pigments, which remained in effect until the end of World War II,

The familiar elements of recent mobilization programs—price and end-use controls—were overshadowed in the industry by success in increasing the production of ilmenite and rutile. The development of a new domestic source of raw materials in Essex County, New York, under a cooperative agreement arranged by the Office of Production Manage­ ment, nearly tripled domestic facilities, which supplied two-thirds of the ilmenite consumed and one-fourth of the rutile by 19U3 *

During the Korean War, price controls on rutile were in effect for only 12 months. Titanium ores (ilmenite and rutile), titanium sponge and titanium metal (ingot and mill products) were placed under allocation controls, although procedures were modified considerably from those employed during World War II. Titanium sponge and metal are currently being allocated under cooperative arrangements between civilian and military agencies and the industry.

Moderate expansion programs for rutile and titanium pigments were established and met by the end of 1953 by issuing certificates of necessity for accelerated tax amortization. No expansion program wa3 initiated for ilmenite. The one exploration project for which

the Defense Minerals Exploration Administration was granted financial

aid delimited considerable tonnages of ilmenite and rutile*

The development of primary titanium metal production for use in military items was actively promoted by the Government after the

firs t expansion goal was announced in March 1951* Two and one-half

years later the production from Government-sponsored facilities, 116 excluding facilities owned outright by the Bureau of Mines producing approximately 20 short tons per month, was over 100 short tons per month from a plant owned by the Titanium Metals Corporation, E. X, du Pont de Nemours was producing an equal amount in a privately

financed plant.

Capacity for which the General Services Administration has

advanced the cost of construction and guaranteed to buy the product, at least until the plant is amortized, totals 21,300 short tons per

year. The expansion of sponge-melting and fabrication facilities was encouraged by means of certificates of necessity and by 'he end

of 1?53 at least two of these projects were in production. The

effects of Government assistance programs are discussed in Chapter VIII,

"Performance of the Industry"• 117 VII. MARKET BEHAVIOR AND STRATEGY

Introduction

Recent history in the industry exhibits the following general

characteristics: (1) Division and branch managers within the firms accounting for the greater part of production exercise a large degree

of autonomy, although expansion of plant capacity or construction of

new plants universally requires approval by top financial and execu­

tive officers. (2) Markets for ores and concentrates, alloys, pig­ ments, titanium sponge and fabricated titanium me^al products demonstrate many of the characteristics of undifferentiated oligopoly.

(3) Decisions at all stages are closely interwoven with policies of

the Federal Government.

Ores and Concentrates

Marketing

All but one of the domestic properties producing titanium ores

and concentrates, with the exception of two minor firms in Idaho,

are owned by major users of these minerals or their subsidiaries.

One mine is operated by the Florida Ore Processing Company in co­

operation with the Hobart Manufacturing Company which utilizes rutile

for manufacturing welding rods.

None of the large mine producers is in the business of selling

titanium ores and concentrates* A ten—year agreement between

National Lead Company and E. I. du Pont de Nemours and Company for

the sale of Tahawus ilmenite expired in October 195>2.^ Since that

See Chapter V - "Public Policy and National Defense.* 118 time the major consumers, with the exception of the Glidden Company, have relied primarily on ores and concentrates from their own mines*

An iron slag averaging from 70 to 71 percent titanium dioxide is sold directly by the Quebec Iron and Titanium Corporation* Sales of this material other than for research purposes are to pigment manu­ facturers*

The greater part of imported ilmenite and rutile is purchased by requesting bids from dealers in this country. In the majority of cases, these dealers represent foreign producers or merchants. Mine output in Brazil, Malaya and other countries is frequently sold to merchants by direct bidding on individual lots of ores and concen­ trates. Minerals purchased in this manner are sometimes resold by competitive bidding, although it would appear that no organized market exists for titanium ores and concentrates. Such a market may be expected to envolve with the development of a stable demand for these materials*

Costs of production and transportation

The cost of exploring, developing and mining titanium ore varies according to the type of deposit* The lowest cost source of ore is probably the area near Tahawus, New York, owned and operated since

19U2 by the National Lead Company. The initial investment of over

$10,000,000 in the mine was amortized in five years as a defense plant.

With modern mining and concentrating equipment, the cost of production is relatively low* Depending on the required degree of concentration, the titanium dioxide contained in the ore costs from 119

2.6 to 6 cents per pound. As exploration of ore deposits is com­ pleted and mining efficiency improves; and as volume increases, this price will probably become considerably lower.

Electric furnace reduction of ilmenite yields an iron slag by­ product of pig iron production containing as much as 7 k percent titanium dioxide. The sale price of such slag has been about 2.5 cent3 per pound of titanium dioxide contained, f.o.b. Sorel, Quebec.

The cost of transportation to major consuming plants influences the use pattern of titanium ores and concentrates to a very great extent because of their low value—weight ratio. Imports have hereto­ fore been across major oceans to dockside consuming plants* Within the United States these minerals are universally transported entirely by rail, with the exception of imported ilmenite transshipped by barge up the Mississippi River to the National Lead Company's pigment plant at St* Louis, Missouri. Railroad rate 3 on titanium ore, from the major domestic producers to the major users, are shown in table 27 .

Ocean freight rates for Indian and Norwegian ilmenite to the major

Atlantic seaboard ports are relatively low (less than $10.00 per ton) because of the large number of empty bottoms returning to the United

States across both oceans. These low rates have encouraged the ex­ tensive use of Indian ilmenite; but since the Norwegian ilmenite mine was opened at Soggendal in 1912, relatively small quantities of ore have been imported from this source.

The Quebec Iron and Titanium Company makes extensive use of water transportation, shipping ilmenite ore up the St. Lawrence River to 120

Tiblo 27 - feUrosd froliht r»t*i 00 tltm la oro (ObUlmi f w febllshid rallrnd tirlffi. Mcrnbor 1953. m nlnjnM nr*tn plus 15 porcent plus 3 wrcwt ptr net tan. 2.000 lbs.)

Orlrin and freight rite per not ton

Jickeenrille tnd S. Jickionvllle, Fli. Melbourne, Fli. (Rutile Mining Co. North Crook, M. I. SfS^iBSUfiS (Florid* Ore of Fli., htlonil Stirko, Fli. (Heir Tihma, Processing Co.) Land Co.) ___ (Went) Rat-lonal leal Co.) I. C. a m wd m nm out mmwrn (Moaencliture In t*riffs)

Plnoy Rirer, Vi. 1 9 .1 5 (taoricin Cyininld Co.)

Gloucester, I. J. 10.32 $ 9 .3 4 (Aaorlein Cyinnid Co.)

Bsltiaore, M. 9.90 1 3 .8 6 "flU1. duPont Do Manurs ( Co., Qllddon Coipu^) Edge Moore, Dal. (E. I. duPont De lo o u n I Co.) 9.01 1 6 .8 8 3.86 1 6 .2 7

Phoenix, I. J., (Nitionil leid Co.) 10.94 9.60 3.73 (idjieint to Siyreville)

St. Louis, Mo. 9.48 8.07 8.13 (Rational Leod Co.)

8VTIU 081 • CmiDE (Noaenelituro In tirlffi)

Biltlaoro, M. 15.08

Exton, Pi. 15.65

Fm er, Pi. 15.65

Phllidolphii, Pi. 15.65

Nlipn Fills end Suspension Brldgo, M. !. 13.42 11.32

SOURCIi Courtny of Attipulgvs Minerals ind Chnleils CorponUon. 1 2 1

Sorel, Quebec, for smelting* Until the proposed St* Lawrence water­ way project becomes an actuality, the slag cannot be moved by water through the Great Lakes to potential users in the area*

Pricing

In general, titanium ores and concentrates are priced according to their titanium dioxide content* In the marketing of rutile for the manufacture of titanium tetrachloride, i t is not the practice to assign penalties for additional undesirable minerals contained in the concentrates, so long as the titanium dioxide content exceeds 93 per­ cent*

Letters written to representative suppliers for quotations elicited the replies shown in table 28. Quotations in European trade journals at approximately the same time are shown in table 29*

Alloys

Marketing

Nontitanium base alloys are sold in tonnage quantities to the iron and steel industry. Because of their relative freedom from impurities and controlled composition, they are used in preference to the natural ores as a medium for adding titanium, which acts as a deoxidizer, grain refiner, and alloying ingredient.

Producers of pig aluminum manufacture titanium alloying in­ gredients within their own plants but do not market them, A small number of steel manufacturers produce ferrotitanium for their own use; but the majority presently meet their needs from finns Trtl«28 ' Quotntlona on tltenlut on

Price I per short ton, I per long ton, Dais of Description 1 TiOj Quantity Pricing point 7,000 lbs. V ; 0 lbs. Quotiilon

IDBfflT- Florid* Ore Processing Co., Inc. Iltenite, Multlwll 5 *-59 C trlots, AX-50 tons F.o.b. Melbourne, Fit. t 31.50 10/30/53 9 South Clinton S t., ptptr begs, 100 lb. etch. Chlcego 6, 111. etch, Florid* origin, produced froa botch stndt.

Foote Hintrtl Co. Iln n ltt, bulk, Indlt $9*40 Shiplotdt, gtntrilly ioilthottn, India, *5/(112.00) 10/21/53 IF Vest Chelton Art., origin, productd froa ainiaa 9,000-10,000 lotdtd on r ttttl Philadelphia 44, Ft. botch ttndt. tons. Representetlre for Delirtrtd, litttre F. I. Perelre 4 Sent, Atlintlc ittboird btttd ♦21,00-122.00 India on freight of 19.00- 910.00 ptr ton

C. Tenant Sons 4 Co. do. 59 Shiploads Trtrtncort, Indlt M/(I9.52) 10/20/53 100 Park Art., liked-et-aorki, lotdtd *4/(111.75) Iw Tork IT, 1. T. on rttttl. Dtilrtrtd, Approx. 123.00 RiprestnUtlre for bitim Atlintlc HopUn I t H lllltu , Ltd., ittboird Trtrtncort, India

Btikthirt Clwaleils, Inc. Ilieniti, piptr-lintd 50 Ctrloti, (tppm. F.o.b. c m , 1 43.00 10/26/53 430 Lexington Art., burltp btgt, 113 lb. 50 tent). Philadelphia, Ft. 1 * fork 17, ». I. neh, Auitnlii origin, Repr»i«tiUr* for productd froa bench A uitnlii 4 Florid* Products* smdi.

Ilaenlti, Hultiwtll 5* Ctrloti F.o.b. Florldt I 3**50 10/30/53 ptptr btgt, 100 1b. etch.

BtiahofMlinhill, Inc., Iln n itt, bulk, pro­ "50 or do. F.o.b. Boltt, Idtho ( 7.00 10/21/53 5303 Irrlflg St., ductd i t byproduct in better* Boln, Idtho lining of pltctr deposit* for aoniiitt.

8UTILE C. fm uit Sou 4 Co. Rutllt, bulk, A uttnlli 95-9* do. C.l.f. Atlintlc 1120.00 10/20/53 100 Park Art., origin, productd froa ittboird ports lov Tork 17, I . T. botch ttndt

Btrkthlrt Cheaictls, Inc., Rutllt, ptpor-lintd, 95-97 do. Ex dock, fWltdtlphit, ♦ 95*00- 10/26/53 420 Ltxington Art., burltp btgt, 112 lb. Pt., duty paid *100.00 In Tork 1 7 , 1. T. etch, Auitrtlli Rtprtionutirv for origin froa batch A uttnliin producer stndt.

SOURCE) U tters to productrt, courtesy of Atttpulgus M nenli tnd Chaicili Corporttion. Table 29 - Quotations In European trade journals

Price per long ton Date of Description Pricing point Quantity (2,2i|0 pounds) Terns quotation

Ilnenite Hot specified C.I.F. European Not specified ft sterling 11} to Not specified 2/22/52 ports 12 (133.75) Min. 55 per­ C.I.F. United Long ton ft- sterling 10 to cent TiOj Kingdoa ports 10j ($28.83) Spot iA »/52 nominal

Rutile 95 to 97 per­ CtliF* Conti­ Long ton ft sterling 31 Spot l / i o M cent M.O2 nental ports (♦87739)

Not specified F.O.B. nain Long ton ft sterling 48 Forward lA o M Australian (*108.00) ports 12U specializing in its manufacture* The Titanium Alloy Manufacturing

Division, National Lead Co., has 100 cvistomers for ferroalloys, 10 of which (including U.S. Steel, Bethlehem and Republic) take rough­ ly 50 percent of the product*

The demand for this product is closely correlated with sales of steel* Of recent years, the demand for the low-carbon grade of ferrotitanium, used chiefly in the production of stainless steels, has increased relatively greater than for the other grades* Demand for the high—carbon grades is fe lt to be relatively elastic with respect to price.

Costs of Production

Medium and high carbon ferro titanium are produced in electric furnaces* The price of electric power is the chief cost item, followed closely by labor costs* Costs in the Titanium Alloy Manu­ facturing Division, National Lead Co., plant at Niagara Falls, N.Y., are distributed roughly as follows:

Raw m aterials ...... • 25 percent (Ilmenite, rutile and steel scrap)

Direct manufacturing expense ...... UO percent (electric power, labor, electrodes and packaging)

Overhead ...*« ...... * 35 percent (research, administration, sales costs, etc*)

The principal items of cost in the production of low-carbon ferrotitanium are aluminum, rutile, coal and coke* The cost of raw materials comprises a substantially greater share of the total In the low—carbon grade. 12$

Pricing

All producers of titanium alloys for sale to the iron and steel industry are believed to quote the same prices; and the Titanium

Alloy Manufacturing Co* has on some occasions acted as the price leader* This company (now a division of the National Lead Co.) 2 apparently follows no formula in pricing its metallurgical products.

The chief of this Division remarked: "That stuff they teach at Harvard Business (School) is baloney. We don't forecast costs or sales — although we do keep a cost book — because what a material costs us doesn't necessarily affect our selling price at all. We have taken losses because of raw material price changes — but what we lose on the swings we make up on the merry go round. We have no formula for pricing. A sales price is what a willing seller and a willing buyer agree upon. It has nothing to do with costs. We never feel guilty about our prices. If we take a loss, we might have a good reason, such as a development proposition. I have full authority to run this business, except for capital expenditures or employment of an individual over a certain length of time. There is no company policy on sales or purchase of raw materials. We usually buy from other branches (of National Lead but if they can't meet our terms we never hesitate to buy outside."

In response to changes in the cost of raw materials, it has absorbed losses temporarily rather than risk disturbing the market by adjust­ ing prices.

Similarly, it will take a loss on some items for the purpose of

meeting competition or developing a market. It will make a novelty item to specifications; but because of its wide line of 200 products it seldom has occasion to do so. Costs of production clearly bear only a very general relation to market prices. As is the case with ferrochrome, which is sold to the steel industry under similar conditions, some grades of the product could be manufactured in 126

existing facilities of a great number of its users. This places an

upper limit on possible prices for the commodity.

Price sheets are rather complex, as some prices are per pound

of alloy, while others are per pound of titanium contained. In

some grades, extras up to $0.10 per pound are charged for smaller

lump size. Within grades, special qualities, such as low aluminum

or silicon content, bring premium prices. A differential of $0,025 between contract and spot prices exists in the high- and medium-

carbon grades but not in others. The base prices in January 1951*

for high and medium-carbon ferrotitanium, manganese and nickel

titanium per pound of alloy are shown in table 30.

TABLE 30. Pricing methods for alloys (Cents per pound)

Car- Truck- 2,000- 300-1,999 Less than load load 22,999 lbs. lb s . 300 lbs.

Ferrotitanium High-carbon $ 8.65 $ 9.10 $ 9.35 $10.10 #10.60 Medium-carbon 10.50 10.75 11.00 11.65 12.15 Manganese titanium 90.00 90.00 90.00 90.00 95.00 Nickel titanium 1.38 1.38 1.38 1.36 1.1*3

The base price in January 1951* for other grades, per pound of

titanium contained are shown in table 31#

TABLE 31* Pricing methods for alloys (’continued) 300-1,999 Less than Ton or more lbs. 300 lbs.

Fe zto ti tanium Low-carbon 1*0 percent $1.35 $1.37 $1.39 Low-carbon 25 percent 1.50 1.52 1.51* Silicon titanium 1.20 1.22 1 . 2ii 127

The Titanium Alloy Manufacturing Division, National Lead Co., sells all of these products, regardless of quantity, on a delivered price basis east of the Mississippi River and north of Baltimore*

Practically all of the customers are in this area* Freight to St*

Louis, Missouri ($7*50 per ton) is absorbed on shipments outside the area described* The Vanadium Corp* of America customarily allows freight on quantities over 100 pounds, provided that the freight charge does not exceed the rate to St. Louis, Mo. Freight is al­ lowed by other producers to approximately the same extent*

If, as indicated above, the pricing of these alloys is in­ fluenced by the possibility of countervailing power arising in the steel industry, then this policy must be deemed a success. The

Titanium Alloy Manufacturing Co. first started producing ferro- titanium in 1906* In 1952, only two steelmakers, Republic Steel

Corp. and Universal-Cyclops Steel Corp., reported consumption of manufactured titanium dioxide, ilmenite and rutile for manufacture of alloys or as slag-making additives*

Pigments

Marketing

The basic use pattern for titanium pigments by the paint and allied industries has remained relatively stable for the past two decades* Producers of titanium pigments all market paints containing the product, and in addition sell pigments to paint manufacturers*

Sherwin-Williams and others, for example, purchase titanium pignents from DuPont and market their paints in competition with those of 128

DuPont, American Cyanamid, Glidden and National Lead* Titanium pigments are purchased for use in paints, varnishes and lacquers, paper, floor coverings, rubber, coated fabrics, and a variety of other products. National Lead has 3,500 customers for titanium pigments and DuPont has 3,000, fifty of which purchase roughly half of DuPont's output*

Replacement of titanium dioxide by other pigments is considered to be technically undesirable. Hence market demand is relatively unresponsive to changes in the price of titanium pigments; or, vice- versa, to prices of potential substitutes*^

3 i.e., the price-elasticity and cross-elasticity of demand for the product is believed by industry officials to be low within quite wide ranges.

Uniform specifications for titanium pigments have not been established, as there are countless variables which affect quality.

Potential buyers are supplied with detailed information regarding particle size, covering power, effect on vehicle, etc. These data have no generally accepted applicability in determining the quality of the product, and must be interpreted by each user in terms of his own needs*

Cost of Production

Although the industry is relatively well established, it is difficult to estimate production costs, due to the variety of ilmenite

grades used, plant layout employed, and other factors. Costs in the

more modem plants are distributed roughly as follows: 129

Raw materials ...... 5U percent (ilmenite, sulfuric acid, tin scrap, etc.)

Direct manufacturing expense ...... 2$ percent (labor, packaging maintenance, u tilities, etc.)

Overhead ...... 21 percent (research, depreciation, taxes, sales, etc.)

As this last category is partly variable, over 90 percent of costs would be expected to vary with the level of production.

Producers report that such variation in the use of plant capacity is not always possible, as in some plants there is only one techni­ cally feasible "capacity** output. It is reported that expansion of output in the National Lead plants is accomplished by the addi­ tion of new plant and equipment; and contraction, by shutting down the entire plant at one time. DuPont reports that average costs are estimated for different levels of plant capacity. Such estimates are linked with sales forecasts to ascertain the profitability of future operations. Sales forecasts are uniformly made on the assump­ tion of a constant sales price.

Pricing

In January 1 90>k, the basic prices quoted throughout the industry are shown in table 32. 130

TABLE 32. Pricing methods for various titanium pigments (Cents per pound )

Carloads a (Minimum of 20 $ tons and Less than tons) over 5 tonsc

Titanium Dioxide 2U -1/2 2$ 25- 1/2 (rutile grades) Titanium Dioxide 22- 1/2 23 23-1/2 (anatase grades) Titanium Dioxide 22- 1/2 23 23-1/2 (nonpigmentary) Titanium Calcium 8—3 /8 to 8- 7/8 to 8- 7/8 to 12- 7/8 13-3/8 13-3/8

£ F.O.B. factories in all cases, ® National Lead Co. b,o.b. factories or warehouses. This company maintains 26 warehouses in all parts of the country, c E. I, du Pont de Nemours and Co., f.o.b, factories.

For deliveries west of the Rocky Mountains, one-half cent per pound is added to these prices. Terms are 1 percent 10 daysj net

30 days. Apparently no charges are made within each grade for "extras” such as particle size, etc.

Prices for anatase and rutile grades of the product are quoted in Great Britain at approximately 7 cents per pound less than in this country, with the same two-cent spread between the two grades.

Prices of titanium pigments produced on the continent of Europe are reported to match these in all markets.

Cartel practices and market allocation, representing a sub­ merging of the separate interests of the leading chemical companies in the field, were universal in the industry before World War II,^

The American Zirconium Corp., under a patent licensing agreement with DuPont, had agreed to limit production to 3,000 short tons per year. The agreement was amended in 19Ul to permit the production 131 of 9,000 short tons per year, (See Chapter III, "Financial and Physical Structure of the Industry," and Chapter V, "Taxation, Tariff and Antitrust Policy,")

Since 19h7, American firms have been enjoined by a court decree from entering into exclusive patent licensing and marketing agreements which tend to restrain trade. The degree of market power exerted by the major producers in some areas of the world, however, remains fairly strong. The history of the Indian firm, Travancore Titanium

Products, Ltd., from October 1, 1951, when i t commenced production until June 30, 1952, when operation was suspended for lack of a market, is of interest in this connection.

The factory produced from 200 to 386 tons per month; but was not able to sell even 500 tons of pigment during that nine month period, "Radical reduction of the company's price failed to over­ come its vulnerability even in the domestic market, as off-shore suppliers promptly retaliated with prices often below landed cost of their products in India,

From a statement by Dr, A, Bowman, Managing Director, Travancore Titanium Products, Ltd., Trivandrum, Travancore-Cochin, India,

The plant was re-opened on January 1, 195k, after the Govern­ ment of India agreed to grant ta riff protection to titanium dioxide, and after British Titan Products, a major stockholder and technical adviser to the firm, agreed to buy all production not sold on the

Indian market. The Government of India has recommended that its

Industrial Finance Corporation lend the company Rs 1 ,$ 0 0 ,0 0 0

($3 1 6 ,5 0 0 ). 132

Price policy for titanium pigments in the DuPont Company is

made in the Pigments Department, by a committee consisting of the

following six persons: the General Manager, Assistant General

Manager, Director of Production, Chemical Director, Director of

Sales and Control Manager. Projects involving expansion of plant

capacity or the construction of a new plant must, however, be

approved by a Finance Committee and an Executive Committee of the

corporation. A project proposal is prepared within the Department,

containing a forecast of sales, an estimated cost of manufacturing,

estimated amount of capital investment and working capital required,

3 forecast of profits and the profits/investment ratio for the new project*

In the National Lead Company, the Sales Manager and Director

of Sales, Titanium Division, report suggested changes of policy

regarding titanium pigments to division management, which exercises

a final veto. Major technological innovations, however, have in­ variably involved cash outlays of sufficient magnitude to require

approval by the Executive Committee of the corporation, which also

supervised reorganizations such as the acquisition of the Titanium

Alloy Manufacturing Co., and the forming of the Titanium Metals

Corporation of America,

Titanium Sponge

Marketing

Since 19U8, the outstanding characteristic of the market has

been dynamic change with emphasis on improving the Kroll process 133 and cooperation with fabricators in developing techniques for melting, rolling, forging, welding and forming the metal. In 1953*

the two principal producers of commercially pure sponge were E, I, du Pont de Nemours and Company and Titanium Metals Corporation of

America.

Sponge from T.M.C.A. is processed by Allegheny Ludlum Steel

Corporation, which charges T.M.C.A, on a fee-for—service basis.

Allegheny Ludlum does not buy or sell titanium sponge, scrap or

fabricated metal. The only firm marketing titanium sponge in

quantity in 1953 was therefore DuPont, although potential competi­

tion existed from at least twenty other firms holding or negotiating

for sponge production contracts with the General Services Administra­

tion.^

^ See Chapter V "Public Policy and National Defense."

DuPont's market for titanium sponge in 1953 included Rem-Cru

Titanium, Incorporated, which took 70 percent of the product;

Mallory-Sharon Titanium Corporation, 10 percent; and Republic Steel

Corporation, 10 percent. The remaining 10 percent was consumed as

an alloying Ingredient by a large number of steel producers. Work­

ing closely with its customers, pooking technical knowledge and the

services of specialists, and gearing specifications to the require­

ments of titanium fabricators, DuPont obtains an excellent picture

of the qualitative aspects of the market. 131* Cost of Production

During this period of application and development, the DuPont company spent more than $U, 000,000 for titanium research and operated at a sizeable loss per pound of titanium sponge sold* This loss was no doubt reduced by the company's practice of allocating research and other overhead costs on the basis of each product's annual sales value, rather than allowing other products to bear part of the expense*

Because of the rapid pace of technological progress at all stages in the production process, extensive outlays on market development as well as process research within the plant are required to keep abreast of the market* Titanium Metals Corporation of America and DuPont are each currently spending around $1,000,000 a year for these purposes* Sponge producers, faced with imminent obsolescence of facilities, would minimize risk by following a price policy which would amortize their investment as rapidly as possible* In any analysis of the cost of producing titanium sponge by the Kroll process, these considerations must remain in the foreground*

Some interesting cost data have been obtained by the Titanium

Development Section of the United States Bureau of Mines, which has a cooperative agreement with Army Ordnance for the development of continuous reactors and research on other means of decreasing the cost of titanium sponge* As a part of this program a pilot plant, designed to have a capacity of one ton of titanium sponge per day, was constructed at Boulder City, Nevada, during the 19^2 fiscal year* 135

The plant was designed for one ton per day because it was believed that the smallest practical continuous reactor the pilot plant has been operated by the conventional Kroll process, with emphasis on training personnel in the techniques necessary to produce high quality metal and on determining the costs of the various operations. Improvement of the quality and uniformity of the sponge, rather than obtaining maximum production from the plant was stressed at this time. The two small reactors can readily produce 1,000 pounds of sponge per day.

By December 1952, a crew of 15 hourly employees and U metal­ lurgists had been gathered and trained in spite of a severe shortage of labor and technical personnel in Nevada. The staff was larger

than necessary for the operation at that time, but was being maintained for some special experimental work which was about

to begin. Although accurate cost figures are kept every month at

the pilot plant, December 1952, was the latest month during which production costs were relatively unaffected by experimental work.

Production costs for December 1952, were based on the costs

lor raw materials, power, water, fuel and labor shown in table 33* 136

TABLE 33, Prices paid for raw materials, utilities and labor by U. S."" Bureau of ifrines at^ouider Ci ty, Nevada, December 1952

Raw Materials Price

Magnesium ingot 27 cents per pound Titanium tetrachloride, U6 .2 1 cents per pound commercial

U tilities

Power 3 .6 mills per kw. hr. Raw water 9 .0 cents per 1 ,000 gallons Softened water 211.0 cents per 1 ,000 gallons Propane gas 71.0 cents per million B.t.u.

Labor

Mechanics, Maintenance $2. 1*65 per hour Mechanics' helpers l . f i O " Operators 2.265 " Assistant operators 1 .9 6 5 " Laborers 1 .6 5 "

A night shift differential of 10 percent over the above labor rates is paid for work between 6 p.m. and 6 a.m. Government em­ ployees are also entitled to annual leave varying from 13 to 26 days per year and 13 days of sick leave per year.

December 1952 had 22 working days. The dry room and ac­ cessories, the cooling water system and the vacuum furnaces operated

31 days. During this period, 11,620 pounds of finished sponge or

528 pounds per day were produced. Actual costs are shown in table

3U. 137

TABLE 3U. Operating costs, Titanium Development Section. U. S. Bureau of Mine 3 , December 19!?Z

Cost per pound of purified titanium sponge

Raw m aterials ...... $2.23 U tilities. . 0.00 Operating and maintenance labor . . . 0*79 Supplies and repair materials • . • • 0*l8

Total direct. $3*28

Building amortization ...... 0.10 Equipment amortization...... 0*73 Office and laboratory ...... 0*li*

Total indirect ...... 0.97

Total c o s t ...... $U>2£

A3 stated above, the same operating force with the addition

of one or two men could produce twice as much titanium sponge. At double production the figure for operating and maintenance labor would be reduced by some 36 percent and overhead by one-half.

Operating costs would then be as shown in table 35* at a level of production of 23 , 22*0 pounds of sponge per month. 138

TABLE 35. Estimated operating costs at doubled production, Titanium Development Section, U. S. Bureauof Mines, December 1952

Cost per pound of purified titanium sponge

Raw materials ...... $2.23 U tilitie s ...... 0.0? Operating and maintenance labor . • • 0.50 Supplies and repair materials . . . • 0.18

Total direct ...... $2*98

Building amortization ...... 0.05 Equipment amortization ...... 0.37 Office and laboratory ...... 0.07

Total indirect...... 0.1*9

Total c o s t ...... 3.37

In the above tabulation of operating costs, the basic raw materials, magnesium and titanium tetrachloride stand out prominently.

The effect of titanium tetrachloride and magnesium prices on the cost of sponge is shown in table 3 6 .

TABLE 36. Cost of basic raw materials per pound of titanium sponge, a t different ~ Prl ° e3 fQr raw materials.

Equivalent cost per pound of titanium sponge

Price of titanium With magnesium With magnesium tetrachloride per at 27 cents at 20 cents per pound ( cents) per pound pound

2*6.21 $2.17 $2.09 1*0. 1.93 1.85 15. 0.93 0.85 1 0 . 0.73 0.65 7 .5 0.6 3 0.55

The above costs are based on the purchase of all raw materials,

with no attempt to recover either magnesium or chlorine from the 139 byproduct, magnesium chloride. A large part of the magnesium could be recovered by electrolysis of the molten, anhydrous mag­ nesium chloride produced in the reaction. This salt is pure white, completely free of moisture, and should make an ideal cell feed.

A.t least one of the commercial producers of titanium is operating such an integrated plant, as will another new plant now under construction.

From the prices of titanium ores and cone art rates shown above, and with chlorine at $56 per ton, the raw material cost of titanium tetrachloride should be from $ t o 9 cents per pound, allowing for freight and for chemical inefficiencies. Since the cost of titanium tetrachloride has such a pronounced effect on the cost of sponge, i t should be of interest to estimate the production cost at the doubled rate but with the assumption that titanium tetrachloride could be obtained at If? cents per pound. Assuming 15 cents per pound as a reasonable figure for titanium tetrachloride delivered to the plant, the estimated cost of producing titanium sponge is shown in table 37 • lUo

TABLE 37, Estimated operating coats at doubled production but with 15 percent titanium tetrachloride; Titanium Development Ejection, U. S. Bureau of Mines, December

Cost per pound of purified titanium sponge

Raw m aterials ...... $0,93 Utilities ...... 0,07 Operating and maintenance labor .... 0,50 Supplies and repair materials • . • . • 0.l8

Total direct ...... $1,68

Building am ortization ...... 0,05 Equipment amortization ...... 0,37 Office and laboratory ...... 0,07

Total indirect ...... 0,1*9

Total c o s t ...... 2,17

In all of the above tables of operating costs certain items

that would normally be included in a commercial operation have been

deliberately omitted, such as the cost of land, property taxes,

insurance, cost of sales and top management. However, the figures

given are by far the major costs; and the 7 cents per pound allowed

for office and laboratory would probably be much lower in a commercial

plant. An additional 10 cents per pound on a production of as little

as one ton per day would add up to $ 72,000 per year, which with a

properly chosen plant site, should be sufficient to cover all the

omitted items with the exception of operating profit.

I t will be noted from the above co 3t figures that the Kroll

process, despite its acknowledge disadvantages, can produce high-

quality metal at a reasonable cost. Recycling of the magnesium and i i a chlorine by electrolysing the byproduct, magnesium chloride, would result in reduced costs for both magnesium and titanium tetrachloride.

The leaching of residual magnesium and magnesium chloride from the sponge instead of removal by d istillin g in a vacuum, as currently practiced, might well reduce both equipment and labor costs. Other contemplated modifications of the Kroll process if successful will result in lowered costs in producing the high quality, uniform sponge demanded by the industry.

Pricing

In January 195h> the following prices were quoted by the Pig­ ments Department, E. I. du Pont de Nemours and Company. It was reported that the same price was charged to all customers.

TA.BLE 38. Pricing Methods for titanium sponge

100 pounds Less than and over 100 pounds

Ductile grade sponge4 . . . $5*00 per lb. $ 7.5 0 per lb, Nonductile grade titanium . 3 .0 0 per lb. 3 .0 0 per lb*

Prices are f.o.b. Newport, Delaware Terms: 1 percent 10 days, net 30 days a The product was reported to assay as follows: Percent Titanium max 99.3 Iron max. . 0 . 2? Nitrogen max. 0.03 Magnesium max 0.10 Chlorine max. 0.1? Carbon max. . 0.0? Brinell Hardness No. max. . 203

Pellet, lump, etc. - no specifications given. This product is sold as an alloying ingredient to the iron and steel industry and is priced to compete with ferrotitanium used for this purpose. I2t2

On April 1, 195U, the following grades were established, and the price for titanium 3ponge was reduced by DuPont, as follows:

Iron (max«) Price per pounda

Ductile Sponge, Grade A-l 0#30 percent $li*72 Ductile Sponge, Grade A-2 O.^O 11 li.k6 a F.O.B. Newport, Del. Net 10th of month. One dollar per pound is added for lots unuer 100 pounds.

The significance of this action is not clear. The specifica­ tions for both of the new grades are looser in terms of iron content than those for the ductile sponge sold previously. Other speci­ fications, such as Brinell hardness, were not announced. Lowering of specifications is, to say the least, unusual behavior in an industry striving for the related goals of a higher quality product and an expanding market. Although DuPont officials said the price cuts were made possible by improvements in process and expansion of manufacturing capacity, i t was known that they were temporarily unable to sell a portion of their sponge output. The change in

specifications may represent an attempt to conceal a price cut.

As indicated above, price policy at DuPont is established on

the departmental level and varies according to the structure of the

market for each product. Nylon and other innovations over which

DuPont has great price jurisdiction have been priced as specialties

while they were sheltered competitively. Cellophane has been ag­

gressively priced for market expansion, with drastic reduction in

price. Sulphuric acid, on the other hand, is simnly priced to meet

all comers. 1U3

In view of the current large expenditures on research and market development and other factors, it is too early to evaluate DuPont*s

price policy for titanium sponge. In the light of the Bureau of

Mines' cost data presented above, pricing as a specialty product would be indicated i f the Pigments Department were to continue the

present price for many months past the development period, which may

run as long as three years into the future. An important factor

to date has been the General Services Administration revolving fund and resale program which is scheduled to expire on June 30, 19 5U*

While this program is in effect it will support the price at $5 per

pound. Purchase contracts in effect with individual producers will

compel the G.S.A. to pay per pound for some titanium sponge

until February 1956 and ^U per pound until the Cramet contract is 7 liquidated*

7 See Chapter VI, "Public Policy and National Defense."

Ingot and Mill Products

Marketing

The use pattern for semifabricated titanium metal remains in the

development stage. Specific desiring for titanium is reported to

be the exception rather than the general rule. A market for the

product, other than for research purposes, has appeared mainly in

the aircraft and chemical industries. One leading producer reports

250 customers; but it does 90 percent of its business with 20 1 U 4

8 companies#

Q For an estimate of the market potential of semi fabric a ted titanium metal as a function of price, see Harvard Graduate School of Business Administration Titanium Metal and Its Future, Cambridge, Mass#: Harvard University 1^52, p# 87# The estimate is not reproduced here for reasons discussed in Chapter VII, "Performance of the Industry."

Marketing methods for fabricated titanium products are similar to those for titanium sponge in the emphasis on fundamental research and on close cooperation between producers and their customers. This is evidenced by the large volume of handbook and other information published by producers, which frequently contains data compiled in the laboratories of consumers and other outside interest groups. One seller reports spending $300,000 in two years on technical assistance

to forging companies# During the same period, tbis company cooperated with customers in the development of new alloys, utilization of scrap

and other technical problems.

An outstanding marketing problem is the recycling and utiliza­

tion of scrap# In future years, this will greatly'affect the price

of titanium. Such is the case with similar materials, such as stain­

less steel, where the price of the product would be easily three times

as great without the utilization of all grades of scrap in massive

quantities# The Titanium Metals Corporation of America, unable at

present to repurchase and melt all the scrap from its products, is

melting away inventories accumulated three years ago at its own

fabrication plants#

Very large corporations are not currently involved In tte

production of titanium and titanium alloy sheet, ingot and mill u * 5 products. In view of their sizable outlays on plant, equipment and research in recent years, their capital resources are probably inadequate to finance a large-scale program of scrap processing and melting; and Government assistance has been offered to an increasing extent in "priming the pump" for the scrap cycle, A small outlay at this point today would undoubtedly exert tremendous leverage in ac­ celerating the use of titanium by industry'.9

9 See Chapter VIII, "Performance of the Industry,"

Pricing

At the present time, published prices are not common in the industry and competition exists with respect to both price and quality* The Titanium Metals Corporation of America published a lis t of base prices and classification of extras for sheets, strip, plates, bars, wire, billets, shapes, tubes and forgings of commercially pure and alloy grades of titanium on December 1, 1950* This lis t was revised in August 19$3 and February 19SU to adjust prices to cost of production* The company reports that price and cost schedules are reviewed approximately every six months for possible changes in the price lis t. The base prices listed by T.M.C.A. follow* Terms are net 30 days* Extras, listed below, are reported to total between

SO and 75 percent of the base price. 1U6

Sheet $15.00 per lb. Strip 15.00 per lb. Plate 12.00 per lb.c Wire 10.00 per lb.d Forgings 6.00 per lb.a Bars 6.00 per lb .r a Extras for finish, adhesive paper protection, testing, shearing, small orders (under 5 tons) and length, width or gauge.

^ Extras for finish, testing, small orders (under 5 tons) and length, width or gauge. c Extras for finish, testing, cutting, adhesive paper protection, small orders (under 5 tons) and length, width or gauge.

^ Extras for finish, testing, diameter, special shapes and small orders (under 5 tons). e Extras for special shapes (other than rounds, discs, round-cornered squares and rectangles), sizes other than standard, finish, testing, cutting, and small orders ( to a minimum of $ .50 per ton on orders of 5 tons or over).

^ Extras for shapes and sizes other than standard, finish, testing, cutting, and small orders (under 5 tons).

Basing points for various products were established by T.M.C.A. as follows:

Sheets Brackenridge, Pa. Strip West Leechburg, Pa. Plates Brackenridge, Pa* Bars (Watervliet, N. Y. (Dunkirk, N. Y. Wire (Watervliet, N. Y. (Dunkirk, N. Y. Billets Watervliet, N. Y. Shapes Watervliet, N. Y. Tubes Watervliet, N. Y. (Watervliet, N. Y. Forgings (Femdale, Mich. (Los Angeles, Calif,

All shipments are made f.o.b. basing points.

Warehousing and research facilities and technical personnel

are located at each basing point and handle only the product to 1 1 * 7 which they pertain. Technical problems are thus handled separately in the T.M.C.A. organization by specialists in only one of the products listed above. Sales and market development facilities of

Allegheny Ludlvun or the National Lead Company are not utilized by

T.M.C.A.

Sales promotion and marketing by Rem—Cru, Mallory—Sharon and

Republic Steel, while similar with respect to a willingness to provide technical assistance, is less specialized. Because of the limited extent of the market, sales facilities are organized on a functional rather than a geographical basis. Basing points for determining transportation charges are established for all products at producing plants, i.e ., Midland, Pennsylvania (Rem-Cru)j Niles,

Ohio (Mallory-Sharon)j Canton and Massilon, Ohio (Republic Steel).

Announcement by T.M.C.A. of a reduction in charges for extras in February 1 9Sht averaging about 12 percent, was followed within a few days by a new development in Rem-Cru's price policy. This company had previously quoted all prices on an item basis* Rem—Cru1s firs t published price list established base prices for bars, billets,

sheet and plates. Extras for size, condition, finish and quantity are added to these base prices.

Rem-Cru's price lis t, unlike that of T.M.C.A., contains uniform quantity extras and allows for differentials of $1 to $2.50 per

pound for sheet and plate prices of certain alloys (RC-130-A and

RC-130-B). Narrow strip, wire shapes and other products continue to

be priced on the old basis, although i t was announced at the time

that prices for them would be published later. These prices are at 1U8 present regarded by each producer as confidential matter* Rem-Cru officials stated that the new policy would in effect cut prices up to

111 percent and represented the third price reduction Rem-Cru had made in its products. The following base prices were published:

Billets $ 9*00 per lb* Bars 9*00 per lb. Sheet 15*00 per lb* Plate 12*00 per lb.

Discrepancies in pricing methods will no doubt tend to dis­ appear with the solution of technical problems and an increase in volume of sales, and lead to the establishment of standard grades of each product and unifomity of base prices and extras throughout the industry*

Other Products

Welding Rods

Uniform specifications for welding rods and coatings are, as indicated in Cahpter II, quite rare. Marketing the product in­ volves close cooperation between producers and their customers. In placing orders, the purchaser often describes a specific welding problem and asks for technical information and a bid for supplying

the appropriate type of rod* The business is based to a large extent

upon service of this type* Suppliers of products used in the com­

pounding of coatings for mild and alloy steel welding rods do pre­

pare specifications and present general information on welding rod

coatings based on past experience in the field* Their business is

similarly based upon technical service and cooperation with manu­

facturers and users of coated rods* I i i 9

Prices for welding rods are not customarily printed in the trade press, but are reported to be quoted on a poundage basis in response to requests for bids, A typical rod (the 6012 rod) sells for 11 to

12-1/2 cents per pound, depending on the diameter. The Lincoln

Slectric Company, Cleveland, Ohio, prices it on the basis of making a net of five percent after taxes. About 200,000 tons of electrode is sold per year and welding rods use rutile or some form of titanium in almost all coatings. These electrodes are sold to a very large market; although not all steel is welded, there are no types of steel which cannot be jojned by welding.

Prices for welding rod coating materials were published by the Titanium Alloy Manufacturing Division, National Lead Company as of January 195U as follows:

TABLE 39, Pricing methods for welding rod coating materials

10,000 - 2,000 - 500 - 36,000 lbs. 35,999 9,999 1,999 Less than and over lbs, ______lbs.______lbs. $00 lbs.

Cents Rutile, granular*1 6-7/8 7-1/8 7-3/8 7-5/8 10-1/8 Rutile, millerb 7-1/U 7-1/2 7-3A 8 10-1/2 Potassium titanateb U* lh-l/it llt-l/2 lU—3/Ii 17-1A Sodium titanateb 12 12-1/U 12-1/2 12-3A 15-l/U a In paper bags of 100 pounds, f.o.b. Suspension Bridge (Niagara Falls) New York. One-fourth cent per pound is added for packing in drums or barrels of 500 lbs. The product is also sold in carloads, f.o.b, Jacksonville, Florida, for $120 per ton,

^ In paper bags of 100 pounds. One-fourth cent per pound is added for packing in drums or barrels of 600 lbs. i5 o

Products for Ceramic Use

Materials sold as media for adding titanium dioxide to ceramic products include ceramic rutile, frit rutile and milled ilmenite.

As of January 195U the following prices were published by the

Titanium Alloy Manufacturing Division for these products,^

Cents per pound, f,o.b# Suspension Bridge (Niagara Falls), New York, net 30 days, in paper bags of 100 pounds.

TABLE liO, Pricing methods for ceramic products

10,000 - 2,000 - 500 - Over 36,000 35,999 9,999 1,999 Less than lbs, lbs, lbs, lbs, $00 lbs.

Ceramic rutile 16-1/2 17 17-1/2 18 20-1/2 Frit rutile 7-1/U 7-1/2 7-3/U 8 10-1/2 Ilmenite,milled 2-1/2 2-3/U 3 3-1/U 5-3/U

Products for Electrical Use

Materials sold as additives in the compounding of ceramic bodies with special electrical properties include , barium , , , mag­ nesium titanate, and strontium titanate. As of January 195^ the

following prices were published by the Titanium Alloy Manufacturing

Division for these products: 151

TABLE lil* Pricing methods for products for electrical use 11

10,000 - 2,000 - 500 - Over 36,000 35,999 1,999 1,999 Less thai lbs. lbs. lbs. lbs. 500 lbs

Barium titanate 38-1/2 39 39-1/2 Uo U2-1/2 Barium strontium titanate 65 65-1/2 66 66 - 1 /2 69 Calcium titanate 1*3 U3-1/2 Uk U1- 1 /2 U7 Lead titanate 100 100 100 100 100 Magnesium titanate 5U 514- 1 /2 55 55-1/2 58 Strontium titanate 91 91-1/2 92 92- 1 /2 95

11 Cents per pound, f.o.b* Suspension Bridge (Niagara Falls), New York, net 30 days, in paper bags of 100 pounds.

Summary

A classification of titanium products is apparent on the bases by which prices are quoted: (1) those with idential delivered prices throughout the industry (alloys); (2) those with identical quoted prices but with delivered prices depending upon a variety of factors — transportation charges to consumers, sise of the order, etc. (titanium pigments and titanium sponge); and (3) those in which each firm establishes price policy on a different basis (ingot and mill products). This classification has the effect of ranking the different branches of the titanium industry by age. (For a history of the different branches of the industry see Chapters III and IV.)

It may be expected that pricing in all branches will in time approach that of the first category. Ores and concentrates can not be classified in exactly these terms, due to the high degree of vertical integration 152 in the industry, the long-term contracts involved in some purchases, and the relatively unorganized state of the market. Average-cost pricing is evident in the older branches of the industry, although a number of clear exceptions are noticeable* In the pigment branch, average costs are estimated by at least one firm for different hypothetical levels of plant capacity. These are compared with

sales forecasts to determine the most profitable level of output*

Sales forecasts are uniformly made on the assumption of a constant

sales price. In some plants it is reported to be technically im­

practicable to vary the level of output*

The possibility of countervailing power arising in the steel

industry is apparently the most important factor in the pricing of

alloys. Price-cost relations in the marketing of titanium sponge are

obscured by large in itial expenditures on a research and market

development, which were partially subsidized by the Federal Govern­

ment; and purchase contracts with the Government, calculated to en­

sure amortization of investments in plant and equipment* The Bureau

of luines* yardstick plant at Boulder City, Nevada might be used as a

pace-setter for the establishment of equitable price—cost relations

in the marketing of titanium sponge*

Estimated operating costs of this plant (under assumed conditions

of capacity production and reasonable prices, based on estimated costs

of production, for raw materials) indicate that the Kroll process,

despite its acknowledged disadvantages, can produce high-quality metal

at a cost of approximately $2.25 per pound. The process would be

desirable to potential new entrants because of free access to patents lf>3 and the large body of technical information made available through

the operation of the Bureau's plant.

'The major share of the price of titanium metal represents value

added by melting and semifabrication. Vigorous competition exists

in developing and improving the existing methods of melting and

fabricating titanium metal. Rapid expansion of facilities will take

place in the near future, as supplies of titanium sponge increase.

The increased supply brought forth by military demand has undoubtedly

encouraged experimentation for other uses. It is difficult to fore­

see where these developments will lead, even assuming a high level of

activity in the economy as a whole. 151*

Appendix - A Visit to the Crane Co., a New Producer

Memorandum

To: Chief, Minerals Division

From: Chief, Light Metals Branch

Subject: Visit by Mr, F. G. Masson with officials of the Crane Company and Cramet, Incorporated,

On April 21, 1951*, Francis G, Masson met with Mr, John P, Magos, director of Engineering, Crane Company, Mr, P. W. Bakarian, Manager,

Cramet, Incorporated, and a number of officials of the company which by 1955 niay be the world's largest producer of titanium sponge,

Masson also examined petrographic and metallurgical laboratories in the company's pilot unit at Chicago, Illinois, to obtain information for the Materials Survey volume on titanium.

On July 31* 1953i Cramet, Incorporated, contracted with the

General Services Administration to construct a plant on a 120-acre

site at Chattanooga, Tennessee, The GSA was to provide #21*,950,000

for the construction of this plant. The Crane Company has announced

that total expenditures on this project will be in excess of

#1*0,000,000, Although the contract called for 6,000 short tons of

capacity per year, subsequent engineering studies revealed that more

efficient production would result from facilities with total capacity

of 7*500 short tons per year. The site provides space for a quad­

rupling of this capacity. An adjoining 70-acre site has been assigned

to Heavy Minerals, Incorporated, a recently reactivated subsidiary of

the Crane Company, This company will exploit byproduct values from

the Cramet plant, including the rare earths, zirconium, titanium, and 155 other waste products. There has been no activity to date on the

Heavy Minerals, Incorporated, site*

One hundred and ten acres have been cleared and graded. Two

control plants have been erected* Control Plant B, containing

facilities for reduction, distillation and sponge removal, came into

production this week. The plant contains two furnaces which will produce titanium sponge in 500—pound batches* It is anticipated

that these two furnaces will be in continuous operation for the next

few months for the purpose of shaking-down and debugging commercial-

scale equipment, training personnel, etc*

Control Plant A, containing chlorination equipment, will begin

operation on May 31* Test runs of rutiel, ilmenite-rutile mixtures,

and titanium slag will be made in this plant on a commercial scale.

Its capacity is 1-1/2 to 2 tons per day. The company is using fixed

bed stack furnace chlorination apparatus. They have not attempted

fluidized chlorination but indicate that they might have to shift

over to this method. To succeed with fluidized chlorination they

would definitely have to use high-grade rutile. The first test run

will be made with rutile recently purchased on the open market,

although the plant is designed to chlorinate slag type materials as

well. The company plans to purchase 5*000 short tons of Australian

rutile as a beginning stockpile. Ur. Uagos noted that preliminary

tests on Sorel slag and Everything from 50 percent ilmenite on up"

have been successful, but cautioned against optimism until the control

plant has been in operation for a few months. Composition of the slag 156 received for testing has changed over the past two years. Formerly it consisted of irregular broken pieces; now it has a long needle- like structure* Material has been purchased from the Quebec Iron and

Titanium Corporation at Sorel, Quebec* **There is a question in our minds," Mr. Magos said, "whether slag is economical so long as the current prices for ilmenite and rutile prevail*"

Attempts to use the material on a commercial scale may clog

the reaction furnaces or result in lower efficiency. In addition to

the technical difficulties presented by such an operation, economic considerations, such as the possibility of operating the plant at less than its rated capacity for titanium tetrachloride and finding markets for ferric and other excess chlorides, also bulk large in the company's thinking* Although no concrete plans have developed in

this respect, the company is investigating the method, develop­ ed in England, of oxidizing ferric chloride into ferric oxide which is salable for pigments and other industrial uses* Possible uses for the silicon chloride byproduct Include materials for impregnation of metals, materials used in the production of carbon white for the rubber industry, and other applications for its corrosive properties could be used. Utilization of high iron titaniferous raw materials ultimately may depend on the development of a process whereby ilmenite may be converted to sponge iron and an upgrading of the titanium dioxide contained in the residue. Work on this process by the Crane

Company has been stopped due to a shortage of manpower and technical

staff* Company officials emphasize the importance of work by the

Bureau of Mines on this sponge iron project in facilitating the 1S7 exploitation of numerous sources of high-iron titanium ores*

Cramet's chlorination patents are licensed from Ciba, a French—

Swiss concern* Mr* Magos mentioned the possibility of patent l i t i ­ gation with Pittsburgh Plate and Glass Company, which owns 3 or U

similar chlorination patents* These patents belonging to Pittsburgh

Plate and Glass run for another 6 to 8 years*

General Services Administration has persuaded the company not to proceed with the construction of facilities for electrolysis of magnesium chloride* Among the reasons cited by GSA were:

1. Construction of these facilities would tie the company too closely to magnesium as a reducing agent; 2. Both magnesium and chlorine are in loose supply today. GSA has recently closed several Government-

owned plants for production of primary magnesium*

Engineering studies made by the company show that these fac ili­ ties would cost $7 to $8 million dollars* At current prices the break even point for such an outlay would be 7 to 8 thousand short

tons of titanium sponge per year. At the present time the company aoes not anticipate installing facilities for the electrolysis and

recycling of magnesium and chlorine*

The formation of a new wholly owned subsidiary of the Crane

Company is to be announced this week* The company will work a placer deposit near Aiken, South Carolina, approximately 12-1/2 miles from the Savannah River, and over ll£ miles from the Atlantic

Ocean. The deposit was explored under a DMEA grant for roonazite*

I t contains rutile, ilmenite, and monazite. Engineering

studies are completed and a dredge is being moved from Montana 158 containing jog-type facilities for wet processing of tie ore. It has not been decided whether electrostatic and magnetic separators for dry processing will be located at Aiken or Chattanooga, although location at the latter site is more likely. It is anticipated that mixed heavy minerals will be shipped to this separation plant prior

to chlorination.

The Aiken deposit will supply sufficient ilmenite and rutile to meet one—third of the Chattanooga plant's requirements at an output

of 7|5>00 short tons per year. The company has leased a mineralized

area in Florida and hopes for further DMEA exploration assistance.

Company geologists have also been examining ore deposits in Canada

snd elsewhere during the past few months.

Two units for production of sponge are under construction at

Chattanooga. Twenty-five percent of the capacity concentrated in

one plant is along the lines of the Kroll process modification

developed by the Bureau of Mines at, Boulder City. The other unit

embodies Crane's own modifications of the process. The foundation

and steel work for these two units have been completed* Other

facilities include a warehouse and maintenance building, an admin­

istrative building, a laboratory building and several minor structures.

Basic engineering of the facilities was conducted by the Societe des

Terres Hares, a subsidiary of the Pechiney Aluminum Company. The

company operates pilot-plant facilities at Thann, Alsace, France.

Vitro Company is engineering a basic control unit into a full blown

plant. Actual construction has been initiated by the Turner

Construction Company contractors. Licensing agreement was concluded 159 with Dr. Kroll who will be paid a royalty on all output of the

Chattanooga plant*

Although melting and other operations will be conducted at the

Chattanooga piant, rolling and fabricating will have to be done outside* Officials announced that if they cannot buy a rolling mill they will buy the services of the rolling mill on a fee-for- service basis. The president of Crane has announced opposition to joint ventures with other companies such as the National Lead-

Allegheny-Ludluin arrangement. Cramet will not market sponge but will market ingot or bar sheet and shapes of titanium and titanium alloys* The Government has arranged to purchase up to 20 percent of the titanium sponge. Uallory-Sharon has before i t a proposal

from Cramet under which Hallory-Ste. ron would take 12-1/2 percent of

Cramet1s annual production* Another possible purchaser is Republic

Steel. In all, Cramet will contract to convert 7$ percent of its

output into sheet, bar and other shapes* Officials report that the

company has had numerous offers from other companies for contracts

of this type*

As soon as supplies will permit the company foresees the use of

titanium in the valves and fittings manufactured for use under highly

corrosive conditions* This use may not be very significant until

the price of the basic product comes down but i t would have an ad­

vantage of providing an outlet for the high-hardness sponge produced

at Chattanooga* Some metal will be sold through Hydro—Aire, Incorpo­

rated, a subsidiary of the Crane Company, which manufactures aircraft

components* Use of the material in the future depends upon the 160 extent to which it is controlled by the Aircraft Production Resources

Agency and determination of specifications for titanium alloys must also be done by military agencies. Alloy development in the Crane

Company's metallurgical laboratories is proceeding at the company's own expense. Procedures for testing of titanium sponge developed in these laboratories at Chicago indicate that the company is interested in applying tests for oxygen and nitrogen content of the

sponge. Mr. Magos indicated that this method of testing might be

superior to the hardness test because of more unifonn distribution

of these gases throughout the sponge. Crane is at present doing all

its analytical work, although test samples have been sent to the

Armour Research Foundation, the University of Illinois, and the

Societe des Terres Rares in France, for comparison.

Crane Company officials indicated to Mr. Masson that

representatives of the Bureau of Mines would be welcomed at

Chattanooga. He indicated that the best time for these visits would

be autumn, 19£i*, at which time a record of operations in the two

control plants would have been established. By this time chlorina­

tion experts will all have been moved to Chattanooga. Although the

company will maintain its pilot plant for production of titanium

sponge at Chicago as well as its alloying and metallurgical labora­

tories, other research on the Kroll process will be conducted at

Chattanooga. Background information obtained on this trip regarding

production and sale methods will be published in the Materials Survey

volume.

F. J. Cservenyak V III. PERFORMANCE OF THE INDUSTRY

Prices

Ores and Concentrates

Price behavior and price trends provide significant information regarding the development of the various branches of the industry*

Table U2 shows the high and low prices, depending on titanium dioxide content, for ilmenite and rutile from 1928 through 1953* For the most part, these nominal quotations were f.o.b* Atlantic Seaboard*

The outstanding aspect of these prices prior to World War II was their inflexibility in response to changing economic conditions

(i.e., the depression of the thirties)* This is characteristic of controlled prices* Maximum prices for ilmenite and rutile were maintained by the Office of Price Administration from April 28, 19ii2, to July 26, 19U6j and for rutile, by the Office of Price Stabiliza­ tion from January 26, 1951, to January 18, 1952*

Because of greatly increased demand and lack of shipments from

India, ilmenite prices rose by roughly 150 percent between 1939 and

19ii2, The price of ilmenite remained on this plateau until 19U7, in spite of the resumption of imports from India in 19liii and the open­ ing of new mines in New York and Florida. Ilmenite prices today are

6$-75 percent higher than prewar*

Since 19U8, the price of rutile, 9h percent titanium dioxide, has been lower than at any time since 1928. This probably reflects

the increased supply from Australia, as mines were rapidly developed

161 n u t y . ■ M - - .W t, - r*ii,. MW mm. m m 1/

llM d ti M U * lla a lte M i l l TiOj o n tn t, M lin pir TiOj eatat, Call per TIOj a a t a t , M lir t p a TlC^itoat, Cau pir Tnr p m a t to r t t « p m a t p a d Tar p m a t to r t t a t

1921 50 1.41 • 9.12 3 / 9.50 1947 57-40 19-20 94 (to.) 1-10 1929 —- — — — 57-40 17*19 1930 — —— 57-40 19-20 1931 45*52 y 1.93 *10.71 94 10.00 1941 . 57-40 19-20 94 (to.) 1*10 32-35 4.25 - 7.14 54-59 11*19 94 (to.! 4*1 1932 40*45 1.93 -10.71 514 10.00 • 54-59 11*20 1933 — — 1949 54-59 11*20 94 to.) 4*1 —- — 1934 45-52 1.93 -10.71 t 54-59 14*11 94 to- 4*4 1935 i — y 10.71 — 54-59 15-17 94 to. 4 -5 1934 1>4 10.00 54-59 14-14 — m (1/) 1950 54-59 14 • 14 94 to. 4*5 1937 —— 94 t o . 3.5 • 4.5 1931 45-55 10-12 1ft 10.00 1951 54-59 U • 14 94 to. 3.5 - 4.5 it-■90 2.75 54-59 15-17 94 to. 5*25- 4J5 1939 45-55 10*12 14 10.00 54-59 14 • 11 i i -■90 2.75 1952 54-59 14*11 94 to. 5.25-4.25 1940 45*55 10-12 14 10.00 54-59 14-20 941to. 3.50- 4.50 50-40 11-20 i i -■90 2.75 54-59 11-20 94 4*5 M-■90 3.75 94 to.S* 5 -7 1941 50*40 11-20 'ft 1-10 94 4 - 1 t i ­■90 3.75 94 7 - 1 ll-■90 4.75 94 t?* o . 7*1.50 1942 40 21-30 94 i l l . 1-10 1953 59.) 11-20 94 to. 7 * 1.50 1943 40 21-30 94 i l l . • -1 0 94 t o 4*4.50 1944 40 21-30 94 i l l . 1-10 94 t o 5-1/2-4 1945 40 21-30 94 ■Ii. • 10 94 t o 5 * 4 1944 40 21-30 94 ■la. 1-10 57-40 24-24 57-40 22-24 * 57-40 19-20

y Prlia in aalul «mUUmm, P«r (TNI ta , f. e. ». Atlatlc M bari, aeipt ton tttwdN MflM. y Ctrlatd lata* y p. a. I. Atlatlc n toiri (tpplln U ill prion 193l-)3). y Dtlinnt it H i#n PiUi,1.1. y L aw p * i, la i tha $100 pw U i.

ig g j i ltlton, u nprtto ii ttawili Tnrtofci 19)1-53, n npwM la M l HoUl to lUaril totto, 9m Tirtt, I . !, 163 there after World War II. Prices for the lower grades of rutile,

88—90 percent titanium dioxide, were firs t quoted in 1938.

Titanium Metal

Nominal prices quoted in the United States for various forms of titanium metal from 1932 through 1953 are shown in table It3.

These prices are not comparable throughout the series because of the rapid rate of technological progress in the industry, resulting in improvement of the product and modifications of the production process.

In I 9I46 , a major producer reported a loss of per pound at the ceiling price of $5*$0 and requested approval for a price of

$15 per pound to cover manufacturing cost, overhead and profit.

A price increase of the magnitude requested did not materialize, as improved processes and expanded output soon reduced unit costs to a level compatible with a price of $5.00 for titanium sponge.

Pi gments

Prices quoted in the United States for titanium pigments from

1928 through 1953 are shown in table liU. Although details are lack­ ing, a downward trend from 19U8 to 1939 and an upward trend from

1939 to the present are apparent. Prices for titanium pigments were controlled by the Office of Price Administration from February

19U2 to November 19U5* Prices today are approximately what they were in 1931, at the trough of the last depression, although the quality of the product has been greatly improved. ii • *3

I t ^ ?

» 0 • 3s f t w ‘ i i* i I• I 0t A* ■ • • t i * 1 dil8! C • •i*1 • w i o jr. t<*%4 A• I * h I .ii £ - i \ |j l | :» j. m aacta n

8 R*R#fc*&!J3333!S35 3 3 H HHHHHHHHHHHrtHHH H H a

11 in CO -B 3 W M s - 3.«f 3. 2 . S § 8 C O f* ^ k »=s. CD m • i :

lilt % 1928-53 , to w U S Unitdd plgaents, iua titw of PrlcM -TABLE • yf ° & s. ° I I I I I I I , . . . . . ! e . I . I b b I Ci I I 4, 9 9 sf I s. v kkkkkk fe b & i t ! I a i s h h h J a y |»f 1 ll I I I I I I I i i I I I M I I I I *11 a? _ g o ^ to ^ 9 o\ o ro • o

e £ i i i i i ii i 111 i M i 11 1111 * * ■ I « s . s i » K 4 3 C J 8 5 ‘ • • I I I II II II I I I I I I I I II £ |M .* tO .*M l£MIO

KfcifcJ • • •uCl I I I I I I I I I I I I I I M I I I I

I ... I I I I I I iiI I I I I I I I I I i i i I .. p 166

Ferrotitaniurn

Nominal prices for low-carbon, high-carbon and medium-carbon i'errotitanium in the United States from 1910 through 1953 are1 shown in table U5. Details are lacking for the period before 1930. Prices for ferrotitanium, as for other titanium products, were relatively inflexible before World War II, and are today approximately the same as in the late twenties.

Nature of Economic Development

In 1920, the consumption of titanium dioxide pigment was in­ dustrially negligible and its selling price was between U0 and $0 cents per pound. During the following decade and a half, the in­ dustry underwent a phenomenal growth j and titanium dioxide rapidly displaced the other sources of paint pigments such as lithopone, zinc oxide, and white lead. Shipments of these pigments from 1920 to 1952 are shown in figure 3* In addition to its inherent qualities, titanium was desirable because the relatively stable price of il­ menite ore, in contrast to the widely fluctuating prices of lead and zinc, made its adoption much less risky. Quantity production was responsible for the rapid drop in price during these years, to 16-17 cents per pound in carload lots by 1936.

In the early years, it was recognized that production of titanium pigments on a commercial scale was one of the most precise chemical operations heretofore attempted. Technical staffs of a high order were required to lay out and control the interrelated processes* TABLE - Prices of ferrotitanlun, United States, 1910-13 M

(low carbon • dollars per pound of titanlun contained; high carbon and uediu* carbon > dollars per short ton of alloy)

L 06 CARBON H 1 OH CARBON MEDIUM C A n e L N Dollars 61 - 81 Carbon $ - 5l Carbon 3i - 6l - 5< Carbon Carbon, Titaniw, per Titanlia, Dollars per Titmiun, Dollars per Titanlun, Dollars per lear percent percent pound percent abort ton percent short ton percent ahort ton 1910-28 ... —... 15-18 t 200.00 ... m — — — 15 160.X ... — — ... 1930 — — — 15-18 150.X — — mmm ... 1931 — — — 15-18 137.50 —- — — 1932 — — •%a» 15-18 2/ 137.50 — mmm 1933 Free — . t 0.20 15-18 y 137.50 — mmm 1931 do. 25 .35 15-18 137.50 — ... mmm do. 60 1.37 15-18 137.50 *** — ... mmm 1935 — «*• — 1936 — 15 • 18 y 137.50 --- — — 1937 ...— — mmm — •** 1938 — -- -- 15-18 y 162.50 —— -- 1939 — — 15-18 y 162.50 --- Wftft — I960 " — —ft »•* ... * * | 191,1 — 60-65 1.23 15-20 162.50 15 - X 1 157.50 — — 20-25 1.35 15-20 162.50 15 - X 157.50 m mm — m ... 60-65 1.23 15-20 162.50 15 - X 157.50 m mm •ee* 20-25 1.35 15-20 162-50 15-X 157.50 — •»* 1963-67 — 60-65 1.23 15-20 162-50 15 - X 157.50 — — — 20-25 1.35 15-20 162.50 15 - X 157.50 — m y 0.10 20-25 1/1-35 15-20 162.50 15 - X 157.50 17 - 21 I 175.X .10 20-25 1.60 15 - 18 160.X .10 38-63 1.28 .10 60-65 1.23 m y .10 20-25 1.60 15-18 160.X — — 17-21 175.X .10 38-63 1.28 15-18 160.X 17 - 21 175.X m y .10 20-25 5/1.60 15 *18 5 /160.X — 17 - 21 y 175.x .10 20 - 25 * y U 5 15-18 y 167.X •— 17-21 y 183.X .10 38-63 1.28 1951 y .10 20-25 y 1.60 15 -18 y 167.X •— — 17 - 21 y 1B3.X .10 20-25 y i.5o 15-18 ]/ 177.X 17 - 21 y 195.X .10 38-63 y u s .10 38-63 y 1 .3 5 1952 y .10 20-25 1.50 15 -18 177.X mmm ... 17 - 21 195.X .10 38-63 1.35 15 -18 177.X mmm — 17-21 195.X m y .10 ■ 25 1.50 15-19 177.X • »* — 17 - 21 195.X .10 60 1.35 15-19 177.X — — 17-21 195.X

]/ Price quoted for ton lo ti. 2/ P.o.b. producer*! plant, freight allowed east of the Kiasiiiippi Hirer and north of Beltiaore, or equlralent deduction! for ahipaenti outiide this territory. 2 / F.o.b. Niagara F alls, I . T. U F.o.b. producer*! plant. y Indicate! price change during year.

SOWBi CoapUed by T. P. Flynn, lig h t K etili Branch, Minerals Dlrlilon, Bureau of Nines. FIGURE J - TITANIUM DIOXIDE, WHITE LEAD, ZINC OXIDE ANO LITHOPONE PIGMENTS d UNITED STATES, 1920-52

THOUSANDS Of SHOUT TONS THOUSANDS Of SHORT TONS •00 600

500 500

\ Whitt food, zinc oxidt and Hthopomi/

400 400

SOO 300

ZOO zoo

too

1930 1935 1940 1949 1990 1955

i J/Totil production at rtlt* Hid, line nld« and llthopom roportod oi $al»i prior to 1945, and at thipmonti, 1945*52.

J/CdMMftpttafl at Ntonhm dloilda for production of pfononti ottlmotod prier to 1941, and roportod at iitinitod TIOg consumod in tht monutaetun of

tit*** dlotldo for pfoMfft um, 1941*52.

FIGURE I - 6 . U.l fivriw ot Minot 169

Large sums of private capital were expended on research for the purpose of improving the quality of titanium pigments and developing new grades and uses. The development of rutile-type pigments at about

the same time (19til) by both of the major producers, and their dis­

placement of the anatase types has resulted in marked improvement

of the product*

Antitrust proceedings initiated in 191U: by the Department of

Justice against two major domestic titanium pigment producers created

no major disturbance in the industry. Entry of new firms into the

industry, which is continuing to date, suggests that the change in patent licensing policy introduced at that time has been a signi­

ficant influence in reducing the degree of concentration in this

branch of the industry. During the Korean War Expansion period,

all Government aid to the industry in the form of accelerated tax

amortization certificates went to the new entrants and smaller pro­

ducers: The American Cyanamid Co., the Glidden Co., and the New

Jersey Zinc Co.^ Such a reenforcement of antitrust policy is I

^ See Chapter VI, "Public Policy and National Defense." The National Lead Co., whose application for similar aid was denied in January 1952, expanded its Sayreville, N. J* plant at the same time withotrt Government assistance.

exceptional in the history of agencies involved in industrial

mobilization and m ilitary procurement. According to available

information, "workable competition" may be said to exist at present

in the market for titanium pigments. In this context, the relatively high degree of concentration

In the production of titanium minerals may not be a cause for alarm*

Since 19l|2, when the National Lead Co. opened its large mine at

Tahawus, N. Y., the two largest producers have accounted for approxi­ mately Q$ percent of the ilmenite, and 90 percent of the rutile out­ put in the United States* A mine at Caldwell, N. C., operated by

the Glidden Co., closed in 1952, further increasing the importance of National Lead and DuPont. However, so long as titanium minerals continue to enter this country free of tariffs, there is equal opportunity for all producers to make use of cheap foreign sources of supply* A "workably competitive" situation in this branch of the

industry is dependent in the near future upon use of foreign ilmenite or the re—introduction of some variation of the scheme offered by the Office of Production Management regarding Tahawus ilmenite in

19l*l* The opening of new domestic mines may alter the situation in the long run.

The current interest in titanium metal was to a large extent an outgrowth of the Bureau of Mines' success in producing ductile

^titanium; continuous research by the Bureau of Ordnance, the Bureau of Ships and other Government agencies; and the distribution of

free samples of the metal, and of research abstracts and other information. The unique combination of properties found in titanium metal and alloys have indicated a number of important applications

for military equipment. Most of the accepted usage is in aircraft components where titanium's light weight (as compared to steel), high

strength in alloyed form, and resi stance to temperature and corrosion 171 make possible a product superior to that obtainable by use of other metals, A continued and widening interest in this metal will require

that it be made available to numerous potential users for testing

in civilian as well as military applications. Without this availability

the development of a stable market for the metal will certainly be re­

tarded, as it will be impossible to specify titanium in designs for

aircraft, chemical and other apparatus.

In its present stage of development, titanium metal technology

is primitive in comparison with that of the other large tonnage

structural metals. It is almost certain that new alloys with

properties superior to and different from those now known will be

developed and that the uses for titanium metal will thus be extended.

Titanium has some inherent properties which indicate that the produc­

tion of this metal will always require complex metallurgical tech­

niques, It cannot be exposed to the atmosphere at the temperatures

required for its reduction, because it picks up oxygen and nitrogen

that embrittle the metalj and either vacuum or inert gas metallurgy

techniques are necessary. It is difficult to conceive of any process

where this would not be true.

The present Kroll process for producing the metal is somewhat

xan satis factory by virtue of the limitation on the size of the batches

produced, in contrast with the continuous electrolytic methods used

in the production of the other light metals. The metal produced by

the Kroll process must be further refined to produce ductile sponge.

The sponge also requires a relatively complex melting technique, as

there is no known material which will hold molten titanium. 172

The problems of utilization of process and users scrap and the grade or purity requirements for sponge remain to be resolved* Until a few months ago titanium scrap was unusable as a source of titanium metal* Scrap losses are a major factor in calculating sponge require­ ments* According to the sponge melters and semi fabricators (producers of ingot, b illet, sheet, rod, etc.) the scrap losses at this stage are 35 to 1*0 percent of the sponge weight* Airframe and aircraft engine manufacturers have reported product utilization of 20 to 90 2 percent of semifabricated metal, depending on the use*

2 On April 19, 195U, Dr. Herbert H* Kellogg, Chairman of the Titani un Advisory Committee, Office of Defense Mobilization, stated that the reworking of scrap had been made effective up to about 30 percent*

Specifications for sponge metal must of necessity be built around the quality of the sponge that can be produced by the produc­

tion processes in use* For example, Brinell Hardness Number (BHN)

is one of the controlling specifications. At the time the Titanium

Metal Corporation's contract was signed a 22$ BHN was stipulated*

Metal of this grade is now considered unsatisfactory and the metal

of 160 to 180 BHN is reported to be produced in quantity by DuPont.

Higher purity metal will certainly be desirable if i t can be produced

on a large scale, although the indications are that radical improve­

ment in sponge quality is unlikely for the next three years.

It is impossible to forecast accurately what course new develop­

ments with respect to either the use pattern or production and

fabrication processes will take. Assuming that costs and metal 173 quality are equal to those achieved by other processes, there are good reasons for retention of the Kroll process. The large body of

technical knowledge made freely available by the Bureau of Mines, coupled with free access to patents at uniform royalties, must be counted strongly in its favor.

According to information available to the Bureau of Mines,

several large and reputable companies have developed other produc­

tion processes in the laboratory and in some cases in small pilot

units. These companies will not divulge details of their processes

except as required for Governmental assistance. The Metals and

Minerals Advisory Board of the National Academy of Sciences, National

Research Council, has inspected a number of these processes for the

General Services Administration.

In the event that one of these processes, or processes yet to

be developed, should prove to be more economical with respect to

production costs and/or capital requirements, it is logical to assume

that it would in time replace plants constructed for production by

the Kroll process. The latest titanium program of the Office of

Defense Mobilization is attempting to promote technological progress

by' providing $ 25, 000,000 to assist pilot plant tests on new processes

which in the opinion of a technical committee appear feasible but

are not being developed as rapidly as desired.

Competition in developing new production processes is vigorous,

as several companies are hopeful of breaking through the numerous

obstacles to volume production. The fact that substantial results

have not yet been made public does not appear to have caused any 17U reduction in research outlays to date, as the rewards for success are high.

Notwithstanding the difficulties associated with the production of titanium metal by other processes and the current high price of sponge produced by the Kroll process, the metal industries and research organizations have demonstrated a great interest in this material, A number of organizations have expended considerable sums of money in trying to develop new production and fabrication processes and melting techniques, and in investigating the charac­ teristics of the metal in a variety of applications. In the interest of developing civilian adoption and use, i t is obvious that a certain proportion of the output of semi—fabricated metal should be removed from allocation, as soon as military needs permit, and thrown on the open market.

With technology in such a state of flux, no rigid conclusions may be drawn. The following premises, however, may be considered as ba3ici

(1) Titanium because of inherent properties is and in all

probability will continue to be an expensive metal to

produce In comparison with other structural metals such

as steel, aluminum, copper and magnesium,

(2) At the present time there is only one process by which it

has been demonstrated that titanium can be produced on a

large scale,

(3) Despite high prices for titanium there will be a certain

demand in military and specialty civilian applications. 175

(It) Continued production of a certain minimum amount of metal

is essential to the promotion of development of titanium

technology with respect to metal production, fabrication

and uses*

(5) Titanium will under these circumstances probably create

its own demand. Industrial processes and applications

which are not commercially practical now because suitable

materials are not available may become a commercial reality

because of titanium.

Policy Alternatives in the Primary Metal Branch

A number of industries were influenced in their development during World War II by the Defense Plant Corporation, which contracted with private firms to construct producing plants at Government ex­ pense and operate them under what came to be known as management contracts. The synthetic rubber industry was built up in this fashion because it was thought that synthetic rubber could not compete with natural rubber when the emergency was over. After the war these plants were retained by the Government, although they will probably be sold to private industry under legislation passed in 1953* A second example was aviation gasoline, in which the plants built under con­ tract with the Defense Plant Corporation have now become obsolete, and have been dismantled.

The case of magnesium provides a third example. During World

War I there were seven producers of magnesium metal; but as demand declined after that war, most producers withdrew, leaving in 1920 176 c.ily the Dow Chemical Co. and the American Magnesium Corp., a sub­

sidiary of the Aluminum Company of America, In July 1927, the latter company withdrew from the producing field. Until 19i*l, Dow wcs the only producer, when Permanente entered production. Magnesium

could not be sold in competition with the other light metals because

of the cost of production and lack of knowledge concerning methods

of forging and extruding the metal.

During World War II, nine other companies entered the producing

field as operators of Government plants, Dow and Permanente also

undertook to operate plants built at Government e x p e n s e , ^ ks of

Tariff Commission, Report No. 10, Magnesium, Government Printing Office: Washington, D, C., 19U5*

December 7, 19U5, the Defense Plant Corp. owned 90 percent of the

domestic metal—producing capacity, and a large share of magnesium-

fabricating capacity* (Because of capacity arising from Government

equipment in scrambled facilities, there are no accurate data on the

percent of fabricating facilities owned by the Government. Ap­

proximately 5>0 percent of forging capacity, U2 percent of extrusion

capacity, 37 percent of sand casting capacity, and 20 percent of die

casting capacity were included in eleven additional Government-owned

fabricating plants operated under management contracts,)

Authority to build such plants was not granted to any agency of

the Federal Government by the Defense Production Act of 1950, In

May 195>1* as the committees on Banking and Currency of both houses

of Congress were considering amendments to this Act, an identical 177 statement was submitted to both committees by Edwin T. Gibson,

Acting Administrator, Defense Production Administration. This statement read in part as follows:

"The Government will need additional production of some items which by their nature will have no peacetime market. If the plant necessary to produce such Items Is costly and of little or no post-emergency use, it Is difficult, if not im­ possible, to induce private concerns to erect such facilities even though we offer tax amortization privileges and make sizable loans and extensive commitments to purchase the material produced. These inducements may not be strong enough in such cases. Unless the Government has the ultimate authority to build and operate such plants, we may lose that vital production.

"In other cases, private businessmen will construct the necessary facilities only if they are given such extensive ad­ vantages by way of long-term loans and purchase commitments that the outlay by the Government would far exceed the costs of construction. Success of the defense production program should not be contingent upon meeting every demand. Private construc­ tion and operation are preferable, of course, but the Govern­ ment should have authority to undertake construction of neces­ sary high-risk capacity which private interests cannot or will not provide*

"If such authority is granted, there can be little doubt of the most desirable type of Government agency to conduct such an operation. Our experiences in the past war supply ample testimony to the many advantages of the corporate device. The operation is essentially a business activity rather than a Governmental one and can best be conducted in business form. The need for capital investments, both for long-range and for operating purposes, and the required use of revolving funds for purchases of materials, payment for services, etc., to be repaid from proceeds of sale, all point to the Government corporation as the ideal mechanism for such an operation* It is important that the President have authority to create new corporations for this purpose."^

^ Committee on Banking and Currency, Defense Production Act Amend­ ments of 1951, 82nd Cong., 1st sess., 1951, Senate - p. 190, House of Representatives - p. 331* 178

In this connection, i t was suggested by Jess Larson, Administra­ tor, General Services Administration, that the only field in which tlie authority might be used at that time was that of titanium produc tion:

"We have no arrangement that has been submitted to us whereby we would be agreeable to purchase titanium. The use of this metal is in the defense field. It is too expensive and has not been developed far enough to be a common use metal, so it would fall definitely in that class of production that had no obvious civilian or apparent civilian use coming to the emergency.

"The proposition we have before us, to which I referred, would call for the expenditure of almost $200,000,000 by the Government to purchase the output. That property can be built for about $15,000,000 and operated under contract by the Govern­ ment at a figure considerably less than $200,000,000*

"It is our estimate that the saving might run up to $100,000,000 in that particular case, with the Government using its facilities for power and all that sort of thing, so that is the one case that we now have before us, which I think we should have this authority' to save that much money."-’

See footnote U (House of Representatives, p. 3^1)•

Ur. Gibson concurred with Mr. Larson's statement, although he had testified previously that he knew of "no situation at the moment where we would use (authority to construct and operate plants)."

The proposed contract mentioned ir> the testimony was not named; presumably Mr. Larson referred to negotiations with the Titanium

Metals Corp. of America or E. I. DuPont de Nemours.

It was made clear in these hearings that the General Services

Administration considered itse lf to be handicapped to an even greater extent by the requirement that all of its contingent liabilities be fully obligated at the onset of a purchase program. This was 179 illustrated in the case of : When General Services Ad­ ministration was given a directive to purchase $185,000,000 worth of the commodity for resale, the agency was compelled to assume an obligation for the full $185*000,000, although it was stated that as a result of the need for tungsten it actually would have to spend no more than $20 - $25, 000,000*

As provided under section 303 of the Defense Production Act, these

obligations were established for: (a) revolving funds for the purchase

and resale of material essential to the defense program (b) contingent

liabilities under procurement contracts for essential materials

(c) a program for the encouragement of exploration for critical and

strategic minerals and metals* Actual projects approved during the

1951 fiscal year totalled approximately $823,000,000, although under­

takings were restricted to $£i50,UiiQ,000 because of the exhaustion of

the agency's appropriation.

As no action was taken by Congress on the simple amendments to

the Defense Production Act suggested at that time by Messrs, Gibson

and Larson, it was necessary for the agency to proceed on the same

basis as before. Under thes. circumstances, the General Services

Administration coiOd not earily have tied up such a large share of

its annual appropriation in initiating a procurement contract program

for titanium sponge* A program for procuring 3,600 short tons per

year over a five-year period would have involved the obligation of

$180,000,000, Negotiation of contracts of the type described in

Chapter VI, "Public Policy and National Defense," was obviously the

onlj course open under General Services Administration's authorizing 180 legislation*

The General Services Administration concluded a contract with the Titanium Metals Corporation of America, in which i t agreed to buy up to 1,500 short tons of titanium sponge, ingot and mill products, in July 1951* The DuPont contract, for a maximum of 1,1*70 short tons of sponge, was announced one year later. The company was producing almost 2—1/2 short tons per day in facilities which it constructed without Government aid; and because of its previous history with antitrust prosecutions i t could not be persuaded to contract for additional production until March 195U. By this time, a contract with Cramet, Inc., had been announcedj and contracts with

Dow Chemical Co. and Union Carbide and Carbon Corp. were also ready

for signing.^ The latter two, plus the second contract with DuPont

* | II “ I!. _ ------'■ " ------™ ' ^ The Dow Chemical contract is to be announced* The Union Carbide and Carbon contract, was subsequently rejected by the company. It was announced by G.S.A. that an effort would be made to place this tonnage with other contractors.

were presented as a package by the General Services Administration.

The announcement added that seventeen other firms were negotiating

for titanium sponge production contracts, although i t cannot be as­

certained how many of these are seriously interested. A number of

firms not mentioned by General Services Administration have also ex­

pressed an interest in primary titanium metal production.

The effect of these contracts, exclusive of the one with Union

Carbide and Carbon Corp., is to make the Government agree to purchase 181 up to $89,700,000 of titanium sponge, ingot and mill products, and to commit the Government to an additional cost of up to $37*500,000,

General Services Administration officials have stated that the prospect of possible changes in production processes does not place a straight jacket on present contract procedures, as loopholes can be written into contracts to allow for this contingency. General Services Administra­ tion officials have stated that any reasonable proposal from a legitimate company will be considered.

It is impossible for the Government to protect itself against a decline in price or a change in the specifications for titanium sponge. Sponge tendered to the Government could not in this event be resold to melters and fabricators without a considerable loss to

General Services Administration, No such cases have been recorded

to date, although it is anticipated that a fairly large inventory of titanium sponge will have been accumulated by the end of 195U,

Utilization of the management contract device would undoubtedly

have shortened the period of negotiation and resulted in more rapid construction of producing plants than did the procedure which was

actually followed. In an all-out war, the saving of a few months might provide an answer to all arguments, as titanium is believed

to be vitally needed in aircraft production. It is not clear that

the Korean War Emergency justified excessive haste in obtaining a

supply of the new product. There were other obstacles to quantity

production, such as establishment of specifications for titanium to

be used in aircraft components, and improving fabrication processes. 182

Although the Government might have been relieved of the obligation to buy titanium sponge under some revisions of the management contract, it would have Vecome the owner of a number of primary metal producing plants* It is difficult to estimate the precise value of the facilities presently being constructed or operated under the titanium program. It is anticipated that Cramet,

Inc., will overrun its estimated construction cost of $50,000,000 by another $10,000,000; and the company has applied to the General

Services Administration for additional Government assistance. A

conservative estimate of the aggregate construction cost of the five projects, excluding the Union Carbide and Carbon Co. plant, would be $131,500,000. The market value of the plants at any given time would of course depend upon the demand for titanium sponge and the

state of technolocy (i.e ., whether the prospects were good for

retention of the Kroll process). Presumably, the operators of the

plants would have been given an opticn to buy them, as were the

majority of operators under management contracts during World War II.

A precise evaluation of the possible disadvantages of management

contracts for titanium sponge production depends upon a number of

less tangible factors. The incentive to experiment with new produc­

tion processes, or to improve the present process, might have been

deadened. The contractors could have delayr their activities on

research and development because the Government was paying all

expenses and bearing the risk associated with going into production

and developing a market for the new product. Other private firms

could have held back because of the uninviting prospect of being in 183 competition with the Government. It is possible, on the other hand, that experience in producing the metal on a commercial scale, with the prospect of eventually owning the producing facilities, would have had exactly the opposite effect on these contractors* The in­ centives for improvement of production methods would depend on the nature of the management contracts (i.e ., whether General Services

Administration would have agreed to buy only a portion of the output, to underwrite laboratory expenditures other than for quality control, 7 etc.). In view of the 3tate of technology and of the market for

The history of management contracts in the magnesium industry is not very revealing on this point. It is impossible to determine from cost sheets and other data submitted by contractors operating Govemment—owned facilities for producing primary magnesium whether they have engaged in basic process research. titanium in 1951, it is doubtful whether any contractors could have been found to operate titanium plants if the Government had refused to grant a firm purchase commitment for at least a portion of the output.

Examination of the available evidence reveals no decided ad­ vantages of the management contract device. In the case of titanium, the methods actually used may attract more firms into the industry than management contracts would have. The General Services Adminis­ tration's contract negotiators have expressed an intention to equalize as much as possible the shares of the industry going to any one primary titanium producer. In December 1953 it was stated unofficially that future contracts would be roughly 3 j600 short tons per producer. 181*

However, i t is not at all clear that they will do so if this means granting unduly favorable concessions to high-cost producers*

The divergence between good intentions and actual results may be seen in the contracts negotiated during the first, second and third rounds of expansion in the primary aluminum industry, (i.e ., from 1950 to 195>3). Prior to each round of negotiations, i t was announced by General Services Administration that contracts would be given to new entrants in preference to the established firms. No new contractor would agree to come in for less than 1—1/2 cents per pound above the market price at that time. Satisfactory contracts were eventually awarded to the Anaconda Copper Company and the Harvey

Machine Co.; but because of a drastic reduction in appropriations to the Bonneville Power Administration, Department of the Interior, i t is doubtful whether Harvey Machine Co. will be able to begin production until Congress acts.

Prediction at this Aage ishazardous. Much depends upon how many firms eventually accept contracts to enter the primary metal branch of the industry, and the provisions of these contracts. New processes of titanium metal production may replace the present facilities, which employ the Kroll process or modifications thereof.

Pe—grouping and consolidation of enterprises, or restrictive practices based on patent licenses could, in the event that only a small number of firms come into the industry, follow the commercial exploitation of new production processes. This would be particularly likely if civilian demand does not develop as rapidly as is hoped. Some m protection against these eventualities exists in the maintenance of an active interest in the industry on the part of the Anti-Trust

Division of the Department of Justice, This agency1s task will he made much easier in case a high level of aggregate demand is main­

tained in the entire economy. IX. SUMMARY AND CONCLUSIONS

Summary

The titanium industry is divided into the following branches:

(1) ores and concentrates branch; (2) alloys and carbide branch;

(3) pigment branch; (U) primary metal branch; and (E>) fabrication branch. Although there is some justification for defining the industry in terms of cross-elasticities of demand for all these products in competing uses, further reasons for classification as an industry can be found in such factors as the common raw materials used in the manufacture of many products; the production of these in the same firms (and in some cases within the same division of a firm) the frequent reassignment of technical and managerial personnel to different titanium products; and the character of clientele rela­ tions with Government agencies, including reporting of statistics, technical assistance, and wartime controls*

Examination of the financial and physical structure of the industry, with reference to conditions influencing the formulation of policy on marketing, pricing and technological innovations, reveals the following: (1) Production is concentrated in a few multiproduct firms for which titanium does not represent the principal source of revenue* (2) The industry is characterized by a high degree of vertical integration* (3) Firms In the industry frequently join in ventures in which they have a common interest, forming a new company for this purpose#

Three common features are apparent in the instances of market behavior and strategy investigated. Division and branch managers 186 187 within the firms accounting for the greater part of production are granted a large degree of autonomy, although expansion of plant capacity or construction of new plants universally requires approval by top financial and executive officers in the corporation. Markets for ores and concentrates, alloys, pigments, titanium sponge and fabricated titanium metal products demonstrate many of the character­ istics of undifferentiated oligopoly, although certain practices in the industry may be considered unique. And finally, decisions at all stages are closely interwoven with policy of the Federal Govern­ ment, particularly in the ores and concentrates, primary metal and fabrication branches of the industry,

A classification of titanium products is apparent on the basis by which prices are quoted. Some products have identical delivered prices throughout the industry (alloys). Others have identical quoted prices, but delivered prices depend upon a variety of factors— transportation charges to consumers, size of the order, etc,

(titanium pigments and titanium sponge), A third group includes those in which each firm establishes price policy on a different basis (ingot and mill products). This classification has the effect of ranking the different branches of the titanium industry by age as the alloys and carbide branch is the oldest. It may be expected that pricing in all branches will in time approach that of the first category. Ores and concentrates cannot be classified in exactly these terms, because of the high degree of vertical integration in the industry, the long-term contracts involved in some purchases, and the relatively unorganized state of the market. 188

Average—cost pricing is evident in the older branches of the industry, although a number of clear exceptions are noticeable* In the pigment branch, average costs are estimated by at least one firm for different hypothetical levels of plant capacity. These are compared with sales forecasts to determine the most profitable level of output. In some plants it is reported to be technically im­ practicable to vary the level of output*

The possibility of countervailing power arising in the steel industry is apparently the most important factor in the pricing of alloys. Price-cost relations in the marketing of titanium sponge are obscured by large expenditures in private industry on research and development, various types of financial assistance from the

Federal Government, and purchase contracts with the Government, calculated to ensure amortization of investments in plant and equip­ ment* The Bureau of lines' yardstick plant at Boulder City, Nevada, might be used as a pace-setter for the establishment of equitable price—cost relations in the marketing of titanium sponge, although improvements will probably be made on the basic production process used in this plant*

Estimated operating costs of this plant (under assumed conditions of capacity production and assumed reasonable prices, based on estimated costs of production, for raw materials) indicate that the

Kroll process, despite its acknowledge disadvantages, can produce high-quality metal sponge at a direct cost of $1*68 per pound* This is sufficiently low to ensure a market for titanium in a variety of military and civilian applications. The process would be desirable 189

to potential new entrants because of free access to patents and the large body of technical information made available through the opera­

tion of the Bureau's plant. These operating costs also indicate

that monopolistic practices would be indicated if the producers were to continue to maintain a price of $5.00 for many months past

the current development period.^

^ A reduction in the price of certain grades of titanium sponge to and others to per pound was announced by DuPont on April 1, 195ii. Government purchase contracts will support the price at from $U.OO to $5.00 per pound until the plants built under the current expansion program are completely amortized.

Possibly three-fourths of the price of titanium metal to the

end-user represents value added by melting and semifabrication.

Vigorous competition exists in developing new processes and improv­

ing the existing method of melting and fabricating titanium metal,

although precise information regarding these developments is not made

available to the Bureau of Mines. Government aid at the semifabricat­

ing stage has taken the form of accelerated amortization certificates.

Rapid expansion of facilities is assured so long as a high level of

activity exists in the economy as a whole.

Public policy during World War II and the Korean War mobiliza­

tion periods involved price stabilization and allocation of supplies;

establishment and implementation of expansion program; and public

purchase of raw materials for stockpiling. Agencies of the Federal

Government were also involved in exploration for new sources of raw

materials and development of new products and processes of production 190 and trust policy, under which an important case involving alleged abuse of patents was launched in 1 9kh»

The Metals Reserve Co. initiated a foreign procurement program for rutile in 19 U0. The Office of Production Management took the initiative in securing an agreement with regard to the development and U3e of an ilmenite deposit at Tahawus, New York. The Bureau of

Mines delimited a deposit of titanium ore in north-central Florida in 191*8 which was developed by the DuPont Co. in the following year.

The Defense Minerals Exploration Administration contributed financial­ ly to an exploration project in Duval County, Florida, in cooperation with the National Lead Co., in 1953*

Research on titanium has been conducted by the Bureau of Mines since 1938* Since 19W*, the Bureau has played an active part in launching the titanium metal branch of the industry, operating the firs t pilot plant for production of titanium metal by the Kroll process, conducting metallurgical research in its own laboratories

■md distributing free samples of titanium for research purposes to expedite the development of the industry. The Bureau’s pilot plant has been visited by representatives of nearly 25 companies for periods ranging from 2 days to 1* or 5 months. I t was operated in order to obtain experience by the Titanium Metals Corporation of America for over a year. The Defense Materials Procurement Agency (until its termination) and the General Services Administration have negotiated purchase contracts with potential entrants into the industry and assumed a large share of the banking and risk-taking function for these firms. 191

Prosecution of the titanium pigment cartels which were an important feature of the industry prior to 19U1* did not immediately affect the degree of concentration of production in the industry, but the entry of three large firms into the industry suggests that the change in patent licensing policy introduced at that time has been a significant influence on the conditions of entry. During the Korean

War expansion period, a ll Government aid to the pigment branch of the industry (in the form of accelerated tax amortization certificates) went to the new entrants. Such a reenforcement of anti-trust policy is exceptional in the history of agencies involved in industrial mobilization and military procurement.

The range of public policy alternatives in encouraging an increase in titanium metal production was circumscribed by the

Defense Production Act. Examination of the available evidence, however, reveals no decided advantages of the management contract or other proposed devices. The method actually used by the General

Services Administration may attract more firms into the industry than management contracts would have. The precise outcome will depend upon how many firms accept contracts to enter the pnraary metal branch of the industry, the provisions of these contracts, and whether new processes of titanium metal production and fabrica­ tion replace the present ones.

Conclusions

Apparently, a "workably competitive" situation exists at present in the marketing of titanium pigments, but approximately 90 percent 192 of domestic titanium minerals output is concentrated in the two largest producers. "Workable competition" in the marketing of titanium ores and concentrates depends, therefore, upon use of foreign ilmenite in large quantities, the opening of domestic mines by additional producers, or the re-introduction of some variation of the arrangement negotiated under the auspices of the Office of

Production Management in 19Ul for the use of ilmenite mined at Tahawus,

New York.

The present manner of establishing depletion allowances, which are the primary component of tax rates in the mineral industries, could be greatly improved. Considerations of equity, economic growth, and national defense all make it imperative that the establishment of these rates be placed in the hands of an executive agency. I t is recommended that a branch of one of the "old line" departments of the Federal Government be authorized by statute to regulate depletion allowances on a mine—by-nine basis*

It is difficult to assess the demand for titanium metal for use in military applications. The increased supply brought forth by military demand has undoubtedly encouraged experimentation for other uses. As semifabricated titanium metal products are currently being allocated to the production of military ordnance and aircraft under a cooperative arrangement between the Department of Defense and the

Buesiness and Defense Services Administration ( i.e ., Department of

Commerce) the policies established by these agencies will play an important role in shaping the growth of the industry. In this con­ nection, a certain amount of semifabricated titanium might be 193 withdrawn from allocation as essential military needs permit, and allowed to enter the civilian market on a free competitive basis*

This would hasten the development of civilian uses for the metal,

particularly in those applications in which resistance to corrosion is the most desirable property.

The large volume of research which is currently being conducted

as a part of the regular operations of a number of Government agencies,

or under contract with these agencies, and the development of policy

similar to these examples in the titanium industry has undoubtedly become a major factor influencing economic growth. Mobilization of public research in the public interest is facilitated by the Patent

Review Hoard which is charged with the task of laying down a uniform

policy with regard to government patents in the numerous agencies in­

volved in research and development work in science and technology.

The assignment and use of government patents to industry should,

however, be supervised on a case—by—case basis by the Anti—Trust

Division of the Department of Justice. Denial of assignment or of

a license to use a patent by the Anti-Trust Division would clear the

government agency which had developed i t from further involvement in

the case. Also, the general policy should be that the Justice Depart­ ment would be guided in most instances by arguments presented by the

scientific agency involved, and by the Patent Review Board in under­

taking to deny a patent license.

The general principle upon which the Anti-Trust Division should

define the public interest in a patent can be briefly stated. Assum­

ing that workably competitive conditions exist in an industry, or can f irs t be achieved by means of trust—busting, the results of govern­ ment r;search should in all cases be introduced on a non-discriminatory basis. In other cases, in which the patent might conceivably be withheld under this principle, i t might later be used by the Anti-

Trust Division as a bargaining weapon in obtaining a consent decree.

Such a policy should be expected to promote an expanding and equit­ able free enterprise system during these trying years of semi- mobilization and ideological conflict. 195 BIBLIOGRAPHY

BOOKS

Barksdale, Jelks, Titanium New York: Ronald Press Co., 19 U9

Schumpeter, Joseph A., Capitalism, Socialism and Democracy, New York: Harper & Bros., 3rd ed. 1?£0.

Triffin, Robert, Monopolistic Competition and General Equilibrium Theory, Cambridge, Mass.: Harvard Press 191*0. PUBLICATIONS OF ADMINISTRATIVE AGENCIES

Bureau of the Census, Facts fo r Industry: Inorganic Chemicals and Gases Report M—19-A, Washington, D. C.: Government Printing Office,

Bureau of Mines, Minerals Yearbook, Washington, D. C.: Government Printing Office.

Department of Justice, Investigation of Government Patent Practices and Policies, Washington, D. £•: CJovernment Triniing Office (19U7) 3 volumes*

Tariff Commission, Report No. 10. Magnesium, Washington, D. C.: Government Printing Office (19l*5). PUBLICATIONS OF OTHER AGENCIES

The President's Materials Policy Conission, Resources for Freedom, Washington, D. C.: Government Printing Office (1952) 5 volumes.

LEGISLATIVE MATERIALS

Revenue Act of 1913 (PL 58, 62nd Congress, 2nd sess.) Revenue Act (PL 20, 69th Congress, 1st sess.) Tariff1 Act ^ (PL 130, 71st Congress, 1st sees,) Revenue Act of 1932 (PL 151*, 72nd Congress, 1st sess,) « Revenue Act of 19U2 (PL 753# 77th Congress, 2nd sess.) Revenue Act of1 191*3 (PL 235, 78th Congress, 2nd sess.) Excess Profits T«c Act of 19j*2 (PL 7U>, 77th Congress, 2nd sess.) An Act to laminate Certain fax Provisions, 19U7 (PL 381*, 8oth Congress, T aT sess.) Excess Profits TaxAct of l950 (PL 80, 8lst Congress, 2nd sess.) Revenue Act of 1951 (Ft 183, 82nd Congress, 1st sess.) CongresslonAl Record LXJU.VIII-19U2 (77th Congress, 2nd sess.) Repletion of Mines {Jo in t Committee on Internal Revenue Taxation, 7ist Congress, 3rd sess.) 1930. Tax Evasion and Evaders (House Committee on Ways and Means, 75th Congress, 1 st sess., 1937)* 196 Revenue Revision of 1 9U2 (House Committee on Ways and Means, 77th Congress, 2nd sess.)* Revenue Act of 19U3 ( Senate Finance Committee, 76th Congress, 1st "sess.'T. Revenue Revision of 19$0 (House Committee on Ways and Means, 8 lst Congress, 2nd sess. /•' Revenue Revision of 1951 (House Comaittee on Ways and Means, 82nd Congress, 1st sess*)* Defense Production Act Amendments of 1951 ( House and Senate Committees on Sanking and"Currency, tJ2nd Congress, "1st sess.),

LEGAL MATERIALS

District Court of the United States for the Southern District of Mew fork. Findings of Fact and Conclusions of Law; Statement of Complaints by the Plaintiff and Replies by the Defendants; and Final Decree, in the Case of United States of America against National Lead Company, Titan Company, Incorporated, and E. I , Du Pont de Nemours and Company (191*5) • 27U U. S. Reports 295 United States v. Ludley

332 U. S. Reports 319 United States v. National Lead Company, Titan Company, Incorporated, and E. I . Du Pont de Nemours and Company PERIODICALS AND PAMPHLETS

Eldridge, D. H. "Tax Incentives for Mineral Enterprise" The Journal of P o litic a l Economy XXXII No. 2 (June 1950) pp. 2 2 6 - 2 2 9 . ------

ELdridge, D. H. "Extractive Industries and the Excess Profits Tax" National Tax Journal XVI No. 1* (December 1951).

Harvard Business School "Titanium Metal and I ts Future" Cambridge, Mass. 1952.

Humphrey, Hubert "Tax Loopholes" Washington, D. C.s Public Affairs Institute 1952* 197

UNPUBLISHED MATERIALS A large volume of archival and unpublished material has Influenced the development of this dissertation. Such memoranda, letter*, telephone conversations, press releases, etc,, cannot, unfortunately, be cited In this bibliography. Some aspects of these are considered to be confidential with reference to national security or by virtue of proprietary information contained. Research leading to the preparation of this dissertation was supervised by Ur, F. J*

Cservenyak, Chief, Light Metals Branch, Minerals Division, U, S. Bureau of Mines, Reference Is made to an earlier investigation by the author: The Premium Price Flan, unpublished thesis, Ohio State

University, Columbus, Ohio, 1951* 1 9 8

AUTOBIOGRAPHY

I, Francis George Masson, was b o m in Pi lares de Nacosarl,

Sonora, Mexico, on March 11, 1929. I received my secondary education by correspondence with the American School, Chicago,

Illinois, and in residence at the San Marcos Baptist Academy, San

Marcos, Texas. My undergraduate training was obtained at the State College of Washington, from which I received the degree Bachelor of Arts in 1950.

From 1950 until 1953 X held an appointment as Graduate

Assistant and as Assistant in the Department of Economics at the

Ohio State University. I specialised in money and banking, international trade and finance, economic statistics, economic theory and public administration, receiving tbs degree Master of Arts in 1951* In 1953 I was appointed a research fellow and held this position while completing the requirements for the degree Doctor of Philosophy.