Document 3N1ZrXNZY1o0ZED4V0BmoKDjx

METALS CHEMICALS ' "1 l J. Aluminum producers ^jy time on bauxite The spreading fight over vinyl chloride With only mild public protests, the ma jor U.S. aluminum companies--Alumi num Co. of America, Reynolds Metals, and Kaiser Aluminum-this week sub mitted to the will of the Jamaican gov ernment. They agreed to increase the tax and royalty payments on their bauxite mining and alumina process ing activities in Jamaica this year from $25-million to $200-million. The result will be higher prices for aluminum products in the U. S. In effect, they had no choice. The U. S. aluminum companies have a gross capital investment in Jamaica of 1800million-which they could have lost if ihoy hail refused to bow to the Jamai- government's order. Even more im|x>rtant, Jamaican bauxite and alu mina supplies today account for a criti cal 40% of the aluminum produced in this country. "We will pay the additional revenues ... but will do so under protest," ac knowledges John D. Harper, chairman and chief executive officer of Alcoa. Along with Reynolds and Kaiser, Alcoa has requested that the International Center for Settlement of Investment lutes (a body formed under the aus- j,._es of the World Bank) rule on the le gality of the Jamaican government's increased tax and royalty action which, the companies claim, breaches long term contract agreements. While the investigation proceeds, however, the increased payments will be made. And this, plus a growing shortage of aluminum in the U. S. could force the price of aluminum ingot, now running at 33Ht per lb., up to 36C to 38f by August and maybe as high as 40<f by yearend. Where It hurt*. Because they do not de pend equally on Jamaican bauxite and alumina, the big U.S. aluminum pro ducers will not be equally hurt by the Jamaican tax boosts. Alcoa, for ex ample, will have to pay only an addi tional $21-million because it gets only about 15% (or 775,000 short tons) of its alumina from Jamaican bauxite. For Kaiser and Reynolds, the in crease will be a much tougher pill to swallow. Reynolds gets 60% of its baux ite from Jamaica, and its royalty bill "will climb to about $50-million gross before any tax effect, based on esti mated production of about 4.5-million s this year," says Richard S. Rey- . .Js, Jr., president and board chair man. Reynolds, the largest U. S. user of Jamaican bauxite, pays export taxes Alcoa's Harper: Aluminum expansion will more likely be in the U. S. not only on the 3.4-million tons of Jamaican bauxite it: ships to its U. S. plants each year but also on 1.1-million tons of ore it sends to the Jamaican alumina plant it owns with Kaiser and Anaconda Copper. i The Kaiser bite will be somewhat smaller-an additional $46-million pay ment. But between 70% andj 75% of Kaiser's U. S. alumina requirements are totally dependent on Jamaican bauxite. So the effect on the company's over-all costs--and thus on its prices-- cannot fail to be more sweeping. Looking elsewhere. Over,the longer haul, though, the Jamaican 'tax boost could force even more important changes in the U. S. aluminum industry. The outlook is for higher prices for aluminum products in the U. S. "Bauxite may well be pricing itself out of the market," concedes Alcoa's Harper. "This doesn't mean that we are walking away from Jamaica. But it means that our future expansion will more likely be in the U. S." Aluminum, he continues, is a very common element in the earth's crust. It is contained in anorthosite, in laterite ore, in clay, and there are big amounts in coal mine wastes. "We will not go ahead with domestic ores until we have demonstration plants huilt," says Harper. "And then it will take two to three years to get new facilities operating." But implicit in the active interest of U. S. aluminum producers in developing alternate sources of aluminum is the knowledge that other bauxite-rich countries in the Caribbean and Africa may not be long in following Jamaica's lead in demand ing far higher taxes on bauxite. In May, the federal Occupational Safety & Health Administration issued a proposed standard that would limit the concentration of vinyl chloride in a plant's atmosphere to "no detectable )evel"-in practice, about one part per million. Next week, producers and users of this chlorinated hydrocarbon, which is the monomer used to make polyvinyl chloride (pvc), industry's most versatile plastic, will square off against OSHA at public hearings in the hope of squashing the new standard. Already, OSHA has extended the Washington hearings beyond the four days originally scheduled. Some wit nesses have asked for as much as three hours to testify. Controversy is hardly new to osha, which has seen most of its standards hotly contested, but this, says an official, "is going to be the big gest show we've ever had." The fight is over osha's attempt to protect workers against angiosarcoma, a rare form of liver cancer. Vinyl chlo ride, normally a gas, has long been a suspected carcinogen, and European scientists had previously reported tu mors in rats exposed to heavy doses. Then in January, B. F. Goodrich Chem ical Co. reported that several of its long-time vinyl workers had died of angiosarcoma. OSHA quickly dropped the previous exposure limit of 500 ppm to 50 ppm as a temporary measure. In April, studies sponsored by the Manu facturing Chemists Assn, showed that 2 of 200 rats exposed seven months to 50 ppm developed tumors. Meanwhile, the number of confirmed deaths due to angiosarcoma among vinyl workers, worldwide, has reached 21. "And we've only begun to look at the problem," says William Lloyd, head of the health surveillance office of the National In stitute of Occupational Safety & Health (niosh). Under the proposed standard, work ers exposed to detectable amounts of vinyl chloride would have to wear res pirators. But, as it did in earlier stan dards, OSHA says it will insist, where feasible, on engineering controls and work practices that avoid contamina tion of the air in the first place. Crippling standard. The vinyl industry's position is, first, that rat tests to date do not prove the need for a 1-ppm limit for human beings, and second, that such a limit is technologically and eco nomically not feasible. The Society of the Plastics Industry (SPI) has called the proposed standard "excessively and BUSINESSWEEK June 22. 1974 29 BFG24386 G&Q&JZqz r fk L f i i unrealistically restrictive." Anton Vit- tone, Jr., president of B. P. Goodrich Chemical, states bluntly that the 1-ppm level "cannot be obtained at this time or in the future.'" A spokesman for Firestone Tire & Rubber Co. puts the case more strongly: The standard, he says, "would literally cripple this in MONEY & CREDIT A new set of rules for floating currencies money from newly rich oil nations that will help poorer lands pay their oil bills. Most significant, though, was the agreement on rules for floating. Much of the technical side of these rules re mains to he worked out, and there is no guarantee that nations will follow rules. The IMF will help draft them, the but v dustry." The threat, moreover, is not confined to those companies that make the monomer and the polymer. The stan dard, says Vittone, "could displace not "We hope we have taken a first step hack toward more stability in cur rencies," said a central banker fresh back in Europe from last week's Com it cannot force a government hent on Mcompetitively devaluing to obey them. "The rules simply express a hope," as rfone central banker sees it. Tinkering. The aim of these rules for only the 6,500 vinyl chloride workers mittee of 20 monetary reform negotia floating is to insure that governments and PVC production workers, but also tions in Washington. That first step avoid competitive devaluations that hundreds of thousands of other em was an agreement on some rules for might damage the exports of other na ployees in the companies that use PVC." managing today's floating exchange tions. Technically, the rules went into Some 5-billion lb. of the plastic was rates, and this week monetary author effect last week. In practice, it will be a used in the U. S. last year to make such ities in both the U. S. and abroad were while before they are applied, and products as pipe, wire insulation, pack mulling over how to make those rules there probably will be tinkering with aging film, and floor tiles. work. the present relationship of rates first. The danger to PVC processors lies in There is no longer a prayer of the In coming months, governments in the small amounts of unreacted vinyl sort of full-scale reform that govern bilateral talks with the IMF staff will chloride that remain in the polymer. That danger took on added weight last week with reports of deaths due to liver cancer of two Connecticut pvc workers. One had worked on a General Electric Co. wire-coating line in Bridgeport, the other on a fabric-coat ing line at Ross & Roberts, Inc., in Stratford. "We're afraid the problem extends far out into the plastics indus try," says NlOSH's Lloyd. Disputed report. No one has had time to calculate fully the economic impact that the new standard could have, but SPI this week released some prelimi nary findings of a study made for it by Arthur D. Little, Inc. adl researchers figure that a shutdown of vinyl produc ers would result in a loss of at least 1.6million jobs and $35-bilIion in annual ia sales. Hardest hit would be the automo tive and construction industries, heavy t pvc users, adl is studying the possible use of substitutes for PVC in some ap- plications and will present its findings Delegates from 20 nations conferred on money at a two-day meeting in Washington. at next week's hearings. Even in advance of the SPI report, ments had in mind when they created work out confidential "target zones"- however, Sheldon Samuels, director of the C-20 two years ago: a dramatic re or ranges of fluctuation-for each cur occupational health, safety, and envi turn to fixed exchange rates. "We'll rency. Thereafter, a government would ronmental affairs of the afl-CIO, called never see the 'big reform'-just a lot of be obliged to keep its currency trading it "meaningless.'' The report, he says, small steps," says one European. within these zones-intervening if nec assumes that the standard cannot be Yet in a world of floating rates, roar essary to keep it there. If a govern met. "But we're getting data showing ing inflation, and deteriorating econo- ment wants to change its zone, either that the standard can, in fact, be met." -mies, even small steps look important. to correct a past mistake or to accom His data show, Samuels says, that At the least, the negotiators have in modate future economic policy, it will plants making less than 100-million lb. sured that international monetary co he expected to consult with the IMF. i a year of vinyl chloride will have to re operation is not dead. Faced with the And the fund staff, based on its own \ sort to respirators; plants of 100-mil unpleasant prospect of returning home models, may suggest when it thinks it lion lb. to 200-million lb. can afTord to empty-handed, the officials buckled is time for a government to move a put in engineering controls; and larger down in Washington and reached some zone up or down a hit. plants could be made "airtight." substantive agreements. Further, the The IMF can only suggest-not order, i The AFL-CIO says it is determined to Washington meeting produced a much- it docs get some muscle from the crea fight for the tough standard even if it strengthened International Monetary tion of a new', ministerial-level interim does mean throwing some people out of Fund. The IMF has a new, more attrac consultative committee. This com work. But Peter Bommarito, president tive special drawing right (SDlt) to mittee, including the same 20 ministers of the United Rubber Workers' union, hand out-one that will be of use not w'ho made up the Committee of 20, is to echoes Samuels' confidence. Industry, only in government blit in private meet yearly to supervise the implemen he says, is trying to "scare everybody transactions as well. And the IMF gets tation of the rules for floating. The about losing a job." to manage a $3-billion "oil facility"-- committee per se will have no real 23217100 BUSINESS WEEK. June 22. 1974 BFG24387