Document mBvMODD4B78V7YJ8e3wqamZg0

ppiPMffmPR mm wmmmmmmm** LIA15709 : iss mmunaui tnuma taoumm mralb, 1 U PAHTICUIJUt LEAD AID tUC BY J. I. V. Duncaa Hirating Director r Tbs Ho Tlnto-Z.loc Carp., IAd. London, Indiana 5 < At you msy know, I u mv to the lead/line Industry sad therefore It vu with sane trepidation thst I accepted the Invitation to address you today. Vbat you would really like mb to do no doubt Is to forecast the course of prices In the near future. If I vers to attempt to predict these future trends and tend* ancles Z would Indeed need a very powerful crystal ball, but nevertheless Z will do my best to give you sene views on the international situation of our industry. Z know you are all avare that world consumption of load and sine baa been Increasing each year and In fact the surpluses which have caused so such da* presslon in the Markets In recent years are relatively soall when coopered with the world level of consuaptlon. For Instance, although the lead oarket price baa ; been unsatisfactory to producers In recent years, nevertheless the surplus fron 1959 onwards has been well Inside five per cent of world conniption, even In the most unsatisfactory years. 1 Ve have not beard very ouch about shortages In recent years, but Z firmly believe that the planners who west around forecasting severe shortages are not without blaae for the present state of affhlrs. In ay view it Is a Major fal lacy to talk of shortages In lead and sine. It is true that there bsve been, and will continue to be, temporary fluctuations In supply end demand, but the record shows that a corresponding fluctuation In metal prices la sufficient to restore equilibrium to the market In the long run. I aa firmly convinced that, given the correct conditions, adequate supplies of lend and sine will always be avalistIs to i meet requlrcaents, and Z consider thst the advocates of gloon who forecast shortages of the petals do a great disservice to the Industry by the effect which they t t have on consuaer thinking. If eonswert of lead and sine become really convinced that there la a shortage costing I have no doubt that they will redouble their ef forts and research to find and adopt a satisfactory alternative Material. You will see frem what I have Just said that Z do not consider that the troubles of the lead and sine Industry arise froa any chronic state. Z believe that they are the result of temporary Imbalances and I would like to "'" the reasons why such fluctuations appear to affect our Industry In particular. Zt seess to ae that the follcaring reasons are Important: . Ohllka the operation of certain aanufacturlng processes, there is a very considerable tine-lag between the discovery of an ore deposit and the produc tion of refined aetal. Many years are needed to develop a mine and to construct ancillary Milling and sasetlaes aaeltlng plants, and In ay view this Is one of the aost Important reasons leading to the temporary Imbalances which ve suffer. To de cide to bring a new nine Into operation Is really an act of faith In the long tern grewth potential of the Industry, ss It nay veil happen that, when the new facil ities case into operation meat years hence, the date will coincide with a tempo rary trough in demand. Mining, milling and smelting on a large scale call for T (Presented by Mr. Frank Gregory, Director, Car.iInc Sales Limited, at the Joint Session of the American Line Institute and Lead Industries Association, Chicago, Illinois, April 30, 1963) IPPPP^PBPiPUT1 'UPP iniMi ' iirtfci 3561 ....... .........................--`Jfr`vri . f - -- .. - 9 L IA15710 j. . t. nm________________., ._ V ______________________________________________________________ ,, considerable capital outlay, and once a decision has been taken to embark on a project and work baa actually commenced, It ia a fact that the project will alaoat certainly go ahead vbatever temportry changes my occur in condition* la the meantime. From thla you will aee that production of load aad tine la not vary aaay to adjuat to t--gmrery change# la deaaad. A further factor causing temporary Imbalance* and consequent prloa fluctuatioaa ia the fact that aaay attain, aad certainly the laad aad tine with which we are primarily concerned, are truly international ccemoditl**. Very large toonagee of lead aad tine orea, concentrate* and refined metal* mow* acroas the world and the pipelines for these product* can be said to extend worldwide. This in lteelf leads to a lack of flexibility because If, for instance, a decision war* to be aad* today to change the rate of min* production la Australia It would ' probably take six months, and maybe longer, before this decision would be reflected in the physical metal becoming available in the large consuming narkete. Thla lack of flexibility which arias* from long pipeline* 1* further complicated by the fact that many spelters aad metal consumers choose to cover the bulk of their require* sent* on forward contracts at unknown price*, and these contracts are often aade for periods of six or twelve month*, end sometimes years ahead, and are related to the market prices ruling at the time of delivery. A producer entering Into such a contract forfeit* considerable flexibility in exchax^e for a secure outlet, and It seems to me that the extant to which lead and sine are sold many months forward am average price contracts has an Important effect on the speed at which producers cen react to aarket clrnemtancea. On the other hand, it will be an extremely brave or foolhardy producer who attempted to "beat the average" by aelling hie whole production at fixed price* for prompt delivery* It is dear that a sensible balance between the two method* of selling should be achieved. It 1* indeed difficult to coameston this question of temporary Imbalance* without dlscussing further the aarket practice* In our Industry, although I realise I aa treading on dangerous ground. The London Metal Exchange price is widely used as the basis for prices of both metal and ere in many part* of the world, and it seems to be true that thla terminal aarket in London, in current circumstances, la narrow and often reflects purely local U.I. conditions. If business is bed in the b'.K. and stocks build up in L.M.Z* warehouses, the aarket prices on the L.M.Z. are likely to be depressed and this influence* the price of hundreds of thousands of tons of lead and xlnc which are sold by producers on average price contracts. I do not pretend to know what the answer is to this particular problem and aany of you have no doubt devoted considerable time to the study of alternative method* of marketing outside the U.S.A. It Is, however, true that no one has yet evolved a workable alternative, but we should perhap* avoid being too defeatist in our approach. In this connection I would like to refer for a moment to other metals. X know that certain other metals do not present quit* such a complex problem as lead and sine. You are all well aware that there is in existence *n International TlA Scheme and in quite a different way the aluminum producers of the world have succeeded in large measure to date in maintaining price stability by being willing to adjust supply to desand. In the field cf copper ve have all been following with great Interest the events of tbs last year or so la the copper market. This experiment which is being carried out in copper has certainly proved successful at least in tbs short term. wee MW" aemwf , y j- - - L I A15711 -3- J. I. V. SUCAI low I would Ilk* to soy a word about Russia. When talking of copper and thinking of possible action In lead and alnc I know 1 do not have to point out tbs fundamental dlfTaranct so far as Russia Is concerned. In tbs case of copper Russia Is a net Importer, whereas In tbs case of lead and tine it would really be very difficult to achieve any fora of International arrangement to adjust supply to demand without the full cooperation of the exporting countries behind the Iron Curtain and notably Russia. I do believe that If ideas for an International sebeae for lead and tine were to be developed the Russians would give tbs proposals their very earnest aad serious consideration. In considering Russian exports in current circumstance*, however, It does appear free ties to tins that transactions by tbs U.S.S.R. are activated by specific reasons such as a need for foreign exchaz^e. Buter transactions Involving the export of Russian setal can be pertlcularly depressing In their sarket affect, as a serebant who say have Bade s good profit at on# leg of tbs barter tranaactlon can afford to sell hla lead or tlr.c at a discount. If the need be, in order to close out the deal. This la particularly true when such >etal is imported into tbs U.K. rather than the European Continent and la delivered on the L.K.X., as has recently been the case with Russian lead. Perhaps bare I should refer to the International Lead and Eloc Study Croup which has been neeting now for several years without any conspicuous success. 1 do feel that this Study Croup provides a forum in which we can all meet aad discuss the problems of our Industry and furthermore It Is a meeting place which la acceptable to certain countries who would otherwise be precluded by Anti-Trust considerations from taklzg part In such dlacuasions. Moreover, the Study Croup provides a coemn ground on which discussions can talc place with Ruasla aad, despite the fact that the Study Croup does not appear to have made any great progress, I would strongly counsel that we continue to support such meetings. I would now like to say a word about Government stockpiling as I sm quit* sure thst many of the ills of the lead and sine industry stem froc the activities of Governments. I will of course admit that agr Croup, in coamoc with many others, has participated In Government progresses to purchase aid accumulate large stocks of sine, li >1 and other metals. I question, however, whether Government stockplll^ has beer, f.r the true good of our Industry and we arc now faced with a situation wnere the Government or the U.S.A. Is holding very large stocks of lead and sine which a'tf overhanging the world market. Tbe very announcement aarly In 1^62 of ths enormous quantities of both metals that were dubbed 'surplus to strategic require ments' was sufficient at the time to depress open market prices by several pounds a ton. I know that many of you have given much thought to the problem. The first essential Is certainly that before any disposal Is even contemplated a further assessment should be made of what is truly surplus to the strategic requirements of the U.S A. Until this point has been properly resolved one cannot begin to get to grips with ths real problem. Z fully appredete that the rules fbr U.S. stockpile disposals ars governed by U.S. legislation, but I do feel that this Is a matter of concern not Just to ths U.S. lead/tlnc Industry alone but to our Industry through out the vcrld. Tbs whole situation requires very careful bsndllrg and no one with any knowledge of the markets can pretend that tonnages of the site held In tbs U.S. stockpile can possibly be disposed of under normal clrcvoetancee without seriously endangering ths stability of tbs sarket. I would now like to turn to another aspect of our industry which Is causing great difficulty at the present time. I refer to the protectionist policies of certain countries who, for locsd and political reasons, subsidise \ MflUBsis s i imjjiusi.qan*1 "m tlPUP .UuUiMuiahatt>a*usiMmuJ^*atoartwmiMfeis rntammJlitadfaiiaShl j. i. v. nnnuL LIA15712 \ domestic mining and Malting operations Which art not truly economic by world standards. I aa fully convinced that tha world can obtain aufficlont quantities of lead and Bloc at economic price* and I aa eure it 1* quite vtoj^ to eiOTCTt uneconomic production for local and political reasons. The world la not perfect, however, and we auat face the fact that Government* will not abandon these policies overnight. I aa aura, however, that we must strive to ensure that Ooveraaent* have positive plana to decrease the support of uneconomic production and aove gradually towards a point where the International laws of economies apply, fit this connection it is interesting to note reports regarding the Italian situation. Ton all know that the Itellen anrket for lead and sine is protected by a very high tariff until 1966# but X understand that the I.E.C. have emphasised to the Italians that the purpose of the tariff is certainly not to allow them to continue to subsidise uneconomic production until 1966. J believe they have been told that they are to use the tlae to put their house la order end it is reported that the Italians are developing leportant plans to open up deposits of lend and sine and establish mines and saelters which will he truly economic end ebls to operate at mrld prices. I feel that bare we have an exa^tle of the right sort of sm and same other Governments would be well advised to take e leaf from the same book. All those countries who have resorted to protection of their lead end tine industries should be in no doubt that protect!onisa to nnowball in its effect. Any country which establishes e high level of local protection by mesas at tariffs, quotas or subsidies ebould beer In alnd that it la settle an extremely bad example to tbs rest of the world and most bad exa^lae tend to be followed. X have no doubt whatsoever that the high level of protection in, for instance, the U.S.A. and Japan has lent strength to the arguments of the European Economic Community for e correspoodlig protection. There may, at course, be some Justification for domestic reasons for seeking temporary protection nnd her* I feel X should refer to the U.K. where yon nave a prise example of the snowballing effect of protectionism. In view of the proximity of the U.K. to Europe it has been necessary for the U.K. sine amaltex to seek parallel tariff protection with the Six countries of the Cession Ifcrket so that it may compete on equal terms for its raw materials. This does not mama that I am in favor of high tariffs on sine but merely that, in order to remain in existence, the important and long-established U.K. sine smelting industry must have parity of tariff treatment with Europe. I would Indeed be perfectly happy if the U.K. tariff were nil, provided it ms also nil into the countries of the E.E.C. and other protected markets of tha world. A further development in our Industry which is causing e fundamental change la the pattern of trade is what I might refer to loosely as a trend towards 'do it yourself." for reasons of nationalise you are well aware that countries owning sufficient mine deposits are tending to build ssmltera In their own countries and usually as close as possible to the mine. This modern trend towards processing materials as close as possible to tbs source is la Itself leedii^ to problems for our Industry. There is a positive encouragement from Governments in nany countries to lncreese smelter capacity and compete for supplies of ore et a time when metal production is already showing a surplus. Xou may well feel that It is strange that I dare refer to this problem in view of the fact that the eaepaey with which I am associated has developed and is engaged in llcenalt* a new Xinc/Lead Smelting Process throughout tha world. X would merely say that I firmly believe SPW pp wpeap tfJiiWi^-ftfrlffia afesafa LIA15713 tirmmtmMa. -J* 3. I. v. BtaCAl that tha tread toward* Local amalters and refineries la aa aatahliabad fact, and X aa convinced that a* industrialisation progresses throughout tha world many nor* eountrlas will build thaaa plant*. Tb* trend towards local aaaltara la, of eouraa, causing a aajor change In tb* patters of ora supply in th* world and la particular there la a current trend toward* a scarcity of supplies to aaaltera which bars been Loc* aatahliabad la certain Industrial area* such aa th* European Cofin Iterket and th* (Jolted State*. < X aa aura you would act wish a* to caalt from agr apaech eon* comment* oa th* aarkmt outlook for lead and doc aa X aa* It. J : Thar* 1* no doubt that with th* rapidly expandlrg ecoooadaa of tha emergent nation*, and with th* art rawsly valuable work which la being doe* through the Expanded Besearch Program to develop and axtend new uses for lead and doc, ooa can foresee a steady and appreciable Increase In world consumption of both artel*. In addition, th* valcoas Improvement In th* U.8. consumption figures, la Una with a general upturn in tb* aconoagr in your country over the last year or so, aay be followed -- aa it ao often la -- by a similar lmprov--at in Europe In tha not too distant future. Aa far aa dne la concerned, provided producer* axerda* a certain aaouat of self-control In bringing any increased supplies of netal onto tbs aarket, there aeeaa no reason why the dne aarket should not adntain Its recent improvement. In th* case of lead X aa hopeful that the acre balanced statistical position which ha* recently becoat apparent will have a beneficial effect no price*. Before I finish X hop* you will allow as to rid* a favorite bobby bora* of aln* concerning freedom of trad*. tfcen tb* lapodtlon of U.S. Quotas was first discussed thoa* opposing thea pointed out tb* danger that world surpluses of production would be thrown upon th* only free aarket, namely th* London Metal Exchange, and thereby have a disproportionate effect on world prices outside the U-S-A. This, of course, has cose about and th* spread between the U.S. price and the L.K.E. price has widened very considerably, to an extent far greater than would have been caused by aa increase in U.S. import tariff*. Bence the whole burden of carrying u&wantod stocks ha* been transferred to on* center of the free world's economy, leaving th* greatest are* of Industrial consiaeption protected by an Insurmountable barrier. This la Indeed an unfortunate situation because aost of th* production that la suffering from this fora of victimisation originates from the newly developing nations of tha world. Exports from these countries play a significant part in their balance of payments and serve to increase the growth of th* standard of living which 1* ao Important for th* panes and prosperity of th* free world. If X were a dictator today In land and aloe X would have no hesitation la crapping all tha duties, Quotas and subaldles that are at present in existence and I confidently believe that, whereas tier* might be eons local nardahlps of a Hal tad nature, th* rla* in price* os th* L.M.E. that would ensue would give mm adequate reward to all other producer* throughout tb* world. Xf X were naked to gueaa at what price level equilibria* between supply 1 * and deaaad would be reached, 1 can see no reason why this should not be In the region of nine cent* for lead and 11 centa for sine. X appreciate that It la * ^i1 srmnj ij. ji mu.i iiu. i sn njisji* m inum' wmeemewswyvwmamgjga^nmtpivenBasimjerwweE^evgsmmesjmsmievw7 *BP fW^yPlwpSjgpwpp* W.yi.WU(M '>> W"--WW 'w m i'*jllM "UMf" LI A 15715 ......,- i-^ai>,n., wpau- ~.................................... mmm* ^ l .. . ........ - I .. . , . ^ j. ji. T.mu - lapoaalhle, even by lntar-gov*nantal action, to r--ova all tha tariff*, aubaldlee and quota* that are at present la operation, but If by such agreaaaat their operation could ba suspended for a period of say two yeara. It would not only bo Interesting but, I balleva, Most axelting to aaa what effect tble would have oo the Market price of the two aetala. Id cooclunion I would like to etraae aa strongly aa 2 eaa that, altho^fc I believe that the laad/rlDC Induetry la antltlad to a fair return os capital Invested, we aust never becoae greedy and teak to aaka aa unreaaooabla profit. This would ba quite aenaelea* and against tha long tare Interests of our ladtMtxy because In the end It would be the custoeer* who suffered. And If the oatoaar once decided that he was being taken for a ride la lead and nine he would devote all hit research and energies to the use of alternative Materials, which would obviously be to the ultlaat* disadvantage of all lead/alnc producers here today. ( iff i BP *H" i h l. J'i m