Dow Up, Jones Down

When World War II caught the U.S. desperately short of magnesium, a No. 1 component of incendiaries and planes, the Federal Government spilled out $515,000,000 to expand the infant industry. Last week, the Senate's wallet-watching Truman Committee ended a two-year probe of: 1) whether the U.S. got its money's worth; 2) what will happen to the new industry at war's end. Its report:

P: Praised Michigan's Dow Chemical Co. which, with its licensees, turned out 61% of all U.S. magnesium last year.

P: Roundly condemned the contract made by Jesse Jones's Defense Plants Corp. with Basic Magnesium, Inc. to build the country's biggest magnesium plant at Las Vegas, Nev. (TIME, April 20, 1942).

P: Gave Henry Kaiser a pat on the back for his Permanente project which, despite WPB pessimism, has produced 19,000,000 lb. and has "future possibilities."

Balm for Dow. To Dow Chemical (only prewar U.S. magnesium manufacturer) the mild praise was sweet. But even sweeter to the company's white-haired president, Dr. Willard H. Dow, was the deathblow the Committee gave to the popular belief that the U.S. magnesium shortage was due to an agreement between Dow, Alcoa and Germany's I.G. Farben. Under that deal--so the libelous rumor ran--Dow magnesium manufacture was limited, while German production was kited. Other agreements brought antitrust indictments down on the heads of Dow and Alcoa in 1941, forced them to pay $140,000 in fines after pleading nolo contendere ("We couldn't spend months in court and still have time to expand production").

The Committee had now found that the agreement "probably assisted in fabricating magnesium and increasing its commercial use in the U.S." though price differentials may have kept newcomers out of the field. "Dow Chemical was never limited in its production." Rather, it "incurred original losses in order to produce magnesium. Without [Dow's] interest the production of magnesium in the U.S. might not have been so great."

Alum for Basic. But the Truman sleuths found little to praise in the sorry story of Basic Magnesium. Conceived by Cleveland's Basic Refractories, Inc., the project mushroomed from a $24,000 investment in magnesium-bearing ore lands to a DPC contract to build and operate a $70,000,000 magnesium plant. Basic Magnesium, the company's operating subsidiary, stood to net a fat $840,000 yearly on the deal, although "it had no financial resources and only the most meager experience and talent." Typical result: although the magnesium-bearing ore was over 200 miles distant, the plant was so poorly located that ore had to be shipped by rail some 950 miles to reach it. Cost of the plant rocketed from $70,000,000 to $133,000,000 ($1.81 per lb. of magnesium capacity v. 79-c- for Dow).

Finally, Basic Magnesium was ousted. But it had netted a profit of $376,176 on the deal, "despite its demonstrated incompetence." Anaconda Copper was brought in. Under Anaconda, the plant got into capacity production, 112,000,000 lb. yearly. But the plant's future is dubious. Warned the Committee: "New sources of power will have to be obtained at low cost if the project is not to be written off at a loss after the war."

The Future. The Committee is not hopeful about the future of the whole industry. With production this year estimated at 531,000,000 lb., a solid 46,000,000 lb. above estimated requirements, WPB is already planning cutbacks. Despite its lightness (one-third lighter than aluminum), the big use for magnesium is still in incendiaries, which burn up about 40% of U.S. production. About 30% goes into planes. Thus, demand at war's end should plummet. However, there is a cheerful note: the cheapest magnesium on a commercial basis at 20-c- per lb. can almost compete with aluminum at 14-c-. But the big problem yet to be licked is magnesium fabrication, a difficulty which was one reason 1939 U.S. usage was a piddling 2,800.000 lb. And U.S. industry must find hundreds of new peacetime uses for the metal. Concluded the Committee: if the U.S. does not do so immediately it will have to write off most of its half-billion investment as a necessary war loss.

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