Strategic Metals, Critical Choices

Worries over dependence on dubious suppliers

The rising use of trade sanctions around the world has demonstrated how economic warfare is now diplomacy by other means. Since 1973 oil producers have openly used their petroleum weapon to further their Middle East political objectives. Last year Nigeria introduced natural resources trade-offs by threatening to cut oil exports to the U.S. if the Carter Administration lifted the American boycott on chrome imports from racially troubled Zimbabwe Rhodesia. Both the possibility of other OPEC-type raw material cartels and Soviet economic retaliation against the U.S. have begun to worry the experts. Warns Harry J. Gray, chairman of United Technologies: "The minerals situation is similar to oil. Without an intelligent national minerals policy now, we will become increasingly vulnerable."

The U.S. is already alarmingly dependent on imports for many of its most critical industrial raw materials. In all, 98% of America's manganese, 97% of its cobalt, 93% of its aluminum and 91% of its chromium come from foreign ores. More than 50% of its tin, nickel, zinc and tungsten ores are also imported. The supply of several of these materials is susceptible to interruption because they come from either the Soviet Union or from unstable southern African nations that suffer serious internal troubles. The most important minerals include:

Cobalt. A white metal used in jet aircraft engines as well as mining and machine-tool bits, cobalt is supplied mainly by Zaire, which has 65% of the non-Communist world's reserves. Recurrent civil wars over the past three years have kept the price dancing between $6.40 and $50 per Ib. Other producers include the U.S.S.R. and Cuba. Reports Charles River Associates, a consulting firm in Boston: "The cobalt situation is one of the most serious problems facing consumers of critical materials today."

Manganese. The Soviet Union and South Africa provide more than 60% of the world's supply of this metal, which is essential in steel production. Australia is a major exporter, but its potential for expansion is limited. Other non-Communist exporters, such as Brazil and Gabon, have either declining exports or unstable internal politics. The Boston consultants call the manganese situation "a cause for some concern" because the possibility of finding substitutes is "extremely limited."

Chromium. The major deposits of this material, used in stainless steel, ball bearings and surgical equipment, are in South Africa, Zimbabwe Rhodesia and the Soviet Union. Says Allen G. Gray, technical director of the American Society of Metals: "A cutoff of our chromium supply could be even more serious than a cutoff of our oil supply. We do have some oil, but we have almost no chromium."

Titanium. As strong as steel but 45% lighter, this metal suddenly became scarce around the world early last year, after the Soviet Union, the largest supplier of titanium "sponge," the semiprocessed metal, abruptly stopped signing new export contracts. Military experts speculate that the Soviets have diverted their normal 3,500 tons of exports to the construction of many submarines and aircraft. Since the metal is used extensively in high-performance jets, missiles and nuclear plants, U.S. and European aerospace companies have been scrambling to buy the remaining titanium sponge produced by Japan, Britain and China. As a result, since last March prices in Europe have jumped from $3.98 to $25 per Ib.

Ever since oil-exporting countries showed how to run up prices by banding together, other developing countries have dreamed of emulating OPEC's success. Discussions have been held about forming cartels to cover commodities as varied as coconut oil, copper and phosphate rock. Such Xerox copies of OPEC have almost universally failed because of easily available substitute products or the unwillingness of would-be cartel members to cut production enough to maintain high prices. The copper exporting organization, for example, was weakened when industrial users began replacing that metal with plastics and aluminum, and effectively collapsed when the last recession produced a worldwide copper glut. The danger of other cartels remains remote --for now. Even so, individual nations may be moved to reduce exports, and those actions could severely tighten supplies and send prices surging.

The American dependence has focused attention on the size of current stockpiles and the feasibility of developing new domestic sources. Since World War II the Government has maintained strategic stockpiles of 93 key materials, including tin, copper and titanium, for use in a national emergency. Some are critically low. Only 32,000 tons of titanium are stockpiled, far below the 130,000-ton goal. Cobalt reserves are 22,000 tons short of the 43,000-ton target.

Though no modern industrial nation can be a totally self-sufficient island, the U.S. has little choice except to build safe stockpiles of those essential materials, such as chromium and manganese, that are found in quantity in only a few countries. The mineral-rich American West, Alaska and the oceans bordering the U.S. contain vast unmined natural resources that hold the longer-term promise of more domestic sufficiency and security. These minerals often remain in the ground or under water because of ecological concerns or the higher profits that firms can earn abroad. Steep mining taxes in Minnesota, Montana and other states have also discouraged digging. Geologists have singled out 40,000 acres of federal land in Idaho as a possible source of cobalt. Yet last November the Senate Energy and Natural Resources Committee designated 2.2 million acres surrounding the site as a wilderness preserve, and banned any commercial activity that would disturb the elk, bighorn sheep and 188 other species that inhabit the area.

Of course, companies can do more to develop secondary and tertiary sources, many of which will become both economically feasible and absolutely necessary as conventional minerals become costlier in the 1980s. For example, the U.S. imports 93% of its bauxite, the major aluminum ore, but the Bureau of Mines is experimenting with a process to extract alumina from clays found in Georgia and Arkansas. More experiments, more domestic mining and some compromises on the environmental front would help avoid repetition of the oil saga of the 1960s and 1970s, when the U.S. became needlessly overdependent on dubious foreign suppliers. In an era of growing economic confrontation, increasing reliance on imported minerals creates a potentially dangerous breach in the nation's defenses.

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