Mr. BLISS. This information that is contained herein is designed to urge all members of the United Nations to stiffen up the economic sanctions against Rhodesia and to be a little more forthright in the presentation of information and a little speedier in delivering it. And it has innuendo references.

Mr. FRASER. Could you help me on stainless steel production? How is stainless steel produced in the sense that steel is added to chrome? Mr. BLISS. I beg your pardon.

Mr. FRASER. How do you make stainless steel?

Mr. BLISS. We have some experts in the room who will be testifying later and they happen to be from stainless steel companies. I just happen to see that this is so. I would prefer if you would ask them that question, how they make stainless steel. But I can tell you I don't know any way to make stainless steel without a chromium product. Mr. FRASER. That is added?

Mr. BLISS. That is added to iron and nickel and many, many other elements, depending on what form of steel you wish, including manganese.

Mr. FRASER. Is stainless steel sold in bulk form?

Mr. BLISS. They start with an ingot. I wish you would defer those questions on the technology and production of stainless steel.

Mr. FRASER. I am trying to get the marketing of stainless steel. In what terms is stainless steel traded between the producer and those who convert it into a finished product?

Mr. BLISS. Some stainless steel companies, I guess, carry it all the way through to sheets and wire and some companies to flatware and some to bar and some do all of these things. I don't know of any stainless steel companies that make ovenware or anything of this sort.

Mr. FRASER. I just want to get some proportions here if I could. What is the unit price for stainless steel. What is it measured in? Mr. BLISS. May I defer this question?

Mr. ANDREWS. It depends on the product. It depends on the sophistication of the product. A sophisticated product will sell by the ton. A highly sophisticated product will sell by the pound. So you are talking about some thousand different products when you say "stainless steel." Mr. FRASER. What would the price range be?

Mr. ANDREWS. Anywhere from $500 a ton to that much a poundto $500 a pound in the nosecone of a capsule, for example.

Mr. GROSS. Mr. Chairman, we do not have the identification of this gentleman.

Mr. ANDREWS. I am Mr. Andrews. I am the vice president of Allegheny Ludlum.

Mr. FRASER. How much chrome would be in a ton of stainless steel? Mr. BLISS. About 18 percent; it varies.

Mr. FRASER. What I had in mind was to get some idea of the extent to which the production and sale of stainless steel, how much that price is influenced by the increase in the cost of chrome itself.

Mr. BLISS. This would vary, I am certain, from company to company and it would vary to the grade you talk about, but if we went up 1 cent per pound in cost over ferroalloy, this would be about $4 a net ton in an 18-8-type steel. Several people here might disagree but, roughly. I think that is an order of magnitude.

Let me put it this way, so you can relate it back to the other, where I feel more comfortable, or in the ferroalloy sector. If you want to carry it right through from the ore to this same type of stainless steel I am talking about, the increase of $40 per ton of chrome ore that we have experienced as a consequence of the sanctions just passed through to stainless steel would give about $29 to $30 per ton increase with no inflationary factors,

Mr. FRASER. In the cost of the ton of stainless steel?

Mr. BLISS. That is right.

Mr. FRASER. I am aware of the general price rise in the steel industry. I am curious to what extent chrome would be a factor.

Mr. BLISS. I would say it is a very significant factor. You must take into account that from a ton of ore, by the time it gets into a ton of stainless steel there are many losses en route, losses of the chromium itself.

Mr. FRASER. I used to be familiar with the iron ore industry and the pricing as it went up the line.

Mr. BLISS. Now the losses in a movement in a ton of iron ore and chrome ore is the same.

Mr. FRASER. I was not familiar with how much chrome ore was used.

Mr. Moxox. Fourteen percent of our total tonnage shipped consists of chrome in the finished product.

Mr. FRASER. That is in content?

Mr. Moxon. Of every ton of special steels that we shipped last year approximately 14 percent was chrome.

Mr. FRASER. Basically one of the things you argue in your statement is that there are countries who are getting the Rhodesian ore at lower cost and consequently the position of the United States is damaged.

Mr. BLISS. Yes. I said one other thing, that it would be a worse damage if the global market was not getting Rhodesian chrome ore because then we would be pretty solely dependent for high-grade chrome ore on one principal, Russia and, to a lesser degree on Turkish ore, and many other small contributors to this exercise. But essentially that is what the whole world would have to feed off of assuming you wish a stainless steel industry.

Mr. FRASER. I must say that insofar as some countries are acquiring this at lower cost it seems that is an unreasonable circumstance.

Mr. BLISS. We believe it is, especially since we own the properties nominally.

Mr. FRASER. I gather that if and when you are back in operation in that country, you, through the accounting you refer to, may find that you have some credit.

Mr. BLISS. I wish I could assist you there and tell you precisely what the ending negotiation would look like but not being privileged to run the negotiations, I cannot report on it. It is clear, however, that the contractual commitments from the ore being produced in Rhodesia are getting longer and longer and to willing buyers, particularly since the prices are obviously lower than those being demanded by other producing areas. As soon as there is free trade reestablished then clearly the commitments made to willing buyers would have to be

filled. I believe that American companies have integrity and they probably would be obliged to fulfill those commitments made by the mandated regime, the regime that mandated the property.

Now, having accomplished this then I would imagine that Rhodesia would have recognized that it is to its interest to retain a more reasonable percentage of its profits in Rhodesia before it releases the ore. We both know that most nations blessed with indigenous raw materials are becoming more interested in enhancing the value of its wealth before it leaves shore.

This is just ordinary commonsense. So that I doubt if we will suddenly, by saying we are ready to do business again, that we can revert back to the principles and arrangements that existed in 1966. It may well be that we have done a great deal of good for the whole world in sanctioning Rhodesia. It is unclear to me what it is, but we have at the same time I think severely penalized our own interests for many, many years to come.

It is my belief that at the appropriate time the Smith government will welcome us back assuming that we do not do anything worse to them than we have already or that we do not perpetuate this policy for much longer.

Mr. GROSS. Mr. Chairman, we just might issue an invitation to Mr. Smith to come over and testify as to what is likely to follow but on second thought I don't know whether the State Department would let the head of the Rhodesian Government into this country.

Mr. BLISS. I can answer that for you, Mr. Congressman. It so happened that the University of Virginia invited him to give a speech and he was denied a visa.

Mr. GROSS. That is why I said what I did, Mr. Bliss.

Mr. FRASER. Thank you very much.

Our next witness is Mr. Kroft, president of ferroalloys division, Union Carbide Corp.

STATEMENT OF FRED C. KROFT, JR., PRESIDENT, FERROALLOYS DIVISION, UNION CARBIDE CORP.

Mr. KROFT. Mr. Chairman, Mr. Gross, my name is Fred C. Kroft, Jr. I am president of ferroalloys division of Union Carbide Corp. I am pleased to have this opportunity to appear before you today to discuss the impact of the Rhodesian sanction on Union Carbide.

Mr. Chairman, with your permission I would like to bridge a portion of my statement, particularly that covering the applications of stainless steel in the interest of conserving time since the prior witnesses have covered this portion adequately.

Mr. FRASER. We will put your whole statement in the record and you can use whatever parts you want.

(The statement referred to follows:)

STATEMENT OF FRED C. KROFT, JR., PRESIDENT, FERROALLOYS DIVISION, UNION CARBIDE CORP.

Mr. Chairman and members of the Committee, my name is Fred C. Kroft, Jr. I am president of the Ferroalloys Division of Union Carbide Corporation. I am pleased to have this opportunity to appear before you today to discuss the impact of the Rhodesian sanctions on Union Carbide.

Union Carbide's Ferroalloys Division operates five plants in the United States which are engaged in taking the ores of metals like chromium and manganese and converting them in high temperature electric furnaces into ferrolloys which

are then employed by the steel industry in the production of a wide variety of general and special purpose steels. Our plants produce several types of ferrochrome as well as pure chromium metal.

Prior to the imposition of the sanctions, Rhodesia was the major source of the chromium used by Union Carbide. The chromium was produced in mines owned and operated by two wholly-owned affiliates of Union Carbide.

Union Carbide began operations in Rhodesia in 1923 because the accidents of nature and geology placed there the largest bodies of high grade chromium ore in the free world.

In 1965, the last year for which published information is available, 625,009 tons of metallurgical chrome ore were mined in Rhodesia, representing approximately 40 percent of the total free world production.

Union Carbide's affiliated companies in Rhodesia mined approximately 490,000 tons, or about 78 percent of the total. Although the tonnage figures may appear large, the total value of metallurgical chrome ore exported from Southern Rhodesia in 1965 was only 2 percent of Southern Rhodesia's total exports for that year, and less than one percent of its gross national product. Chrome ore is, thus, not a major factor in the Rhodesian economy.

Prior to the sanctions, the pattern of our operation in Rhodesia was as follows: Over half of the 450,000 to 500,000 tons of metallurgical chrome ore produced each year by Union Carbide's affiliated companies in Rhodesia was shipped to, and consumed in Union Carbide's plants in the United States. Approximately 25 percent was shipped to, and consumed by Union Carbide's affiliated companies in Canada, Norway, and the United Kingdom, with the remainder being sold to other U.S. firms and in free world markets.

Since the imposition of sanctions, our mines have continued to operate at the specific direction of the government of Rhodesia. That government has directed car Rhodesia companies to produce and sell chrome ore to a trading Corporation (UNIVEX), which the Rhodesian government has established, in such quantities as UNIVEX specified. There is, of course, no counection-direct or indirect-between UNIVEX and Union Carbide.

IMPORTANCE OF CHROME ORE TO THE UNITED STATES

The United States consumes approximately 1,400,000 tons of chrome ore annually. Some 60 per cent of this amount is consumed by the ferroalloy industry, the remainder going into chemical and refractory applications.

The chrome ore consumed by the ferroalloy industry is used to produce variens iron-bearing chromium alloys, principally low-carbon ferrochrome-consuming 42 per cent of the ore; high-carbon ferrochrome-consuming 41 per cent of the ore; and the ferrochrome-silicon-consuming 13 per cent of the ore. Production of chromium metal consumes the balance. The major end-use products requiring chromium ferroalloys are:

There is no adequate replacement for chromium in the manufacture of the above products.

Stainless steel production, by far the largest consumer of ferrochrome alloys derived from chrome ore, is used in a wide variety of applications. Annual stainless steel production in the United States is valued at about $1 billion. In its many functional applications, stainless steels are selected for one or more of several special properties which make it the only practical choice. Among these are corrosion resistance, oxidation resistance, high temperature strength, toughness at subarctic temperatures, abrasion resistance, and ease of fabrication.

The electric power generating industry is one major area where stainless steel is required. Its use in steam turbine blades is required since if materials with less resistance to corosion or less high temperature strength were used, operating temperatures would have to be lowered with a resulting loss in efficiency leading to lower power availability and higher costs.

Stainless steel is also employed directly in nuclear power generation where, among other things, it is used as the reactor vessel itself, as tubes containing control rods, and in various associated applications such as pumps and tubing. In the chemical manufacturing industry, stainless steel is the standard of equipment construction. Nitric acid, ammonium nitrate, acetic acid, and ethylene are only four of an extremely large number of materials either manufactured or transported in stainless steel vessels. The corrosion resistance of stainless steel, frequently combined with its strength at elevated temperatures, makes it the best selection for these very demanding environments.

Industries where cleanliness is critical use a substantial amount of stainless because the metal is easy to clean, it does not chip, does not need paint, and does not react chemically with materials to which it is exposed and hence does not contaminate these materials. Hospitals, food processing, and pharmaceuticals are but three industries where these qualities give tangible benefits. The household uses of stainless steel utensils are well known.

In the outer space and inner space phases of science and national security. stainless steel and chromium containing corrosion resisting steels play a major role. They are used in space for rocket cases and for propellant tanks where good strength to weight ratios and the ability to withstand both heat and cold are paramount. They are used in undersea work as critical parts of propulsion reactors on nuclear submarines and for a variety of associated parts.

Stainless steel is used extensively in the automotive industry for valves, mufflers and other functional parts as for trim.

Thus chrome ore is fundamental to a broad area of our national economy and security.

EFFECTS OF RHODESIAN SANCTIONS ON UNION CARBIDE

The Rhodesian sanctions have had a compounded effect on the operations of Union Carbide as a result of several different factors.

First, as the previous testimony including that of the State Department has indicated, the Rhodesian sanctions have clearly resulted in an increase in the world price of chrome ores. While this price increase, in general, has occurred on a worldwide basis, it has had its most pronounced effect on the U.S. ferroalloys industry because it has been coupled with increases in the costs of other factors involved in ferroalloy production.

Labor rates, power costs, and the costs of pollution control have been rising more swiftly here than in other areas of the world where ferrochrome is produced and the U. S. industry has been placed at an increasing disadvantage. Second, the sanctions have had two additional effects on Union Carbide. Because of our long ownership of Rhodesian chrome mines, our domestic ferroalloy plants have been specifically designed to use high-grade, lumpy Rhodesian ore. The use of Russian, Turkish, or Iranian ores imposes economic penalties on our operations-in terms of higher costs and reduced efficiencies. Our reliance on Rhodesian ore has also meant that we were not, prior to the sanctions, significant purchasers of Russian ore and we did not have long established trading relationship with the Soviet Union in this area. As a result, we have been generally in the position of having to take what we could get. In 1969, for instance, Union Carbide had to take one ton of run-of-mine Russian ore in order to obtain one ton of high-grade lump ore. From 70 to 80 per cent of the run-of-mine ore was obtained as fines, and we were forced to place much of this ore in inventory for future blending. For this reason, and because of other physical and chemical characteristics of the Russian ore, we have estimated that our manufacturing costs were increased by over $1,000,000 in 1969.

A third and perhaps the most important effect of the sanctions relates to the changing patterns of world trade in stainless steel. Here the sanctions are only one of the many factors, and possibly even an indirect one, but it is of considerable importance. Imports of stainless steel into the United States, principally from Japan, have been rising at a very rapid rate. We believe it is fair to state that our customers, the U. S. producers of stainless steel are being severely affected by these imports and the long range consequences of this development for the ferroalloys industry and steel industry could be of great significance to the economy and the security of the nation.

The U.S. Executive Order No. 11322, dated January 5, 1967, permanently stopped all imports of Rhodesian chrome ore into the United States. However. the White House and the Treasury Department recognized that cases of "undue hardship" would arise from transactions commenced prior to January 5, 1967.