CHAPTER 12 INTERNATIONAL MINERAL SUPPLIES AND THE UNITED STATES FUTURE

• Jurisdiction: United States

International Minerals Acquisition and Operations
(Oct-Nov 1974)
CHAPTER 12
INTERNATIONAL MINERAL SUPPLIES AND THE UNITED STATES FUTURE
John J. Schanz, Jr.
Resources for the Future, Inc.
Washington, D.C.

In contemplating what might be appropriate for a luncheon session, it seemed to me that a change of pace from the highly focused, technical papers would be in order. So I would like to tackle a fairly broad-gauged topic, but one which is still appropriate to the Institute's theme of international mineral appraisals.

The topic that I have chosen reflects an emerging concern in Washington about our materials outlook. This awareness can be measured by a news story here, a few congressional hearings, the creation of a commission, a conference at the Export-Import Bank, and so on. We have received at Resources For the Future, for example, two recent calls from congressional committees to testify about materials shortages. These appearances have been followed by phone call requests to elaborate on certain points.

I suspect that the energy fiasco which resulted from congressional and administrative failure to be familiar with the basic facts about energy resources and energy industries and the emergence of alarms about the limits to our resources have created a more receptive audience in the media, Congress, and staff personnel than in the past. It behooves us then to take advantage of this opportunity to educate our audience before emotion and political expediency dominate the legislative process.

[Page 12-2]

With this in mind, I would like to give you an overview of our national and world mineral status that I feel represents a good consensus of economic opinion about the mineral outlook. With the current shortages of materials, rising prices, and mineral producers all talking like new versions of the OPEC cartel, it is quite normal that some anxiety is beginning to appear about what portends for the short and long term.

I think we need to establish some understanding of the nature of the utilization of the commodities we are discussing and some of the definitional and measurement problems we face. The one thing that has always been a key facet in dealing with energy economics is that all energy forms are ultimately substitutable for all other energy forms. In the case of minerals this is not quite so true—each mineral or metal has utility because of some particular physical or chemical property or combination of properties. For example, there is no other material that has the exact combination of properties that are possessed by iron. So we do not in studying the minerals arena have anything comparable to the Btu common denominator that we have for energy.

Yet that does not mean that we have no opportunities for substitution—we actually find clusters of materials that can do similar jobs. The interesting thing is that these clusters include metals, minerals, and organics. Thus in construction a structural member may be made of steel, lumber, or concrete. In cloth we can use animal fibers, vegetable fibers, glass fibers, synthetic carbon-based fibers, or asbestos. We have a number of different metals that can be alloyed with steel. Both graphite and molybdenum disulfide have lubricating properties. Lead and titanium oxides both do things for paint, and three or four metals

[Page 12-3]

conduct electricity rather well. Both aluminum and steel can be the outer skin of a vehicle. Within these clusters, we find that the various materials while doing similar things do not do them identically at quite the same cost. For example, among the seven common ferro-alloys, there are several that will make steel harder or tougher, but not in quite the same way. So we must conclude that substitution is complex in the materials world. In some cases, we do find that a material has a totally unique property for which there appears to be no substitute. Manganese is the only ferro-alloy that can tie up the sulfur in steel to prevent hot-shortness. Plants need the elements potassium, nitrogen, and phosphorous—so you cannot substitute a super phosphate fertilizer material for a potash.

As we approach the supply side of materials we find that familiar problem we have been experiencing in the fuels for the past several years. Basically it is the question, "How much do we have?" The nice distinction between reserves and resources is frequently lost in trying to answer this question. People are inclined to forget, if they ever knew, that reserves are quantities known to exist with a high degree of certainty and are expected to have a quality and production cost that makes them recoverable at or near prevailing prices. Resources on the other hand are estimates of varying degrees of certainty as to whether or not they really exist and involve varying assumptions as to the quality and costs of recovery. To illustrate, if we go to the Geological Survey Professional Paper 820 and examine their reserve data on zinc we find, as of 1972, that there were 45 million tons of contained zinc in the U.S. reserves. This is our industrial, domestic, on-the-shelf inventory. We

[Page 12-4]

know we have it, and we know we can produce it. We can compare this to a national consumption level of 1.6 million tons, of which 20 percent is normally met by secondary...