811.20 Defense (M) Spain/941: Telegram
The Ambassador in Spain (Hayes) to the Secretary of State
[Received 10:08 p.m.]
2037. In view of continued German absence from the wolfram market and their existing financial difficulties the Anglo-American Committee has authorized a sharp reduction in wolfram prices from the present market price of 243 pesetas for 65% ore. I [apparent omission] prices to about 130 pesetas, but with a premium of an additional 30 pesetas per kilo for persons with whom we have total output contracts. Both the base price and the premium will be reduced according to the extent to which the ore delivered is below 65%. The price for ore below 55% is fixed at what we hope will be shutout levels thus discouraging fossicking. The reduced price is also expected to discourage smuggling from Portugal. This action does not violate our total output contracts and will enable us to conserve our resources for a time when the Germans may reenter the market. By withholding the premium until the termination of each output contract we will develop a hold over producers against German reentry in the market. Persons not now holding total output contracts will be given an opportunity to sign them and thereby receive an additional 30 pesetas per kilo.
Although the foregoing decision is based on the absence of enemy activity and their present financial difficulties the necessity for it is clearly evidenced by our rapidly mounting purchases. Provisional figures for July show 510 tons of ore bought as against 348 in June and 270 in May. Reduced to 65% concentrates these purchases amount to 416, 283 and 227 tons respectively. At the prevailing market price of 243 pesetas our July purchases amounted to more than 100,000,000 pesetas without taking into account [apparent omission].
This move admittedly is experimental and the situation will be watched with extreme care for signs of renewed German activity. However, the Germans are still unable to raise the 8,000,000 pesetas needed to pay the tax on accumulated stocks for which they hold export licenses and with insignificant purchases in July coupled with our own purchases reaching astronomical levels the time to take some action is opportune to say the least.
Repeated to London and Lisbon.