158. Memorandum of a Conversation, Department of Commerce, Washington, February 9, 1976, 11 a.m.1
SUBJECT
- U.S. Ferrous Scrap Exports to the CSC
PARTICIPANTS
- M. René Mayer, President, High Authority, CSC
- M. Pierre Uri, Director of the Economic Divn., High Authority, CSC
- M. Anthony Rollman, Director, Marketing Divn., High Authority, CSC
- M. Fernand Spaak, Special Assistant to M. Mayer
- Mr. Weeks, Secretary, U.S. Dept. of Commerce
- Mr. Frederick H. Mueller, Asst. Secty. U.S. Dept. of Commerce
- Mr. Marshall Smith, Dep. Asst. for International Affairs, U.S. Dept. of Commerce
- Mr. Horace McCoy, Deputy Administrator, BDSA
- Mr. T.V. Kalijarvi, Dep. Asst. Secty. U.S. Dept. of State
- Ambassador W. Walton Butterworth, U.S. Representative to the CSC
- Mr. G.M. Pollard, IRD, Dept. of State
M. Mayer reviewed the increase in the rate of steel production in the CSC which occurred in 1954 and throughout 1955 and the continued high production which has now reached a rate of over 55,000,000 metric tons per annum. M. Mayer observed that no abatement in the demand for steel was in sight. He observed that the high rates of production in the CSC during the last half of 1954, during 1955, and in 1956 required extensive imports of ferrous scrap, including large tonnages from the United States. M. Mayer and M. Rollman mentioned that the CSC potential demand for ferrous scrap from the U.S. had been in currently in excess of the working limitation of an average of 150,000 metric tons per month which had been established for the last half of 1955 and is in effect for the entirety of 1956. In response to an inquiry, M. Mayer and M. Rollman gave emphatic assurances that the High Authority was capable of restraining purchases of U.S. scrap for importation into the CSC so that the average of 150,000 m.t. per month would not be exceeded and that the High Authority intended to keep imports within this limitation. This limitation below demand is to be maintained because of strong demand in the U.S. and related pressures for U.S. Government action to limit exports and also as an added incentive to CSC to consumers to find substitutes for imports of scrap from the U.S.
M. Mayer twice emphasized that if imports of U.S. ferrous scrap were severely restricted, the High Authority probably would have to yield to pressure from scrap consumers and declare the existence of a scarcity of scrap. A concomitant action would be for the High Authority to place the distribution of scrap under allocation which would be administered by the governments of the member states on a national basis. Hence, a common market in scrap could not be maintained. Also, a probable result would be lessened capability to resist pressures for declaring scarcities of coal, coke and steel with consequent endangering of the effectiveness and substantive existence of the European Coal and Steel Community.
[Page 411]M. Mayer and M. Rollman reviewed the reasons for establishing the perequation or equalization payments to CSC consumers of imported scrap and the operation of the payment system. The levy per ton on all scrap consumed in the CSC regardless of source which provides funds for equalization payments has risen from an initial fee of approximately $1 to around $9 currently and is expected to go higher. Basic prices paid, plus the levy, bring the CSC consumer’s current cost of U.S. scrap delivered to his plant to approximately the same as that paid by a U.S. consumer at the latter’s plant, according to M. Rollman. He said scrap imported from the U.S. currently had a delivered cost (buying price in the U.S. plus transportation costs) of about $75 per ton. This compares with about $60 per ton for imports into the CSC from sources other than the U.S. Delivered prices for domestically collected scrap in Germany and France currently are around $40 to $42 per ton. (It was observed that domestic scrap brought around $22 per ton in the United Kingdom where the price was fixed under government control.)
Secretary Weeks asked for an explanation as to the reason for No. 1 heavy melting scrap being a much larger proportion of total CSC imports of U.S. ferrous scrap than this grade of scrap represents in total scrap consumption by the U.S. steel industry. Secretary Weeks observed that it would be very helpful for the CSC to make every effort to develop sources of scrap supplies outside the U.S. and to reduce the proportion of heavy melting scrap in the total CSC scrap imports from the U.S. M. Rollman stated that a reduction in the portion of scrap imports from the U.S. taken in the form of heavy melting scrap would definitely reduce the rate of CSC steel production. When pressed for further details as to why CSC steel makers could not use a greater proportion of No. 2 bundle scrap, M. Rollman said he was not enough of a specialist in the matter to give the specific difficulties which prevented a greater use of bundles.
M. Mayer and M. Rollman referred to the CSC subsidy established in 1955 on enlarged use of pig iron in lieu of scrap in steel making. They commented also on the expansion and improvement of facilities for making pig iron, including new blast furnaces, improved performance of existing blast furnaces, improved iron ore preparation, etc.
Secretary Weeks told M. Mayer of the U.S. interest in the success of the CSC operation and in being as helpful as possible. Mr. Weeks reviewed some of the serious problems the U.S. must consider relative to the rate of consumption and export of ferrous scrap. He mentioned his responsibility for administration of the Export Control Act2 and the necessity for consultations with the several government [Page 412] agencies and numerous interests concerned with this field. Mr. Weeks pointed out to M. Mayer that because of the complexities of the scrap problems and unpredictability of related developments, he was unable to assure that the export of any given quantity of ferrous scrap would be permitted in 1956 in total, to the CSC or to any other destination. In so far as he was able to make a considered guess, however, he said he thought it unlikely that the U.S. Government would find it necessary to take any action which would prevent the CSC from obtaining the contemplated amount of ferrous scrap from the U.S. in 1956, an average of 150,000 metric tons per month or nearly two million short tons for the year. He mentioned that his concern about scrap exports pertained less to the immediate future than to U.S. capabilities of maintaining full capacity steel production some two, three, five or more years hence if domestic consumption and exports of collected or obsolescent scrap continued at the 1955 rate or higher. It was observed that much of the new capacity to make steel in the U.S. which has been added in recent months and which is being planned for the next few years is designed to consume relatively large quantities of scrap. Electric furnaces make up much of this new U.S. capacity.
Secretary Weeks also told M. Mayer that it would not be practical to give any advance notice of a limitation on scrap exports if the U.S. Government should find it necessary to impose such restrictions.
There was general agreement that it would be advantageous to continue to develop the full exchange of information on long-range prospects for steel production and on prospective scrap requirements and availability.