The reason for declining ore imports is relatively simple: countries with chromite supplies are reluctant to sell ore if they can sell ferrochrome. Many countries—including Rhodesia-which have reserves of chromite ore are anxious to develop primary refining facilities of their own; exporting semi-finished (ferrochrome) rather than raw materials. This follows the pattern of most developing countries which wish to control the exploitation of their own resources. To this end, countries with large ore deposits have built gigantic ferrochrome facilities over the past five years. Rhodesia, which produced almost no ferrochrome in 1967, now has an industry almost double the size of the U.S. ferrochrome capacity. All countries lacking supplies of ore are in a similar position. Japan, France, West Germany and Sweden-as well as the United States are finding chrome ore an increasingly scare commodity. The trend is likely to accelerate in the future. Rhodesian, South African, Turkish and even Russian ferrochrome production is certain to increase. Their chromite ore exports are likely to continue to decline. Ferrochrome is increasingly replacing raw ore as the strategic material. The decline of U.S. stocks of chromite parallels the constricted world availability of metallurgical grade ore. The availability of high quality metallurgical grade chromite is further complicated by our historical dependence upon the Soviet Union as a source of supply. During the sanctions period and immediately thereafter, over half of U.S. imports of metallurgical grade chromite ore came from the Soviet Union. Russian chrome dealers exploited this virtual monopoloy in two ways: 1. The physical quality of the Russian lump ore exported to U.S. consumers steadily deteriorated when Rhodesian chromite was unavailable to the U.S. Market. The increase in Russian shipments since 1964 has been largely run-ofmine ore, some of which contains excessive "fines," dras tically limiting its utility for the production of high-carbon ferrochrome.23 2. Russian prices dram: ically accelerated during the sanctions period as the following chart indicates: AVERAGE PRICE/SHORT TON SOVIET (Price/Chrome Contained) 1969 1970 1971 1972 1973 1974 SOURCE: Bureau of Mines Mineral Industry Surveys. AVERAGE PRICE/TON SOVIET METALLURGICAL GRADE CHROMITE ORE (Price/Chrome Contained) (Short Tons) 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 $35.78 $36.46 $41.12 $39.87 $45.30 $56.88 $68.49 $68.45 $51.73 $61.33 [Source: Bureau of Mines Mineral Industry Surveys] 23 Id. NMAB Report. When the Byrd Amendment was enacted, Russian prices stabilized; then fell as Soviet chrome dealers felt the impact of stiff Rhodesian competition. The price history of Soviet chrome is particularly noteworthy in view of the economic conditions of the time. Russian prices reached their peak in 1971, the last year of the Rhodesian embargo, despite the fact chrome demand in the U.S. reached a 10-year low. In 1973, Russian chrome prices continued to decline despite an all-time high in chrome demand. The Soviet Union became increasingly noncompetitive as high-quality Rhodesian chrome reached American markets. It was not until late 1974 when legislation to reimpose the Rhodesian embargo appeared headed for passage did the Russians rebound. Soviet chromite prices soared in the fourth quarter. Temporarily set back by the stagnant death of S.1868 in December, 1974, the Russians reacted to the reintroduction of this legislation in January with an economic "squeeze play." First, they informed their exclusive U.S. distributor, Airco Alloys Ltd., that shipments would be cut back 35% immediately. Second, they more than doubled their price to $160/ton. The Soviets have everything to gain and little to lose by this maneuver. As chromite must be ordered months in advance, Soviet price hikes capitalize on the uncertainty regarding the availability of Rhodesian chromium to American consumers. Thus, whether the Byrd Amendment is repealed or not, Russian chrome merchants will have made enormous profits at American expense. Further, the fact that chromite demand exceeds imports, gives Russian chrome dealers considerable leverage in creating shortages in this country. A 35% cutback in exports to the U.S. would have significant impact in making their price hikes stick should American consumers be denied access to Rhodesian ore. |