As a result of the worsened international situation, construction of the St. Lawrence seaway now becomes essential to national security.

THE IMPORTANCE OF STEEL IN A WAR ECONOMY

Steel was one of our most acute problems in World War II. In an interim report on steel issued in 1943 (Rept. No. 10, pt. 3), the Special Senate Committee Investigating the National Defense Program found that most of our shortage problems were closely linked to the shortage of steel. It said:

"Steel, always the backbone of America's economy, is the keystone of our war production. But it has come very close to being the stumbling block. Álmost all of our strategic material shortages today could be relieved sooner if we had steel. The aviation-gasoline program, the synthetic-rubber program, the shipping program, the aircraft program-all have suffered for lack of steel. We have been short of both gross tonnage and the specialized types of steel. Our fuel oil and gasoline shortages, our farm machinery shortage, our railroad problems, our housing difficulties, could be relieved if sufficient steel were available.”

With so recent an experience vividly in mind, the agencies to which the President delegated responsibilities under the Defense Production Act of 1950 are vigorously attempting to encourage and facilitate construction of additional steel-making capacity and related facilities.

Much of what can and will be done to increase steel production hinges on the extent to which iron ore can be produced and delivered to steel-consuming centers. The need for larger steel capacity is reflected in Government plans for building up and maintaining a vastly increased Military Establishment and Government and industry plans for maximizing our industrial potential. Prospective steel demand, necessarily, is far in excess of that anticipated in the Board's previous report.

PROSPECTIVE STEEL INGOT CAPACITY

To meet the situation developing, the steel industry announced, several months ago, that individual steel companies would expand capacity to provide 110 million tons of ingots by the end of 1952. Since then, additional expansion plans have been announced scheduling capacity at 117.5 million tons at the end of 1952 and more recently, at 121 million tons. It, therefore, appears safe to assume that capacity completed by the end of 1952 will reach at least 115 million tons.

The probabilities are that even in the absence of global war the international situation will for many years require that Government defense expenditures be continued at a high level, thus augmenting the demand for steel products. Also in this period, there will continue to be substantial increases in population which will add to essential civilian needs for steel products. It, therefore, is clear that unless an outbreak of full-scale war prevents doing so, further additions to steel capacity will have to be made after 1952.

In view of the tight supply outlook for iron ore in future years, the probable availability of iron ore will have a significant influence on the extent to which steel ingot capacity is increased. Partly because of this, it is impossible to judge with real assurance just what steel ingot capacity will be in 1960.

Nevertheless, it seems reasonable to assume that the rate of growth in ingot capacity will average about 2 million tons per year after 1952. This would indicate a prospective capacity of about 130 million tons at the beginning of 1960. Studies now under way may demonstrate both the need for and feasibility of reaching this capacity before 1960. However, for the purposes of this analysis, it is assumed that 130 million tons represents steel ingot capacity for 1960.

THE IRON ORE SHORTAGE

If and when the St. Lawrence seaway and power project is authorized and funds are made available, it will take about 41⁄2 years to open it to navigation. Accordingly, consideration of the project in relationship to iron ore must be made against a long-range prospective.

Now, because of the much higher than anticipated rate of steel operations in the 1951-55 period, the industry plans to accelerate mining of the remaining Mesabi open-pit reserves. Instead of an average annual production of about 82 million gross tons from the Lake Superior region over the next 4 years, the industry has scheduled an average output of about 92 million gross tons.

In its earlier report, the Board estimated that Lake Superior ore production would decline to about 70 million tons per year in 1960. Now, as a result of new studies made by the Bureau of Mines it appears that Lake Superior resources are

larger than had been estimated previously. Accordingly, there is a good prospect that we may get as much as 80 million tons out of the Lake Superior region in 1960. As pointed out above, steel ingot capacity in 1960 is assumed for the purposes of this analysis to be 130 million tons. If operations in 1960 were at capacity and sufficient scrap were available to provide 46 percent of the open hearth furnace charge, about 148 million gross tons of iron ore would be required in that year. However, the quantities of scrap coming on the market over the next 10 years will be inadequate to maintain even the current pig iron-scrap ration. This is owing to the greater than normal growth in ingot capacity anticipated over the next 10 years with which scrap supplies cannot keep pace, the large quantities of steel which have gone into tin cans and reinforcing bars and other uses from which there is no scrap recovery and the relatively small quantities of consumer durable goods produced during the 1930's and throughout the war. It is estimated that in 1960, because of a shortage of scrap, the pig-iron ratio will be significantly higher and iron ore requirements for 130 million tons of ingots would be approximately 160 million tons.

Inasmuch as the Lake Superior region is expected to supply about 80 million gross tons of these requirements in 1960, approximately 80 million gross tons will have to be secured from other sources. Of this total of 80 million gross tons, roughly 25 million gross tons can be provided by domestic sources other than Lake Superior and from Canadian production in the Lake Superior region Another 4 or 5 million gross tons can be obtained in peacetime from such areas as Chile, Sweden, and Liberia. This leaves about 50 million gross tons which must be furnished from entirely new sources of supply. To obtain so large a quantity of ore from new sources involves gigantic problems.

If full-scale global war can be avoided it will be possible to meet these requirements. If full-scale war cannot be avoided, it will be virtually impossible to do so without ready access to the huge ore resources in Labrador. It, therefore, is imperative that every practicable means be utilized in advance of war to assure delivery of maximum supplies of iron ore to consuming centers in the event of war.

NEW SOURCES OF ORE

There are three sources which could contribute to supplying the additional 50 million gross tons of requirements referred to above-Venezuela, Labrador, and the concentrating of taconites.

In the absence of war, the Venezuelan deposits could be developed, to the extent that demand warranted doing so. Certainly 20 million gross tons could come each year from Venezuela by 1960. However, war would make it extremely difficult to maintain shipments of Venezuelan and other ocean-borne ore to American ports and there is real doubt regarding the quantity of ore which could continue to come through.

Our reserve of taconite ores is a promising source of future supply. As much as 15 million gross tons of concentrates is a possibility by 1960. However, additional experimental work must be carried on before construction of a full-scale plant can be initiated. Furthermore, each 1 million gross tons of concentrating capacity will involve an investment of roughly 20 million dollars. Therefore, while the probabilities are good that large quantities of ore can be obtained from this source eventually, the difficulties still to be overcome leave some doubt as to whether so large a tonnage can be obtained from this source by 1960.

In the case of Labrador, the business interests developing these properties have scheduled production of 5 million gross tons in 1955, 8 million gross tons in 1956, and 10 million in 1957. Production could, if necessary, be expanded somewhat more rapidly and eventually to a much larger extent-to 20, 30, or even more millions of tons. This obviously will be necessary if war comes. It is, therefore, important to plan now how the large tonnages of Labrador ore will be moved to steel-consuming centers.

TRANSPORTATION OF LABRADOR ORE

Various alternative routes are available for moving Labrador ore to consuming centers. Assuming that war can be avoided, that the St. Lawrence seaway is not built, and that production amounts to 20 million tons, the movement of the bulk of this ore would be through the Gulf of the St. Lawrence to the Atlantic Ocean with delivery at east coast ports.

This movement in peacetime is completely feasible though much less efficient than movement through the St. Lawrence to Great Lakes ports. Assuming peace, and a decision not to build the St. Lawrence, facilities will have to be constructed

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to move a large tonnage of the Labrador ore by the ocean route. From the point of view of national security this development could have tragic consequences. If war should come after such a route were developed, the probabilities are strong that submarine action would quickly and seriously interfere with deliveries of Labrador ore to east coast ports. Under such circumstances, facilities would not be available for loading adequate quantities of ore at Montreal for shipment by domestic rail to consuming centers, for shipment by Canadian railway to Lake Ontario ports, or for unloading ore shipped over Canadian lines.

To provide such facilities after war broke out would take a minimum of 18 months. Until these facilities could be provided, delivery of Labrador ore to consuming centers might be sharply reduced. And, of course, these facilities ore cars, locomotives, docks and material-handling equipment-would take substantial quantities of critical materials, probably at a time when they could be spared least.

For example, for a rail movement of 20 million tons approximately 10,000 hopper cars would have to be provided. This quantity of cars probably could temporarily be freed for this service but sooner or later would create a demand for about 230,000 tons of steel for car construction. Such an amount is considerably greater than the quantity of steel required for construction of the United States share of the St. Lawrence project. Additional freight cars are, of course, needed for all kinds of commodities. To the extent that the large requirement for additional freight cars could be relieved in part, the interest of national security would be better served.

Presumably steps could be taken in advance of war to handle the movement of Labrador ore via domestic and Canadian rail lines. To do so would, however, represent conscious planning to use a far less efficient means of transportation for this ore than could be provided by construction of the St. Lawrence waterway. The hauling of Labrador ore by rail would put a much greater drain on critical resources, including manpower, than transportation of the ore would over the St. Lawrence waterway. It represents a waste of resources which should only be considered as a last resort to keep our vital steel industry operating.

ELECTRIC POWER

In its earlier report, the National Security Resources Board said, with respect to electric power, "the project would furnish large quantities of additional power to an important industrial area which suffered critical shortages in both World War I and II." In the absence of construction of substantial additional generating capacity, correspondingly large or larger power shortages should be anticipated in this area in case of another war. The avoidance of such shortages is vital. The power project is one of the best alternatives for providing a substantial part of the capacity needed to avoid such shortages.

The accelerated mobilization on which the United States is now embarked encompasses a substantial expansion of the capacity of manufacturing industries, maximum utilization of existing industrial capacities, and substantial supplemental requirements for atomic energy. In the aggregate, the program necessitates a large net addition to the requirements for electric energy.

The Federal Power Commission, on the basis of an 80 percent daily load factor, has estimated the reasonable dependable capacity available from the United States half of the project as 700,000 kilowatts at the site. This supply is required to help relieve the power shortages anticipated in 1955 and succeeding years in the industrial region which would be served by the St. Lawrence project.

If this additional power were to be distributed in New York State east of Rochester, in Vermont, New Hampshire, and southern New England, it would add about 10 percent to the existing supply. However, use of the St. Lawrence power may be more concentrated in the industrial area closer to the site. To the extent that the use were to be so concentrated, it would, of course, represent a larger proportion of the supply in the smaller area.

While the installation cost would be heavy compared with the cost of equally large steam generating capacity the relative cost of operation would be small. For so far ahead as we can see the resources of the economy will be seriously strained in mecting the combined military and essential civilian requirements. It is, therefore, imperative not only that our resources be expanded to the fullest extent possible but that the use of them be conserved as much as possible.

In World War II we were fortunate in having large blocks of additional power available at Grand Coulee for Hanford and at TVA for Oak Ridge. In planning

our national security we should anticipate similar needs for large blocks of power in the event of another war and be prepared in advance to meet them. The St. Lawrence is one of the very few remaining power resources which is suitable to meet such needs.

The construction of the St. Lawrence project thus would add substantially to the supply of electric power-one of the key resources in waging war. Equally important the project would provide power with far less drain on critical resources such as coal, manpower, and transportation than fuel generation plants of comparable magnitude.

OVER-ALL REAPPRAISAL

The St. Lawrence River is one of our few remaining great natural resources still virtually undeveloped. It can provide efficient and economical transportation of bulk commodities, particularly iron ore, and huge quantities of electric power. In view of the grave dangers facing the country in the years ahead and the need to expand and conserve our resources, it would be a serious blunder not to plan to use so important a resource as the St. Lawrence.

This conclusion is based on a consideration of the following alternatives:

(1) The world may continue in a high state of tension but without a global conflict for the next 10, 15, or 20 years

Under such circumstances the construction of the St. Lawrence waterway and power project should be undertaken. Its availability would increase the supply of ore, help to keep its price down and thus the price of steel and the cost of living. It would supply large quantities of low-cost power. It would contribute to balanced economic growth and to our economic wellbeing. Moreover, it would provide insurance against the probable need to cut steel production in the event of war.

(2) The world may avoid global conflict for the next 6 to 10 years with full-scale war coming after that time

Under these circumstances it is essential to construct the waterway. The waterway would provide a protected inland route for a wartime movement of 20 and even as much as 30 million tons of vitally needed ore. In time of war, movement of ore over the North Atlantic would be interfered with by enemy submarine action. Thus, part of the steel industry would have to shut down until makeshift and costly alternative routes could be developed. This would take a minimum of 18 months and large quantities of critical materials at the time when they could be spared least.

(3) Full-scale war may break out in the next 1, 2, or 3 years

This would necessitate a decision as to whether or not construction should be continued. Depending upon how much of the project has been completed and upon other urgent and competing demands for scarce resources, it might appear unwise to proceed with completion of the project. However, in view of its great economic importance, in both war and peace, it appears highly likely that the decision would be to complete the project.

With these possibilities in mind, it is clear the construction of the waterway and power project should be initiated as promptly and carried forward to completion as speedily as possible. There is no sound basis upon which to build an argument for not doing so.

Finally, the cost of the project both in dollar terms and in terms of a drain on scarce resources is relatively small.

Over a 5-year period, the dollar cost to the United States would average about $100 million per year. This is less than the two-tenths of 1 percent of prospective defense expenditures over the next 5 years. Moreover, since the project will be self-liquidating, the Government, over a period of years, will recover the entire cost. It is, therefore, a very important and at the same time practically 'costfree" security measure.

It is estimated that over a 5-year period of construction, the average yearly drain on United States resources would be about as follows: Manpower on and off the site, 19,000 men; steel, 30,000 tons; copper, 500 tons; aluminum, negligible; and cement, 750,000 barrels.

In view of the relatively small amounts of critical resources involved as compared with the great additions to our transportation and electrical energy resources which would result from construction of the project, it represents a highly practical, feasible, and urgent national security measure.

The CHAIRMAN. Is there any member here who wishes to ask any question of Secretary Sawyer?

Mr. DONDERO. I would like to ask a question.

The CHAIRMAN. Mr. Dondero.

Mr. DONDERO. Mr. Secretary, you know the essential elements that have entered into this discussion of the St. Lawrence seaway over what they were in previous years. One is the question of tolls. The other is the question of iron ore in relation to our national security.

Can you tell the committee the amount of iron ore remaining in the United States? That is, how many years will it last?

Secretary SAWYER. There are differences of opinion about that, as you know. I do not feel qualified to testify in detail on that. I think Secretary Chapman plans to give you that information.

Mr. DONDERO. Has a study been made by the Bureau of Mines on that subject?

Secretary SAWYER. Yes; but there is no doubt, regardless of all arguments, that there is a very rapid depletion of our iron-ore reserves of high-grade iron ore; and that it will probably be fairly close to completion by the end of 10 years. The discussion, as I understand it, revolves around the question as to what use can be made of so-called taconite, and how rapidly it can be produced.

Mr. DONDERO. Has any process been developed by which taconite can be mined economically?

Secretary SAWYER. I think so. As I say, I would prefer to have Secretary Chapman testify on that. I think there are processes being developed or utilized so that the taconite can be used; but I think the real problem is in the amount in which it will be available. That will be nothing like the ultimate amount of ore which is available today. Mr. DONDERO. Do you know of any deposit in the United States today that compares with the deposit of iron ore in Labrador and Quebec, Mr. Secretary?

are.

Secretary SAWYER. No. There are some deposits in other parts of Canada they have been talking about. I do not know how large they I believe that they are not comparable to the deposits in Labrador, and there is no other deposit of which I know of any large amount. Mr. DONDERO. Has a deposit been brought to your attention on the north shore of Lake Superior, west of Fort William in Canada, known as the Steep Rock mine?

Secretary SAWYER. Yes. That is what I referred to in that state

ment.

Mr. DONDERO. Is that a large amount?

Secretary SAWYER. It is large actually, I think, but comparatively I understand it is not large by comparison with the Labrador deposits. Mr. DONDERO. How many tons of iron ore are we using annually? Secretary SAWYER. I do not know the exact amount. As I testified, the output of ingot steel will pass 110,000,000 tons this year, and by the end of 1952 will be 118,000,000 tons. There are a variety of estimates.

Mr. DONDERO. It is a figure of 80,000,000 tons of ore we have been using.

Secretary SAWYER. Dr. Zeis says it is higher than that, but I do not have the exact figure. However, the use is increasing, and the ore is decreasing very rapidly.