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 Thus, whether the Byrd Amendment is repealed or not, Russian chrome merchants will have made enormous profits at American expense.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. Not only did the Byrd Amendment force reductions in Soviet prices, our dependence upon the U.S.S.R. as a source for this critical material has been significantly reduced as the following chart demonstrates: SOURCE: U.S. Bureau of Mines; Minerals Yearbook; Mineral Industry Surveys. chrome imports to U.S. from U.S.S.R. 51.5% 61.2% 51.9% 57.7% 38.8% 48.9% 35.9% 37.9% [SOURCES: U.S. Bureau of Mines; Minerals Yearbook; Mineral Industry Surveys] The reasons for the relative decline in the Soviet dominance in the American chrome market can be traced directly to two factors: 1. Chromite ore imports have steadily declined since 1970, while ferrochrome imports have dramatically increased. The Soviet Union has never been a major ferrochrome supplier to U.S. consumers. While the U.S.S.R. continues to enjoy a large percentage of our ore imports, its relative importance as a chrome supplier has been severely curtailed by the Byrd Amendment. 2. In an attempt to shore up rapidly deteriorating prices in the United States, the Soviet Union placed an embargo on shipments of chromite for 5 months in 1973. Imports of metallurgical grade chromite from the U.S.S.R." in 1973 decreased approximately 50 percent below 1972 25 levels. Although the Soviet chrome traders were successful in their attempt to stem the rapidly falling price trend, they sacrificed a large share of the American market to Rhodesian competition. Aside from raising serious questions as to their reliability as a supplier, the Russian embargo also had the effect of further injuring an already weak American ferrochrome industry. Several American ferrochrome facilities were closed due to the unavailability of Russian ore. With the development of an indigenous ferrochrome industry, the Soviet Union will inevitably become less willing to sell chromite to the United States at any price. 24 See chart, p. 14, supra. 25 This decrease was largely due to contract negotiations between the Soviet Union and Airco Alloys and Carbide Division of Air Reduction Company, a major ferrochrome producer, which has long held an exclusive requirements contract with the Soviet Union for metallurgical grade chromite. In January, 1973, their 5-year contract expired and renegotiation proved difficult. During contract negotiations, imports of Soviet metallurgical grade chromite ceased, and the Charleston, S.C. plant of Airco was forced to curtail operations. After a new contract was signed, reportedly on terms much less favorable to Airco than formerly, operations recommenced. See Hearings on H.R. 8005 et al. before the Subcommittee on Africa and the Subcommittee of International Organizations and Movements of the House Committee on Foreign Affairs, October 5, 1973 (statement of E. F. Andrews). THOUSAND SHORT TONS It is in this milieu that liquidation of the stockpile and reimposition of the Rhodesian sanctions have been proposed. While the decline in the American ferrochromium industry was largely precipitated by the initial embargo, its demise would be a foregone conclusion should they be reenacted. FERROCHROMIUM United States Production While there are no publicly available statistics on world ferrochromium production, several trends can be determined. The economics of ferrochrome production are largely dependent upon low-cost electric power, environmental regulations and raw material availability. Although wage rates are a factor, they represent less than 10 percent of overall production costs. Due to its highly capital-intensive nature, ferrochrome is produced mostly in developed countries. During the Rhodesian embargo, U.S. ferrochrome production almost consistently declined. American production during this period was as follows: |