The Waterbury Democrat., 1945-03-05


 to light in . months Senate Small Business Sub- committee investigation of the light metals situation, just now getting under way.
 The 400 million dollar difference may be merely matter of book keeping and 1t may be that the extra costs are justiflable as war costs. But the extra costs are there and they are beginning to show now through @ number of closely related facts:
 l. The war-expanded magnesium production industry is now operat- ing at only l5 per cent of its rated capacity.
 ?. Nearly all government-owned magnesium plants are now shut down.
 3. There are now tremendous stockpiles of magnesium variously estimated at double the necessary reserve" and enough for 10 years peacetime consumption"
 1. The two privately owned mag nesium producing companies, Dow
 
 all postwar demands. and
 s. The government-owned plants are therefore unstable and will have to be written of as a mere cost of the war or disposed of at frac- ton of value.
 NEEDS OVER-ESTIMATED TO 9O-FOLD EXPANSION
 The reason for this somewhat em. barrassing situation is simply that requirements for magnesium were vastly over-estimated and the in- dustry was over.expanded.
 In 1889 U. s. industry actually consumed 6,450,000 pounds of mag nesium.
 Under war pressure and panic planning, the industry was expand ed 90 times to a rated production capacity of 5S6 million pounds year.
 Today the industry is operating at a rate of only 90 times to a rated production capacity of 586 million pounds year. Today the industry is operating at rate of only 90 mil- lion pounds year, IA times greater than pre-war production but tonly one-Seventh of capacity.
 Government war agencies went all-out in planning this tremendous capacity. On War Production Board directives. Reconstruction Finance Corporation made 52 commitments for a total of 453 million dollars to build new magnesium plants.
 It is this 453 million dollar capi- tai investment which, If charged of as 8 war cost and pro-rated against the approximately one bil- lion pounds of magnesium produced between l940 and the end of l945, would add to the actual ceiling prices which the government has paid for its magnesium an over head of around 45 cents a pound, or more than double the cost of the metal itself.
 The government is now whole owner of a thirteenth. WIPE began to cut back these plants production @ year ago, first by 50 per cent, then by shutting them down completely. In all. nearly 4.000 workmen have been laid of by these cutbacks and sent to other war jobs.
 Biggest of the closed plants is Basic Magnesium in Nevada, once called by the Senate War Investi- gating Committee the worst contract the government ever made. DOW HAS MADE IT FOR 12 CENTS A POUND
 Dow Chemical has been the big gest and most successful operator. furnishing the know-how for other operators. Dow was in the business before the war and some of Its mag nesium has been produced at l2 cents a pound. Dow's own mother" plant at Midland. Mich. is still go- ing.
 The only other privately owned plant is Henry J. Kaiser's Perma- nente Metals in California. Using new process, Permanente had trouble with it's early production and costs were higher than the OPA ceiling prices. WIPE therefore recorl- mended that Kaiser be paid out-of- pocket costs in the form Of a sub- sidy. This was done on IS million pounds at a cost of $2.700.O00. an average of IS cents a pound.
 REC loans to the Kaiser Company to build Permanente total 28 mil- lion dollars. Kaiser has pledged the profits of some of his shipbuilding operations to retire this debt. and the Kaiser Companys latest balance sheet shows surplus of over g mil lion dollars from which Kaiser says the government loan will be repaid in full.
 Only chance for the government to break even on most of its other magnesium production ventures is through development of a great post war boom in magnesium trains, planes, autos, etc.