Business: Strategic Metals, Critical Choices

(2 of 3)

Titanium. As strong as steel but 45% lighter, this metal suddenly became scarce around the world early last year, after the Soviet Union, the largest supplier of titanium "sponge," the semiprocessed metal, abruptly stopped signing new export contracts. Military experts speculate that the Soviets have diverted their normal 3,500 tons of exports to the construction of many submarines and aircraft. Since the metal is used extensively in high-performance jets, missiles and nuclear plants, U.S. and European aerospace companies have been scrambling to buy the remaining titanium sponge produced by Japan, Britain and China. As a result, since last March prices in Europe have jumped from $3.98 to $25 per Ib.

Ever since oil-exporting countries showed how to run up prices by banding together, other developing countries have dreamed of emulating OPEC's success. Discussions have been held about forming cartels to cover commodities as varied as coconut oil, copper and phosphate rock. Such Xerox copies of OPEC have almost universally failed because of easily available substitute products or the unwillingness of would-be cartel members to cut production enough to maintain high prices. The copper exporting organization, for example, was weakened when industrial users began replacing that metal with plastics and aluminum, and effectively collapsed when the last recession produced a worldwide copper glut. The danger of other cartels remains remote —for now. Even so, individual nations may be moved to reduce exports, and those actions could severely tighten supplies and send prices surging.

The American dependence has focused attention on the size of current stockpiles and the feasibility of developing new domestic sources. Since World War II the Government has maintained strategic stockpiles of 93 key materials, including tin, copper and titanium, for use in a national emergency. Some are critically low. Only 32,000 tons of titanium are stockpiled, far below the 130,000-ton goal. Cobalt reserves are 22,000 tons short of the 43,000-ton target.

Though no modern industrial nation can be a totally self-sufficient island, the U.S. has little choice except to build safe stockpiles of those essential materials, such as chromium and manganese, that are found in quantity in only a few countries. The mineral-rich American West, Alaska and the oceans bordering the U.S. contain vast unmined natural resources that hold the longer-term promise of more domestic sufficiency and security. These minerals often remain in the ground or under water because of ecological concerns or the higher profits that firms can earn abroad. Steep mining taxes in Minnesota, Montana and other states have also discouraged digging. Geologists have singled out 40,000 acres of federal land in Idaho as a possible source of cobalt. Yet last November the Senate Energy and Natural Resources Committee designated 2.2 million acres surrounding the site as a wilderness preserve, and banned any commercial activity that would disturb the elk, bighorn sheep and 188 other species that inhabit the area.