Minerals Price Increases and Volatility: Causes and Consequences
Minerals Price Increases and Volatility:
Causes and Consequences
October 3, 2008
Stephen Cooney (Coordinator),
Robert Pirog, Peter Folger, and Marc Humphries
Resources, Science, and Industry Division
Dick K. Nanto
Foreign Affairs, Defense, and Trade Division
Minerals Price Increases and Volatility:
Causes and Consequences
A rise in the prices of minerals has had a major impact on U.S. manufacturers
and consumers. Mineral prices have risen while the economy as a whole has entered
a period of slowing growth. This has created serious difficulties for consuming
industries and concern in Congress. This report reviews the increases in price across
a wide range of metals commodities. Prices have at least nearly doubled between
2001 and 2008. In the case of steel, the most widely used industrial metal, the rise in
price appears largely driven by the high prices of iron ore and steel scrap. Weak
demand and increasing supply may reduce metals prices, but it is also widely
believed that prices will not fall to the levels seen earlier in this decade. The long-
term trend of declining real prices for metals inputs, which boosted the
competitiveness of the U.S. industrial economy throughout the 20th century, may be
Fundamental changes in commodity markets may explain why a rise in metals
prices is not simply a cyclical or temporary phenomenon. Consolidation of ownership
of minerals companies has given them increased pricing power. Market speculation
may have driven up the prices of mineral commodities. The 2000 Commodity
Futures Modernization Act (P.L. 106-554) exempted both energy commodities and
metals from regulation by the Commodity Futures Trading Commission (CFTC).
The 2008 Farm Bill (P.L. 110-246) partially closed this exemption, and other bills
have been introduced to extend CFTC regulation.
Another often-heard explanation for higher minerals prices is the ongoing and
rapid industrial development of lower-income countries. This report discusses
China’s efforts to improve and increase its access to foreign mineral resources, which
may have the effect of raising prices for U.S. domestic industrial users.
The report examines in detail the relationship between prices, production, and
availability of selected metal minerals essential to the U.S. economy. It focuses on:
! Zi n c
!Platinum Group Metals (PGMs)
Domestic metals production generally declined since the 1990s, but has
increased again in recent years. However, the upturn in supply has not been adequate
to meet domestic or global demand. Congress has extensively debated the 1872
General Mining Law (30 U.S.C. 21-54), but, with the exception of uranium, the issue
of mining on public lands has little relationship to the question of domestic supply
of industrial metal minerals.
In troduction ......................................................1
Organization of Report.........................................2
Overview of Minerals Price Trends....................................4
The Rise in Industrial Metals Prices...............................4
Iron Ore and Steel Prices........................................6
A Reversal of the Twentieth Century Decline in Metals Prices?.........11
Commodity Markets and Minerals Price Increases.......................12
Demand for Commodities......................................13
Supply of Commodities........................................15
China’s Growing Role as a Minerals Consumer.........................20
Metals Mineral Resources Availability................................25
Mineral Commodity Analyses...................................26
Platinum Group Metals (PGMs).............................37
Issues For Congress...............................................42
Financial Market Policy Issues..................................42
Federal Minerals Policy Issues...................................43
List of Figures
Figure 1. Metals Prices.............................................5
Figure 2. Steel Monthly Average Prices...............................10
Figure 3. Chinese Imports of Selected Mineral Ores.....................21
Figure 4. Sources of China’s Imports of Iron and Copper Ores in 2007......22
Figure 5. Iron Ore Production and Price...............................27
Figure 6. Aluminum Production and Price.............................28
Figure 7. Copper Production and Price................................31
Figure 8. Manganese Production and Price.............................32
Figure 9. Molybdenum Production and Price...........................34
Figure 10. Zinc Production and Price.................................36
Figure 12. Uranium Production and Price.............................41
List of Tables
Table 1. U.S. Steel Prices............................................9
Table 2. Increase in Consumer Prices (CPI)............................14
Table 3. World Gross Domestic Product Growth Rates...................15
Table 4. Index Speculator Commodity Holdings, 2003-2008...............19
Table 5. Commodity Futures Price Increases............................19
Minerals Price Increases and Volatility:
Causes and Consequences
Congress has been concerned with higher mineral prices and the effects on the
U.S. industrial economy. Of course, the rise in price of petroleum and other mineral2
fuels has been a subject of great public concern and front page news. But many
manufacturers, and others in industries such as construction, have been at least
equally concerned about recent surges in the price rises, especially in 2007-08, in
steel and other metals. In the short run, Congress will consider the effect of higher
material costs in public contracts, particularly in infrastructure projects financed by
federal resources. More indirectly, the federal budget and domestic economic growth
are being affected by layoffs and employment contraction as industries are hit by the
double effects of slower economic growth and higher metal materials input costs.
There is also some evidence that the long-term decline in relative metals prices,
as it evolved through most of the twentieth century, has been succeeded by an era in
which metals prices are increasing relative to other economic inputs. As the United
States has moved into a position in which it imports significant amounts (in some
cases, virtually all) of its industrial metal ores, this could have a dampening effect on
U.S. economic growth and industrial employment. Such a fundamental economic
shift could have even more important consequences for policy makers than the
shorter-term budgetary and employment impacts. Although metals mineral prices
may have peaked in mid-2008 and may decline going forward, most analysts believe
that they will not return to the much lower levels seen earlier in the decade.
The policy actions to reverse or ameliorate this situation may be relatively
limited. Some Members have cited the possible impact of increased minerals
commodity speculation, which they believe has artificially increased the price of oil
and other industrial mineral commodities. They have supported legislation aimed at
limiting the role of financial speculators. Members have also debated the question
of mining on public lands, and whether U.S. mining laws should be reformed.
1 This section was written by Stephen Cooney, Resources, Science, and Industry Division,
who also coordinated the report.
2 This subject is discussed in CRS Report RL34625, Gasoline and Oil Prices, by Robert
Organization of Report
The rise in metal minerals prices. The first substantive section of the
report details the general increase in metals prices in the current decade. Since 2001,
aluminum prices have nearly doubled, and a broad range of other metals commodities
prices, included ferrous and non-ferrous scrap, have tripled or increased at a higher
rate, even as U.S. economic growth has slowed. A separate sub-section reviews the
across-the-board rise in prices of steel, the most widely used industrial metal.
Causes of minerals price increases. Some analysts have suggested that
the structure of the market for minerals is fundamentally changing, and this has
resulted in higher prices for U.S. industrial consumers of such materials. Such
changes may be due both to the increased pressures of global supply and demand, as
well as to active market manipulation. Causal factors that have been widely
discussed, and which will be reviewed in detail, are:
!Consolidation and the development of oligopolies in metals and ore
!Increased commodities market speculation;
!Growth of demand for metals and metal ores among rapidly
developing countries, especially China.
Metals mineral resources. While there are general trends that affect metals,
supply, demand, and price developments are specific for each metal commodity. Any
study of supply and demand of industrial metals must necessarily be selective. The
report will review specific mineral resources, their sources and availability, and
policy issues that may affect their availability in the U.S. economy.
Concern over the impact on the U.S. economy of nonfuel minerals availability
led the National Research Council to prepare a study, Minerals, Critical Minerals
and the U.S. Economy that will be referenced throughout the current CRS report.3
The NRC study chose to focus primarily on those minerals that might be considered
“critical” to the United States as defined by both the risk to supply of the mineral and
the impact of any supply restriction. “The criticality matrix ... emphasizes that
importance in use and availability (supply risk) are the key considerations in4
evaluating a mineral’s criticality.” The NRC examined in detail three metal
minerals as potentially critical under this definition: copper, rare earths (as a group),
and platinum group metals (PGMs). It concluded that rare earths and PGMs could
be defined as critical, but that copper was not — despite its importance of use, it was
considered widely available. The NRC further examined some other metals and
concluded that niobium, indium, and manganese might be defined as “critical,” and
3 National Research Council. Minerals, Critical Minerals and the U.S. Economy
(Washington, DC: National Academies Press, 2008). Hereafter NRC, Critical Minerals.
4 Quote from NRC, Critical Minerals, p. 109. The criticality matrix is introduced and
defined on pp. 5-6, 30-34.
gallium might be added to this list.5 As with this CRS report, the NRC did not
evaluate the “strategic” importance of minerals for national security.6
This CRS report takes a broader view of the significance of metal minerals for
the economy. Consequently, the range of minerals upon which this report focuses
are those that may be used more broadly in the economy than those on which the
NRC focused, although there is some overlap. The specific metals studied in this
! Zi n c
!Platinum group metals (PGMs)
This group covers a wide range of general and specialty uses. The first three
products, in their refined state, are probably the most widely used industrial metals
in the U.S. and global economies. Manganese and molybdenum are metals that are
critical in the use and production of steel, while zinc is used to galvanize steel,
especially for construction products. While these metals are all base metal
commodities, platinum is a precious metal, mined and traded in small quantities.
Together with the other PGMs, it plays an important role in the automotive industry.
Uranium is chemically defined as a metal, though its importance is primarily as
nuclear fuel. For some of these metals, U.S. industry is mostly reliant on domestic
resources. For others, the United States is almost completely reliant on imports.
Issues for Congress. The report concludes with a review of the issues and
legislation that Congress passed or considered, and its effects on mineral markets.
It examines recent legislation to deal with commodities speculation, and concludes
that it has so far only had limited effects on commodity markets and prices. The
report also examines legislative proposals to reform the rules governing mining on
federal lands, but notes that these issues primarily affect only gold, which is not
considered as an industrial commodity, and uranium.
5 NRC, Critical Minerals, ch. 4.
6 NRC, Critical Minerals, pp. 29-30.
Overview of Minerals Price Trends7
The Rise in Industrial Metals Prices
The U.S. industrial economy is affected by mineral prices, which have continued
to rise — in some cases, accelerated — while economic growth has slowed. Rising
materials input costs have become a major problem for many U.S. businesses, as
noted in Business Week:
More small business owners say higher costs are hammering profits, according
to a June  survey by the National Federation of Independent Business. For
the first time since 1981, NFIB members say inflation is their top concern. Even
excluding energy and food, wholesale prices for crude materials in June were up
products, rose 8%. Both rates are triple those at this time [in 2007].
A 2008 report for Lehman Brothers, a New York-based investment bank,
calculated that the cost of mineral commodities in the average new motor vehicle as
of February 2008 was $2,241, up by $421 (19%) over the cost one year earlier. This
was contributing to higher vehicle prices, even though market demand in early 2008
was substantially down across the board — and especially for the larger and heavier
vehicles that used more metal. According to this report, the average new vehicle
contains 2,200 pounds of steel, 300 pounds of aluminum, and 60 pounds of copper.
Even metals used in much smaller quantities contribute significantly to overall costs.
The report noted, for example, that only small amounts of platinum and palladium,
primarily used in catalytic converters, contributed 6% to the average commodity cost
figure, because the price per pound is much higher than base metals. Despite efforts
to reduce vehicle weight to improve fuel economy, the average new vehicle (car or
light truck) sold in the United States today weighs more than 4,000 pounds,
compared to 3,200 pounds in 1980. This change largely reflects the net effect of the
consumer market shift to SUVs and trucks in the 1990s.9 Another source calculated
that the higher cost of steel alone in 2008 would add $250 million to General Motors’
North American manufacturing costs, and $200 million to those of Ford Motor10
7 This section was written by Stephen Cooney, Resources, Science, and Industry Division.
8 “Earnings Are Heading into Even Rougher Seas,” Business Week (July 28, 2008), p. 11.
9 American Metal Market (AMM), “High Metal Prices Blamed for Auto Stagflation Threat”
(March 12, 2008), p. 8. NRC, Critical Minerals notes as many as 39 different minerals may
be used in modern automobiles. It cites weight statistics from the Minerals Information
Institute similar to those above. NRC also analyzes the use of minerals in the aerospace,
electronics and energy production industries, pp. 50-63.
10 Analysis by Rod Lache of Deutsche Bank AG, reported in Detroit News (detnews.com),
“Auto Briefs” (April 11, 2008). Auto parts supplier Dana Corp. predicted in mid-2008 that
steel price increases would cost it $242 million in 2008, less than half of which could be
recovered from price increases to customers; AMM, “High Steel Tags Widen Dana’s Lossesnd
in 2 Qtr.” (August 8, 2008), p. 6.
While much less copper than steel is used in automotive manufacturing, the
reverse is true in homebuilding. “Construction accounts for more than 40% of
copper use, with about two-thirds of that attributed to residential building ... An
average single-family house uses about 439 pounds of copper.”11 Thus, as the
homebuilding industry struggles with the decline in U.S. home sales, it also faces
higher basic material costs, led by copper and other metals.
Figure 1. Metals Prices
2001 2002 2003 2004 2005 2006 2007 2008*
Al u mi n u m Copper Zi n c
PlatinumFerrous ScrapCopper Scrap
* Annual average as of June, 2008.
Source: American Metal Market (AMM.com) historical metals prices series.
Note: Definition of commodities —
Aluminum: COMEX spot price.
Copper: London Metal Exchg. Spot asking price.
Zinc: London Metal Exchg. Spot asking price.
Platinum: Engelhard producer price.
Ferrous scrap: Consumers’ no. 1 heavy melting scrap price, Chicago.
Nonferrous (copper) scrap: Refiners’ no. 1 quality.
Figure 1 illustrates how a rise in some selected metals prices used broadly
across industry has occurred since the beginning of the decade. Except for zinc,
among these metals inputs, the price rise continued or even accelerated in 2008,
despite wide perceptions of an economic slowdown. The figure uses the 2001
average price of each industrial input as the base line. It shows the relative price
increase of three base metals (aluminum, copper, zinc), one precious metal with
significant industrial usage (platinum), and ferrous and non-ferrous scrap (in the
11 AMM monthly ed., “Staring into the Abyss” (March 2008), p. 38.
latter case, copper).12 Except for aluminum prices, all have at least tripled during the
period, with both ferrous and non-ferrous scrap, and raw copper increasing about five
times in price by early 2008. Moreover, in early 2008, all these commodities, except
zinc (which, though declining somewhat in price since 2006, nevertheless remained
historically high), exhibited continued price increases despite a slowdown in U.S.
Iron Ore and Steel Prices
The data in Figure 1 do not include iron ore, which, after mineral fuels, is
probably the mineral product most widely used by industry, primarily in the form of
steel mill products. Iron ore prices internationally and domestically are set by
contract. Moreover, the impact of increased prices of both iron ore and ferrous scrap
input prices on the economy in this decade has been reflected primarily in rising
prices of steel mill products, which will be reviewed separately below.14
Iron ore trades only in limited amounts in the open market. Internationally, the
key price has been set in annual contract negotiations between the three largest
international producers on the one side (the big Brazilian iron ore producer, Vale, and
two large Australian producers, BHP Billiton and Rio Tinto) and the large Japanese
and Korean steel producers on the other. Since 2004 the Chinese steel companies,
negotiating as a group, have become the major importers, but they have not been able
to lower the price set by the traditional negotiators. In 2005, after a booming global
recovery in steel demand and explosive growth in China, Vale succeeded in
negotiating a 71.5% annual increase in its contracted ore price. This was followed
by successive annual increases of 19% and 9.5%; then in early 2008 Vale raised its
price between 65% and 71%, depending on ore grade, to an average price of about15
$200 per metric ton (MT). Citing the advantages of shorter shipping routes, Rio
Tinto raised its price to Chinese iron ore consumers even more, by 96.5%, in 2008.16
The domestic U.S. steel industry is only indirectly affected by international iron
ore price developments. The majority of steel in the United States, by tonnage, is
produced in electric arc furnaces, in so-called “minimills,” which use scrap as their
12 Scrap is listed in NRC, Critical Minerals as a mineral resource. It distinguishes between
“old scrap,” which is considered as a “secondary” mineral resource, and “new scrap,” waste
material from manufacturing processes, which “is essentially primary material that requires
an additional processing step to find its way into products;” pp. 91n and 101.
13 On falling zinc prices in mid-2008, AMM, “‘Deathwatch’ Facing a Number of North
American Zinc Mines” (July 21, 2008), p. 12.
14 Note, in the following subsection, and throughout this report, that, internationally, large
mineral volume units are generally measured in metric tons (about 2,200 pounds). This unit
is abbreviated here as “MT.” Domestic production is often measured in “tons” (2,000
pounds), a term that is spelled out in the report.
15 AMM print ed., “Soaring Ore Prices May Be the Bullet Beijing Needs” (April 2008), p.
16 Financial Times, “Chinese Agree 96% Jump in Ore Prices” (June 23, 2008).
primary charge.17 Historically, this has enabled them to produce steel more quickly
and cheaply than integrated mills using blast furnaces, and many types of product,
such as reinforcing bars, steel beams, and most other construction steel products, are
now only made domestically in minimills. But, as shown in Figure 1, ferrous scrap
prices increased more than fivefold between 2001 and mid-2008. The United States
is the world’s leading exporter of ferrous scrap, and international buyers have
increasingly competed for U.S. domestic scrap. While the supply base has remained
relatively constant, U.S. exports have risen from about six million tons annually in
2000 to 12 million tons in 2004-06, 16 million tons in 2007, and an even higher rate
in early 2008.18 To protect their own domestic steel industries, some foreign
countries have enacted restrictions on scrap exports, a policy that has been considered
in the United States, but not adopted.19
Integrated mills must use iron ore to produce pig iron in blast furnaces as their
principal ingredient for making steel. U.S. Steel, the largest single steelmaker in
North America, supplies 100% of its iron ore from its own mines. ArcelorMittal, the
internationally owned firm which is the other dominant North American integrated
steel producer, owns substantial iron ore sources around the world, but only sufficient
for 45% of its global needs. It is seeking to expand its holdings, both in North
America and elsewhere. The major independent source of domestic iron ore is
Cleveland-Cliffs, which sells most of its ore under long-term contracts, but which
tends to follow the global iron ore price. Cleveland-Cliffs’ price is reported to have20
increased from a 2007 average of $66 per ton to about $85 in 2008. The company
reportedly has further issued “guidance” that it expects its average price in 2009 to21
be at least $107 per ton.
With North American ore prices much lower than the internationally traded
Brazilian and Australian ores, the former price advantage of both the domestic
minimills and imports over the integrated mills has been reversed. World Steel
Dynamics, an industry consulting and data services firm, reported in 2008 a total
17 CRS Report RL32333, Steel: Price and Policy Issues, p. 4 and table 1.
18 Ferrous scrap trade data quoted from AMM, “Scrap Users Unite to ‘Level the Playing
Field’” (June 16, 2008), pp. 1-2; and, “Ferrous Exports Rocket, Sparking Fears on Trade”
(July 16, 2008), pp. 1 and 7. Note some decline in U.S. scrap prices and exports in mid-2008
and turmoil in the market, but price falls have been marginal compared to earlier price
increases; ibid. “Ferrous Scrap Pricing Plunges Up to $70/Ton” (August 8, 2008).
19 The American Scrap Coalition has been formed to try to eliminate such barriers to global
trade in scrap; see ibid. A summary of recent measures by foreign governments to restrict
or discourage exports of scrap is listed by Michele Applebaum in Steel Market Intelligence,
“Resource-Hugging — Reverse Protectionism Will Drive Further Commodity Price Hikes”
(June 12, 2008), p. 2. Moreover, Russia has reportedly drafted a decree to reverse negotiated
decreases in scrap export taxes; AMM, “Export Tariffs by Developing Countries to Hurt
Supply: BIR” (August 7, 2008), p. 10. On responses by the U.S. Trade Representative and
the European Union to reduce such restrictions, and on U.S. rejection of “short supply”
export controls on ferrous and non-ferrous scrap, see CRS Report RL32333, pp. 23-25.
20 AMM, “Vale’s Big Score Seen Benefitting North American Mines, Mills” (March 21,
21 AMM, “Cliffs Raising 2008 Guidance on Ore” (July 10, 2008), p. 8.
price advantage for North American integrated mills in producing cold-rolled coil
steel of about $130 per ton under the cost of minimills.22 Nucor, the largest U.S.
minimill producer, is reported to be planning to build a large new blast furnace to
offset this cost disadvantage.23 Meanwhile the weak exchange rate of the dollar,
continued trade remedy tariffs on products from some countries, and high ocean
freight rates have combined to discourage steel imports.24
Because it is difficult to develop meaningful and comparable price series for
iron ore, and because U.S. steel mills may use iron ore or scrap as their principal
charge, this report shows instead the price changes for a wide range of steel mill
products, which are the most widely used intermediate goods produced from iron ore
(all ferrous scrap was originally processed from iron ore). Some sample product
prices since 2001 are illustrated in Table 1. They show roughly the same magnitude
of price increases as displayed for mineral prices.
As with mineral commodities, by 2007 many steel mill product prices were
double or triple the levels seen earlier in the decade. This price increase put serious
pressure on consuming industries, as many smaller manufacturers and other steel
consumers testified before Congress in 2004.25 As seen in Table 1, the prices either
declined or rose more slowly between 2004 and 2007. But in early 2008, there was
a further run-up in most steel product prices, even though demand for final goods
using steel products was not nearly so robust. The clearest example is in sheet steel,
which, in the first half of 2008 averaged $300 per ton higher than in 2007, despite
declines in homebuilding and automotive production. Only stainless steel products
showed a small price decline in early 2008.
This price escalation in 2008 is shown in more detail in Figure 2. This
illustrates the monthly movement of prices for some representative steel products in
Table 1 from 2007 to early 2008, normalized at the January 2007 level. The figure
illustrates prices rising for four products (carbon sheet, coiled plate, rebar, and low-
carbon industrial rod) by 50% to more than 100% higher than the level of January
2007. Momentum built late in 2007 and early 2008, just as the overall U.S. economy
was slowing. Even special bar quality steel, widely used in the automotive industry,
followed the pattern with a 20% increase in price, despite declining motor vehicle
22 World Steel Dynamics, Steel Cost Curve Monitor (May 23, 2008), table on p. 2.
23 AMM, “Nucor Eyes Building $3B Iron-Making Facility in La.” (May 16, 2008); see also,
“Southeast Asia Looking More to Blast Furnaces” in the same source.
24 Another major cost increase for integrated steelmakers worldwide is the cost of coking
coal. “Annual benchmark ... prices ... have jumped to around $250 to $300 per ton recently
from less than $50 per ton just five years ago,” according to U.S. Steel CEO John Surma.
Ibid., “Surma Says Steel Still Best Material for Auto Industry” (April 10, 2008), p. 6.
25 See U.S. House. Committee on Small Business. Spike in Metal Prices — What Does it
Mean for Small Manufacturers? Hearings, March 10 and 25, 2004 (serial nos. 108-57&59).
Table 1. U.S. Steel Prices
ProductsAnnual Average Price Per Short Ton ($)
2001 2002 2003 2004 2005 2006 2007 2008
Flat Productsthru mid-June
Hot-Dipped Galvanized Sheet328.20440.00401.60733.80675.40761.80765.001077.20
g/wHR Carbon Steel - Special Bar Quality340.00353.20371.60546.40719.20838.00721.80865.20
leakCold-Finished Carbon Steel 1018455.20465.20503.00773.40899.20880.40905.20977.00
://wikiMerchant Angles (2”x2”x1/4” std. size)287.60252.00306.00482.00520.20582.20661.20845.60
http (Rod) a
Low-Carbon Industrial Quality310.00317.40323.00567.60583.00591.80652.80854.40
High-Carbon a 330.00 330.00 333.00 598.80 605.00 618.00 679.00 884.40
(Oil Country Tubular Goods)
OCTG Carbon, Welded880.06810.58787.871130.531344.951367.821305.611454.94
OCTG Carbon, Seamless1008.72925.52883.521227.581534.191567.201488.081628.85
OCTG N80, Welded1071.43999.24997.781341.381613.831735.271677.981807.13
OCTG N80, Seamless1163.121091.541072.111421.511764.141869.341812.601978.01
Cold-Rolled Sheet 3041376.401300.601295.201734.402514.603287.204827.204510.60
Source: Annual average price data from American Metal Market historical steel base price series. Except for OCTG, prices converted from cwt.
to per ton basis by CRS. Selected categories based on those used by Global Insight consultancy in its Steel Monthly Report forecasts.
a. Product definition adjusted in 2007.
Figure 2. Steel Monthly Average Prices
(January 2007 = 100.0)220.0
200.0Hot-Rolled SheetCoiled Plate
180.0HR Carbon Steel - Special Bar Quality 1000
Low-Carbon Industrial Quality Steel Rod*
160.0OCTG Carbon, SeamlessCold-Rolled Stainless Sheet 304
80. 0 7
07 -07 r-07 r-07 -07 07 l-07 -07 -07 t-07 v-0 -07 08 -08 r-08 r-08 -08 08
b y un- Ju g p c an- b y un-
Jan- Fe Ma Ap Ma J Au Se Oc No De J Fe Ma Ap Ma J
*Source uses discontinued series for Jan.-Mar. 2007.
Source: As for Table 1.
Many analysts believe that the prices of early 2008 for basic minerals and the
intermediate products made from them will not continue to rise or to remain at that
level for a prolonged period. In a widely quoted presentation, for example, Peter
Marcus of World Steel Dynamics predicted that hot-rolled coil steel could fall from
quoted prices of more than $1,000 per MT in mid-2008 to $650-$750 by the fourth
quarter.26 With respect to iron ore, John Anton of the economics consulting firm
Global Insight has pointed out that global steel production increased 5.8% from mid-
2007 to mid-2008, compared to output increases by the three big international firms
of 9% to 23% — and with even larger output increases projected for 2009.27 With
respect to ferrous scrap, steel industry analyst Michelle Applebaum has cited fall in
prices in September 2008, which “are down the most for a single month ever.”28
While there is some question whether the elevated prices of early 2008 for many
minerals and mineral products (notably steel) can be sustained through 2008, there
seems to be little prospect of basic prices for such commodities and their products
26 His views are outlined in World Steel Dynamics, Inside Track #87, “World Export Price
to Plummet 2H 2008” (June 12, 2008), esp. p. 3. A global commodity index created by
Standard & Poor’s and Goldman Sachs Group investment bankers declined by 19% in mid-
27 Global Insight. “Could Iron Ore Prices Weaken in 2009?” Steel Monthly Report (August
28 In her Steel Market Intelligence (September 10, 2008), p. 1.
to return to the low levels of 2001-2002.29 While U.S. economic growth and that of
other industrial countries may be slowing down, economic growth is expected to
remain strong in most emerging market countries, even if somewhat lower than
previously forecast.30 Many mineral analysts conclude that in today’s global
economy, demand and prices for basic mineral inputs will remain historically high.31
A Reversal of the Twentieth Century Decline
in Metals Prices?
If prices of metals mineral ores and products remain near recent levels, it would
be a fundamental change from an historic pattern that underpinned U.S. industrial
development in the twentieth century. The National Research Council’s 2008 report
on minerals cites a U.S. Geological Survey (USGS) analysis as concluding:
The overall price of mineral commodities declined in the twentieth century
despite increases in consumption: supply and competition were adequate and32
technology improvements decreased the cost of production and supply.
The USGS analysis distinguished between “industrial mineral commodities”
(such as cement, clay, lime, and crushed stone) and five “metal commodities” mined
in the United States: copper, gold, iron ore, lead and zinc. The metals price index
was marginally down on a real basis, with copper, lead, and zinc declining in price,
while iron ore and gold were up slightly over the full century. Copper notably
declined from more than $2.00 per pound in 1900 (in 1997 constant dollars), to just
above $1.00 by the end of the century. The downward trend of metals prices would
have been clearer had it not been for a major price spike between the early 1970s and
the early 1980s. Aluminum, considered separately because little bauxite ore is mined
in the United States, fell even faster in price. In constant dollars per pound, it had
29 Despite the possibility of a sharp steel price fall ahead, World Steel Dynamics predicts
that the “global steel demand outlook ... seems bright longer-term” (through 2017). Anton
has forecast typical spot steel price declines of only 20% or less by the end of 2009; Global
Insight, Steel Monthly Report (May 2008), p. 7.
30 International Monetary Fund (IMF), World Economic Outlook (April 2008), table 1.1;
Michael Mussa, Peterson Institute for International Economics (formerly Director of
Research, IMF), “Global Economic Prospects: Suffering a Mild Case of Stagflation”
(September 26, 2008).
31 Mussa, cited above, stated that, “ ... [T]he broad upsurge in commodity prices has been
largely if not completely reversed,” but in oral remarks stated that there would be “no
‘crash’ in global commodity prices.” John Anton has been “bearish” about steel prices
maintaining the high levels of early 2008 going forward — but foresaw only a “fall back to
2008), p. 4. Subsequently, he forecast, “Steel prices generally increased about US$500 [per
ton]; we roughly estimate that $300-350 will go away, but $150-200 will remain as a new
higher floor.”Global Insight, Steel Monthly Report (July 2008), p. 2. Also, see World Steel
Dynamics, “Truth & Consequences #47” (April 3, 2008), p. 2. Similarly, while U.S.
aluminum prices and production fell in the second half of 2008, production elsewhere
continued to rise; see AMM articles of September 23, 2008, pp. 1 and 8.
32 NRC, Critical Minerals, p. 89.
declined from an average value of more than $5 per pound before 1920 to
substantially less than $1 by 2000.33
Price increases since 2001 mark a clear change from long-term downward trends
or stable costs of metal inputs for industry. The metals commodities in Figure 1
displayed price increases in this decade ranging between nearly 100% for aluminum
to more than 500% for copper and copper scrap. Steel prices in Table 1 mostly
doubled, tripled or even quadrupled over the 2001 level. By comparison, the
Consumer Price Index (used in the USGS study to deflate twentieth century metals
prices) has only increased 24% since 2000.34 If metals analysts are correct that most
of the increase in metals commodity prices is not a temporary bubble, but represents
a long-term shift in the relative value of such industrial inputs, the consequences may
be significant for future U.S. economic growth and competitiveness.
Commodity Markets and Minerals Price Increases35
In many ways, the commodity markets, including those of the metals covered
in this report, are similar to markets for consumer goods, but in several specific ways,
they differ. The major similarity between commodity and consumer goods markets
is that, in both cases, their prices are determined through the interaction of demand
and supply. In the case of many commodity markets, there are actually two markets
that contribute in the price determination process:
!The first is the real, physical, commodity market. It is composed of
firms that use these commodities in production processes, and thus
create the demand side of the market. The other part consists of the
firms that supply this physical market.
!The second market is the financial market, which is composed of
firms that desire price predictability, and hedge real commodity
market transactions, and financial speculators, who are willing to
accept the risk that real commodity users wish to reduce. Risk
transfer of this type is a key factor in enhancing market efficiency,
ensuring a relatively stable cost structure that can translate into less
volatile consumer prices on the market.
In recent years, an additional class of speculators, financial investors, have
begun to use commodity markets as portfolio investment instruments. Critics have
asserted that this new class of speculators has contributed to increased commodity
prices, as well as price volatility. Others counter that, unless special conditions exist
that have created a financial “bubble”, these new participants in the financial
33 U.S. Dept. of the Interior. U.S. Geological Survey. “20th Century U.S. Mineral Prices
Decline in Constant Dollars,” by Daniel E. Sullivan, John L. Sznopek, and Lorie A. Wagner
(Open File Report 00-389).
34 U.S. Dept. of Labor. Bureau of Labor Statistics. “Inflation Calculator,” April 22, 2008.
35 Prepared by Robert Pirog, Resources, Science, and Industry Division.
markets represent transactions similar to those already taking in place in the market,
and are unlikely to affect prices in any systematic manner.
Demand for Commodities
The demand for metals commodities differs from consumer goods demand
because it is a derived demand. A derived demand is characterized as one for which
ultimate consumers have no direct need for the commodity itself as a consumer good.
The purpose of these goods is largely to serve as inputs in the production process of
other goods that do serve ultimate consumer needs. As a result, the demand for
metals commodities, in general, depends on the strength of the demand of the
consumable goods for which they are inputs. This characteristic of derived demand
has several important implications for the demand relationship and how prices are
Economists theorize that the law of demand holds for essentially all
commodities. This law states that when the price of a good rises, the quantity
demanded falls. In the case of derived demand, the relationship is more complicated.
The extent to which the quantity demand declines when the price of a metal rises
depends largely on the degree to which its price increase can be passed on to the final
consumer, as well as the proportion of the final good’s price that is accounted for by
the metal commodity. For example, if a final consumer good is viewed as an
essential by consumers, and only a small fraction of its price is related to the cost of
the metal contained in it, it is likely that the metal’s quantity demanded (at least the
part related to that particular consumer good) will be insensitive to changes in its
price. In this case, the seller of metal commodity will be able to pass through the
price increase of the metal, and the metal quantity demanded will be relatively
insensitive to price increases.
Alternatively, the cost of a metal may be a significant proportion of the cost of
the final consumer good. This final product may be subject to intense competition
from other products, and the metal may be subject to a highly price sensitive demand.
Then the producers of that metal might not be able to pass price increases on to final
commodity users, and might themselves face a highly price-sensitive demand
relationship. In addition, it may be possible to substitute other materials for the metal
in question when its price increases. If substitutes are available, then once a critical
price is reached, demand may move to the substitute commodities, resulting in
reduced quantities demanded of the primary metal commodity. In the residential
home market, copper was used for water pipe systems, but was replaced by plastic
pipe as a result of cost pressures.
As a result of these price effects, it is possible that the quantity demanded of
metals commodities might either remain relatively stable, grow, or decline, when
their own prices increase.
For goods that are characterized by derived demand, the demand conditions for
the final consumer goods to which they contribute are key factors. The major
variables that determine the growth in demand for consumer’s goods are price and
income growth. General consumer price changes are measured by changes in the
consumer price index (CPI).
Table 2. Increase in Consumer Prices (CPI)
YearIncrease in CPIYearIncrease in CPI
2007 4.08 2002 2.37
2006 3.06 2001 1.55
2005 2.88 2000 3.38
2004 3.25 1999 2.68
2003 1.87 1998 1.61
Source: U.S. Dept. of Labor. Bureau of Labor Statistics, available at [http://www.bls.gov].
Note: CPI growth is calculated from December to December.
Table 2 shows that although consumer prices have increased since 2004, their
increase has remained less than the growth in the prices of minerals and steel
products, as shown earlier in this report. Moderate growth in consumer prices
suggests that either mineral materials costs were not passed on to consumers, or if
they were, the cost of minerals were only a small fraction of the total cost of the
consumer products. Other explanations are that falling labor costs could have offset
rising material costs. This factor might be important for goods whose production has
shifted to China, or other emerging market nations. Substitutes might also have been
identified for some mineral commodities (e.g. plastic pipe for copper), which would
result in reduced quantities demanded.
Income growth as measured by the growth in world gross domestic product
(GDP) has been rising since 2003. World GDP growth rates, coupled with relatively
low prices for goods coming from low-wage economies entering the global economy
have likely increased the demand for metals for the production of all types of goods.
With GDP growth accelerating over the period, growth in demand for mineral
commodities could occur, even though prices were rising.
Growth rates in China have been a major driver of higher world GDP growth
rates. As shown in Table 3, China’s growth has been over double that of the world
as a whole for each of the reported years, except 2005. During this period China’s
economy began a process of transition, from supplying goods to the rest of the world,
to producing to satisfy rising domestic demand, fueled by growing income and
Table 3. World Gross Domestic Product Growth Rates
YearWorld Growth RateChina Growth Rate
Source: Central Intelligence Agency. The 2008 World Factbook, May
Although the Central Intelligence Agency forecasts GDP growth of 11.4% for
China in 2008, the weakening of the world economy might lead to lower growth.36
The International Monetary Fund estimated Chinese GDP growth at 9.2% for 2008.37
A lower rate of world and Chinese GDP growth would be likely to slow the growth
in demand for minerals commodities and moderate prices.
A subsequent section of this report reviews specifically Chinese government
policies and actions to secure access to mineral resources necessary to support
China’s domestic industries. This may have the collateral effect of raising prices for
metal minerals resources well above price changes previously associated with given
levels of economic activity in the United States and other advanced industrial
Supply of Commodities
Economists theorize that, under ideal market conditions, firms will tend to
supply more of a good to the market when its price rises. The logic suggests that
firms can employ more resources used in the production process, even if those added
resources are less productive, or more expensive, as the price, of the good being
produced, rises. This analysis is partially applicable to the metals markets; however,
significant differences exist between metals and manufactured goods in general.
Metals production depends on the existence of a resource deposit, and is capital
intensive. These two factors limit the potential for short-term expansion of output.
Although existing mines may expand production in the short run and utilize any
accumulation of stockpiled ore, capacity limitations exist. In the longer term, new
mineral deposits must be identified and specialized equipment may take time to
36 Central Intelligence Agency, The World FactBook 2008, updated September 4, 2008.
37 International Monetary Fund, 2008 World Economic Outlook, April 2008.
procure, both of which limit the potential of the industries to respond quickly to high
prices with more production. If the financial performance of the firms are weak, then
the industry may experience difficulty in obtaining funding for additional equipment.
Larger scale expansion of output may require the location and development of a new
ore bodies, which may take substantial capital investment and a long development
Because of the need to find new reserves, as well as historically cyclical
behavior of metals demand, little new entry into the industry might be expected in
response to higher prices. With limited potential for output expansion from existing
firms and little potential for the entry of new firms offering additional output, the
supply conditions in the market may be characterized as inelastic, or relatively
insensitive to price changes.
Market imperfections may cause observed prices on commodity markets to
differ from those that would be set under competitive market conditions. A key
market imperfection can be the actual, or potential, use of market power. Market
power exists when a market participant, usually a firm, or group of firms, can
manipulate or influence the market to its benefit. In this sense, the market is
controlled by a firm with market power.
Market power can be accumulated through the process of merger and
acquisition. The decreasing number of competitors, coupled with the growing size
of the remaining firms in the industry makes it more likely that potential market
power could exist. Merger and acquisition activity in the metals industries
accelerated in 2007 to an estimated 411disclosed deals, compared with 385 deals in
2006. However, the value of those deals increased from some $86.4 billion in 2006
to $144.7 billion in 2007. Of these 2007 deals, 115, worth in total about $77 billion,
took place in North America. Rio Tinto’s takeover of Alcan alone accounted for
nearly half of the total value.38
The aluminum sector, as a result of two major transactions, became more
concentrated. The top five global producers increased their share of production to
with 106 transactions in 2007, up from 88 in 2006. Major transactions were in the
zinc industry, where the Australian firm, Zinifex, and the Belgian firm, Umicore,
came together to form Nyrstar, the world’s largest zinc smelter, with operations in
seven countries. The steel sector experienced 249 deals in 2007, down by about a
quarter from 2006.39 However, as opposed to about a dozen companies that operated
integrated steel mills in North America ten years ago, just three companies
38 Price Waterhouse Coopers, Mergers and Acquisition Activity in the Global Metals
Industry 2007, p. 5.
39 Ibid. pp. 7-12.
(ArcelorMittal, U.S. Steel, and Severstal) now dominate this part the industry. There
has been a similar consolidation on the minimill side of the business.40
Markets with inelastic supply, as well as inelastic demand, are likely to have
volatile prices. If demand increases, price might increase sharply, because little
extra output enters the market to offset the additional demand. Under these
conditions, price increases ration the good to high-value users (who can afford the
higher price) and effectively force low-value users of the commodity out of the
market, a process called demand destruction. Only those uses that can bear the
higher costs of the commodity will continue to procure adequate supply. Similarly,
if supply is reduced, prices are likely to increase sharply because of buyers’ relative
insensitivity to price variations, especially if cost increases can be passed on through
the production process to final consumers.
During most of the past century, commodity prices have trended downward
relative to manufactured goods at a rate of about 1.6% per year.41 However, the
downward trend has been interrupted by price spikes in the mid 1970s, the late
1980s, and again, since 2003. The declining prices of the 1990s may have created
conditions that led to the recent price increases. Poor incentives to expand capacity,
low investment due to declining profit expectations, and a long-term decline in real
prices (net of inflation) likely left the minerals industries unable to expand to meet
the needs of a world economy whose GDP growth rates accelerated as shown in
If mineral prices are strongly correlated with the business cycle, and virtually
every period of rising prices is tied to increasing world GDP growth, it is likely that
a world economic slowdown in 2008 could lead to moderating prices. For the future,
the major question is whether the industries have used the recent period of high
prices to begin expanding to meet the requirements of the next growth surge.
In addition to physical spot market and contractual relationships, many
commodities, including metals, are traded on forward exchanges. These market
activities are represented by futures contracts and options on futures contracts.
Historically, these markets have served the valuable function of allowing commodity
producers and consumers to guarantee future prices and costs, reducing risk. For this
type of hedging activity to work, financial traders take financial positions opposite
that of the commodity buyers and sellers. Through this type of transaction, price risk
is transferred from the real commodity market to the speculator. Although
economists have debated whether this type of activity increases or decreases price
40 On steel industry consolidation, see CRS Report RL32333, Steel: Price and Policy Issues,
41 International Monetary Fund, 2006 World Economic Outlook, September 2006, Chapter
volatility in a market, few have claimed that excess price volatility, or a sustained
upward movement in prices, occurs as a result of hedging transactions.
Recently, new kinds of investors have entered commodity markets, including
metals markets, possibly contributing to the price increases of the past several years.
These investors are interested in neither the real commodity market, nor the
speculation on price movements of the traditional hedging transaction. These new
investors, including pension funds, university endowments and insurance companies,
are taking long (ownership) positions in the commodity futures markets purely as
long-term portfolio investments.
Investors might be interested in this type of transaction because they are thought
to contribute to risk reduction for the overall portfolio. The risk associated with price
movements for individual securities is thought to be minimized through
diversification. After an investment portfolio is fully diversified to essentially
eliminate the risk associated with individual securities, market risk remains. Market
risk is associated with price movements of the market as a whole. The reason
portfolio investors find the commodities futures market attractive, is that many
believe that price movements in commodities tend to counter price movements in
equity markets. This counter price movement is a factor in reducing the market risk
of an investment portfolio.
For example, if the price of a metal rises, implying the possibility of consumer
price increases, and possibly a contribution to general inflation, equity markets might
respond with falling share prices for specific firms, or industries, or even the equity
market as a whole. However, rising prices for the metal in the futures market creates
value for investors who are long, or in an ownership position, in futures contracts,
offsetting potential losses in the equity market. In this way, market risk may be
reduced by diversification into futures markets. This type of investment can be
achieved through the purchase of commodity index funds. These funds have the
further benefit to investors in that the index is composed of a substantial number of
commodity contracts in many different markets, further contributing to the
diversification of the overall portfolio.42
Because portfolio investors are interested in longer term positions, they may use
a “buy and hold” investment strategy. As a result, a potentially permanent increase
in demand occurs in the futures market, raising prices, and keeping them elevated as
long positions are “rolled over” and new investors are attracted to the market to
follow the success of earlier investors. Index speculators have increased their claim
on a variety of metals over the period 2003 to 2008 as shown in Table 4.
42 The Standard & Poor’s-Goldman Sachs and the Dow Jones-AIG commodity indexes are
commonly used in this type of investment.
Table 4. Index Speculator Commodity Holdings, 2003-2008
Holdings Holdings P ercent
Base MetalJan. 1, 2003Mar. 12, 2008Net IncrementChange
Aluminum 344,246 3,576,652 3,232,406 939%
Lead 82,019 240,745 158,726 194%
Nickel 20,147 122,135 101,998 506%
Zi nc 133,381 1,315,472 1,182,091 886%
Copper 220,096 1,364,634 1,144,538 520%
Source: U.S. Senate. Committee on Homeland Security and Governmental Affairs. Financial
Speculation in Commodity Markets (Hearing on , May 20, 2008), testimony of Michael W. Masters.
Supporters of the viewpoint that speculation on futures markets is fueling price
increases in commodities point to the data in Table 4 as evidence that the demand
for commodities has increased due to the activities of financial investors. The
question remains whether the paper demand for metals commodities represented by
the futures contracts held by the various financial funds is likely to result in real
commodity demand anytime in the future. In general, the answer appears to be that
it will not. Futures contracts are settled in cash or by delivery of the commodity as
the contract matures. Experience suggests that cash is the preferred settlement
method. If the settlement payment is not used to buy the metal on the spot market,
but is simply recycled into futures contracts or other financial assets, the holdings
represented in Table 4 represent a different category of demand, less likely to result
in upward market price pressure than real spot or contract demand.
The price increases in the commodity futures markets that likely have resulted
from the increased holdings by index speculators and other financial participants
have occurred during the same time period as the increase in real commodity prices.
Table 5. Commodity Futures Price Increases
(March 2003-March 2008)
Base MetalPrice Increase
Source: As for Table 4.
Table 5 presents data on the extent of price increases on futures markets for key
metals. It is possible that the futures markets and the real commodity markets have
worked in tandem. It may be that the underlying demand and supply conditions in
the real commodity market, largely related to high world GDP growth and a lack of
expanded productive capacity due to a prolonged period of low, and declining prices,
has resulted in a tight market with a bias for increasing prices. The later sections of
this report that review specific mineral commodities show for many of them a period
of output decline, especially in the domestic U.S. market, followed by a period of
increased output starting around 2003. However, the increased output has not kept
pace, either domestically or internationally, with GDP growth, resulting in a rapid
rise in price. This has been coupled with a financial market that has consistently
bought into the market since 2003 for investment reasons. The result has been
“financial bets” on the futures markets that prices will increase. These “financial
bets” have largely been validated by tight market conditions on the real commodity
markets. If this interaction has resulted in a financial-real market price spiral, it
might reverse itself when world GDP growth slows.
China’s Growing Role as a Minerals Consumer43
China’s strategic minerals policy stems from a vision of where its leaders want
the country to go over the near future. It is partly born of exigency, partly of legacy,
and partly of ideology. As is the case for any nation, China faces two vital national
interests plus one existential interest for the country’s leaders.44 The vital interests
are security and prosperity, while the particular interest is the survival of the Chinese
Communist Party as the sole ruler of China. All of these interests rest upon
continued economic growth and the transformation of the economy and country into
a major industrial power. Economic growth finances the military, diplomacy, foreign
aid and investment, and other means to obtain both internal and external security and
territorial integrity. Economic growth is key to the country’s prosperity and the
lifting of people out of poverty. It also is key to providing legitimacy for sole rule
by the Party, and for garnering popular support and moderating dissent.
This exigent need for rapid economic growth has combined with China’s legacy
of being subject to trade boycotts and the mind set of economic control — a legacy
from socialism — to generate policies that ultimately reach deep into the hinterlands
of the world and challenge long dominance both by Western transnational
corporations and by international financial institutions (such as the World Bank) in
certain countries. For China, a major disruption in the supply of copper, iron ore,
petroleum, or other industrially important minerals could devastate its industries and
quickly generate instability in society. For the regime in Beijing, instability is the
major internal threat to its privileged rule, and policy makers consider stability as a
43 Prepared by Dick K. Nanto, Foreign Affairs, Defense, and Trade Division.
44 For details on China’s interests, see China’s Foreign Policy and “Soft Power” in South
America, Asia, and Africa, a CRS study prepared for the U.S. Senate, Committee on Foreign
Relations (Washington, DC: GPO, April 2008).
sine qua non for economic growth.45 Hence, China’s government has urged its
industries, particularly the state-owned enterprises, to “Go Global” to tie down secure
sources of supply, and the state is facilitating their activities.
China also seeks some insulation from price spikes in raw materials needed by
its burgeoning industrial sector. Its leaders are acutely aware of the fate of oil-poor
countries, such as South Korea, who must buy their crude oil on open markets and,
therefore, are exposed to sharp price increases. China has chosen to avoid excess
reliance on spot markets by investing in exploration and development in countries
with mineral deposits but lack the capital, technology, or infrastructure to exploit
them.46 It has been more successful in such investments in petroleum production
than in iron or copper mining, but its large multinational enterprises have been active
in seeking opportunities to secure stable sources of supply.
Figure 3 shows the value in U.S. dollars (at then-current exchange rates) of
China’s total imports of ores from 1995 to 2007, and China’s two leading metal ore
imports by value. In 1995, China imported a total of only $2 billion in mineral ores.
By 2007 its imports had risen to $54 billion. The majority by value was iron ores and
concentrates, which reached $38 billion in 2007. Imports of copper ores and
concentrates had risen to $9 billion.
Figure 3. Chinese Imports of Selected Mineral Ores
17 . 320$
2 2. 2 2. 5 2. 3 2. 2 3. 1 4. 2 4 . 3
19 95 19 96 19 9 19 98 19 99 20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07
Total OresIron OresCopper Ores
Source: Data from Global Trade Atlas.
Figure 4 shows China’s imports of iron and copper ores and concentrates in
45 Joshua Cooper Ramo, The Beijing Consensus (London: The Foreign Policy Centre, May
46 Matthew Forney, “China’s Quest for Oil,” Time (Internet version), October 18, 2004.
Brazil, and India. China also imports limited amounts from Iran, North Korea, and
Burma — countries under U.S. trade sanctions. The major sources of copper ore for
China are Chile and Peru with small amounts from Iran and the Democratic Republic
of the Congo — the latter two being problematic countries for the United States.
In ore imports, China essentially is a price taker. It has had to pay the prices for
iron ore, in particular, that have been negotiated between large steel companies in
Japan and South Korea and the major ore producers, as detailed in a previous section
of this report. It has argued, to date unsuccessfully, that lower shipping costs from
Australia should be considered in the price it has to pay for Australian iron ore.
Figure 4. Sources of China’s Imports of Iron and Copper Ores
Source: Global Trade Atlas.
Note: Includes ores and concentrates.
China’s increasing demand for imports of minerals stems not only from the
needs of its rapidly developing economy and a rising middle class that is demanding
the accoutrements of modern life styles (including automobiles), but also from
China’s role as a manufacturing platform for the world. Everything from furniture
to high-technology machinery are high users of iron and copper. China’s exports of
manufactured goods have transferred the required imports of raw materials from the
consuming country (such as the United States) to China.
Attempts, such as China’s, to secure sources of supply for minerals are not
unusual in mineral extraction industries. Western multinational corporations in
cooperation with host governments have long invested in exploration and
development of promising oil fields or ore bodies. In 2006, for example, foreign
affiliated companies accounted for 100% of metal mining production in countries as
varied as Argentina in South America; Gabon, Ghana, Guinea, Mali, Tanzania,
Zambia, and Botswana in Africa; and, Mongolia and Papua New Guinea in the Asia-
Pacific region. Foreign affiliates also accounted for more than half the production
in such large mineral-producing countries as South Africa, Namibia, New Caledonia,
Indonesia, Colombia, Chile, Peru, and Kazakhstan. China has been a latecomer in
these activities. In 2006, the top 25 metal mining companies involved in exploration
projects did not include any from China.47
China’s large state-owned enterprises often have the advantage of access to
subsidized finance and investment insurance when investing overseas. This financial
backing can enable them to assume greater risks in these investments. They also may
be willing to pay a higher price for access to particular mineral resources. While
most of the activity by Chinese companies has been in petroleum, the methods also
could be used in investments in other mineral extraction projects. In 2006 in Angola,
for example, China’s Sinopec paid a reported $2.2 billion signature bonus in return
for the right to explore for oil in two blocks.48 Chinese companies also may be
willing to invest in non-core businesses to secure control over production. In Nigeria
in 2006, CNPC agreed to invest around $4 billion to revamp a refinery and construct
a hydro power plant and a railway line in return for oil exploration and extraction
Some of the promised Chinese investment in infrastructure, however, has not
come to fruition. Chinese companies often are inexperienced in confronting the
challenges of working in Africa or other developing nations. In Angola, for example,
Chinese construction workers have dismantled their 16 camps built to restore the
Lobito railway line, and a $2 billion contract has been canceled.50 Some energy
experts, moreover, state that China overpaid to buy into production from oil fields
that already were mature and that Chinese companies are still learning what large
foreign companies took a century to master.51
A key aspect of China’s overseas investment policy is that it generally provides
the funds without respect to human rights, economic sanctions, or other conditions
that the host country must first meet. China also allows recipient countries to bypass
the “red tape” and time delays associated with funding from international financial
47 United Nations Conference on Trade and Development. World Investment Report 2007:
Transnational Corporations, Extractive Industries and Development (henceforth cited as
48 “Sinopec Said to Bid for Angolan Offshore Oil Field,” SinoCast China Business Daily
News (London) (May 12, 2006), p. 1.
49 UNCTAD, 2007, p. 124.
50 Serge Michel, “When China Met Africa,” Foreign Policy, May/June 2008, p. 41-43.
51 Matthew Forney, “China’s Quest for Oil,” Time (Internet version), October 18, 2004.
institutions. The President of Senegal reportedly made the following comment on
I have found that a contract that would take five years to discuss, negotiate and
sign with the World Bank takes three months when we have dealt with Chinese
authorities. I am a firm believer in good governance and the rule of law. But
when bureaucracy and senseless red tape impede our ability to act — and when
poverty persists while international functionaries drag their feet — African
leaders have an obligation to opt for swifter solutions. I achieved more in my one
hour meeting with President Hu Jintao in an executive suite at my hotel in Berlin
during the recent G8 meeting in Heiligendamm than I did during the entire,
orchestrated meeting of world leaders at the summit — where African leaders52
were told little more than that G8 nations would respect existing commitments.
In essence, China is a new player in global mineral and energy markets. Its
state-owned enterprises are well financed and eager to accomplish Beijing’s plan to
“Go Global.” In many cases, the Chinese companies face severe competition from
existing transnational corporations and have, consequently, ventured into countries
where political risk is high and economic sanctions may be in force. Still, the vast
majority of China’s imports of minerals is purchased on the open market. The
process of securing supplies of minerals, particularly those requiring new exploration
and development, is long-term and costly.53
On the demand side, the Chinese people are abandoning their bicycles for cars,
turning from agriculture to manufacturing, and developing a mineral-intensive
lifestyle typical of other industrialized nations of the world. Nicholas Lardy, a
specialist on the Chinese economy at the Peterson Institute for the International
Economy, has stated that China uses three to five times as many primary products per
unit of output as the amounts used in advanced industrial economies.54 China’s
economy is expected to grow at about 8% over the near term. As its economy grows,
demand for products that take mineral ores as raw materials inevitably will also
52 Abdoulaye Wade, “Time for the West to Practise What It Preaches,” Financial Times
(January 24, 2008), p. 6.
53 This CRS report does not cover allegations of China also seeking to reduce through
government policies the exports of primary products, in order to keep them at home for use
by domestic manufacturers. The Office of the U.S. Trade Representative is reportedly
considering an international trade case against such Chinese policies, which may affect some
of the minerals discussed in the next section. See Financial Times (FT.com), “U.S. to
Challenge China over Steel Prices” (September 3, 2008); and AMM, “WTO Case May
Target China’s Export Barriers” (September 5, 2008).
54 N. Lardy, presentation on China at Peterson Institute conference on “The Trillion Dollar
Club” (September 23, 2008).
Metals Mineral Resources Availability55
U.S. mineral policies provide a framework for the development of domestic
metal mineral resources and for securing supplies from foreign sources. Specifically,
the Mining and Minerals Policy Act of 1970 (P.L. 91-631; 30 U.S.C. §21a.) declared
that it is in the national interest of the United States to foster the development of the
domestic mining industry “... including the use of recycling and scrap.” The
National Materials and Minerals Policy, Research and Development Act of 1980,
among other things,
declares that it is the continuing policy of the United States to promote an
adequate and stable supply of materials necessary to maintain national security,
economic well-being and industrial production, with appropriate attention to a
long-term balance between resource production, energy use, a healthy56
environment, natural resources conservation, and social needs.
This section reviews trends in mineral production and mineral prices over the
past decade or so for a selected set of mineral commodities, and discusses possible
reasons for the substantial price increase each commodity has experienced in the past
few years. Within that context, the report examines the relationship between mineral
prices and mineral production, and the consequences to the access and availability
of the selected minerals essential to the United States. It focuses on the following
minerals, which have major industrial significance:
! Zi n c
!Platinum group metals (PGMs)
The group of minerals listed above represent a broad spectrum of minerals used
in the U.S. economy. They range from the United States being virtually 100%
import-reliant (bauxite and manganese) to little import reliance (molybdenum and
iron ore). They also represent a range of industry usage. For example, iron ore,
manganese, and zinc are used for steelmaking; PGMs and aluminum are used in the
transportation sector; and, uranium is used in the electric power sector and for
There has been a long-term policy interest in mineral import reliance and its
impact on national security and the U.S. economy. In addition to examining the
relationship between price, production, and availability, this report will briefly
explore the concept of “criticality” as examined within the NRC 2008 report,
55 Prepared by Peter Folger and Marc Humphries of the Resources, Science, and Industry
56 P.L. 96-479; 30 U.S.C. §1601.
Critical Minerals, discussed earlier. Critical minerals are defined in the NRC report
as those minerals that are both essential in use and subject to considerable supply
risk. There is also considerable congressional debate over how best to reform the
General Mining Law of 1872 (30 U.S.C. 21-54) and how that reform might relate to
domestic mining capacity on U.S. public lands.
This section also provides some discussion of the U.S. reliance for minerals on
one or two dominant producers, or dominant producing countries (having the bulk
of reserves or production capacity), which could be a cause of concern when it comes
to reliable and secure mineral supplies.
Mineral Commodity Analyses
Iron Ore. Nearly all iron ore is used for steelmaking. World production of iron
ore is expected to continue to increase as a result of increasing global demand for
steel. Despite actual and planned production output increases, domestically and
abroad, iron ore prices have risen dramatically.
The United States directly produces and consumes about 3% of world iron ore
supply. U.S. iron ore average annual prices nearly doubled from $32/MT(metric
tons) in 2003 to $63/MT in 2007, compared to $28-$32 per MT during the late57
1990s. As discussed earlier, prices continued to rise in 2008, and further increases
are expected in 2009. Iron ore production in the United States generally declined
from more than 60 million MT in the mid-1990s, to 58 million MT in 1999, and 46
million MT in 2003. Then it rose marginally to 52 million MT by 2007. The United
States in 2007 was essentially self-sufficient in iron ore with both imports and
exports of about nine million MT. Imported iron ore has declined since 2003 as a
share of consumption, as world prices increased and some closed U.S. mines have
World production has increased significantly (nearly double) since 1998, from
a range of 1-1.2 billion MT in 2003, to 1.9 billion MT in 2007. Major world iron
ore producers include China, Brazil, Australia, India, and Russia. Together, they
account for 82% (1.56 billion MT) of 2007 world output. About 72% of world
reserves are located in Ukraine, Russia, China, Brazil, and Australia (in descending
order of quantities). China is the world’s leading iron ore producer and importer,
increasing production from 310 million MT in 1998 to 600 million MT in 2007.
57 All data under this subhead are from USGS 2007-08 sources (Minerals Commodity
Summaries and Minerals Yearbooks), unless otherwise identified.
Figure 5. Iron Ore Production and Price
800UST m$40e p
19 19 20 20 20 20 20 20 20 20
98 99 00 01 02 03 04 05 06 07
World Production US Production Price
Source: USGS Mineral Commodity Summaries, various issues.
World mine capacity is expanding, but not as fast as demand, according to the
USGS, causing a global supply shortage.58 U.S. producers are evaluating the
expansion of lower grade deposits but are faced with similar constraints as other
producers, such as the lack of skilled workers, shortages of capital equipment, and
higher transportation costs. In the United States, twelve mines (located in northern
Minnesota and northern Michigan) are operated by three companies: Cleveland
Cliffs, ArcelorMittal Steel, and U.S. Steel Corporation. There are eight concentrate
plants and eight pelletizing plants (taconite) in the United States. Investment in
downstream pelletizing and nugget facilities is taking place, and the United States is
among the highest in world pelletizing capacity.59 A possible merger between
RioTinto and BHP of Australia has raised concern over the global supply and price
for iron ore since the companies are two of the world’s three leading producers.
Together they control about 15% of the world iron ore mine capacity.
Aluminum (Bauxite/Alumina). Bauxite is the raw material that is
transformed into alumina (an intermediate product) before being processed into
aluminum. About 85% of world bauxite production is used to make alumina.60 The
United States produces a negligible amount of bauxite for making alumina, and the
USGS rates U.S. alumina producers as 100% reliant on bauxite imports. Domestic
aluminum end-use consumption is primarily in the transportation (38%) and
packaging (22%) sectors.
58 USGS, Mineral Commodities Summaries (2008), p. 94. But note earlier comments by
industry analysts cited in this CRS report who believe this situation may be changing.
59 USGS, Minerals Yearbook, vol. I, 2005.
60 USGS, Minerals Yearbook, vol. I, 2006.
Prices for bauxite rose from $19/MT in 2003 to $27/MT in 2007, and even
higher in 2008.61 Prices increased despite growth in world production from 146.0
million MT in 2003 to 190.0 million MT in 2007. Leading producers, accounting for
85% of total production are Australia, China, Brazil, Guinea, India, and Jamaica, in
descending order. World production has risen steadily since 1998 with much of the
increase coming from Brazil, China, and Australia. About 68% of bauxite reserves
are located in four countries: Guinea, Australia, Jamaica, and Brazil.
In 2007, the United States received 80% of its bauxite imports from Jamaica
(45%), Guinea (20%), and Brazil (15%). North American aluminum producers Alcan
and Alcoa are heavily invested in alumina and bauxite production worldwide.
Because of consistent investment in global bauxite mine capacity and alumina
refineries, diversity of supply, and huge bauxite reserves, supplies of bauxite and
alumina are likely to be sufficient over the long term.
Figure 6. Aluminum Production and Price
15/UST m$0.80rice p
19 19 20 20 20 20 20 20 20 20
98 99 00 01 02 03 04 05 06 07
World Production US Production Price
Source: USGS Mineral Commodity Summaries, various issues.
Transportation and packaging dominated the end use sector in the 1990s as well.
But U.S. consumption has declined since the late 1990s from 7.5 million tons to 5.3
million tons in 2007. According to USGS aluminum analyst Lee Bray, the downturn
in U.S. aluminum consumption over the past several years is the result of a reduction
of manufactured goods produced in the United States that use aluminum, such as auto
parts and “white goods” (home appliances). More of these products are imported,
and thus, the aluminum consumption is recorded where the products are62
manufactured, not necessarily where the products are used.
Primary aluminum production in the United States, which had been as high as
3.7 million MT in 1998, declined from 2.7 million MT in 2003 to 2.3 million MT in
61 USGS, Mineral Commodity Summaries, various years.
62 CRS communication with Lee Bray, Aluminum Specialist, USGS, August 2008.
2006, then rose again to 2.6 million MT in 2007.63 During the first few months of
demand declined. U.S. aluminum net import reliance stayed between 20%-30% in
the latter half of the 1990s, then rose to as much as 45% in 2005 amid U.S. industry
production declines. Net import reliance has since declined again to 26%. Most
imports (55%) are from Canada.64
Changes in aluminum prices partly reflects the increase in bauxite prices. The
average annual price for aluminum increased from $0.68 per pound (lb.) in 2003 to
about $1.25 per lb. in 2007. By mid-July 2008, the average weekly price per pound
was $1.46.65 Refining aluminum requires large amounts of energy, such much of this
price increase may also be explained by higher energy costs.
By contrast to U.S. production fluctuations, world aluminum production rose
by more than 70% from 22.1 million MT in 1998 to 38.0 million MT in 2007. There
are currently about 4.7 million MT of excess world capacity, including about 1.1
million MT of excess aluminum capacity in the United States, despite prices rising
so dramatically in the past few years. Most aluminum capacity is in China (14
million MT), with Russia (4.4 million MT) and the United States (3.7 million MT)
a distant second and third respectively.66 China and Russia have expanded capacity
and production since 2003. Some metals analysts believe that China may face
aluminum production constraints as a result of electric power shortages, but they also
note that current high inventories may minimize the effect of any supply cutback.
Increasing world demand for aluminum has generated interest in more planned
aluminum capacity and the restarting of idle capacity. Experts predict that aluminum
supplies should be ample in the foreseeable future, but making aluminum is energy
intensive, as noted above. This results in high production costs. Should prices fall
significantly, many high-cost producers may cut back on production.
Copper.67 Approximately half of the copper and copper alloy products
produced in the United States is used in the building and construction industry;
approximately 20% is used in the electric and electronic industry; and transportation
equipment, consumer and general products, and industrial equipment and machinery
account for approximately 10% of copper consumption each.
The average annual price for copper ranged between $0.72 per pound and $0.84
per pound from 1998 to 2003, rising to $1.29 per pound in 2004 and to $3.29 per
pound in 2007 (see Figure 7). As of June 16, 2008, the price of copper was $3.71
per pound, nearly five times its value in 1998 (in nominal dollars not adjusted for
63 USGS, Mineral Commodity Summaries, various years.
64 USGS, Mineral Commodity Summaries, various years.
65 Metals Week average transaction price July 21, 2008.
66 USGS, Mineral Commodity Summaries, various years.
67 Production, import, export, price, and usage data from USGS, “Copper Statistics and
Information,” at [http://minerals.usgs.gov/minerals/pubs/commodity/copper/].
Annual U.S. mine production of copper was 1.86 million MT in 1998, and
declined each year to a low of 1.14 million MT in 2003, before stabilizing and rising
slightly to 1.19 million MT in 2007. Mines in five states produce 99% of the U.S.
copper mined each year: Arizona, Utah, New Mexico, Nevada, and Montana. In
2007, 17 of the 26 mines operating accounted for 99% of the copper produced in the
Annual world production (not including U.S. production) has risen each year
since 1998 except in 2002 and 2003. Annual global mine production of copper was
12.1 million MT in 1998, and 15.6 million MT in 2007, an increase of 22% over the
production has ranged from a high of 15.4% in 1998 to a low of 7.6% in 2005, and
was still about the same share in 2007.
Except for 2002-2003, the total sum of global copper mine production
(including the United States) has increased each year over the past 10 years, and as
of 2007 was 16.9% greater than in 1998. Chile is the world’s leading copper
producer from mines, responsible for approximately 5.7 million MT in 2007,
approximately 37% of global copper production, and nearly five times that of the
China is the world’s leading copper consumer. If Chinese demand for copper
continues at current levels or increases, copper prices are likely to remain high until
production from existing and new mines in the United States and elsewhere begins
to catch up. The recent slump in the U.S. housing market is likely to decrease
domestic demand for copper from the building and construction industry, which
could also affect prices.
In response to persistent global demand for copper, particularly from China,
some commodity analysts have concluded that planned copper production at mines
will increase both in the United States and abroad.68 New projects in Minnesota,
Montana, and Arizona may add 240,000 MT of new mine capacity in the United
States by 2009, which would increase U.S. production by 20% over 2007 levels, and
could ease tight supplies which are contributing to high copper prices. However,
copper production from mines often lags behind spikes in demand and higher prices;
for example, U.S. copper production from mines has increased by 5.9% since 2003
even though the price for copper has quadrupled over the same time period. Labor
and equipment shortages at U.S. copper mines have constrained production, which
affects supply and prices. However, U.S. copper reserves and anticipated new mine
production are both likely to be large enough to meet domestic demand over the
68 International Copper Study Group, “Forecast 2008-2009,” (April 28, 2008); at
[ h t t p : / / www.i c s g.or g/ ] .
Figure 7. Copper Production and Price
10roduc illio $2. 00 e
8S P M$1.50ce p
19 19 20 20 20 20 20 20 20 20 20
98 99 00 01 02 03 04 05 06 07 08
World production (not incl. U.S.)
Price ($ per pound)
Source: USGS Copper Statistics and Information, at [http://minerals.usgs.gov/minerals/pubs/
Note: Year 2008 price as of June 16, 2008.
The rapid increase in copper prices suggests that an increase in demand, as
opposed to a drop in supply from producing mines, has been the primary force
driving the higher price of copper since 2003. Fluctuations in price may reflect
changes in the short-term availability of copper, either from stocks or other sources
of refined or recycled copper. Resources of copper available to mine, both in the
United States and abroad, are likely sufficient to meet foreseeable global demand,
even in view of China’s economic expansion.
However, industry analysts identify a key factor, known as mine capacity
utilization — the ratio of total production to annual production capacity — which has
hindered the production of copper from mines and has likely affected copper prices,
which, as seen in Figure 1 earlier, have risen more steeply than any other mineral
prices. Labor unrest, adverse weather, and shortages of skilled labor, electricity, and
other raw materials and supplies, all contribute to lower the mine capacity utilization
rate so that actual mine output does not match planned output. According to industry
analysts, global mine capacity utilization averaged roughly 90% from 2002 to 2007,
a reasonably high rate. It declined to 82% during the first quarter of 2008.69 Thus,
while copper production from planned mine expansions and new mines, both in the
United States and abroad, may theoretically ease tight supplies in the near future,
unknown disruptions to mine production may contribute to lower than anticipated
mine capacity utilization and continued high copper prices.
69 International Copper Study Group.
Manganese. Manganese is essential to making steel (it hardens the steel) and
demand is directly related to steel production (derived demand). Manganese is also
used in the construction, machinery, and transportation sectors.
The average annual price for manganese ore increased from $2.41 per metric ton
unit (mtu)70 in 2003 to $3.32 /mtu in 2007, after peaking at an average annual price
near $4.50/mtu in 2005. The USGS reports prices as high as $8.65/mtu in 2007 (as
the average spot market price). Because of high demand from India and China, and
high ocean transportation costs, metals analysts forecast manganese ore prices (44-
48% manganese content) to be in the $9/mtu-$13/mtu range in 2008. It is unclear
what impact the recent price run-up will have on U.S. demand.
Figure 8. Manganese Production and Price
100tion s) $4. 00 on
60d PT millr m
19 19 2 0 20 20 2 0 2 0 20 20 20
9 8 9 9 00 0 1 0 2 03 04 05 0 6 07
World Production Price
Source: USGS Mineral Commodity Summaries, various issues.
The top five producing countries (South Africa, Australia, China, Gabon, and
Brazil) account for 75% of world production (8.65 million MT). Manganese ore
reserves are dispersed in significant quantities around the world. But South Africa,
Ukraine, and Australia hold about 75% of world manganese reserves. Other countries
with significant reserves include Brazil, China, India, and Gabon. World production
of manganese ore rose from 7 million MT in 1998 to 11.6 million MT in 2007, a 66%
i n crease. 71
70 The “mtu” is a volume measure related to mineral content — 44%-48% manganese
content is the usual standard.
71 USGS, Mineral Commodity Summaries, various years.
The United States produces no manganese, thus is 100% import-reliant. Some
ferromanganese is produced at two U.S. smelters, although production data are
proprietary and not publicly available. About 65% of U.S. manganese ore imports
are from Gabon. Also, the United States imports a considerable amount of
ferroalloys processed from manganese (ferromanganese and silicomanganese)
primarily from South Africa (51%). Imports of ferroalloys have been consistently
more than 300,000 MT since the 1990s. There are supply risks associated with
manganese because of its importance to the U.S. steel market and lack of substitutes,
and the United States will likely remain 100% import-reliant on manganese for years
to come. However, because of the diversity of ore and alloy producers, the supply
risk may be minimal.72
Molybdenum.73 Molybdenum (often shortened to “moly”) is used principally
as an alloying agent in cast iron, steel, and other metal alloys to increase hardness,
strength, toughness, and resistance to corrosion and wear. The steel manufacturing
industry is a significant consumer of moly, for example. Domestically, iron, steel,
and other alloy producers account for approximately 80% of annual U.S. moly
consumption. Moly is also used in catalysts, lubricants, and pigments. Some
commodity experts indicate that consumption of moly by the steel industry,
particularly in China, is a major driver underlying the change in moly price over the
past five years.
The average annual price for molybdenum in metal form rose was less than $5
per pound in 2002, and slightly more than $5 per pound early in 2003. Then the price
escalated to more than $16 per pound in 2003, and has been more than $25 per pound
since 2004 (see Figure 9). As of June 9, 2008, the price for moly was $33.20 per
pound,74 over 12 times its value in 1998 (in nominal dollars not adjusted for
inflation). Annual U.S. production of moly concentrate from mines and mills was
more than 53,000 MT in 1998, and decreased to a low of 32,300 MT in 2002.
Annual production in the United States has risen since 2002 to more than 58,000 MT
between 2005 and 2007. Annual world production (not including U.S. production)
has also increased since 2002, from 89,700 MT to 127,600 MT in 2007. As a percent
of world production, annual U.S. production in the past decade started at 39.2% in
1998, and fell to to a low of 26% in 2003. In 2007 the U.S. produced 32% of the
world’s moly concentrate from mines.
With the exception of two years — 2002 and 2006 — the total sum of global
production of moly from mines has increased every year over the past 10 years, and
as of 2007 was 37% greater than in 1998. The rapid increase in the moly price
suggests that an increase in demand, even while both global and U.S. production
increased, has primarily been driving the higher price since 2003.
72 USGS, Mineral Commodity Summaries, various years.
73 Production, import, export, price, and usage data from USGS, “Molybdenum Statistics
and Information,” at [http://minerals.usgs.gov/minerals/pubs/commodity/molybdenum/].
74 Platts Metals Week (June 9, 2008), p. 20.
Figure 9. Molybdenum Production and Price
140, 000 $35. 00
120, 000 $30. 00
100, 000ion $25. 00
t ) .
Pric Te per
60, 000US et $15. 00 ric
rld/ (M P
40, 000Wo $10. 00
20, 000 $5. 00
0 $0. 00
19 98 19 99 20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08
U.S. production World production Price
Source: USGS Molybdenum Statistics and Information, at [http://minerals.usgs.gov/minerals/pubs/
Note: Year 2008 price as of June 16, 2008.
The United States produces more moly ore from mines than any other country,
and is second only to China in identified moly reserves. The U.S. reserves of moly
are large enough to meet anticipated domestic demands in the foreseeable future:
from the four existing mines that produce moly as a primary product,75 and from the
five copper mines that produce moly as a byproduct.76 In addition, the giant Climax
moly mine near Leadville, Colorado, which has been inactive since 1995, is
reportedly preparing to resume open pit mining and could become the leading U.S.
moly producer by 2010.77
Mines often are unable to increase production quickly enough to meet increases
in demand, which may explain some of the recent price increase, and which could
contribute to a further rise in moly prices. Also, some commodity specialists identify
moly “roasting” plants as a possible bottleneck to increased moly production.78
Molybdenum concentrate produced from a mine is “roasted” in plants to convert
75 One mine each in Colorado, Idaho, Nevada, and New Mexico.
76 Two mines in Arizona, one each in Montana, New Mexico, and Utah.
77 The Climax mine might produce as much as 15,000 MT of moly per year beginning in
2010, over one-fifth of current U.S. annual production. Rocky Mountain News, “Climax
Back in Business” (December 5, 2007).
78 Michael J. Magyar, USGS Mineral Commodity Specialist, CRS interview (June 20, 2008).
molybdenite (molybdenum disulfide, or MoS2) concentrate to an oxide, which is then
used to produce intermediate products such as ferromolybdenum, metal powder, and
various chemicals. Domestic roasting plants operated at full production capacity in
2006 and 2007. Thus, the anticipated increase in moly production from existing and
new mines in the United States could exceed the ability of U.S. roasting plants to
process the ore. This capacity shortfall could limit the delivery of moly intermediate
products to the market or result in increased U.S. exports to roasting facilities in
other countries. A roasting plant bottleneck could have an effect on moly prices if
demand continues to increase.
Zinc.79 Zinc is primarily used for galvanizing, the process in which zinc is
applied as a coating to protect steel from corrosion, which accounted for 55% of the
zinc consumed in the United States in 2007. Approximately 20% of zinc is
consumed in zinc-based alloys, 16% consumed for manufacturing brass and bronze,
while less than 10% is consumed for other uses in the United States. Globally, China
is the leading consumer of zinc (approximately 30% of global consumption), and the
United States is the second largest consumer (approximately 10%).
The average annual price for zinc metal ranged from $0.35 to $0.51 per pound
between 1998 and 2004, rose to a peak of $1.51 per pound in 2007, and dropped to
$0.91 per pound as of June 9, 2008 (see Figure 10). Spot prices rose briefly above
$2 per pound in November 2006, declined but rose again to approximately $1.75 per
pound in May 2007, and have declined to below $0.90 per pound as of June 20,
Annual U.S. production of mined zinc ore concentrate was relatively constant
between 1998 to 2007, averaging approximately 781,000 MT per year, reaching a
maximum of 852,000 MT per year in 2000 and a minimum of 727,000 MT per year
in 2006. Annual world production (excluding U.S. production) has risen each year
since 1998, from 6.82 million MT to 9.76 million MT, an increase of 30% over the
10-year period. As a percent of world mine production, annual U.S. zinc production
from mines has decreased from about 10% in 1998 to about 7% in 2007. Zinc is
mined in the United States in seven states, with Alaska, Missouri, Montana, and
Washington accounting for 99% of total mine output. A single mine, the Red Dog
Mine in northwest Alaska, accounts for 77% of the entire U.S. mine production, and
is the world’s single largest producer of zinc concentrate.
Globally, China produces more zinc ore concentrate than any other country,
followed by Peru, Australia, and the United States. China produced 2.8 million MT
of zinc from mines in 2007. This was approximately one quarter of the global zinc
production from mines, and 3.8 times the U.S. mine production.
With the exception of 2001-2002, global production of zinc from mines
(including the United States) has risen each year since 1998. The rapid increase in
the average annual price of zinc, beginning in 2003 and peaking in 2007, suggests
79 Production, import, export, price, and usage data from USGS Zinc Statistics and
Information, at [http://minerals.usgs.gov/minerals/pubs/commodity/zinc/].
80 London Metal Exchange, at [http://www.lme.co.uk/zinc_graphs.asp].
that an increase in demand, as opposed to a decrease in supply from producing mines,
was primarily driving the higher price. From 2004 to 2006, consumption of zinc
outpaced production, causing a decline in zinc stocks accompanied by a rise in
price.81 Some analysts suggest that the gap between production and consumption
resulted from industry underinvestment in exploration and mine development while
the market had a surplus supply of zinc.82 In 2007, a surge in mine production,
resulting from mine reopenings and new mine commissioning in 2006, outpaced an
increase in zinc consumption. The resulting surplus of zinc supply over zinc
consumption has likely caused prices to drop since 2007 (see Figure 10).83
Figure 10. Zinc Production and Price
6S P$1.00e p
19 98 19 9 200 200 200 20 03 20 0 200 200 20 0 20 0
U.S. production World production Price
Source: USGS Zinc Statistics and Information, at [http://minerals.usgs.gov/minerals/pubs/commodity/
Note: Year 2008 prices as of June 16, 2008.
Zinc ore production was forecast to increase in the United States in 2007 and
2008, due in part to the reopening of several zinc mines in eastern Tennessee that
closed earlier because of low zinc prices. Global zinc production was also forecast
to continue increasing through 2008, owing to increased mine production in several
countries in addition to the United States. If production and consumption trends
continue as expected in 2008, the resulting net surplus of zinc will likely keep zinc
81 Amy C. Tolcin, USGS Mineral Commodity Specialist, communication to CRS (June 24,
83 The question of the impact of the major 2008 earthquake in a zinc-producing region in
China was addressed in the first part of this report.
prices from spiking again to 2007 levels. In fact, as noted earlier in the price
overview section of this report, falling zinc prices in 2008 had led to consideration
of closure of some U.S. mines.
As with copper and moly, reserves of zinc are likely sufficient to meet
foreseeable global demand driven primarily by expansion of the Chinese economy.
Factors other than the amount of zinc available to mine (discussed above), both in the
United States and abroad, constrain zinc production in the short term, affecting prices
particularly since 2004. As with copper and moly, a short-term increase in demand
is not immediately met with increased production from existing mines or from new
mines, which could result in a short-term tight supply, as occurred between 2004 and
2007. In the future, zinc production would likely lag a short-term increase in demand
until existing mines are reopened or new mines begin producing, or sufficient
stockpiles of zinc concentrate are available to meet short-term surges in demand.
Platinum Group Metals (PGMs). The platinum group metals are platinum,
palladium, rhodium, ruthenium, iridium, and osmium. They have excellent oxidizing
catalytic properties. For that reason, the global auto industry has become a major
end user of PGMs, especially platinum and palladium, for catalytic converters that
reduce air emissions. Catalysts for pollution control lead the consumption categories
for PGMs, and this report will focus on platinum in particular. As standards become
more stringent worldwide, both platinum and palladium will likely continue to be in
high demand. Platinum may be used more in diesel engines, while more palladium
can be used in gasoline engines. PGMs are also used for catalysts in the chemical84
industry, for the fabrication of laboratory equipment, and for jewelry.
The United States is 94% import-reliant for platinum and about 73% import-
reliant in palladium. The United States imports 44% of its unwrought platinum from
South Africa, but also receives significant fabricated and secondary supply from the
United Kingdom and Germany. The United States does produce a small amount of
platinum at one mine in Montana. That same mine also produces more palladium
than platinum. Since 1998, U.S. platinum production steadily grew from 3,240
kilograms (kg) to about 4,300 kg in 2006, but dropped to 3,400 kg in 2007. Annual
imports of platinum have risen almost 50%, from 97,000 kg in 1998 to 140,000 kg
84 USGS, Mineral Commodity Summaries, 2008.
Figure 11. Platinum Production and Price
19 19 20 20 20 20 20 20 20 20
98 99 00 01 02 03 04 05 06 07
World ProductionUS Production Price
Source: USGS Mineral Commodity Summaries, various issues.
World production of platinum grew from 146,000 kg to 230,000 kg between
2003 and 2007. South Africa dominates global platinum production, accounting for
nearly 80% of the total. Russia produces nearly 12% of world platinum production.
World palladium production is dominated by the same two countries, each producing
about 40% of the world total. Russia and a third producer, Canada, produce much of
their palladium as a co-product or byproduct of nickel, cobalt and copper production.
South Africa alone contains 89% of world PGM reserves (63 million kg).
Platinum, traded as a precious metal, was $372.50 per ounce (oz.) in 1998. The
average annual price for platinum rose from $695/oz. in 2003 to $1,260/oz. in 2007.
The July 2008 New York Mercantile Exchange (NYMEX) weekly average price for
platinum was $1,990/oz., almost triple the 2003 price.
Supply disruptions in platinum mining took place in South Africa because of a
shortage of electric generating capacity, which resulted in power outages throughout
the country in 2008. Some platinum mine shut-downs and slow-downs have
followed. Electric generating capacity could be a problem going forward because
many believe that South Africa’s electric capacity is inadequate. A state-owned
utility company, Eskom Holding Ltd., has requested that mine producers curtail their
use of energy to 90% of normal use. Some platinum producers may curtail
expansions because Eskom cannot guarantee electric power for full operations. In
Zimbabwe, some platinum operations are on hold because of the political turmoil
there, but others in Zimbabwe, including those of Chinese companies and Anglo
Platinum, a major producer, are expected to move forward with platinum mining
projects. In Russia, severe weather and shipment delays have led to supply
disruptions of palladium and platinum.
There is a great deal of supply risk and vulnerability for U.S. auto manufacturers
and most other end users of PGMs (particularly platinum and rhodium) because of
the reliance on South Africa as the primary source of platinum, because producers in
that country have been shown to be vulnerable to supply disruptions. Although the
requirements of PGMs in catalytic converters may be reduced to decrease the per unit
demand, there are no substitutes that could replace PGMs entirely. Secondary
recovery operations in the United States have increased but may not keep pace with
increasing consumption to make a significant impact on import reliance. As a result
of high platinum costs, imports of platinum scrap have increased from about 5,700
kg in 2003 to 39,400 kg in 2007.85
Uranium.86 Unlike base metals such as copper, moly, and zinc, which are used
primarily in manufacturing, the primary commercial use for uranium is in nuclear
reactors to generate electricity. According to some industry experts, the cost
structure of nuclear power generation — high capital costs and low fuel costs — has
traditionally made it easier to predict demand for uranium than for other87
commodities. Demand forecasts have thus largely depended on installed and
operable capacity, regardless of short-term economic fluctuations.88
In the absence of a spike in demand in the past two years, some industry
observers attribute the spike in the spot price for uranium in 2007 to a perception of
scarcity,89 perhaps due to the exhaustion of stockpiled uranium held by utilities, even
though global uranium production from mines has remained relatively constant since
2003. Other factors, such as continued economic growth in China and increasing
electricity demand, as well as concerns about the greenhouse gas emissions of coal-
and natural gas-fired electricity plants, may also lead to a perception of uranium
scarcity amidst higher demand. An analysis of the factors influencing uranium prices
is beyond the scope of this report; however, the rise in uranium prices has sparked
interest in developing new U.S. uranium resources. Renewed interest in developing
new uranium mines or reopening shuttered mines has also raised concerns about
access to uranium deposits on both public and private land, and concerns about
possible environment consequences of a reinvigorated uranium mining industry.
Note especially the controversy, discussed below, about mining near the Grand
Like copper, moly, and zinc, and the other metals discussed above, the average
annual price for uranium has risen substantially in the past few years (see Figure 12).
Unlike copper and zinc, which are widely traded and priced on formal commodity
exchanges, such as the London and New York Metal Exchanges, uranium is mostly
traded through direct contracts between buyers and sellers, and price indicators are
85 USGS, Mineral Commodity Summaries, various years.
86 Production and price data from the U.S. Dept. of Energy. Energy Information
Administration (EIA), “Official Energy Statistics From the U.S. Government,” at
[ ht t p: / / www.ei a.doe.gov/ f uel nucl ear .ht ml ] .
87 World Nuclear Association, at [http://www.world-nuclear.org/info/inf22.html].
88 World Nuclear Association, at [http://www.world-nuclear.org/info/inf22.html].
89 World Nuclear Association, at [http://www.world-nuclear.org/info/inf22.html].
developed by a small number of private businesses.90 Contracts can be spot-market
contracts, usually a one-time delivery of an entire contract within a year of the
contract signing date; or they can be short-, medium-, or long-term contracts, with
one or more deliveries occurring after one year of contract signing.91 The distinction
is important because the average annual weighted-average price92 for uranium rose
sharply between 2006 and 2007 from approximately $18 per pound to over $30 per
pound; however, the spot-market price peaked at over $130 per pound between June
and July, 2007.93 According to one price indicator, the uranium spot market price has
dropped since the 2007 peak, and as of June 16, 2008, was approximately $56 per
Uranium mining and production has been a cyclical industry in the United
States, with production of uranium linked to its price. The last price spike for
uranium occurred in the mid 1970s and early and mid 1980s, after which prices fell
and remained relatively low throughout the 1990s, bottoming out at approximately
$10 per pound in 2001 (not adjusted for inflation). Over the past 10 years, U.S.
production of uranium from mines and mills has averaged about 3.4 million pounds
per year, with a low of two million pounds per year in 2003, and a high of 4.7 million
pounds per year in 1998. U.S. production has increased each year since 2003, and
in 2007 was 4.5 million pounds per year, more than double the amount produced in
U.S.-produced uranium accounted for less than 10% of U.S. purchases in 2007 (see
The rise in uranium prices over the past several years has led to an increase in
exploration activities for new sources of uranium in the United States. Uranium
exploration and development drilling increased in 2007 by 90% over 2006 levels: a
total of 9,347 boreholes drilled for a combined length of 5.1 million feet, 2.4 million94
feet (89%) more than in 2006. Employment in the exploration sector for uranium
doubled from approximately 200 person-years in 2006 to 400 person-years in 2007.95
Exploration employment was below 100 person-years in 2005. In addition to
mining industry statistics, news reports in the past year have pointed to the rise in
uranium mining claims on public lands in western states as an indicator of renewed
interest in uranium mining. For example, the Durango Herald reported a rise in
90 See, for example, the price index developed by the UX Consulting Company, LLC, at
[http://www.uxc.com/index.aspx]. Uranium futures contracts are also provided via the New
York Mercantile Exchange (NYMEX). The NYMEX futures contracts are based on the UX
Consulting Company index. See [http://www.nymex.com/UX_pre_agree.aspx].
91 EIA, at [http://www.eia.doe.gov/cneaf/nuclear/umar/summarytable1.html].
92 Reported by the EIA as weighted-average price, short-, medium-, long-term, and spot
market prices, for both U.S.-origin uranium and foreign-origin uranium. See
[ ht t p: / / www.ei a.doe.gov/ c neaf / nucl ear / uma r / summa r yt a bl e1.ht ml ] .
93 UX Consulting Company, LLC, at [http://www.uxc.com/review/uxc_g_2yr-price.html].
94 EIA, at [http://www.eia.doe.gov/cneaf/nuclear/dupr/dupr.html].
uranium mining claims in Delores County, CO, from 396 in 2006 to 5,399 in 2007.96
Mining claims do not necessarily mean new mining activity is taking place, but
indicate an interest in developing the land for mining under the General Mining Law
Figure 12. Uranium Production and Price
60 Co oe pe
40um illio $1 0. 00 P
19 19 20 20 20 20 20 20 20 20
98 99 00 01 02 03 04 05 06 07
Price U.S. origin
Price Uranium Concentrate foreign origin
Source: U.S. Dept. of Energy. Energy Information Administration. “Official Energy Statistics From
the U.S. Government,” at [http://www.eia.doe.gov/fuelnuclear.html].
Note: World production figures of U3O8 were unavailable prior to 2002. Also, U.S. production of
U3O8 for 2002-2004 are estimates. Uranium price reflects the average annual weighted-average price,
not the spot market price.
Some environmental groups have expressed concerns about the possibility of
uranium contamination of soil and water from new uranium mining, especially near98
the Colorado River and Grand Canyon National Park. This issue will be reviewed
in the next section.
96 Durango Herald , “Uranium Speculation Skyrockets,” (May 14, 2008).
97 For more information, see CRS Report RL33908, Mining on Federal Lands: Hardrock
Minerals, by Marc Humphries.
98 Environmental Working Group Report, “Grand Canyon Threatened by Approval of
Uranium Mining Activities” (January 2008), at [http://www.ewg.org/reports/grandcanyon]
Issues For Congress99
Financial Market Policy Issues100
The 110th Congress has considered more than 36 bills to control the ability of
speculators, and financial investors in general, from exerting undue influence on
commodity market prices. Although this proposed legislation is primarily directed
to oil market speculation, some of the provisions may apply to trading in metals as
well. Both energy commodities and metals are “exempt commodities” under the
Commodity Futures Modernization Act of 2000 (P.L. 106-554), and thus have been
exempt from regulation by the Commodity Futures Trading Commission (CFTC).
Specifically, trades that are on a principal-to-principal basis, not undertaken on a
market-like trading facility, and trades carried out on an electronic trading facility,
are exempt from CFTC oversight, creating the so-called “Enron Loophole.”101
Speculation and trading based on standardized contracts traded in a market like the
New York Mercantile Exchange (NYMEX) are subject to CFTC regulation.
The Food, Conservation, and Energy Act of 2008 (P.L. 110-246, also known as
the Farm Bill), extended CFTC regulation into electronic trading facilities if the
CFTC finds that the contract traded had a significant role in price determination, that
is, if the price is a reference point for other transactions or trading facilities. The
provisions of the Farm Bill partially close the “Enron Loophole.” Private
transactions, not carried out on a trading facility in exempt commodities, including
metals, are still not under CFTC oversight.
A number of bills in the 110th Congress seek to close what has been dubbed the
“London Loophole.” This results from different regulatory standards between
nations; in this case the United States and the United Kingdom. The potential
problem is that contracts, essentially identical to the NYMEX contracts, can be
purchased in the United States, but traded on an exchange based in London, which
potentially might allow investors to bypass CFTC technical trading requirements.
Another provision, the so-called “Swaps Loophole,” has also been the focus of
a number of bills in the 110th Congress. Institutional investors are likely to establish
positions in commodity markets through the use of an intermediary, a commodity
index fund, or a transaction with an investment bank. The dollar value of
institutional investors’ portfolios is large relative to the size of commodity markets.
Through these investments, institutional investors can exceed the limits established
by the CFTC on the number of contracts held. The net effect is that some investors,
who are speculating on price movements, might hold positions in the market large
enough to influence the price.
99 This section was written by Stephen Cooney, Robert Pirog,, and Marc Humphries.
100 This section is based on CRS Report RL34555, Speculation and Energy Prices:
Legislative Responses, Mark Jickling and Lynne J. Cunningham. More detail on each of the
issues covered in this section, as well as summaries of each piece of proposed legislation,
can be found in that report.
101 Enron Corporation supported the idea of “exempt commodities.”
Federal Minerals Policy Issues
In order to meet the congressionally stated minerals policy objectives, “...to
promote an adequate and stable supply of materials necessary to maintain national
security, economic well being, and industrial production ...,”102 it may be useful to
assess periodically industry vulnerability to supply disruptions. Congress could
review, with industry, how the United States is positioned to effectively address
potential supply disruptions or restrictions. Other areas that may be of interest to
Congress include :
!An understanding of U.S. production potential and capacity based on
reserve estimates, exploration expenditures, investment in
downstream facilities, and labor and infrastructure requirements.
!The role of secondary recovery of materials, and whether federal
research and development (R&D) investment could assist in the
review and possible development of technologies and infrastructure
for secondary supply sources.
!The role of substitute materials, including whether these materials
exist, and at what point do they become economic. Also, is there a
federal R&D role in the development of substitutes that could
minimize risk of potential supply disruptions?
!Gaining a clearer picture of supply risk (where and how supply
disruptions might occur and how they are addressed) by examining
the supply cycle of materials produced domestically and elsewhere.
!Closer government monitoring of data for supply and demand of
essential material requirements for the U.S. economy.
During the 110th Congress, attention has been focused on reforming the General
Mining Law of 1872. One issue for Congress is access to public lands for mining
uranium and other hardrock minerals, currently authorized under the 1872 Mining
Law. The House passed broad-based legislation (H.R. 2262) to reform the 1872
Mining Law on November 1, 2007, and the Senate Committee on Energy and Natural
Resources has held oversight hearings on hardrock mining on federal lands.
But Mining Law reform legislation would not likely have much impact on the
domestic mining capacity or the import reliance of the essential minerals reviewed
in this report. The vast majority of mining activity on federal lands is in gold mining.
According to the last data published by the Interior Department,103 gold accounted for
88% of the total dollar value of hardrock (base metals and nonmetals) minerals
mined on federal lands. Although that report was written in the 1990s, it is unlikely
that gold’s dominance has decreased since then, because, while other metals prices
102 From 30 U.S.C. §1601, as quoted more fully above (see citation in fn. 57).
103 U.S. Dept. of the Interior. Task Force on Mining Royalties. Economic Implications of a
Royalty System for Hardrock Minerals (August 16, 1993).
have risen, so has the price of gold. The Interior report also showed that federal lands
mineral production only represented about 6% of the value of all minerals produced
in the United States. For example, federal lands contributed about 1% of the value
of copper mined in the United States according to the report. Further, the report
indicated that while all platinum group metal mines were initially located on federal
lands, nearly all of those claims were later patented (transferred to private
Congress has also been interested in the environmental impact of mining on
public lands. Uranium mining claims on federal lands have jumped from about 100
in 2003 to near 10,000 in 2007, according to the Department of the Interior. This has
been controversial because several of these claims are located in what are described
as environmentally sensitive areas (i.e., near the Grand Canyon). On June 19, 2008,
Representative Raul Grijalva, Chair of the House Subcommittee on Natural
Resources Subcommittee on National Parks, Forests, and Public Lands, introduced
a resolution to withdraw public lands adjacent to the Grand Canyon National Park
from uranium mining. On June 25, 2008, the House Natural Resources Committee
adopted the resolution. Because a significant fraction of U.S. uranium resources is
located on public lands in the West, reform of the 1872 Mining Law or other
congressional action to limit or permit access for uranium exploration and mining
could affect future U.S. uranium production. Legislation that has been introduced, the
Grand Canyon Watersheds Protection Act of 2008 (H.R. 5583), would withdraw
about one million acres around the Grand Canyon, and thus prohibit uranium mining
in those withdrawn areas.
While the broad impact on the metals and ores covered in this report may be
limited, Congress is continuing to examine the subject. Issues of the best use of
public lands, fair returns to the public for access to publicly owned natural resources,
and the environmental and economic consequences of the domestic mining industry
are of interest.
In general, the high prices of the mineral commodities reviewed in this report
are a result of rapidly increasing global demand, increasing production costs, and
tightening supplies. While production is expanding at the mine or refinery stage in
most cases, it has generally not kept pace with rising demand. Higher metals mineral
prices have led to expansions of some existing operations, reopening of historic
projects (such as some iron ore mines, zinc mines in Tennessee and possibly the
Climax moly mine in Colorado), and the development of new mining projects. High
mineral prices have also resulted in significantly higher exploration expenditures.
Annually, world exploration expenditures rose from around $2 billion in 2002 to over105
$10 billion in 2007. The increase is spread across the precious metals and base
104 This section was prepared by Marc Humphries and Stephen Cooney.
105 Mining Engineering, “Annual Mining Review” (May 2008).
metals spectrum. And, as shown above, high uranium prices have led to dramatic
increases in the number of uranium claims staked on U.S. public lands.
This review of selected minerals and metals has shown that while mining and
refining capital expansion projects may be in the works, any number of bottlenecks
might arise among both domestic and foreign producers, such as electric power,
skilled labor, and equipment shortages; labor unrest; weather or transportation delays;
and, opposition on environmental policy grounds. Any of these could raise costs,
exacerbate the tightness of supplies and, thus, raise prices.
Higher prices have led to more efficient use of materials in some cases. For
example, there has been a reduction in the amount of platinum used in auto catalytic
converters, or the substitution of the less expensive palladium for platinum when
possible. As prices rise, another area of increased interest is secondary recovery of
certain materials such as scrap iron and steel, copper, aluminum, and PGMs. There
is a well established global infrastructure for secondary recovery for some materials
but not for others, such as manganese. Although secondary recovery is beyond the
scope of this report, it is worth noting that the amount of secondary material
produced and imported into the United States has risen dramatically over the past five
years. And so have exports of material, such as ferrous and nonferrous scrap, of
which the United States is a major global supplier.
The United States is reliant on imports of many minerals that support its
economy. For several minerals studied here, the United States is more than 90%
import-reliant — e.g., manganese (100%), bauxite (100%), platinum (94%), and
uranium (90%). For other minerals examined in this report, such as iron ore and
molybdenum, the United States is self-sufficient. For refined aluminum, zinc and
uranium, the United States’ chief trading partner is Canada. While import reliance
may be a cause for concern, high import reliance is not necessarily the best measure,
or even a good measure, of supply risk. U.S. companies may be invested in overseas
operations — e.g., copper and bauxite mines — and supply sources may be
diversified, of higher quality, of lower cost, and located in countries that have
extensive reserves and production capacity. Such conditions may not always exist
in the United States, even when resources are present. Estimates of the global
reserves of minerals reviewed in this report are substantial and appear to be
sufficient to meet material needs in the foreseeable future.
However, as shown in the review of market conditions and policies, including
rising foreign demand, prices may still be more volatile in the short term At best,
from the viewpoint of U.S. metals consuming industries, increased production and
supply of ores and metals may bring relative price stability over the longer term. But
despite increased production, fundamental market changes could reverse the historic
long-term downward price trend of the twentieth century, and U.S. industry could be
in for a long period of rising metals prices.