FILE COPY Report No. EC-163 F This report may not be published nor may it be quoted as representing the view of the Bank and its affiliated organizations. They do not accept responsibility for its accuracy or completeness. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION PAST AND PROSPECTIVE TRENDS IN THE WORLD ALUMINUM INDUSTRY May 31, 1968 Economic Department Prepared by: Andrew C. Huang TABLE OF CONTENTS Page No. PREFACE I. HISTORICAL TRENDS OF AIUMINUM CONSUMPTION 1 Area and Country Patterns 1 Tables: I-1 Growth Rates of World Aluminum Consumption 3 I-2 World Aluminum Consumption by Selected Regions 1910-1964 4 I-3 World Consumption Trend of Aluminum for Selected Periods, 19h8-1964 I-4 World Aluminum Consumption by Countries for Selected Years 6 Charts: I-1 W4orld Production and Consumption and U.S. Actual and Real Prices of Aluminum 7 I-2 World Production Trends of Manufactures and Primary Aluminum 1900-1965 7a II. TRENDS AND STRUCTURE OF WORLD AIUMINUM PRODUCTION 8 Area and Country Patterns 8 Corporate Patterns 8 Tables: II-1 World Aluminum Production by Countries for Selected Years 12 II-2 Estimated Annual Capacity of Nine Major Aluminum Producing Companies in 1954 and 19614 19 II-3 Relation of kbrld Aluminum Capacity to Production and Consumption 1953-1965, by Leading Areas 21 - ii - Page No. III. WORLD TRADE DEVELOPMENTS 22 Tables. III-1 WJorld Exports of Aluminum by Major Countries, 1948-1965 25 III-2 World Imports of Aluminum oy Major Countries, lh8-1965 26 III-3 Trends of Exports and Imports of Aluminum by Major Countries for Selected Periods 1936-1965 27 III-4 World Trade of Aluminum by Origin and Destination, in 19h8 28 III-5 Wibrld Aluminum Trade by Origin and Destination, in 1964 29 III-6 Estimated Composition of W4orld Trade in Aluminum, 1948-1965 30 IV. PRICE TRENDS 31 Tables: IV-1 Aluminum Prices in U.S. and U.K. 1900-1966 34 V. DEuAf1D PROSPECTS 36 Tables: V-1 Elasticities and Correlation Coefficients of Aluminum Consumption in Relation to Index of Produietion of Manufactures, 1950-1966 39 V-2 WJorld Aluminum Demand Projections, 1964-66 to 1969-71 and 197h-1976 40 Chart: V-1 Per Capita Consumption of Aluminum and Per Capita GNP of Selected Countries in 1964 41 - iii - Page No. VI. PROSPECTIVE SUPPLY AND PRICES 42 Tables: VI-l Estimates of WTorld Aluminum Production Capacity in Selected Years 45 VI-2 Summary of Present and Planned Aluminum Capacity by Major Regions, 1967-1972 46 VI-3 Present and Planned Aluminum Capacity by Country and Company, 1967-1972 47 VI-8 Estimates of World Demand and Supply of Aluminum by Major Regions 51 APPENDIXES A. PROSPECTS FOR THE CENTRALLY PLANNED ECONOMIES 1 Tables: A-1 (A) U.S.S.R. Production and Apparent Consumption of Aluminum 1955-1965 (B) U.S.S.R. Exports of Aluminum 1955-1965 h A-2 Centrally Planned Economies: Aluminum Production Capacity 5 A-3 Estimated Demand/Supply of Aluminum in Centrally Planned Countries 7 Chart: A-1 Aluminum: U.S.S.R. Export and London Prices 8 B. INDUSTRIAL PRODUCTION AND AIUMINUM CONSUMPTION 1 A. Global Trends l B. Experience in the United States 2 C. Development of New Uses of Aluminum in the United States 5 - iv - Page No. (1) Transportation Equipment 5 (a) Automobiles 5 (b) Aircraft 6 (c) Rail and Marine Equipment 7 (2) Building and Construction Products 7 (3) Electrical M4achinery 8 (4) Packaging and Containers 9 (5) Consumer Durables and Non-Electrical Machinery 10 Tables: B-1 Annual Rates of Increase in World Aluminum Consumption and in Industrial Production, Selected Periods, 1909-1965 11 B-2 Industry Patterns of Aluminum Consumption in U.S. for Selected Years, 1948-1965 12 B-3 Trends in Industrial Production U.S.A. 1948-1965 13 B-4 Growth Trends in Industrial Output and Aluminum Consumption of Leading Aluminum Consuming Industries in the U.S.A., 1948-1965 1 B-5 Pattern of Aluminum Consumption by Industry - Western Europe and Japan Selected Years 15 Charts: B-1 United States: Trends of Industrial Production and Aluminum Consumption 16 B-2 Annual Averages of London Copper and Aluminum Quotations 1850-1963 17 PPRE ACE This report discusses past trends in and probable levels of world demand, supply, trade and prices of aluminum by the mid-1970's. Primary aluminum is not currently a major export of the developing countries, with the notable exception of Cameroon, where it accounts for about 15 percent of export earnings. Nevertheless, the subject is of interest because a number of developing member countries of the Bank, notably Guinea, Guyana, Jamaica and Surinam, are currently or potentially large suppliers of raw and intermediate materials for aluminum production, i.e., bauxite or alumina. The export prospects for these materials ultimately depend on the demand prospects for aluminum. Among other member coulntries of the Bank which have received development loans, Australia, Greece, Norway and Yugoslavia also participate in the international trade in aluminum and its raw materials. The author gratefully aclmowfledges the helpful criticism and suggestions received from his colleagues, and in particular he is deeply indebted to A. J. IMIacone of the Economics Department for his guidance and encouragement. Saiuel Lipkowitz, Economic Adviser to the Projects Department, and Samuel Mioment, an industrial consultant, critically reviewed an earlier version and offered many valuable comments. Grateful appreciation is also extended to members of' the Statistical Services Division and to Dorothy Ryan and Leon Hunter of the Export Projections and Trade Division for their assistance in the collection and processing of data and the preparation of charts. However, the views expressed in this paper are strictly the author's and in no way reflect those of the Bank group. The author alone is responsible for the analysis in the report and its statistical accuracy, This paper is part of the continuing research program of the Economics Department's Export Projections and Trade Division under the immediate direction of A. J. Macone. Earlier studies in the-field of primary commodities include W4ool, Trends and Prospects (EC-109, August 30, 1962); Extra-long Staple Cotton, Demand and Price Prospects (EC-125, April 16, 1964); Commodity Price Trends (1967 Edition) (EC-155, August 1967). Andrew M. Kamarck Director Economics Department I. HISTORICAL TREiDS OF ALUMIWH COWSUiPTITOiNT Area and Country Patterns 1. The first commercial production of aluminum started in 1888. Reliable data are not readily available for the earliest years, but indi- cations are that since its initial use -aluminum has had the fastest demand growth rate among the major non-ferrous metals. For instance, even after World War II, when the aluminum industry can be considered to have reached maturity, aluminum demand has grown in 1948-1950 to 1964-1966 at a rate of about 10 percent per annum compared to 4.5 percent for prim- ary copper, 3.5 percent for lead, 4.5 percent for zinc and 2 percent for tin. By the mid-1950s, aluminum had achieved a ranking position in ton- nage second only to iron, among the five most widely used (ferrous and non-ferrous) rmetals of the world.l/ (The other three are copper, zinc and lead.) Not only did aluminum exceed all other non-ferrous metals individually in world demand, but its consumption in volumetric terms wias greater than that of copper, lead and zinc cambined.2./ 2. WJorld trends in aluminum consumption since the early 1900's are summarized in Table I-1. Since that time, iTorld consumption has been growing-almost without iinterruption. Over the fifty-year period 1910-1914 to 1960-1964, as shown in Table I-1, the rate of growth averaged around 9 percent--per annum, a more than doubling of wiorld consumption every decade. Table I-1 also shows that the rate of growth in world aluminum consumption has been relatively steady over long-run periods, but with wider variations in the medium and shorter terms. Specifically for intervals of 30, 40 and 50 years, the growth rates have ranged between 9 percent and 11 percent per annum. In contrast, the growth rates for various 20-year periods widened to between 5 percent and 13 percent per annum and those for periods of 5 to 10 years to between 3 percent and 22 percent per annum. 1/ Throughout this report the tern "world" is defined as the areas out- side the USSR, Eastern Europe and lMainland China, unless otherwise mentioned. A brief review of the aluminum industry of the centrally planned economies (referred to collectively for purposes of brevity as the Soviet Bloc) is given in Appendix A. For present purposes, the survey will be made in terms of "primary" or "virgin" al=uinum, which in recent years accounted for roughly 85 percent and 75 percent of total aluminum consumption in the United States and Western Eruope, respectively. In both instances, the choice has been influenced largely by scarcity of reliable historical data, especially for the pre-World War II period. In this report, North lmerica refers to Canada and the United States, and the term "ton" refers to the metric ton of approximately 2,205 pounds, unless otherwise specified. 2/ I.e., measured in terms of volume rather than weight. However, a volumetric comparison is not necessarily fairer than one based on weight. Thus, in cables it would take a greater volume of aluminum to achieve the same degree of conductivity as a given volume of copper, 3. The evolution of world consumption is summarized in Table I-2 and Chart I-1. These show world consumption averaging about 58,000 tons per annum during 1910-1914. In the intenrtar period, demand experienced sharp cyclical fluctuations (see Chart I-1), first due to the post-l^Jorld War I recession, and subsequently to the great depression of the 1930's (see further Chart I-2). Nevertheless, the underlying growth potential remained strong and by 1935-1939 world consumption had reached an aver- age level of 425,000 tons per annum. Since the end of Wjorld War II, consumption has continued to increase from a post-World War II low of under 1 million tons per annum in 1945-1949 to nearly 2.7 million tons per anxzum in 1955-1959, and finally to about 4 million tons per annum in 1960-1964. Ln the year 1966 it had reached 6 million tons. 4. WJith regard to geographical patterns of consumption, Table I-2 shows that during most of the pre-World War II period, 11orth America and Western Europe accounted for roughly equal shares of total world consump- tion, and consumption in the rest of the world was very insignificant. Since the end of World Wlar II, however, the center of world aluminum con- sumption has shifted decidodly to :orth Alerica. 5. The post-World lZar II pattern of world aluminum consumption is shown in greater detail in Table I-3. Growth rates for the peiod as a whole have ranged from about 9½ percent per annum for both the United States and WVestern Europe to almost 13 percent for Latin America, 19 percent for Oceania and 22 percent for Asia. As a result, the share of the United States decreased from about 58 percent to 54 percent of the world total and that of lWestern Europe from 34 percent to 32 percent between 1946-1948 and 1962-1964, while the relative position of the rest of the world improved appreciably during the corresponding period. Aluminum consumption growth in Japan has been strikingly rapid during the post-World War II period with its share rising from less than 1 percent to over 5 percent of world demand. The rest of the world has had a simi- lar experience although its demand level in absolute terms remained quite low. The demand growth trends by countries in 1950-1966 are given in Table Io4. -3- Table 1-1: GROWTH RATES OF WORLDY ALUMINUM CONSUMPTION Selected periods between l910-lL and 1960-64 Number of Percent From To Years Per Annum 1910-14 1960-64 50 8.8 1950-54 ho 9.0 19h0-h4 30 10.5 1930-34 20 5.2 1920-2h 10 7.5 1915-19 5 14.5 1920-24 1960-64 h0 9.1 1950-54 30 9.3 1940-44 20 11.8 1930-34 10 3.0 1925-29 5 11.8 1930-34 1960-64 30 11.3 1950-54 20 12.8 19h40-h 10 22.0 1935-39 5 21.0 1945-h9 1960-6h 15 9.6 1955-59 10 10.6 1950-54 1960-64 10 8.5 1955-59 5 9.0 1955-59 1960-6h 5 8.2 1/ Excluding the Soviet Bloc. Source: Table 1-2. Table I-2: WORID ALUMIMUM CONSUMPTION BY SELECTED REGIONS 1910-196hV/ (Annual average - 1,000 metric tons) Western Tapan and Period Total Americas Europe Other 1910-1914 58 25 32 2/ 1915-1919 115 3 71 1 1920-1924 121 65 53 3 1925-1929 212 108 95 9 1930-193h 162 71 B4 7 1935-1939 425 129 262 34 1940-191X4 1,l4 513 525 106 1945-1949 978 653 3o14 21 1950-1954 1,747 1,139 533 55 1955-1959 2,670 1,664 874 132 1960-1964 3,9140 2,206 1,324 L1o 1/ Annual average. 2/ 1912-1914 average. Source: cibl!se11schaft, Op. cit. Table 1-3: WORLD 2/ CONSUIPTION TREND OF ALUMIINUM FOR SELECTED PERIODS, 1948-1964 (three-year ave'rages) 19h6-1948 1962-1964 Growth Rate 1.,000 % of 19,000 % of Percent Per Annum tons total tons total 1976-19h8 to 1962-1964 United States 554 57.8 2,321 53.6 9-4 Canada 45 4.7 1h3 3.3 7.5 Westiern Europe 327 34.2 1,386 32.1 9.5 Latin America 13 1.h 90 2.1 12.8 Africa 1 0.1 20 0.5 20.5 Asia 13 1.4 305 7.0 21.5 (Japan) (7) (0-7) (222) (5.1) (24.5) Oceania _4 0.h 62 1.4 18.7 Total 957 100.0 4,327 100.0 9.9 _/ Excluding the Soviet Bloc. Source: McNtajgesjl1sch&ft, op. cit. Tablel-4: WORLD0/ALUMINUM CONSUMPTION BY COUNTRIES FOR SELECTED YEARS (In 1,000 metric tons) 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 399.4 520.1 571.1 520.6 651.5 813.0 854.2 816.6 850.9 1035.9 1278.6 1179.1 1254.7 1365.1 1537.1 1574.3 1797.7 Austria 6.0 12.0 16.0 23.6 2 33.5 36.0 32.7 31. T34. 37.0 37.6 3-0E 39.0 143.0 42.O 46.0 Belgium (LUx.) 5.4 14.0 12.7 12.2 16.7 26.2 32.5 27.2 41.1 48.5 63.5 69.0 67.5 88.3 111.5 114.6 149.4 Denmark 2.9 3.2 3.3 2.9 2.9 4.4 3.2 3.7 4.6 6.1 5.7 5.5 6.2 5.2 5.4 7.5 4.6 France 55.2 79.0 90.3 74.9 98.6 108.5 134.8 153.1 143.1 167.8 212.7 201.2 235.6 242.6 249.3 248.5 298.3 Finland .6 1.6 1.5 1.6 .9 2.5 2.1 2.4 4.2 6.4 2.9 5.1 6.1 4.0 5.5 7.6 lo.8 Germany 49.8 81.5 92.1 102.1 133.3 174.2 172.8 185.7 191.1 231.8 313.0 297.0 301.9 315.4 385.9 387.4 419.5 Italy 47.-5 47.3 52.3 48.2 60.9 61.9 71.7 66.2 62.2 83.0 99.0 107.5 115.0 128.0 120.0 128.0 171.0 Netherlands 4.2 5.7 6.4 5.6 7.8 7.8 9.4 8.o 7.0 12.5 14.0 12.0 114.0 19.5 21.6 19.2 23.1 Norway 9.5 11.4 11.9 11.9 13.6 13.8 15.3 16.6 18.0 16.5 18.5 18.5 18.5 19.0 21.0 24.0 26.0 Spa'n 3.9 5.7 5.0 7.1 6.9 12.7 16.4 21.0 27.1 27.1 20.0 20.0 22.5 35.2 46.o 64.0 84.7 Switzerland 12.1 29.9 28.4 23.9 27.1 35.4 36.8 39.3 31.8 42.2 47.9 47.5 53.5 48.3 53.8 61.8 65.1 Sweden 14.4 18.2 22.5 18.8 21.9 30.2 27.3 25.4 32.4 36.0 37.9 33.6 39.4 49.6 51.2 44.2 53.3 United Kingdom 183.8 206.2 223.9 183.5 228.8 290.8 280.6 214.0 235.3 291.8 357.2 282.6 285.4 317.5 356.2 350.6 362.9 Yugoslavia 2.6 2.8 2.9 2.8 4.1 8.9 13.1 17.1 16.2 25.1 40.9 30.9 38.7 41.2 49.0 57.4 62.0 Other 1.5 1.6 1.9 1.5 2.0 2.2 2.2 4.2 4.9 6.7 8.4 11.1 12.4 12.2 18.1 17.5 21.0 904.0 977.5 1060.6 1479.0 1370.2 1695.0 1737.7 11430.5 1483.3 1977.8 1706.9 1991.0 2307.2 2561.3 2801.5 3141.2 3583.6 U.S.A. o23.0 877.1 966.2 1377.6 1260.0 15817. 1609.14 13114.4 1334.0 145 1541.2 1791.1 2009.3 231403 25314.9 2871.8 3273. Canada 59.1 78.2 81.9 80.3 72.9 83.0 83.3 70.7 92.14 80.5 101.5 114.6 133.8 137.8 156.0 168.8 180.0 Brazil 6.8 11.3 7.0 8.6 16,7 8.2 19.0 21.6 26,0 27.0 33.0 36.8 41.2 46.7 45.1 51.6 63.0 Other 15.1 10.9 5.5 12.5 20.6 22.0 26.0 23.8 30.9 25.0 31.2 48.5 42.9 36.5 65.5 69.0 67.0 27.6 41.4 41.1 48.4 60.6 70.6 83.8 98.0 109.3 151.4 198.4 238.6 258.2 319.8 370.4 409.1 538.0 Japan 19.0 30.8 33.0 3 42 49.6 65. 7477 -T0.7 112.6 150.5 1U 104.2 2193 -21 721 390.0 India 5.6 7.1 5.1 4.4 7.9 13.0 9.6 13.8 15.6 23.8 24.9 30.0 49.0 62.0 56.6 71.0 93.0 Other 3.0 3.5 3,0 5.5 6.5 8.0 8.5 9.5 13.0 15.0 23.0 23.0 25.0 38.5 52.0 50.0 55.0 2.0 2.5 3.0 3.5 5.0 6.5 6.1 8.5 9.2 10.3 114.0 17.1 19.0 21.3 27.4 31.9 41.0 South Africa 1.2 2.0 27. 2 7 - 752 b W - 7 6-9 7. T113 10.7 14.0 1141 16.9 200.4 28.-5 Other .8 .5 .8 1.0 1,2 1.3 1.5 1.8 2.3 2.9 2.7 6.7 5.0 7.2 10.5 11.5 12.5 Australia and Oceania 6.3 11.8 8.5 8.1 11,2 17.0 20.0 18.9 26.8 31.9 39.4 31.9 53.4 54.0 72.0 75.8 85.0 Total 1339.3 1553.3 1648.3 2059.6 2098.5 2602.1 2699.8 2372.5 2479.5 3207.3 3237.3 3457.7 3892.5 4321.5 4808.8 5232.3 6045.3 1/ Excluding the Sovies Bloe; Source: !4etallgesellsubaft, op. cit. G '2r -1 WORLD" PRODUCTION AND CONSUMPTION, AND U.S. ACTUAL AND REAL PRICES OF ALUMINUM 10,000 TVT T-- '; I4I CI I , Ir T 1 7F,T 1 TT I 1 I V F 8,000 - ---- ..--- . ..- __ 6,000 _f t~~~~ - t ______ _ _ ____ 4,0001 ----- 3,000 - -_ _ ___ 2,000 -______ __ ____ I,000 ____ __ - - 800k - - z 60 z 400 ---------- - -- _ 1L _ _ __ __ 4- i i .^ CONSUMPTION 300 1 - - (--LEFT SCALE) - - - - t---- LL 0 , --200 --- -- -- - - 100 ,- 100 0 80 - --- 4 2. ___ 80 U.S. REAL PRICE, 1966= 100 C 40. - )~- --*- a;- x,. - e 5 / (RIGHT SCALE ) i 40 rn 30 - ---_ 8 . *8 . - t --r -- - - t ~ -- 30 upm~~~ 20 U.S ACTUAL PRICE c /RiGHT SCALE ) - --- -- -. 10 8 0----t--= < | : =f -- ~tSEMI-LOGARITHMIC SCALE8 8 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~I8 1900 1905 1910 1915 1920 1925 1930 1935 1940 1945 1950 1955 1960 1965 1970 1/ Exciuciirt tie Soviet jlo . (2R) IBRD- 3701 WORLD* PRODUCTION TRENDS OF MANUFACTURES AND PRIMARY ALUMINUM, 1900-1965 (INDEX, 1958=100)______ 200 ' 'II ' T11111111T--l---~------T----1I--I---T--F---1------F- I III 1 1T1I 0 YEARLY 0 Ia __ ___ ___-la 8 0 _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 8 0 60 KMNFCUE 6_ _____ ______ __ 0 0 3 I ~~~~PRIMARY ALUMINUM 8 -~_ ____ 1--~ _ 8 6 p ' V----- ~6 4 ___ _ _4 2 -'_ _ _ _ _ _2 SEMI-LOGARITHMIC SCALE l~~~ Li L 1 I L - LLL L ~~LI IIII 1900 1905 1910 1915 1920 1925 1930 1935 1940 1945 1950 1955 1960 1965 *Excluding the Soviet Bloc. SOURCES- Aluminum consumption: Metal9gesellschaft, op. cit.; Industrial production- Manchester School of Economics ond Social Studies, (May 1952) and United Naitions Statistical Yearbook (New York) various issues. (R)lIBRD - 2928 - 8 - II. TRENDS AND STRUCTURE OF WORLD ALUTMINUtM PRODUCTION 6. Having examined the historical development of consumption, the next step is to analyze briefly aluminum production trends. For this purpose, data on world production by country for selected periods between 1901 and 1966 were assembled in Table II-1. Area and Country Patterns 7. The outstanding regional features of world production for the 65-year period ending in 1966 were: (a) Until the mid-1930's, production was confined exclusively to North America and Western Europe; (b) During most of the pre-World War II period, Western Europe was responsible for a predominant share of world produc- tion. However, during the course of World War II, the center of production shifted to North America and has re- mained there since then; and (c) Following World War II, production has further expanded to the rest of the world, including Latin America, Africa and Oceania. 8. Thus, in 1901, there were seven producing countries: United States, France, Germany, United Kingdom, Switzerland, Austria and Canada in descending order of magnitude. These were joined by Italy in 1908 and Norway in 1909. During the inter-war period, production started in Spain in 1928, Japan in 1933, Sweden in 1934 and Yugoslavia in 1937. The erection of aluminum production facilities spread to the developing areas with the construction of a smelter in Formosa in 1935 by the Japanese. During World War II, production also started in India in 1942 and Brazil in 1945. These were followed by Australia in 1955, Cameroon in 1957, Mexico in 1963, Surinam in 1965, the Netherlands and Greece in 1966. 1/ 9. By 1966, there were 22 primary aluminum producing countries. Assuming as the criterion of a major aluminum producing country an annual level of 100,000 tons, there were seven such countries as of 1966. Lead- ing this group are the United States, Canada, France, Japan, Norway, Germany and Italy (in descending order of magnitude). The combined out- put of these countries accounted for almost 90 percent of total world output in 1966. Except for Japan, all of these had started production prior to World War I. Of the seven countries which were producing in 1901, as noted before, the position of the United Kingdom, Switzerland and Austria has deteriorated significantly in relative terms: Their joint output as a percentage of the world total has declined from about 30 percent in 1913 to less than 5 percent in 1966. l/ Smith Bracewell, Bauxite, Alumina and Aluminium (Overseas Geological Surveys), London, 1962. -9- Corporate Patterns 10. While primary aluminum metal may be regarded as a raw material vis-a-vis fabricated products, it is in fact a far-advanced stage of pro- cessing which starts with bauxite ore. Moreover, production of metallic aluminum requires (a) a comparatively large amount of investment capital per unit of production capacity; (b) a high degree of technology; and (c) an unusually large input of electric power per unit of output. 1/ For these reasons, the primary aluminum industry up to now has been character- ized by a limited number of large companies mostly located in developed countries, where there is also the added advantage of proxiuity to con- suming markets. In the United States, Aluminum Company of America (Alcoa) was the sole producer prior to 1940. 2/ In most European countries, na- tional production was accounted for by one or two companies, many of them government owned. Moreover, between the early 1920's and the late 1930rs, there were Z--, if any, new entrants into the industry. Not until the mid-1950's was there entry of new producers in significant numbers, and then mainly in the United States. 11. From the standpoint of post-World War II market developments, there are about nine international major producers, i.e., companies having subsidiaries and affiliates all over the world. They are: Alcoa, Reynolds Metals Company (Reynolds) and Kaiser Aluminum and Chemical Corporation (Kaiser), with headquarters in the United States; Aluminum Company of Canada (Alcan), based in Canada; Pechiney, Cie. de Produits Chimiques et Electro- letallurgiques (Pechiney) and Soc. d'Electro-Chimie, d'Electro-Hetallurgie et des Acieries Electriques d'Ugine (Ugine), based in France; Vereinigte Aluminium-Werke A.G. (VAW) in Germany; "Montecatini", Soc. Generale per llIndustria Dlineraria e Chimica (Montecatini) in Italy; and Swiss Aluminiua Limited (Alusuisse) in Switzerland. In order to have some idea of their role in the industry in recent years, both individually and as a group, data on their respective production capacities in 1954 and 1964 are given in Table II-2. 12. As shown in that table, the nine companies in question are re- sponsible for almost 90 percent of total world capacity. The four North American producers alone account for 70 percent. Among the five European producers, the position of I4ontecatini and Alusuisse has remained more or less stable in relation to total world capacity, while the share of Pechiney and Ugine has increased considerably (partly as a result of their new joint smelter built in Cameroon_, but it is still relatively very small. 13. Among the four North American producers, the combined share of the three United States companies, Alcoa, Reynolds and Kaiser as a group has remained remarkably constant at about 50 percent of the world total 1/ Except for titanium and a few other metals. 2/ United States Congress (82nd), Aluminum (House Report #255), Report of the Subcommittee on Study of Monopoly Power of the Committee on the Judiciary (Washington, llarch 13, 1951). - 10 - during the period covered, with a small deterioration in Alcoats share being offset by an improvement in Reynold's share. On the other hand, the share of Alcan 1/has declined sharply from nearly 27 percent in 1954 to 19 percent in 1964, The resultant slack has been taken up not by the other majors, but by small independent producers. It will be noted from Table II-2 that the combined share of world capacity controlled by the major companies remains overwhelmingly large; it has nevertheless fallen from 91 percent in 1954 to 85 percent in 1964. lh. An exhaustive inquiry into the different growth trends of the nine international major producers in question is beyond the scope of the report. However, a brief comment on the leading factors for Alcants sharp decline and the increase in the share of the independent companies (refer- ring to producers other than the nirle international majors) may be useful. First, with regard to Alcan, the Company is traditionally the world's larg- est single exporter and has generally been regarded as the lowest cost pro- ducer. Despite this, the immediate cause for the decline of its position seems to have been the growing competition in international markets, espe- cially from United States producers during the late 1950ts. 15, This increasing competition was induced by rising capacityr in the United States since 1957, following government-sponsored expansion of the domestic aluminum industry in the wake of the Korean liar. The trends of capacity growth in relation to production and consumption for the lead- ing areas and countries between 1953 and 1965 are summarized in Table II-3. In 1957-1958, the annual average level of idle capacity in the United States was equal to 30 percent of domestic consumption. An almost similar situa- tion reappeared in 1960-1961. In the face of this unused capacity, major United States producers apparently felt compelled to turn to markets over- seas. This was an historic turning point. Traditionally, United States and Canadian producers had been complementary rather than competitive with one another. 16. In the struggle for export markets, major United States produc- ers decided to concentrate on the United Kingdom which has traditionally been, and still remains, the world's largest single net importer. To gain access to the United Kingdom market, Reynolds acquired in 1959 control of British Aluminium Company, the sole aluminum producer in the United Kingdom and, more significantly, owner of over 50 percent of the United Kingdom's total aluminum fabricating capacity. As a result, aluminum imports from Canada declined from over 90 percent of total United Kingdom aluminum im- ports in 1959-1960 to below 60 percent in the early 1960's, while those from the United States have risen from nothing to about 15 percent of the 1/ The company was the sole producer until the entry of British Canadian Aluminium in Canada in 1954. In recent years, the production of Alcan has accounted for about 90 percent of Canada's total. - 11 - total. This illustrates the importance of company affiliation and of vertical integration 2/ in determining shifts in the growth pattern of production and trade in the world aluminum industry. 17. Wlith regard to the rising share of indpendent producers in total world capacity in 1955-1965, two groups of producers were mainly responsi- ble. The first group included three United States producers, Anaconda Aluminum Company (Anaconda), Harvey Aluminum, Inc. (Harvey) and Ormet Cor- poration (Ormet), which entered the domestic market under the impetus of the Defense Production Act. The program provided such incentives for new producers as: (a) special tax consideration; (b) guaranteed sales to gov- ernment stockpiles; and (c) financing on favorable terms, The second group included state-owned producers, mainly in Norway (A/S Aardal og Sunndal Verk), Spain (Eapresa Nacional del Aluninio, S.A.) and Yugoslavia. Output of the state-owned producers in Norway is entirely for export markets, while those in Spain and Yugoslavia are mostly for import substitution. 1/ In 1960, for example, the final product composition of Alcan was about 70 percent primary aluminum in terms of total tonnage. The share of primary aluminum in the final output of the major United States producers ranged from about 5 percent for Reynolds and about 15 percent for Alcoa to zero for Kaiser, which is fully integrated. During periods of general overcapacity coupled with a diminished demand from independent fabricators, relatively unintegrated com- panies face serious competitive disadvantages. TableII-1: WORLD-ALUMINUM PRODUCTION BY COUNTRIES FOR SELECTED YEARS (In 1,000 metric tons) 1901 1902 1903 1904 1905 1906 1907 1908 1909 1910 1911 1912 1913 19114 North America Canada .1 .9 .8 1.0 1.2 2.1 2.7 .4 2.8 14.4 4.4 5.5 6.4 6.6 United States 2.6 2.6 3.0 3.7 4.9 8.9 7.4 4.8 13.2 16.0 17.4 18.9 21.4 40.8 'rotal 2.7 3.5 3.8 4.7 6.1 11.0 10.1 5.2 16.0 20.4 21.8 24.4 27.8 47.4 H Western Europe Austria .5 .5 .7 1.0 1.2 1.6 2.0 1.2 2.0 2.3 1.9 2.5 2.3 1.9 France 1.3 1.4 1.5 1.8 2.7 3.9 5.9 3.3 6.5 8.9 10.2 12.0 15.5 10.6 Germany .6 .7 .7 .8 1.0 1.0 1.0 .5 .8 1.1 1.3 1.3 1.4 1.2 Italy - - - - - - - .6 .8 .8 .8 .8 .8 .9 Norway - - - - - - - - .6 .9 .9 1.5 1.5 2.5 Switzerland .5 .6 .7 .7 .8 .7 .8 1.3 3.0 5.0 6.o 8.0 9.0 8.0 United Kingdom .6 .6 .7 .7 1.0 1.0 1.8 2.0 2.8 5.0 5.0 7.5 7.6 7.5 Total 3.5 3.8 4.3 5.0 6.7 8.2 31.5 8.9 16.5 24.0 26.1 33.6 38.1 32.6 Grand total 6.2 7.3 8.1 9.7 12.8 19.2 21.6 14.1 32.5 44.4 47.9 58,0 65.9 80.0 I/ See note at end of table. Table II-1 Continued 1918 1919 1920 1921 1922 1923 1924 1925 1926 1927 1928 1929 North America Canada 10.7 9.8 10.2 2.9 5.8 11.0 12.4 14.1 17.7 37.5 37.6 28.8 United 102.0 81.6 62.6 24.5 33.6 58.6 68.5 68.0 72.0 75.0 80.0 103.4 Total 112.7 91.4 72.8 27.4 39.4 69.6 80.9 83.1 89.7 112.5 117.6 132.2 Western Europe Austria 2.8 2.0 2.0 2.0 2e0 1,5 202 3.0 3.0 140 4.0 2,7 France 12.5 9.0 12.4 8.9 6.7 14.0 16.7 19.2 23,7 25.2 27.0 29.0 Germany 14.7 14.5 10.5 10.0 15.0 15.9 18.7 26.2 29.6 28.4 31.7 33.3 Italy 1.7 1.7 1.7 .7 .8 1.5 2.1 1.9 1.8 2.3 3.6 7.0 Norway 6.9 3.1 5.6 4.0 4.9 13.3 20.0 21.3 24.4 20.8 22.8 29.1 Spain - - - - - - - - - - 1.0 1.0 Switzerland 15.0 8.0 8.0 12.0 13.0 15.0 19.0 21.0 21.0 20.0 19.9 20.7 United Kingdom 8.3 8.1 8.0 5.0 5.0 8.0 7.0 9.7 7.3 7.9 10.7 13.9 Total 61.9. 46.4 18.2 42.6 17.h 69.2 85.7 102.3 110.8 108.6 120.7 136.7 Grand total 174.6 137.8 121.0 70.0 86e8 138.8 166.6 185.4 200.5 221.1 238.3 268.9 Table II-1 Continued 1930 1931 1932 1933 19314 1935 1936 1937 1938 19146 1947 19148 North America Canada 314.6. 31.0 18.0 16.2 15.5 20.6 26.9 142.6 66.o 176.1 271.3 332.9 United States 103.9 80.5 47.6 38.6 33.6 54.1 102.0 132.8 139.0 371.9 518.6 565.5 Total 138.5 111.5 65.6 54.8 49.1 74.7 128.9 175.4 205.0 548.0 789.9 898.4 Western Europe Austria 3.0 2.5 2.1 2.1 2.2 2.5 3.3 14.2 14.14 1.0 4.3 13.3 France 25.8 18.0 14.5 14.5 16.3 21.8 26.5 314.5 145.3 147.8 53.14 64.8 Germany 30.7 27.1 19.2 18.9 37.2 70.7 97.5 127.5 161.2 .7 .5 7.3 Italy 8.0 11.1. 13.4 12.1 12.8 13.8 15.9 22.9 25.8 10.9 24.3 32.3 Norway 27.4 21.4 18.0 15.5 15.5 15.3 15.14 23.0 29.0 16.7 21.7 30.0 ° Spain 1.1 1.2 1.1 1.1 1.2 1.3 .7 - .7 1.0 1.0 1.0 ¢ Sweden - - - - .3 1.8 1.8 2.3 2.14 3.9 3.1 3.3 Switzerland 20.5 12.2 8.5 7.5 8.2 11.7 13.7 25.0 26.0 13.1 18.14 19.0 United Kingdom 114.0 14.2 10.3 11.0 13.0 15.2 16.5 19.3 23.14 32.1 29.14 30.5 Yugoslavia - .2 1.3 .6 1.3 1.9 Total 130.5 107.7 87.1 82.7 106.7 154.1 191.3 258.9 319.5 127.8 157.1i 203.14 Asia Formosa - - - - .2 2.8 14.6 - - 2.5 India - - - - - - - - - 3.3 3.3 3.14 Japan - - - - 1.0 3.2 5.8 14.5 23.3 3.2 2.7 6.9 Total - - - - 1.0 3.2 6.0 17.3 27.9 6.5 6.0 12.8 Grand total 269.0 219.2 152.7 137.5 156.8 232.0 326.2 451.6 552.14 682.3 953.3 1L114.6 …~~~~~~~~~~ ____ Table II-1 Continued 1949 1950 1951 1952 1953 1954 1955 1956 1957 North America Canada 335.1 360o0 403.4 454h.4 495.o 508.8 551.2 562.6 504.9 United States 546.8 651.8 758.2 849.2 1,135.6 1,324.7 1,420.2 1,523.2 1,494.4 Total 881.9 1,011.8 1 6 1,303.6 1,630.6 1,833.5 1971.4 2±2 .8 1,999.3 Latin America H Brazil _ .2 .4 1.1 1.2 1.5 1.7 6.3 8.9 Total - .2 .4 1.1 1.2 1.5 1.7 6.3 8.9 TWJestern Europe Austria 14.8 18.0 26.4 36.7 41.0 48.0 57c0 59.4 56.4 France 54.1 60.7 91.1 106.1 112.2 120.2 129.2 149.8 159.8 Germany 29.1 27.8 74.1 100.5 106.9 129.2 137.1 147.4 153.8 Italy 25.6 36.8 49.4 52.0 55.1 57.2 61.7 63.6 66.2 Norway 35.7 47.1 51.1 52.5 55.6 63.0 74.4 93.5 95.7 Spain .8 2.5 4.3 4.5 1.5 4.9 10.7 13.3 14.3 Sweden 3.9 4.0 6.7 8.2 9.6 10.6 10.4 12.5 13.6 Switzerland 21.0 19.0 27.0 27.0 29.0 26.0 30.2 30.1 31.1 United Kingdom 30.8 29.9 28.2 28,5 31.4 32.1 24.8 28.0 29.9 Yugoslavia 2.5 1.9 2.8 2.6 2.8 3,5 11.5 14.7 18.1 Total 218.3 247.7 361.1 418.6 448.1 494.7 547.0 612.3 638¢9 Table II-1 Continued 1949 1950 1951 1952 1953 1954 1955 1956 1957 Asia Australia - - - - - - 1.4 9.3 11.7 Taiwan (China) 1.3 1.8 2.6 3.9 4.9 7.1 7.0 8.8 8.3 3 India 3.5 3.7 3.9 3.6 3.4 5.0 7.3 6.6 7,9 Japan 21.2 24.8 36.9 42.7 45.5 53.1 57.7 65.9- 68.o Total 26.0 30.3 43.4 50.2 53.8 65.2 96.8 90 6 95.9 Africa Cameroo.n - - - - - - - - 7.5 Grand total .2 1,290.0 1,566.5 1,773.5 2,3934.9 2,616.9 2,795.0 2,750.5 Table II-1 Continued 1958 1959 1960 1961 1962 1963 1964 1965 1966 North America Canada 579.0 538.4 690.6 601.5 626.2 652.6 764.8 762.6 820.4 United States 1,420.0 1,771.4 1,827.2 1,727.0 1,921.4 2,097.9 2,31600 2,498.8 2,692.4 Total 1,999.0 2,309.8 2,517.8 2,328.5 2,547,6 75oS _Q8 3,261.4 3,512.8 Latin America Brazil 11.9 16.7 18.7 19.2 21.7 20.9 226.6 32.0 32.6 - Mexico - - - - - 5.5 17.8 19.2 21.2 Surinam - - - - - - - 2.0 27.4 Total 11.9 16.7 18.7 19.2 21.7 26.4 44.4 53.2 81.2 Western Europe Austria 57.1 65.6 68.0 67.7 74.1 76.5 77.7 78.7 78.9 France 168.9 173.0 235.2 279.2 294.5 298.4 316.0 340.5 363.5 Germany 136.8 151.2 168.9 172.6 177.8 208.8 219.9 234.4 243.9 Greece - - - - - - - - 36.2 Italy 64.1 74.9 83.6 83.4 80.9 91.4 115.0 124.1 127.8 Netherlands - - - - - - - - 19 5 Norway 121.6 144.9 165.4 171.9 208.9 225.3 261.0 276.3 330C9 Spain 15.7 21.1 28.9 37.2 44.7 46.1 49.6 53.3 64.7 Sweden 13.7 15.5 16.0 15.6 16.0 17 1 32.3 29.6 28.7 Switzerland 31.4 34.3 39.7 42.2 49.6 60.1 64.2 67.1 63.7 United Kingdom 26.8 24.9 29.4 32.8 34.6 31.1 32.2 36.2 37.1 Yugoslavia 21.7 19.2 25.1 27.4 28.0 35.9 34.8 41.3 42.0 Total 657.8 724.6 360.2 930.0 1,009.1 1,090.7 1,202.7 2,281.5 1,[Q1.9 Table II-1 Continued 1958 1959 1960 1961 1962 1963 1964 1965 1966 Asia Australia 11.1 11.2 12.0 13.4 16.4 41.9 80.0 87.8 92.0 Taiwan (China) 8.6 7.5 8.3 9.0 11.1 11.9 19.4 18.9 17.3 India 8.3 17.4 18.2 18.4 35.2 55.2 56.2 63.7 83.6 Japan 84.6 100.0 131.2 152.1 171.5 223.9 265.8 293.9 337.3 Total 112.6 136.1 169.7 192.9 234.2 332.9 421.4 464.3 530.2co Africa Cameroon 31.9 42.3 43.9 47.6 52.2 52.9 51.5 50.5 48.2 Total Worldl/ -2813.2 3,229.5 3,610.3 3,518.2 3 454 4,800.8 5,110.9 5,614.3 1/ Excluding the SoviLt Bloc. Source: Data prior to 1960 was supplied by Peohiney, op., cit. Table II-2: ESTIMATED ANNUAL CAPACITY- OF NINE MAJOR ALUMINUM PRODUCING COMPANIES IN 1954 AND 1964 (1,000 metric tons) Major United Latin Western As ?1 of Companies Area States Canada America Europe Asia Oceania Africa Total World.?' Total Alcan (Canada) 1954 - 579.3 - 43.0 53.0 - _ 657.3 26.5 1964 - 733.0 15.0 50.0 134.5 - _ 932.5 18.6 A.-lcoa H (U.S.) 1954 517.4 - - - - 517.4 20.3 ° 1964 778.5 - 20.0 56.o0 _ 40.6 - 895.1 17.8 KRa a Ner (TJuS.) 1954 365.7 - - .8 - - - 366.5 14.4 1964 589.6 - - 14.5 20.0 52.8 - 666.9 13.3 Tleynolds (U.S.) 1954 376.1 - - - - - - 376.1 14.7 1964 821.0 95.0 - 51.0 30.0 - - 997.0 19.8 Pechiney (France) 19514 - - - 118.5 - - - 118.5 4.6 19614 - - - 266.8 - - 26.5 293.3 5.8 Ugine (Francee) 1954 - - - 22.5 - - - 22.5 0,9 1964 - - - 67,0 - - 26.5 93.5 .9 1/ ard 2 Pi At cffi of tarileo Table II-2 Continued Major Iu nEi te'd Latin Western as ' of Companies Area States Canada America Europe Asia Oceania Africa Total World2 Total VAW (Germany) 1954 - - - 93.0 - - - 93.0 3.6 1964 - - - 180.0 - - - 180.0 3.6 Montecatini (Italy) 1954 - - - 34.0 - - - 3h.0 1.3 1964 - - - 80.5 - - - 80.5 1.6 Alusuisse 0 (Switzer- 1954 - - - 110.0 2.5 - - 112.5 4.4 land) 1964 29.0 - - 185.0 7.5 - - 221.5 4.4 Total Major Companies 1954 1,259.2 579.3 - 421.8 55.5 - - 2,315.8 90.7 1964 2,218.1 828.0 35.0 940.8 192.0 93.4 53.0 4,360.3 86.8 Total All Pro- ducers in Area 1954 1,259.2 579.3 12.4 599.1 102.0 - - 2,552.0 100.0 1964 2,356.0 828.3 56.0 1,266.5 372.1 93.4 53.0 5,025.3 100.0 1/ Insofar as can be ascertained capaoities of affiliated foreign producers in proportion to major producers, share ownership has been included. 2/ Excluding the Soviet Bloc. Source: American Bureau of Metal Statistics, Yearbook (New York, various issues); Metal Bulletin Ltd., London. - 21 - Table II-3: RELATION OF WORLD iALUMINUM CAPACITY TO PRODUCTION AND CONSUMPTION 1953-1965, BY LEADING AREAS U.S. Canada W. Eur Japn World!/ (A) (B) (-A) (-B) (A) ¢ Ca7 ( ) (A) (B) 1953 95 116 100 16 86 100 55 46 92 89 1954 105 100 88 13 82 109 61 53 94 82 1955 99 110 93 1 85 127 71 61 93 94 1956 95 100 82 12 90 126 75 75 90 87 1957 87 76 73 10 95 121 85 93 85 74 1958 70 66 74 12 88 114 86 82 75 66 1959 81 85 69 10 89 170 75 85 81 80 1960 82 69 87 13 94 138 88 100 86 76 1961 77 79 76 1 91 107 89 107 81 79 1962 85 92 78 15 89 110 82 86 85 85 1963 92 103 81 17 89 112 91 89 88 90 1964 98 108 92 18 95 121 98 97 96 96 1965 99 113 92 18 91 112 84 83 9b 96 Average 1953-1965 90 94 83 1b 90 121 80 81 88 84 Average 1955-1965 88 91 82 1b 91 123 84 87 87 84 Average 1960-1965 89 9b 8h 16 92 117 89 9b 88 87 1/ Excluding the Soviet Bloc. Note: (A) refers to production as percentage of capacity. (B) refers to consumption as percentage of capacity. Source: Metallgac.11schaft, op. cit. - 22 - III. WORLD TRADE DEVELOPIENTS 18. World exports and imports have been expanding rapidly since the end of World War II (see Tables III-1 and III-2). Between 1948-1950 and 1963-1965, total exports rose from an annual average of about 380,000 tons per annum to 1.3 million tons per annum. This would imply a growth rate of about 8.5 percent per annum for the period concerned. During the same period world production rose from 1.2 million tons to 4.7 million tons, equal to a rate of increase of about 9.5 percent per aimum. Therefore, world trade of aluminum tended to lag slightly behind production. In terms of total output, the volume which entered into the export markets accounted for about 32 percent in 1948-1950 and for 27 percent in 1963- 1965. 19. As of the early postwar years, world trade in primary aluminum was confined almost excLusively to North America and Western Europe. These areas were responsible for 100 percent of aluminum exports in l948-1950 and of these exports, nearly 90 percent were destined to countries within the same areas (see Table III-3). By the early 1960's, however, other areas were beginning to participate in world trade. As of 1963-1965, countries in North America and WJestern Europe were accounting for 94 percent of world exports and 85 percent of imports. At the same time, the number of coun- tries participating in world trade in aluminum was increasing. On the ex- port side, Spain, Cameroon and Australia were notable additions. The roster of new importers included countries in Latin America, the Far and Id;ddle East and Africa. The number of countries buying aluminum from Ganada rose from about 20 in the mid-1930's to over 50 in the mid-1960's (see Tables III-4 and III-5). 20. In 1948-1950, Canada alone was responsible for about 77 percent of total world exports. By 1958, however, Cznadals share had already de- creased to 63 percent in the wake of rapidly growing competition in world markets, most importantly from the United States, Norway and France. As of 1963-1965, Canada was responsible for about 47 percent of total world exports, 1/ followed by Norway (19 percent), United States (14 percent) and France (8 percent). It should be noted that United States aluminum exports until the late 1950's were negligible either in absolute quantity or in relation to those of the other major exporting countries (see Table III-3). 21. On the import side, Western Europe has remained the largest single net importing area, although its share of gross imports has declined slightly from about 68 percent in 1948-1950 to 63 percent of world total in 1963-l965. Significant shifts in relative position among individual countries in West- ern Europe were also discernible during the recent years. For -instance, while the imports of the United Kingdom declined from about 47 percent to 26 percent of the world total between 1948-1950 and 1963-1965, those of Germany have risen from 4 percent to 13 percent and those of Belgium- 1/ If USSR exports were taken into consideration, Canada's share would be 72 percent in 1950, 53 percent in 1958 and 40 percent in 1965 (see Table III-1). - 23 - Luxembourg from 2 percent to 9 percent of world total. On the other hand, t,he share of the United States in total world gross imports of aluminum has remained broadly the same at around 30 percent of world total during the same period. 22. The salient trends in world trade since the end of the 1930's are summarized in Table III-3. The table shows that the United Kingdom, United States, Germany and Belgium-Luxembourg have remained as leading net importers, and Canada, Norway, France and Switzerland, the leading net exporters in 1963-1965, as they were in 1931'1937 IMeanwhile, West- ern Europe as a whole has shifted from approximate self-sufficiency to being a large net importer, and North America has remained a net exporter, but on a much larger scale. The rest of the world has shifted fron being a net importer to a net exporter, but this reflects largely the production of aluminum in Cameroon, which is shipped largely to France. 23. The trends and patterns which have characterized post-World Wlar II trade in aluminum reflect two important influences. The first is de- mand originating in deficit areas, leading to shipments of aluminuam from surplus areas. Trade of this nature has been referred to in a United Na- tions study on steel 1/ as "deficit covering". The second is comparative advantage, which leads to imports of aluminum by countries which are able to produce all or most of the aluminum required for their domestic con- sumption. These comparative advantages include location, differences in productivity, traditional specialization and sales policies of the indi- vidual producers so that at a particular time they are able to offer alu- minum for export at an attractive price or on favorable delivery terms. This kind of trade is referred to as "exchange". 2/ The underlying fac- tors for this tendency include increasing domestic supply in the major deficit areas of the United States and Western Furope on the one hand, and the expanding geographic dispersion of production facilities of major producers through their foreign operations. The internationalization of the operations of the major producers may also be an important contr-ibutinlg factor. 24. An attempt has been made in Table III-6. based on data in Tables III-1 and III-2, to quantify approximately these two influences based on the methodology used in the above-mentioned study. Briefly, the method was to compute the net exports of each exporting country in a given year and to take the sum of these as equal to global net imports or imports used to cover import deficits. The difference between total export trade and the sum of such net exports then was taken as a measure of exchange trade. The results indicate that while the bulk of world trade (exclud- ing the Bloc) still is based on deficit covering, the share of total trade 1/ United Nations, Long-Term Trends and Problems of the European Steel Industry (Geneva,71959). 2/ Ibid. - 24 - based on locational and other factors influencing the decisions of indi- vidual plants has gained considerably in importance, rising from less than 10 percent of the total in the early post-war years, when both Europe and the United States relied heavily on Canada to cover their import deficits, to about a quarter of the total as of 1963-1965. Table III-1: WOR9LD EXPORTS OF ALUI4ITUM BY PIAJOR COM TTIES, 1948-1965 (1,000 metric tons) 1948 1949 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 United States 1 8 1 1 1 2 4 5 31 26 48 110 259 117 137 150 189 185 Canada 297 269 305 322 374 417 425 463 462 434 440 460 501 442 523 576 570 642 Total N. America 298 277 306 323 375 419 429 468 493 460 488 570 760 559 660 726 759 827 Western Europe Austria 15 10 1t 7 11 26 21 25 24 23 32 38 22 28 42 35 34 32 Belgium-Luxembourg 2 4 3 -- -- 1 2 1 1 1 1 1 1 1 1 1 1 2 France 1 9 17 9 9 39 17 22 13 13 40 33 57 106 86 84 87 125 Germany - - - 1 5 25 12 -- 1 6 4 2 3 3 4 12 7 6 Italy 17 4 4 7 5 3 12 5 3 1 9 10 1 -- __ __ 19 32 Netherlands -- 1 -- -- -- 1 -- 4 1 1 2 2 1 2 1 -- 1 1 Norway 22 22 40 42 35 49 46 61 80 72 110 132 138 146 172 208 265 243 Spain - - - - - - - - - - - -- 11 4 11 10 8 - Sweden - - - __ __ -_ 3 1 1 1 3 2 -_ __ __ 1 2 2 Switzerland 11 7 10 2 3 9 8 5 3 2 7 8 8 5 7 16 16 17 United Kingdom 7 6 6 2 2 12 4 4 3 3 1 2 2 2 1 1 3 12 Total W. Europe 75 63 94 70 70 165 125 128 130 123 209 230 244 297 325 368 443 472 Cameroon - - - - - - - - - 5 21 26 38 44 46 47 50 33 Japan - - 23 7 7 10 8 14 3 -- 4 -- - - 6 14 19 29 Australia - - - - - - - - - 1 - - - - - 5 15 22 Total above 373 340 423 400 452 594 562 610 626 589 722 826 1042 900 1037 1160 1286 1383 Soviet Bloc - - - - - - -- 42 60 85 115 77 68 86 116 122 175 229 Wcrld Total 373 340 423 400 452 594 562 652 686 674 837 903 1110 986 1153 1282 1461 1612 - Nil -- Less than 500 tons. Sources: Metallgesellschaft, op. cit. Organization for Econonic Cooperation and Development, The Non-Ferrous Metals Industry (Paris, various issues). l 4 4 l * Table TTT-2: WORL.D IMP()T3 O.P ALUNIKTiTl BY LA,JOR COU'liTRIS, 1948-1965 (1,000 metric tons) 1948 1949 1950 1951 1952 19'53 19581 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 United 3tates 75 71 160 111 116 273 195 161 196 202 232 218 140 181 282 377 356 476 Canada - - - - 1 2 10 1 1 1 4 2 4 6 Total LS. America 75 71 160 111 116 273 195 161 197 204 242 219 141 182 286 379 360 482 Wiestern Lurope Austria - - - - 1 1 2 1 Belgium-Luxembourg 5 8 9 14 13 13 18 27 33 28 42 49 64 70 68 89 113 117 France 23 5 1 2 4 -- 2 1 7 9 29 33 54 43 51 53 67 66 Germany 16 16 5 10 6 15 19 43 39 41 61 80 176 135 116 120 160 166 Italy 9 5 14 4 4 8 5 6 12 17 6 16 34 26 44 52 33 34 Netherlands 10 4 4 6 7 6 8 11 10 8 9 14 15 14 15 20 22 20 Norway -- 1 1 2 2 2 1 -- 1 -- 2 -- 1 2 1 2 12 10 Spain 2 3 2 2 1 3 3 2 3 5 11 6 2 4 7 7 5 11 Sweden 14 13 8 12 15 15 15 19 20 16 21 22 28 24 31 37 25 27 Switzerland 7 9 3 5 5 3 9 10 10 10 7 16 16 I1 11 5 6 12l United Kingdom 141 168 143 180 241 182 194 263 236 194 214 254 316 240 255 271 332 324 Total id. Europe 227 232 190 237 298 247 274 382 371 328 402 490 706 569 600 657 777 788 Japan - - - - - 1 1 - 3 9 -- 15 23 32 16 17 19 23 Australia - - - - - - 470 - 10 9 15 20 27 16 32 12 1 - Total above 302 303 350 348 414 521 470 543 581 550 659 744 897 799 934 1065 1157 1293 Soviet Bloc - - - - - - -- 7 10 - - - - 1 - - - World Total 302 303 350 348 414 521 470 550 591 550 659 744 897 800 934 1065 1157 1293 - Nil- -- Less than 500 tons. Sources: Metallgesellschaft, op. cit. OECD, op. cit. Table III-3: TRENDS OF EXPORTS AND W1PORTS OF ALUJ41N11J1UM BY MAJOR COUMRIES FOR SELECTED PERIODS 1936-1965 (3-year averages in 1,000 metric tons) 1935-1937 1948-195o 1958-1960 1963-1965 Import Export Balance Import Export Balance Import Export Balance Import Export Balance United States 13,8 1.3 -12,5 102.00 3.00 -99.00 197.00 139.00 -58.oo 403.00 175.00 -228.00 Uanada 32.4 +32.4 290.00 +290.00 4I.00 407.00 +463.00 4.00 595.00 +591.00 Total '1. America 13.8 33.7 +19.9 102.00 293.00 +191.00 201.00 546.oo +405.oo 407.00 770.00 +363.00 T;western Europe Belgium-Luxembourg 2.9 1.1 -1.8 7.00 3.00 -4.00 52.00 1.00 -51.00 106.00 1.00 -105.00 France 0.5 3.2 +2.7 10.00 9.00 -1.00 39.00 43.00 +4.00 62.00 99.00 +37.00 Germany 6.7 3.1 -3.6 12.00 -12.00 106.00 3.00 -103.00 149.00 8.oo -141.00 Italy 1.3 2.0 +0.7 Norway 17.2 +17.2 1.00 28.00 +27.00 1.00 127.00 +126.00 8.00 239.00 +231.00 Sweden 1.7 -1.7 Switzerland 3.1 12.8 +9.7 6.oo 9.00 -3.00 7.00 16.00 +9.00 - United Kingdom 25.9 4.1 -21.8 151.00 6.00 -145.00 261.00 2.00 -259.00 309.00 5.00 -304.00 Other W. Europe 35.00 23.00 -3.00 74.00 52.00 -22.00 100.00 60.00 -31.00 Total W. Europe 42.1 43.5 +91. 222.00 78.00 -141.00 533.00 228.00 -305.00 741.00 428.00 -304.00 Other countries 7.6 -7.6 8.00 +8.00 33.00 30.00 -3.00 24.00 78.00 +54.00 Total above 63.5 77.2 +13.7 324.00 379.00 +58.00 767.00 804.00 +97.00 1172.00 1276.00 +113.00 Soviet Bloc 86.oo +86.oo 175.00 +175.00 World Total 63.5 77.2 +13.7 324.00 379.00 +58.00 767.00 890.00 +183.00 1172.00 1451.00 +288.00 + Indicates net exports - Indicates net imports. Source: Metallgesellschaft, op. cit. Taile IIT-4. W~.O.PLD T3ADE OF AlUATITUM, BY OiIGITH AND DESTIITATIOI1, IN 1948 (1,000 metric tons) United Latin Western Africa/ Asia (Ex Eastern Tr:'tal States Canada America Europe Middle Japan) Japan Oceania Others Europe World From East Exr.orts United States/ - - - .7 - - - - .4 - 1.1 Canada 70.6 - 10.7 195.1 .4 3.3 - 5.0 - 11.6 296.7 Austria 1.0 _ _ 13.9 _ _ _ _ _ .2 15.1 B31gium-Luxembourg .8 - .5 - - - - - .6 - 1.9 F1rance *5 .1 - .1 .1 1.2 2/-- Jermany/ - - - - - - - - - - I,ay 6.1 - 4.9 6.4 - _ _ _ _ 117.4 e'therlands - - - .1 - - - - .1 -2 ;Torway 1.8 _ .2 16.9 - 3.0 2t.9 Siain - 'Tqi 3zorland 1.4 - .4 6.6 - - - - - 2.4 10.d br:4ed Kingdom 2.2 .2 .4 3.3 .2 _ _ .1 .3 - 6.1 toal Western Europe 13.3 .2 6.9 47.6 .3 .1 1.1 5.7 75.2 Japan - - - - - - - - - - Aotal above 83.9 .2 17.6 243.4 .7 3.3 _ 5.1 1.5 17.3 373.0 U. S.S. R. TLotal World Imports 83.9 .2 17.6 243.4 .7 3.3 5.1 1.5 17.3 373.0 1/ Excluding re-exports during 1948. 2/ 1948 foreign trade of the Bizone. - Nil or negligible. Source: 2cta11gt3eo1lschaft, OP. cit. L'4hle III-5: WORID ALliMINUM TRADE BY ORIGIN AND DESTINATION IN 196b (1,000 metric tons) TO United Latin Jestern Africa/ Eastern Total F:'l4 States Canada America Europe Mid.East Asia Japan Oceania Others Europe W;orld Exports United States - 2.0 18.5 125.7 - 5.6 3.7 .3 33.5 - 189.3 nanada 231.0 - 21.9 251.3 22.6 14.0 21.9 6.9 _ _ 569.6 Total rJ% America 231.0 2.0 40.4 377.0 22.6 19.6 25.6 7.2 33.5 - 758.9 Western Europe Austria .3 - .5 30.2 .3 - - - - 2.5 33.8 Belgium-Luxembourg - - 1.0 - - - - - 1.0 France 4.4 4 4.7 72.2 5.0 .3 - - - - 86.8 Germany - - - 8.9 .5 .3 - - .2 - 9.9 Italy - - - 18.3 - - - - .9 - 19.2 M Netherlands _ - - .7 - - - .7 Norway 91.14 3.6 161.6 3.1 - - 4.5 .6 264.8 Spain - - - - - - - - 8.2 - 8.2 Sweden - - - - - - - - 2.1 - 2.1 Switzerland - - .3 18.7 - - - - .1 - 19.1 United Kingdom - .2 - 5.4 .2 .5 - *1 .3 - 6.7 Total W. Eirope 96.1 .2 9.1 317.0 9.1 1.1 - .3 16.3 3.1 452.3 Australia 3.0 - - 9.0 - 3.0 - - - - 15.0 Cameroon 4.0 -- 144.0 -- - - - - 48.o Japan 14.5 - 3.0 - - 1.5 - - - - 19.0 Total above 348.6 2.2 52.5 747.0 31.7 25.2 25.6 7.5 49.8 3.1 1293.2 Soviet Bloc - - - - - - - - - - - Total World Imports 348.6 2.2 52.5 747.0 31.7 25.2 25.6 7.5 49.8 3.1 1293.2 - Nil or negligible. Source: Metallgesellschaft, op. cit. OECD, op. cit. - 30 - Table III-6: ESTRIATED CO01POSITION OF WORLD/ TRADE IN ALIUMIIJUM, 1948-1965 Total Of which: Eorts Deficit Covering Exchange ,000 (1,000 (As percentage (1,000 (As percentage tons) tons) of total trade) tons) of total trade) 1948 373 346 92.8 27 7.2 1949 340 300 88.2 4o 11.8 1950 423 404 95.5 19 4.5 1951 400 388 97.0 12 3cO 1952 452 431 95.4 21 4.6 1953 594 554 93e3 4° 6.7 1954 562 520 92.5 42 7.5 1955 610 584 95,7 26 4.3 1956 626 570 91.0 56 9.0 1957 589 536 91.0 53 9.0 1958 722 606 83.9 116 16.1 1959 826 655 79.3 171 20.7 1960 1,042 868 83.3 174 16.7 1961 900 720 80.0 180 20.0 1962 1,037 816 78.7 221 21.3 1263 1,160 906 78.1 254 21.9 1964 1,286 948 73.7 338 26.3 1965 1,383 1,025 74.1 358 25.9 1/ Excluding the Soviet Bloc. Source: Tables III-1 and 2. - 31 - IV. PRICE TRZNDS 25. The long-term price trend of aluminum is represented in Table RI-1 in terms of actual and real prices (1966=100) in the United States and the United Kingdom. (The price in the U.S.., in actual and real terms, is also plotted in Chart I-1.) Of the two markets, the Unitted Kingdom is the lower-priced and more sensitive since it reflects more closely inter- national competition and the influence of marginal amounts of metal not readily saleable elsewhere. The London price also fluctuates more fre- quently and more widely, being influenced to a greater extent by demand from independent fabricators than the United States price, which reflects largely the posted offering price of the major sellers. In addition, the United States prQducer price is deliberately adjusted only from time to time rather than allowed to fluctuate freely from day to day._/ 26. The long-term. price history of the world aluminum industry presents an excellent example of the price trend in an industry going through the stages of infancy, growth and maturity. Its most pronounced feature is the steady long-term fall in real terms (1966=100) from over a dollar a pound at the turn of the century to about 50 cents a pound during the 1920's and 1930's and then to about 20 cents per pound durilng the early post-Wflorld War II years. This trend reflects a steady fall in the unit costs of production, iwhich in tkurn is largely attributable to a rising scale of production and tech.nological refinements in the produc- tion process. For example, in 1962 the unit costs of power and labor for aluminuml production in France were lower by about 30 percent and 15 per- cent, respectively, than they were in 1938.2/ 27. It is initeresting to note that the benefits of the declining unit costs have been passed on by United States producers, in teims of the selling price of aluminum, by rmaintaining a nominal market price of primary aluminum at levels that have fallen between 20 cents and 25 cents per pound in most peacetime years since 1909 and permitting the general inflation of commodity prices as a whole to yield a declining real price for aluminum. In effect, this strategy has given the aluminum industry, in its search for new markets and its thus far successful battle wvith other materials, both relative stability in its current price and a rela- tive cost advantage over the longer term. An interesting oy-product of this strategy, however, was that the real price of alum.inum was higlher during the years of the Great Depression than during the 1920's, simply because the nominal United States price was lowered only moderately and gradually from 2h1.3 cents in 1929 to 19.9 cents per pound in 1937. 28. ~ khile fluctuations in the price of aluminum have been modest in relatioin to price fluctuations in other non-ferrous metals and in most other primary commTodities, they have nevertheless existed. In general, 1/ The fact that prior to 1940 Alcoa was the sole producer in the United States, as noted before, miglht also have some bearing on its price trend. 2/ lIetal Information Bureau Ltd., Aluminum: World Survey (London, Decemiber 1963). - 32 - they appear to have reflected periods of large idle capacity in the in- dustry. This is illustrated in Chart I-1 which shows world production and consumption of aluminum for the peacetime years between 1920 and 1966 and reported capacity between 1952 and 1966. The chart also shows the annual average price in the United States in nominal and real terms dur- ing the period. For the periods 1919-1925, 1930-1934 and 1943-1953 a notional idea of capacity is shown by a light dotted line during periods when production fell below a previous peak. It will be noted that in periods of inadequate or falling demand, the industry is subject to a weakening of prices, a situation usually corrected quickly, however, even if the resultant idle capacity is of considerable proportion, as it was in the early 1920's and again during the reconversion period following World War II. 29. The bottom of the long-tenm decline in the real price of alum- inum was reached in the early 1950's, ironically at the height of the Korean War, when it reached an annual average of 20.2 cents per pound in 1951 (in 1966 money terms). The corresponding norminal quotation for that year in the United States was 19.0 cents per pound. Subsequently, the price increased to a plateau of 23.2-26.5 cents per pound in real terms, or 24-26 cents per pound in nominal terms during the period 1956-1962, falling back to the lower 20's cents in 1962-1964 and recovering to roughly the previous plateau level (24-25 cents per pound) in 1965-1966. 30. Tne resultant upward trend shown by aluminum prices in the post-Wiorld Vir II years certainly reflects temporary supply and demand factors. The early postwar trough in the curve reflects a fall in pro- duction resulting from the reconversion of the industry in the United States from heavy military equipment production to meeting civilian re- qouirements. Prices strengthened, however, as rising demand absorbed, and at times threatened to exceed, existing and additional capacity during most of the 1950's. During the mid-1950's boom in durable goods produc- tion, capacity utilization averaged 94 percent on a worldwide basis. This was also a period when the United States strategic stockpile was being accelerated, and at times capacity expansion barely kept up with total demand. The boom, however, generated not only an increasingly ambitious round of capacity expansion, especially in the United States, but also encouraged new entry into the field (see Chapter II). In the United States, ironically this was promoted by the very fact of the high degree of vertical integration in the industry. In times of short supply, small independent fabricators of aluminum products are the ones who are affec- ted most seriously. This was a part of the influences leading to en- couragement of new producers by the government. 31. Towards the end of the 1950's, the virtual coincidence of the industrial recession in the United States of 1956-1957 and the sudden appearance of Soviet aluminum on the international market at competitive prices (see Appendix A, Chart 1) caused another dip in prices, but the weakness wias short-lived and the recovery to a post-war peak of 252S-26 cents in 1960-1961 was swift. During 1964-1966, the price settled at about 24-25 cents per pound in the United States in real terms (and at a similar level in dollar terms in the United Kingdom) while operating rates in United States industry averaged 98 percent of capacity. - 33 - 32. There is some evidence that supply and demand influences on prices during the post-World War II years, a period of generally vigorous demand growth, may have been partly offset by a continuation of the long- run decline in production costs, although perhaps at a somewhat slower pace that in the past. Many United States producers have stressed repeatedly their ability to reduce unit production costs and mainitain the price advantage of aluminum relative to other competing materials. The rising efficiency has been based on lower unit input of both energy and labor through continuous technological advance; one important example is the use of reflectory hard metals in reduction cells which leads to a significant rise in productivity according to the leading producers. There are no indications that the industry may not be able to maintain such trends in the foreseeable future.l/ 1/ See especially the 1961 Annual Reports of Reynolds and Kaiser and the 1962 Annual Report of Alcoa. For data on current production process see Ivan Bloch and Samuel Moment, The Aluminum Industry of the Pacific Northwest (Portland, Oregon, 1967). - 34 - Table I-V-1: ALUMINIU PRICES IN U.S. AND U.K., 1900-1966 United States United Kirngdom Year Actual Price Real Price_/ Actual Price Real Price 4 per lb) (1966=lo0) (1! per long ton) (1966=100) 1900 32.7 109o.4 - 1901 33.0 112.2 _ 1902 33.0 105.1 - - 1903 33.0 104.1 _ . 1904 35.0 110.1 _ 1905 35.0 109.3 - - 1906 35,8 io8.4 _ _ 1907 45.0 129.7 _ _ 1908 28.7 85.7 1909 22.0 61.1 - - 1910 22.3 59.4 1911 20.1 58.3 - _ 1912 22.0 59.8 - - 1913 23.6 63.4 80.0 379.1 1914 18.6 51.2 82.0 388.6 1915 34.1 92.2 91.2 341.6 1916 60.7 133.4 156.0 464.3 1917 51.2 81.9 219.2 507.4 1918 33.6 48.2 223.0 469.5 1919 32.1 43.6 154.2 302.14 1920 30.6 37.2 163.8 263.8 1921 21.2 40.8 142.9 372.1 1922 5.87 36.3 105.4 325.3 1923 25.4 47.4 110.8 349.5 1924 27.0 51.8 122.5 356.1 1925 27.2 49.4 121.2 360.7 1926 27.0 50.7 ii6.o 375.14 1927 25.4 49.9 106.0 351.0 1928 24v3 47.1 99.2 337.4 1929 24.3 47.9 95.0 336.9 1930 23.8 51.7 93.3 392.0 1931 23.3 60.1 87.8 432.5 1932 23.3 67.3 96.3 491.3 1933 23e3 66.4 100.0 518.1 1934 23.3 59.4 100.0 500.0 1935 20.0 46.9 100.0 487.8 1936 20.0 46.5 100.0 458.7 1937 19.9 43.4 10OX0 395.3 1938 20.0 47.8 97.5 437.2 1939 20.0 48.7 95.3 410.S 1940 18.7 44.7 110.0 347.0 1941 16.5 35.5 110.0 313.14 1942 15.0 28.6 110.0 294.1 1943 15.0 27.3 110.0 286.5 -35 - Table TV-l: Continued United States United Kingdom Year Actual Price Real PricelY Actual Price Real Price_ (¢ per lb) (1966-100) (; per long ton) (1966=C00) 1944 15.0 27.0 I10.0 277.8 1945 15.0 26.6 89.2 220.2 1946 15.o 23.3 73.8 160.4 1947 15.0 19.0 78.3 137.6 1948 15.7 18.4 81.8 127.2 1949 17.0 20.9 95.6 141.0 1950 17.7 21.0 113.8 142.1 1951 19.0 20.2 124.0 124.7 1952 19.4 21.2 115.8 123.2 1953 20.9 23.2 156.8 173.1 1954 21.8 24.1 156.0 174.7 1955 23.7 25.6 167cO 182.5 1950 24.0 26.4 189O8 199.8 1957 25.4 2504 197.0 211.8 1958 24.8 25c2 184.3 209.9 1959 24.7 26.5 180.0 204,2 1960 26.0 26.1 186.0 209.5 1961 25.5 24.4 186.0 212.3 1962 23.9 23.2 181.0 203.1 1963 22.6 24.2 181.0 195.7 1964 23.7 24,2 191.0 192.9 1965 24.5 24.6 196.0 196.2 1966 24.5 24.5 196.0 196.0 1/ Deflated by U.S. General Wholesale Price Index (1966=100). 2/ Deflated by U.K. Sauerbeck Index (1966=100). Source: Metallgesellschaft, op. cit. - 36 - V. DEMAND PROSPECTS 33. The level and growth trend of aluminum demand tend to vary among countries partly due to differences in the composition of their industrial production and partly due to the degree of their industrial developmnent. The effects of these influences on national levels of aluminum consumption per capita are illustrated by comparative data given in Chart V-1 on the level of per capita GiNP and aluminum consump- tion of selected countries in 1964. The chart shows, for example, that although per capita GNP in Benelux and Denmark is about the same, per capita aluminum consumption in the former is about 10 times higher tlhan in the latter. 34. Generally speaking, however, the growth of aluminum demnand is chiefly determined by the growth of a country's industrial activity and this relationship has often been used as a means to project future aluminum requirements. However, the elasticity ratio between industrial growth and aluminum demand growth in individual countries tends to change over time as a result of changes in industrial structure and aluminum use per unit of output. This is illustrated by the analysis of the trends in the United States given in Appendix B. Since 1950, the ratio of the growTth rate in world aluminum demand (excluding the Bloc) to world indus- trial production as a whole, as summarized in Table V-1, has not changed significantly. 35. The average elasticity for the 1950-1966 period was 1.62 with a range of variations from 1.50 in 1954-1966 to 1.66 in 1957-1966 and cor- Irelation has remained very high. The generally stable elasticity ratio of aluminum demand with respect to manufacturing can be attributed mainly to: (a) the general trend towards increasing aluminum input per unit of output in the leading consuming industries (autormotive, building, packaging, electrical machinery industries); (b) relatively faster growth in the aluminum intensive sectors in industrial activity; and (c) the relatively favorable price trend compared with most competing materials as noted before. 36. There are no indications that these factors will chanage sig- nificantly in the foreseeable future and this assumption wuderlies the choice of elasticities indicated in Table V-2, wfhich shows projected demand for the world and by major geographic areas to 1970 and 1975 (represented by centered three-year averages). For the world (excluding the Bloc) as a wyhole it seemed reasonable to assume an elasticity of 1.60 and a growth rate in industrial production of 5.5 percent per annum for the period to 1969-1971. 37. Table V-2 shows that, on the basic assumptions stated above, the growth rate of aluminum consumption for the world as a whole would amount - 37 - to 9 percent per annum between 1964-1966 and 1969-1971. This would lead to an annual volume of aluminum demand of about 8.4 million tons in the early 1970's. The above figures would compare with a growth rate of about 10 percent per annum between 1959-1961 and 1964-1966 and an annual average of aluminum consumption of 5.4 million tons in 1964- 1966. It should be noted that the projected rate is slightly higher than the growth trends (8 percent per annum) which had prevailed during the ten-year period 1954-1956 to 1964-1966. However, using aluminum consump- tion in 1966 as a base, an annual level of 8.4 million tons in the early 1970's would reflect a growth rate of around 7.5 percent per annum. These estimates may be compared with those made by the Kaiser Aluminum Company in 1964 which forecast an annual level of about 7.3 million tons in 1970 for the world (excluding the Bloc) based on a growth rate of about 8.5 percent per annum. 38. For the United States, the growth rate during the next five years, as given in Table V-2, was assumed to be about 9 percent per annum leading to an annual aluminum consumption of about 4.5 million tons in 1969-1971. During 1959-1961 and 1964-1966, the growth rate of United States aluminum consumption was almost 11 percent per annum and demand in the United States had reached a level of 3.3 million tons in 1966. Resources for the Future has used three different growth rates ranging from 4 percent and 7.5 percent to 12 percent for 1960-1970 based on different assumptions concerning aluminum intensity in consuming industries and probable growth trends in industrial production. The estimated level of 4.5 million tons per annum by 1970 in this report is equal to the average volume between the medium and high growth assump- tions contained in the RFF study. Recently, an independent research organization has estimated aluminum demand in the United States at about 4 million tons per annum in 1970 based on an average growth rate between 6 percent and 8 percent per annum during 1965-1970, of which about three percentage points (i.e., up to as much as half the growth rate) is related to new uses of aluminum. With regard to the lower end of the forecasted range of growth rates, the underlying assumptions would seem to be rather too pessimistic in terms of sectoral influences and perhaps too optimTistic in terms of the relative contribution of new uses to the overall growth rate. 39. The growth rate of aluminum consumption for Western Europe has been calculated at around 7 percent per annum resulting in an annual level of aluminum demand of 2.2 million tons in the early 1970's. This would imply a continuation of the same growth rate which prevailed between 1959-1961 and 1964-1966 and compares with a demand of 1.7 million tons in 1966. Alcan in 1963, applying a projected growth rate of 6 per- cent for the period 1962-1970, arrived at an annual level of 2 million tons in 1970 for Western Europe. 40. For Canada, the growth rate in 1969-1971 was estimated at 8.5 percent per annum, resulting in an annual level of aluminum consumption amounting to about 300,000 tons during 1969-1971. The growth during 1959-1961 and 1964-1966 was about 11 percent and the demand in 1966 amounted to about 180,000 tons. The growth assumption was related, as in the other OECD countries, to the projected income growth trend forecast by OECD. - 38 - 41. For Japan, the growth rate of aluminum demand during the next few years was estimated at about 15 percent per annum, which would lead to a total demand of about 60,O00 tons per annum in 1969-1971. Aluminum has been growing at an annual rate of about 16 percent between 1959-1961 and 1964-1966, and it is assumed that the rate of growth from a base of 1966 (390,000 tons) will continue at only marginally reduced levels. For the rest of the world, the growth rate for 1969-1971 wias assumed to be 15 percent per annum, leading to a total demand of about 800,000 tons per annum in the early 1970's, on the assumption that there would be only a slight weakening of the rate of growth of recent years. 42. For longer-term planning purposes, of course, 1970 represents too short a time horizon. A more distant target date, obviously, greatly increases the uncertainty of projections, both from the point of view of assumptions regarding overall economic growth and assumptions regarding technical coefficients. In the absence of firm or specific information regarding both, it has generally been assumed for 1970-1975 that there would be a slight slowing-down in the average pace of industrial produc- tion and in the income elasticities of demand, in view of the fact that these elasticities are still comparatively high and that they have tended to decline in the longer run. It is specifically assumed that either there will be no technological breakthrough before the mid-1970's in the development of an economically feasible aluminaum automobile engine for general use or that such a breakthrough will occur too late in the period covered to have a significant impact on the elasticities of demand (see automobile market trends in Appendix B). 43. In the light of these assumptions, any change froa the rate of growth forecast to the early 1970's will probably be in a downward direc- tion but only marginally so, especially on a global basis. Generally, a global rate of growth of 8.5 percent per annum seems reasonable between the early and mid-1970's, with demand in both Western Europe and the United States moving at about the same rate of 8 percent per annum. In Western Europe, the projected rate for 1970-1975 (midpoints of three-year averages) would in fact represent a slight acceleration of rates realized since 1966. 44. If these rates of growth were realized, then world demand (excluding the Bloc) for aluminum in the mid-1970's should reach close to 12-3/4 million tons per year, compared to 6.1 million tons per annum in 1966. Of the global consumption pattern in the mid-1970's, almost 90 percent would still remain in the developed areas, with the United States accounting for slightly over 50 percent, and Western Europe for about one quarter of the totals / For an interesting compilation of world demand projections for aluminum see Ivan Bloch and Saimuel Moment, op., cit. Table V-1: ELASTICITIES AND CORRELATION COEFFICIENTS OF ALUMINUM CONSUMPTION IN RELATION TO INDEX OF PROLJCTION OF MANUFACTURES, 1950-1966 United States Canada O.E.C.D. (Europe)!Y Japan World_ Elasti- Correlation Elasti- Correlation Elasti- Correlation Elasti- Correlation Elasti- Correlation city Coefficient city Coefficient city Coefficient city Coefficient city Coefficient 1950-66 1.89 .973 1.218 .928 1.512 .987 1.349 .998 1.616 .991 1954-66 1.67 .969 1.501 .944 1.384 .982 1.355 .996 1.502 .987 1955-66 1.71 .965 1.572 .94o 1.357 .977 1.359 .995 1.531 .984 1956-66 1.77 .968 1.648 .940 1.396 .975 1.358 .993 1.598 .988 1957-66 1.81 .970 1.637 .933 1.433 .971 1.345 .990 1.656 .990 1958-66 1.71 .977 1.473 .938 1.343 .968 1.300 .990 1.570 .995 1959-66 1.68 .966 1.505 .926 1.190 .962 1.251 .985 1.517 .993 1960-66 1.81 .975 1.236 .977 1.181 .938 1.293 .975 1.624 .999 1/ For O.E.C.D. (Europe) aluminum consumption is correlated with the Index of Industrial Production. For all other countries aluminum consumption is correlated with Index of Production of Manufactures. 2/ Excluding the Soviet Bloc. Equation used: Log X1 = a + b log X2 where: X1 = consumption of aluminum X2 = index of production of manufactures. Source: Metallgesellschaft, op. cit. (for basic consumption figures). O.E.C.D., Main Economic Indicators (various issues). Table V-2: WORLD-1/ ALUMINUM DEMAND PROJECTIONS, 1964-66 TO 1969-71 AND 1974-76 United Western Total States Europe Japan Canada O.E.C.D. Others Worldi/ Recent Trends (percentage p.a.) 1950-5? to 1964-66 9.0 9.0 19.0 6.o 9.0 18.0 9.5 1954-56 to 1964-66 7.0 7.5 19.0 8.0 8.o 17.0 8.o 1959-61 to 1964-66 11.0 7.0 16.0 11.0 10.0 16.o 10.0 Demand Elasticity Range 1950 to 1966 1.7-1.9 1.2-1.5 1.2-1.4 1.2-1.6 1.5-1.7 1.5-1.7 Assumed Demand Elasticity 1964-66 to 1969-71 1.8 1.3 1.3 1.4 1.6 1.6 1969-71 to 1974-76 1.7 1.4 1.2 1.4 1.6 1.5 Estimated Growth Rate of Indus- trial Production (percentage p.a.) 1964-66 to 1969-71 5.0 5.5 11.5 6.o 5.5 5.5 1969-71 to 1974-76 4.5 5.5 10.0 6.o 5.o 5.0 ° Estimated Growth Rate of Aluminum Demand (percentage p.a.) 1964-66 to 1969-71 9.0 7.0 15.0 8.5 9.0 15.0 9.0 1969-71 to 1974-76 8.o 8.0 12.0 8.5 8.o 13.5 8.5 Actual Aluminum Demand (million tons) 1964-66 (average) 2.9 1.6 0.3 0.2 5.0 0.4 5.4 1966 3.3 1.7 0.4 0.2 5.6 0.5 6.1 7stimated Aluminum Demand (million tons) 1969-71 (average) 4.5 2.2 o.6 0.3 7.6 0.8 8.4 1974i-76 (average) 6.5 3.2 1.0 0.45 11.2 1.5 12.7 1/ Excluding the Soviet Bloc. Souirce: Table V-1; Metallgesellschaft, op. cit.; O.E.C.D. Main Economic Indicators, op. cit CGart V-1 PER CAPITA CONSUMPTION OF ALUMINUM AND PER CAPITA GNP OF SELECTED COUNTRIES IN 1964 100.07111 ____ 80.0 - - - - _ _ _ - - - --.- - --- 60.0 tJ - - - - - - 50.0 - - - - - - - - - - - -- - - --- 400!-____--- - 30.0 I UNITED STATE4 t BELGIUM-LUXO 20.0 _WSITZERLAN D,,1 GERMANY, F R., I * ~~SWEDEN Z ] --|; - - -- NE AUST RIA U K >20 ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ' 0 iA ~ z ~~~~~~~~~~~~~~~~~~HUNGARY. NRA O i I .FRANCE a.. I I IC.LZECHOSLOVKIA *AUSTRALIA 2 w-Jo- _ o.~~J PRODUCTION 100 ' ' _ _ - .__" 50 50 r, PRO tDUCTION 50 0 0 .l.L . . . . .250 200 1 ELECTRICAL AND 2 APPLIANCES COMMUNICATIONS _200 1 50 -_ PRODUCTIOALUMINUM CONSUMPTION. 5 PRODUCTION 0 - ~~~~~~~~~~~~~100 50___,-_ ALUMINUM CONSUMPTION . 50 50 300 PACKAGING 250 I250 ALUMINUM / MACHINERYI AND 200 ALUMINUM CONSUMP TON - EQUIPMENT 200 150 ISO PRODUCTION _-.10-- PRDUCTION/," - 0 50_ - ALUMINUM CONSUMPTION 50 a o-. N'L n tlo -.o "I 0Da N If) "U 0 01 a 0 - T LO 0 1( 1- 0 d) 0 - CT n 0 U 1 It ID If) U) Lo t) LL) L) LC LO0 s 0 CD 0 ( 'I IT LO t f LC LO LC LO EC W) tc LO (D (D w (D 0 a) aw al l a, B o) a a-, a) O l an _- ao a> El 0)a) a) al al aw al al aw an) ao aw al al a) al al an aw a) a SOURCES: Tables B-2 and B-3. 4 (R)IBRD -3433 -16 - Appendix B Chart 2 Annual Averages of London Copper and Alumminim Quotaions 1850-1963 *4, -£copper .....alumni m b. 4- .......500 0~~~4 I M 1|1,l11 11 '1 j1i1F11 4 U0 185no lUO UN an 1M 11 NO 1940 " 1929 19Jgr Source: Metallgesellschaft, op., cit. dMndix B - Page 17