R E S T R I C T E D
Report No.EC-78a
C1E2CUlAhG U >a f\pY
TO BE RETURNED TO ARlIIIVES DiV!SION
This report was prepared for use within the Bank. In making it
available to others, the Bank assumes no responsibility to them for
the accuracy or completeness of the information contained herein.
INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT
TIHE PROSPECTS
FOR
ALUMINUM
September 14, 1959
RIlE COPY
Economic Staff
Prepared by: Kenneth A. Bohr



I              J                                                                                                                                                                                



Tab-Le of_Contents
Page
Sum_ary and Conclusions                                                  i-ii
Introduction                                                              1
I.    Recent Develonments and the,Present Situation in the
World's Aluminum IndustrV
A. The General Pattern of Production, Consumotion and
Trade                                                       2-3
B.  The U.S. and European Markets                                 3-5
C.  Recent Trends                                                 5-7
II.   The Prospects for Demand
A. Characteristics of -the Aluminum Market and the
Problem of Anticipating Future Demand                       8-9
B.  The Prospects for the U.S. Market                            10-11
C.  Prospects for the European Market                             11
III.  Estimates of Future Suppl.v nd Europels GrowingNeed
for Imports
A. The Importance of Power in the Production of
Aluminum                                                    12
B.  The Future Supply of Aluminum                                12-13
C.  The Future Balance of Capacity and Demand                    13-14
D.  Europe's Growing Need for Imports                            14-15
IV.   Filling the GaD
A. Aluminum from Canada                                          16-21
B.  The African Projects                                         21-22
C. Aluminum from Russia                                          23-26
D. A Probable Pattern of Development                              27
E.  Price Considerations                                         27-28
Appendix A - Differences in t_e Aluminum Consumption, Farp e
and the U.S.
Statistical Appendix



i
S-T114ARY AiTD CONCLUSIONS
1.   In spite of the present surplus of aluminum, by the mid-1960's
there will be a need for additional smelting capacity over and above that
now existing or presently planned for construction in Europe, the United
States and Canada.   This new capacity will be required to meet the anti-
cipated growth of the markets in Europe and the U.S.   Part of the U.S. re-
quirements will probably be sulplied from increased domestic production; but
because of a lack of suitable power sites on the Continent, Europe's growing
needs must be met largely from imports.   The purpose of this paper is to
estimate the probable development of Europe's growing import needs and to
consider the ways in which they mayr be filled.
2.   A feature of the recent development of the aluminum industry has
been the shift in the center of production and consumption from Europe to
North America with the result that whereas before World War II consumption
was about equal in the two areas, today twice as much aluminum is consumed
in lNorth America as is consumed in Europe.   There is reason to believe that
the lag in European consumption is not due so much to basic economic factors
as to unusual conditions brought about by World lar II - the most important
being great differences in the conditions of supply between the two areas.
3.   The importance of supply conditions is reflected in the estimates
of market growth for Europe and the U.S.   In spite of the great differences
in levels of consumption, both markets are expected to grow at about the
same rate (8%) for the period 1956--65.   In the case of the U.S., the aggres-
sive developmernt and promotion of new uses typical of the industry is a
particularly favorable factor.   In the case of Europe, the fact that aluminum
consumers must depend on virtual national monopolies or imports for their
supplies may be expected to inhibit to some extent the expansion of the mar-
ket.   However, it is recognized that a major change in the conditions of
supply might have a stimulating effect on the European market and demand
might grow more rapidly than estimated.   After 1965 it is expected that
demand will grow faster in Europe -than in the U.S.
4.   Cn a world-wide basis present plans for expanding aluminum capacity
will be about in balance with expected demand by 1961; by 1965 more capacity
than presently planned will have to be built in order to supply the anti-
cipated market.   Some of this will probably be built in the U.S. to meet
growing domestic requirements.   However Europe, the other principal market,
can supply its expanding market only through imports.
5.   It is estimated that Elurope's import requirements will be approach-
ing 700,000 tons of aluminum a year by 1965 and that they will be increasing
at a rate of about 100,000 tons a year by this time.   These requirements
can be supplied from Canada, Africa, or possibly to some extent from the
U.S.S.R., which has recently increased its exports of aluminum to WTestern
Europe.  An analysis of each possible source results in the conclusions
that:



ii
(a) Canada may be expected to be the principal supplier of
European import requirements up to about 1965.
(b)  African supplies may enter the European market at about
this time or shortly thereafter and may be expected to
supply an increasing share of European requirements in
the late 1960's.   The rarket for African metal could
reach 1,000,000 tons by 1970.
(c)  Russian exports of alum.inumi are not expected to become
a major factor in t'he European market.   The quality of
Russian raw materials and the location of the major
planned expansion of thes industry in Siberia would place
Russian production for the European rrarket under a severe
disadvantage as compared' with production in Canada or
Africa.   Although shipirents to Burope may fluctuate, in
general they are not expected to exceed marginal anounts
in terms of the total market.
6.   The Canadians dominate t;he world trade in aluminum and most of the
metal shipped between countries moves at the Canadian export price of 22T10
(U.S.) a pound.   The  Canadians are expected to retain their position as
"price leader" in the export field and no significant change is expected in
the present level of prices at this time.   A key factor in the long term
price will be the cost conditions prevailing in the new producing areas.



THE PR1OSPECTS FOR ALUIAINUMI
Introduction
1.   In spite of the present surplus of aluminum, it is generally be-
lieved that by the mid-1960's there will be a need for additional smelting
capacity over and above that nlow existing or presently planned for con-
struction in Eurooe, the United States and Canada. Some of this new capa-
city will be required to meet the anticipated expansion of the U.S. market.
This portion will probably be built partly in the U.S. based. on domestic
resources of cheap fuel, and partly in Canada where cost conditicns are
more favorable.   The other large portion of new capacity will be required
to meet the expected growth in European consumption.   In this case, how-
ever, because of the scarcity of suitable power sites on the continent, the
anticipated demand cannot be met on an economic basis by expanding European
production.   Europe's growing requirements must be supplied increasingly
from areas more advantageously sit;uated for the economic production of
aluminum.   There are three possible sources for these requirements, Canada,
which still has vast untapped hydro resources; Africa, where the presence
of bauxite and hydro resources together has stimulated the planning of a
number of large schemes; and possibly the U.S.S.R., which has recently
increased its exports of aluminum to lestern Europe and which appears to
have both the resou-rces and the intention to considerably expand its alu-
minum production.
2.   Because of its central importance to the development of world
trade in aluminum and to the opening up of new sources of supply, this
paper focuses on Europe1s positi.on in the world alumsinum industry.   This
involves: (1) estimating the probable development of Europe's growing im-
port needs in the late 1960's and (2) considering the probable role of each
of the potential suppliers in meeting these requirements.   This in turn
involves an examination of the relative position of each of the suppliers.
together with the requirements of other markets.   In the case of aluminum
the prospects for the mid-1960's have a particular relevance today because
of the time required to construct new smelting capacity.   The pattern and
volume of supply in 1965 will be affected in large part by investment de-
cisions to be taken within the next year.
3.   The paper is divided into four parts.   Part I discusses the
present situation and the recent developments in the world's principal
markets for aluminum.   In Part II estimates of the probable grow-th of
demand in these markets are developed.   Part III deals with the prospects
for supply based on existing plans for expansion, the future balance of
capacity aid demand on a world-wide basis, and, in particular, the probable
development of Europe's import requirements.   In Part IV the various ways
in which Europe's requirements may be met are discussed ard a probable
pattern of development is suggested.



I.   RECENT DEIELOPM111TS AND THE PRESE-N-IT SITUATICO
I.K TlE- LTQE LD'S  LDIINUh INDUSTRY
A.  The General Pattern of Production. Consumption and Trade
4.   In the rapid development of the world's use of aluminum a number
of important trends can be observed which are of significance to an assess-
ment of the future prospects for the metal.   One of these has been the
shift in the center of production from Europe, where over half of the world's
aluminum was produced prior to W9rld War I, to Morth America where three-
fourths of it is now produced. i/ This shift took place largely as a direct
result of World War II.   However, a movement in this direction based on
the attraction of cheap power in North America had commenced earlier, al-
though it was obscured in thle 1930's by a combination of the U.S. depression
and German rearmament.   While U.S. and Canadian production did not regain
1929 levels until 1937, German aluninum production increased about 10 times
between 1933 and 1939, raising the German share of world output from 13; to
almost 30%.  The shifts of the pre-war years, however, were dwarfed by the
tremendous impact of the war it;self.   Between 1938 and 1943, the year of
peak wartime production, the production of aluiminum in NJorth America in-
creased 6e- times while that of Europe rose by only 40%.   The resulting
division of production, roughlr 3 tons in Nlorth America to every ton pro-
duced in lurope, remains to this day, although the total output of the two
areas is now 50$ above the wartime peak.
5.   The wartime expansion of aluminum production in North aLmerica
was greater than the requirements of the area and during the war consi-
derable quantities of metal were shipped to the U.h. and the U.S.S.R.
After the war both production and consuiption declined but recovery was
rapid and by 1950 the 1943 level of consur,ption was regained in the U.S. -
based largely on the spectacular expansion of civilian use.   This level
was some seven times that of pre-war.   After the start of the Korean IJar
in 1950 military requirements again played an important part in the expan-
sion of the industry and by 1952 production had regained its wartime peak.
The export surplus built up during the war remained and the area has since
become increasingly- important as a supplier of aluminum to the rest of the
vorld.
6.   A second related trend has been the shift in the center of con-
sumption from Europe to North America.   In the early 1920's approximately
the same amount of aluminum was consumed in Europe and North America.  Today
with consumption about 15 times greater, twice as much is consumed in N7orth
America as in Europe.   This trend was temporarily reversed during the
1930's for the reasons already noted.   However, even though consumption
has growin less rapidly in Europe tlan Nlorth America, production of aluminum
/ Unless otherwise indicated the term "worldt' as used in this paper does
not include the Soviet Sphere.   At oresent Europe and North America account
for about 95` of production and use in the non-Soviet world.  Production
and consumption in the Soviet Bloc is estimated to be about one quarter that
in the Free Torld.   The Soviet ariea is self-sufficient in aluminum having
both resources of bauxite and hydroelectric power.   Recently Russia has
exported aluminum to lWbestern Furope and the U.K. and the prospect for this
trade is an important element in the assessment of future market conditions.
This subject will be dealt with specifically in Part IV.



3-
has grown even more slowly with the result that Europe has become increasingly
dependent on imports - the counterpart of North America's growing export
surplus.   These developments are illustrated in Table 1 and Figure I.
7.   In terms of specific countries the U.S. is both the leading con-
sumer and producer accounting J'or 60% of world consumption and 54% of pro-
duction.   It also accounts for 95,- of North American consumption and 75%
of production for this area.   Canada produces the other 25% and is the
world's major exporter of alum-inum, supplying in recent years slightly over
10% of U.S. and about 30% of European requirements of primary aluminum.
Canadian exports to Europe are mainly exports to the United Kingdom and the
growth in Europe's net imports of alumintum has coincided roughly with the
growth in the U.K.'s imports.   Continental Western Europe is about self-
sufficient in aluminum at the present time with Norway and Austria the chief
exporting countries and Benelux, Germany and Sweden the most important im-
porters.   (Details for world production, consumption and trade are shown
in Appendix Tables I, II and I]I).
8.   70% of European constumption is at present accounted for by three
countries, the United Kin-dorn, France and Uermany;  the U.K. and the six
Common Market countries 1S account for 80%.   Since pre-war important shifts
have taken place in the relatiAre positions of the principal European con-
suners.   The U.K. has increased its share of Europe's consumption from 15%
to 33%o, and French consumption has increased from 10% to over 15%.   Corres-
pondingly pre-war Germany and Austria together accounted for 58% of the
aluminum consumed in Earope while 1W[estern Germany today accounts for about
20%.  The effect of these shifts on the levels of per capita consumption is
shown in Table 2.
B.  The U. S. and European M-arkets
9.   A particularly significant feature of the present pattern of
world consumption is the great disperity between the use of aluminum in the
U.S. and in Europe which has developed since the pre-war years.   This is
clearly revealed in Table 2 ancd treated in more detail in Appendix A.   It
is of particular relevance to the f'uture prospects of the European market
for aluminum to consider to what extent this disparity appears to be the
result of basic economic factois and to what extent it may be attributed
simply to a lag in the development of the market which is of an essentially
temporary nature.
10. Although the present position seems distorted in favor of the U.S.,
the opposite was probably true in the case of the pre- r market and. this
tends to  exaggerate the change that has taken place. i    Furthermore, an
additional portion of the change must be attributed   o the war-induced growth
in disparity in income between Europe and the U.S.    and it may be that the
, France, Germany, Italy, Belgium, Netherlands and Luxembourg.
/ The levels of consumption in 1935-38 reflected rearmament in Europe on
the one hand and the depressed economic conditions in the U.S. on the other.
,/ Whereas income per capita in the U.S. is now estimated to be about
double that in the U.K., France and Germany, before the war it was about
40% higher - based on OEDC Comparative National Products and Price Levels
and Economic Staff studies of growth rates.



Table 1
Production and Consumption of Primary Aluminum
The Changing Position of Europe vis-a-vis North America
1901-   1911-   1921-   1931-   1941-   1951-
1910    1920    1930    1940    1950    1955    1956
EUROPE
% World Consumption      58      58       45      65      36       31      32
% World Production       57      46       51      62      32       22      22
Net Position           -1     --12      +6      -3      -4      - 9     -10
NORTH AIERICA
% W41orld Consumption    42      42       51      29       58      66      63
% World Production       43      54       49      35      66       76      75
Net Position           +1     + 8       -2      +6      +g      +10     +11
Source: Data from Mletal Statistics 1941-56 Metall-
gesellscha:ft, Frankfurt.   Soviet Sphere
excluded.



I I                                                           II
ALUMINUM
(MILLIONS OF METRIC TONS)
2.2  T-T   I   I   T  r   7r   --o --I-T  T   --1 VT  ------,T --- T -r---r--- - [ 1      - F  F
2.0                                                                          _
NET
J~~  E,XPORTS
8TOTAL U.S. AND CANADA PRODUCTION                     EXPORTS
1.6 ^ICONSUMPTION_   /                                                         no°I
1.4      -   ---                                                         1o --0- 
0
0
00
00~~~
1.8                                             M      a         go         62
I 0~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~0
.8  ~ ~ ~ ~  ~     ~     ~     ~    ~     ~ ~ 2 ~~~~NET
i6-  -                          .           * ,<o      IMPORTS
04~~~~~~~~~~~~~~~~~~~~~~~~~
.4  _                                                   _ }t; U   \    6gEUROPE 
.2_                I E    .  (EXCL. SOVIET BLOC)
CONSUMPTION
PRODUCTIONI
1910         1920          1930          1940          1950          1960  '65  c
rn
D-62                                                                             W50S IbS5I



Table 2
Consumption of Aluminum
(Pounds per Capita)
1935 - 8            1956
United States                             2.0              25.6
United Kingdom                            2.1               12.8
Common Market                             2.3                7.1
France                               1.4                g.l
Germany                              4.1 2/            10.5
Belgium-Luxembourg                     .8               4.0
Netherlands                            .1               3.5
Italy                                1.0                4.2
/ Includes prinary and secondary.
2/ A great part of German consumption during this period must
have been for military use.   This is much less so in the case
of the others.   In 1956-7 military use is negligible in Europe
and of relatively minor importance in the U.S.
Source: 1935-8 - lNlinerais-14ietaux.
1956    -  Aluminium Ltd., Montreal.



Table 3
Pattern of Post War Economic Growth in U.S. and Europe
Average Rates of Growth 1948-55
u_ Oei/            U. S. A.
GNP                                   585                 4.4
Industrial Production                 8.4                 4.9
Basic Metal Industries                9.g                 4.7
Metal Product Industries             10.0                 6.5
Steel                                 7.1                 4.4
Aluminum                             10.9                12.7
Copper                                5.2                 1.4
/ O.E.E.C. countries.



effect of income differences is magnified by a particular sensitivity of
aluminum demand to income wher income exceeds a certain "threshold" level.
To the extent that factors such as these can account for the observed dis-
parity in consumption there is no lag in the sense that this term is used
here and consumption is roughly what should be expected considering the
basic economic forces involved.   However the above factors do not seem
adequate to explain the observed gap.   The major argument for this con-
clusion is based on a comparison of the conditions in Europe and NTorth
America that gave rise to the present situation.  IW,hen these are considered
it is seen that to a large extent the gap must be attributed to factors
which were characteristic of the particular period and which may not be ex-
pected to persist in the long run.
11. The tremendous growth of capacity in N\Torth America during the war
has already been mentioned.   The existence of this capacity which exceeded
any previous levels of civilian demard tended to keep the price low, (the
post-war price of aluminum has been less than one half its pre-war price in
real terms) to stimulate active promotion of aluminum and the development
of new uses and in general to change the industry from one typified by
small volumes and high prices to one of large volumes and low prices.
These changes were undoubtedly stimulated by the advent of two major pro-
ducers, Reynolds and Kaiser, which joined the traditional single American
producer, the Aluminum Company- of America (Alcoa), immediately after the
war.   The effect of this change in the structure of the industry was pro-
bably felt most strongly in the drive to develop new uses for aluminum.  In
addition to these factors within the industry there existed a considerable
labor force familiar with the use of aluminum as a result of wartime ex-
perience making the promotion of nrew uses very much easier than it otherwise
would have been.   These conditions together with the economic boom of the
post-war years with the great increase in production of consumers' durable
goods and housing largely account for the resulting spectacular growth of
the commercial market for aluminum.
12. In Europe, on the other hand, the situation was quite different.
Instead of surplus capacity there was a shortage of aluminum.   Capacity
was expanded little during the war and even this was more than offset by
the destruction or immobilization of plants.   At the same time imported
metal was no adequate substitute for the domestic product in most of European
markets because of the scarcity of dollars.   Instead of low prices, there
were high prices.   With the exception of the U.K. where prices were kept
low owing to special contracts with Canada, prices in a number of major
markets were considerably above the level of Canadian and U.S. prices.
Instead of a vastly increased familiarity with aluminum the metal was little
more widely known than before the war.   Furtherrore, while the economic
expansion in Europe during the reconstruction years was rapid, unlike the
U.S., the structure of production was more heavily weighted by reconstruc-
tion activities whose potentiel aluminun consumption was relatively low
under the traditional pattern of aluminum use in £lurope.   As a result of
all these factors the post-war growth of aluminum consumption in Europe was
slower than that in the U.:S. even though it started at a much lower level
and even though other measures of economic activity were expanding more
rapidly in Europe as shown in Table 3.



-5-
13. Essentially U.S. consumption of aluminum has far out-distanced
that of Europe largely as a result of special war-induced conditions.
Although there was a basis for a trend in this direction before the war, the
war appears to have exaggerated and distorted the relative position of the
two areas.   Specifically it has been the great differences in the supply
of aluminum that has been the primary cause of the disparity in consumption,
a factor which has had an unusually strong effect because of the trade pro-
blems of the post-war period.   Insofar as the supply situation is improved
in the future and efforts are increased to widen the uses of aluminum, a
considerable increase in European consumption would not appear to be lirited
by income levels.   Furthermore, the rapid development of the market for
aluminum in the U.S. has prov-ided examples of new uses and processes that
should make expansion of the E]uropean market easier than it otherwise would
be.
C.   Recent Trends
14.  As the military requirerients of W-orld War II came to an end, alu-
minum consumption dropped abruptly.   In 1946 about half as much aluminum
was consumed in the Free World as during the peak war year of 1943.   How-
ever, the recovery was rapid.   Aided by the expansion of commercial appli-
cations and, for several years following Xorea, by a large U.S. defense
program 1/ the'wartime levels were soon equaled dnd exceeded and donsumption
expanded steadily through 1955.   In 1956, however, the expansion slowed
down and in some markets consumption actually declined though the overall
level remained slightly above that of 1955.   There was some decline in 1957
followed by a slight increase in 1958 with the result that from 1955 through
1958 world consumption increased only slightly (see Appendix Table II).
However, by mid-1959 consumpt:ion was again expanding rapidly in major markets.
In July 1959 the U.S. Departrment of Commerce estimated that shipments to
U.S. consumers for the year might run 25-30'% above the 1958 level.
15. Though there was no actual decline in consumption from 1955 to
1958, the expansion of capacity that took place during these years resulted
in the creation of a considerable surplus in the industry.   U.S. capacity
which was more than doubled in the period 1950-55 under the stimulation of
the Korean defense program was increased 30% between 1955 and the fall of
1958. At the present time p:Lants "under construction" represent an addi-
tional 20% of present capacity.   The Canadian experience has been similar.
As a result, it was estimated that 25% of the industry in the U.S. and
Canada was idle in the fall of 1958.   In early 1959 when Canadian long-term
contracts to supply U.S. producers ran out and business picked up in the
U.S., some of the burden of idle capacity was shifted onto the Canadian
industry.   WShile the U.S. industry was running at close to 90% of capacity
by mid-summer, the Canadians were only operating at 65% of capacity.
1/ In 1952 30% of aluminum consumed in the U.S. was for direct military uses.
This proportion has dropped steadily since then to a level of about 6% in
1958.   During 1943, the peak war year, direct mlitary uses accounted for
87% of U.S. aluminum consumption.



- 6 -
16. In addition to the appearance of idle capacity there was a consi-
derable increase in government purchases of aluminum in 1957 and 1958 under
the "lput-right" provisions of contracts set up to encourage expansion during
the Korean 'War.   Under these provisions the U.S. government took 295,000
tens in 1957 and 320,000 tons in 1958.   These amounts were over 15% of
total supply of primary aluminum available in these years.   Since most of
the contracts expired in 1958, government purchases are expected to be only
about 45,000 tons in 1959.   These purchases have tended to soften the
effect of the 1957-58 "slump" and at the same time conceal the extent of the
expansion of commercial demrand as 1959 shipments exceed by a large margin
those of the preceding year. l/
17. A factor tending to aggravate the situation in 1957 and 1958 was
the increase of Russian exports of aluminum at cut rate prices.   Although
the quantity was not great, the effect was considerable.   The Canadians
were most directly affected because of Russian shipments into the U.K.
The Canadian appeal to the British government to impose anti-dumping provi-
sions was rejected but an agreement reached between the U.K. and U.S.S.R.
will limit Russian imports to 15,000 tons for the 12 months ending October
1959.   This is about 4-% of present U.K. consumption and about 10% of
Canadian exports to the U.K. in 1957 and 1958.   Although U.S. producers
were not directly affected by Russian exports, they used the Russian threat
to bolster their appeals in 1958 for increased tariff protection.  W,ith
the Russian agreement to limit export to the U.K. and the increasing evi-
dence of recovery in the aluminum markets, concern over Russian actions in
this field has lessened considerably.
18.  In addition to the attempts to gain protection, the incustry
postponed or stretched out its plans for expansion and it cut the price of
aluminum.   In April 1958 the Aluminium Company of Canada (Alcan) reduced
its price of primary aluminum b,y 2¢ to 22-¢ (U.S.) per pound.   The
American companies followed. 2/  In August the U.S. producers regained
some of this cut when they increased prices by 7/100 per pound.   Alcan
followed in the U.S. market but not in other markets.   Then in December
1958 prices of both ingot and semi-fabricated products in the U.S. market
were frozen at present levels until July 1, 1959 by action of the producers
themselves. i/
lJ Some of this increase may be due to stockpiling in anticipation of a
strike.   Industry sources generally discount the importance of this
factor.
?  Actually  a differential we,s maintained between the U.S. price and the
Canadian export nrice to other markets equivalent to the U.S. Tariff and
the exchange differential between U.S. and Canadian currencies - or
1.5¢ (U.S.).
2/ This action was initiated by the Canadians, who agreed to guarantee pre-
sent prices of ingot on orders placed before January 1 and shipped before
July 1, 1959. Reynolds promptly extended the same price protection to all
aluminum products and then Alcoa went even further by dropping the require-
ment that orders had to be pleLced before January 1.  Kaiser followed Alcoa
and the entire industry conformed to the pattern set down by Alcoa & Kaiser.



- 7 -
19. A third reaction of producers to the present condition of surplus
has been an apparent quickening of the pace of technical development and
product promotion as producers seek to meet the challenge of idle capacity
by developing new markets.   Cn the basis of efforts along these lines,
there are good prospects for considerable increases in aluminum consumnption,
particularly in the automobile, housing and canning industries, although
the full impact of these developments may still be a few years away.   How-
ever, with the general improvement in economic activity and the recovery
of aluminum consumption underway in 1959, the prospects are good for a re-
sumption of the high rates of growth that have characterized the industry
in the past.   The market prospects for the 1960's will be dealt with in
the foliowing section.



- 8 -
II. THE PROSPECTS FOR DEˇ'iAND
A.   Characteristics of the Aluminum Market and the Problem of Anticipating
Future Demand
20. Reference has already been made to the very rapid expansion that
has characterized the aluminwn market.   This has been due to the inherent
qualities and relative cost of the metal combined with its late start. It
was introduced on a commerciaL scale only shortly before the turn of the cen-
tury and since the mid-1900's when it accounted for less than 1% of the
tonnage of all non-ferrous metals consumed in the world, it has grown at an
average annual rate of 11% until today its share is about 27%, a position
comparable to copper, the worLd's leading non-ferrous metal since the mid-
1920's (see Figure II).   However, in spite of this rapid growth, when the
prospects for the further expansion of uses are considered it is clear that
aluminum has not yet reached a position among the much older metals consistent
with its particular qualities and relative cost.   Accordingly its future
growth can be expected to continue to be more rapid than the growth of non-
ferrous metals in general.   Although this is favorable to aluminum, it does
pose a problem for estimating the future development of demand.   If its use
is not closely related to metal use in general, on what can estimates of
future demand be based?   Can they be based directly on past trends or can
the development of the aluminum market be expected to follow some regular
curve of growth with a gradual declining rate until aluminum reaches a stable
position among metals at some future time?   Neither approach is wholly
satisfactory.   The extrapolation of past trends is not a logical method for
forecasting the demand for a rapidly growing "new product" and there is as
yet no adequate basis for fitting expected demand to some regular growth
curve, V
21.  The problem of projecting aluminum demand arises from the diffi-
culty of forecasting the development of new uses.   The growth of aluminum
consumption can be considered as consisting of two parts: that directly
related to the expansion of established uses growing in step with the
expansion of the economy and that coisisting of new uses which are con-
tinually being developed as aluminum's inherent qualities and relative
price are more'fully exloited.   If the pattern of growth of the ecbnomy
can be anticipated the implied growth of aluminum cosumption due solely'
to such expansion is relatively simple to estimate.   The main problem is
how to estimate the growth of new uses.   In the past thi,s type of growth
has been an outstanding characteristic of the industry.j   There is no doubt
j/ Although development of aluminum demand has many characteristics of the
development of demand for a new good, because of the many separate markets
involved its pattern of growth cannot be expected to follow a simple growth
curve.
2/ Some rough calculations indicate that in the period 1952-56 when aluminum
consumption was expanding at El rate of 11.5%0 in the U.S. a rate of 5% was
attributable to the growth of the sectors consuming aluminumA and the remainder
6.5% to the "development of new uses".   Similarly for the OEEC countries in
the period 1950-55 the overall rate was 12.5%, that attributable to economic
growth of consuming sectors 7.5% and that to new uses, 5%.



PRODUCTION OF THE 5 MOST IMPORTANT NON-FERROUS METALS IN THE WORLD
(THOUSANDS OF METRIC TONS)
3000          E      I             F                           1                                                          3000
YEARLY  AVERAGES                                      '
2500                      _                                    ,                  _    _      _                -         2500
2000                                                                                        K2000
COPPER 
1500                                                                                                                     1500
1000                                                                                                                     1000
500                                                                                                                     500
O <L£S ~~~~~~~~~~~~~~~~~~~~..........                                        ..do....   ..O......................S<
O                                                                                     I ~~~~~~~~~~~~~~~~~~~0
1801   1811   1821   1831  1841   1851   1861   1871  1881   1891   1901   1911   1921   1931   1941   1951                   -Im
- 1810  -1820 -1830 -1840 -1850  -1860  -1870 -1880 -1890 -1900 -1910  -1920 -1930 -1940 -1950 -1960                            G)
SOURCE: Metal Statistics, 1946 -1955                                                          IBRD - Economic Staff       1459  M



that it has been related to the development of the technology of the metal
and to the favorable development of its price relative to that of competing
materials,!/ and to the effort; given to its promotion.   These factors would
in turn appear to be related. to the conditions of supply.   This is illus-
trated by the experience following both IWJorld Wars.   In each case wartime
demand led to a great expansion of smelter capacity and a corresponding
challenge to develop new markets for the metal when wartime needs ended.
After each war the challenge was successfully met.   The capacities created
were quickly turned to new conmercial applications.   But as pointed out in
the previous discussion of the post World W,<ar II developments, not only the
volume of metal available but also the structure of the supplying industry
would seem to have been an important factor in stimulating the growth of
the market.   The role played by the change in structure of the American
industry brought about by the introduction of two new producers following
World lar II has already been mentioned.
22.  The following estimates project demand to grow at slower rates
than would simple extrapolations of past trends but at more rapid rates than
could be expected to result simply from an expansion of the existing pat-
terns of consumption in step with general economic growth.   These projec-
tions involve an appreciable development of new uses.   Although it is not
possible to translate an evaluation of factors which may largely influence
the effort devoted to the promotion of aluminum into an estimate of quanti-
tative results, it is believed that the demrand projections are generally
consistent with the following assumptions insofar as the development of new
uses is concerned.   It is assumed that the U.S. aluminum industry will
continue to maintain a fairly rapid development of new applications in
spite of the already high level of consumption.   This is due largely to
the active promotion of new uses typical of the industry today and is re-
lated to the large volume of cdomestic production and the competitive rela-
tionship amDng the several producers.   In the case of Europe, it is more
difficult to anticipete the rate at which new applications will be developed.
In spite of the great potential for growth arising from the very low level
of present consumption, the fact that aluminum consumers must depend upon
virtual national monopolies and imports for their supplies might be expected
to inhibit to some extent the rapid growth of the market.   This view is
reflected in the demand estimates which assume that at least for the period
1956-65 European demand will grow at about the same rate as that of the U.S.
Although this view seems to be justified on the basis of present conditions
and immediate prospects, these could change and demand might well grow more
rapidly as the result.   In particular, a major change in the conditions of
supply might have a stimulating effect on the market.   It is conceivable,
for example, that the participation of European producers in the development
of production in Africa could result in stimulating the growth of the
European market.
/ The price of aluminum has been characterized by stability and a long run
decline in real terms.   Its price has also declined relative to that of
its principal competitors, copper and steel.   From the late 1930's to the
present the decline in both real and relatIve terms has been considerable.



- 10 _
B.   The Prospects for the U.S. Farket
23.  Although U.S. consurimtion was relatively stagnant from 1956
through 1958 by mid-1959 the renewed expansion of the market appeared to
be well underway and the prospects are good for a continuation of the rapid
growth that has characterized the industry in the past.   The factors of
strength in the U.S. market are the aggressive product development and
selling efforts of the industry, as indicated by the actual development of
new uses which may be expected to account for considerable tonnages in the
near future, and the general prospect for continued expansion of the economy.
24. Aluminum consumption in the U.S. is concentrated in the fields of
building, transoortation, electrical lines and equipment, and consumer
durables.   Since some of these sectors tend to grow more rapidly than in-
dustry in general (in particular the transport and electrical sectors) that
portion of aluminum consumption attributable to economic expansion tends
to grow more rapidly than total industrial output.   In the period 1952-56
the relative growth rates were 5% for aluninum and 3.5, for industrial out-
put.   For the period 1956-65 it is assumed that industrial output will
grow at about the same rate V and accordingly it may be expected that the
present uses of aluminum will expand at a rate of about 5% per year.   In
addition it is clear that important new uses will also be developed in this
period.   In particular uses in automobiles, in building and in packaging
are exoected to increase far more rapidly than the output of the corres-
pondingf sectors.
25.  The impending production of cars with aluminum engines added to
the many other growing uses of aluminum in transmission, grilles and trim,
etc., is expected to increase tlhe average use per car from the 1956 level
of 35 pounds to a level of 100-120 pounds in 1965.   In 1959 use had
already increased to over 50 pounds.   The industry is also anticipating a
great increase of the use of aluminum in homes with the development of
aluminum panels in addition to roofing, insulation, windows and screens.
Canning is another field where alwinum use may also be greatly expanded.
The tinplate industry is about as big as the entire aluminum industry and
success of the present initial ventures into the canning field could result
in a very large new use for aluminum.   These are perhaps the more important
examples of new uses being developed but they are not the only ones.  WTith
the prospects for very sizeable increase in use per unit of output in impor-
tant fields of present consumption, it seems reasonable to attribute an
additional 3% rate of growth to the develop2gnt of new uses over and above
the basic 5% related to economic expansion.!'   The resu;ting overall rate
of 8% is somewhat lower than recent industry estimates 2'but considerably
above the rate of growth during the past 2 years.   However, it now appears
lJ Worl _cnomic Growth  t95962.                  ased on Lcst-ng Proiections,
IBRD, Economic Staff, December 1958.
g/ If use per unit in the transport sector (excluding aircraft), .hich
accounts for about 15% of aluminum, should increase 2'- times this alone
would increase the overall rate from 5?0 to over 61%.
K Kaiser - 8-e%; Reynolds - 10%.                                     -



- 11 -
that consumption in 1959 may make up most of the deficits of 1957 and 1958
and that growth from 1956 to 1959 may not be far below the 8% rate.   For
the period after 1965 it has been assumed that with many of the potertial
new markets already exploited, growth may slacken somewhat.   A rate of 7%
has been projected for the period 1965-70.
C.   Prospects for the Euronean Market
26. The factors of strength in the Ehropean market are the relatively
low level of present consumption comrpared with the U.S. which, as already
pointed out, could provide a basis for a considerable expansion of consump-
tion, and the prospects for a f'airly rapid pace of economic grovwth over the
next 10 to 15 years.   On the other hand, less aggressive promotion of
aluminum arising from the differences in conditions of supply already men-
tioned, less familiarity with the uses of almninum, and strong attachments
for traditional ways and traditional materials are all factors that may tend
to inhibit the expansion of the market.   However, these retarding forces
are important primarily in the short-run;  their effects should tend to
diminish as the market grows.
27. Available estimates of the expected rate of growth of European
demand over the next 10 to 15 years range from under 7% upward to around 10%o.
Generally that part of the }Luropean market consisting of the 6 nations of
the European Economic Community (Conmon IKarket) is expected to expand more
rapidly than the U.K. market.   This seems a reasonable expectation consi-
dering the much higher level of' Dresent consumption per capita in the U.K.
and the fact that the prospects for general economic growth appear to be
somewhat less favorable than in the case of the 7E.E.C. /  These two areas
together account for 80% of the aluminum consumption in Europe.
28.  The estimate used in this study is that the demand for aluminum
in Europe as a whole will grow at an average annual rate of 83  for the period
1956-65.   WJith what information is available this seems a reasonable esti-
mate on the assumption that GPil will grow at an average rate of 3.3% per
year during the period and industrial outDut at a rate of 4.5%. L  Along
wit-h an 8%; growth for Europe as a whole, it is estimated that demand in the
6 Common Yarket countries will grow at a rate of 8.5%, that in the U.K. at
a rate of 7% and that in the "rest of L-rope" at 8%.   After 1965 the rate
of expansion is expected to increase.   An overall rate of 8.5% is assumed
for Europe as a whole for the period 1965-70 with corresponding increases
for the various individual markets.   The implications of these estimates
in terms of consumption are shown in Table 4 along with estimates for Ntorth
America developed in the preceding section and an estimate for the "rest of
the world" which is assumed to grow at a rate of 10%/.
I/ It is interesting to note that representatives of the E.E.C. are on record
as considerably more opt rmistic in regard to the prospects for future demand
for aluminun in the area (103,%) than representatives of the nations exporting
to the area (6-7%).   GATT "'Report of the Wjorking Party on the Association
of Overseas Territories with the Luropean Economic Community, Report on
Aluminum, Alurnina and Bauxite", August 11, 1958.
?/ World Fconomic Growth, op.c:it.



Table 4
Estimates of Future Demand for Primary Aluminum
(in thousands of metric tons)
1956        1965        1970
United States                     1610         3200        4500
Canada                               85         155         220
Europe                              850        1700        2600
United Kingdom                      280         520          750
Common Market                       420         880         1400
Rest of Europe                      150         300          450
Rest of World                       155         365         600
TOTAL                              2700        5420        7920
Implied raves of growth for period 1956-65:  8% for U.S.,
Europe as a whole, and "llest of Europe";  8.5% for Common
Market, 7% for United Kilgdom and Canada and 10% for "Rest of
WIorld."  For 1965-70:  7%, for U.S., 8.5% for Europe, 10% for
"Rest of WJorld".



- 12 -
III.  ESTI,ATES OF FUTURE SUPPLY AND EUROPE' S GROl;lING
NiID FOR I1vTORTS
A.   The Importance of Power in the Production of Aluminum
29. In the production of aluminum there are two main steps: the con-
version of the ore (bauxite) to alumina (alumLinum oxide), and the reduction
of alumina to aluminum metal.   The first step is a chemical process re-
quiring fuel, the second is an electrolytic process, requiring large amounts
of electric power.  It takes roughly 4 tons of bauxite to produce 2 tons of
alumina from which 1 ton of aluminum metal can be extracted.   The economics
of location for an alumina plant are governed mainly by transport considera-
tions.   Because of the weight lost in the process there is a trend toward
the production of alumina near the source of bauxite, e.g. Jamaica, British
Guiana and Guinea.   In the case of an aluminum smelter location is governed
mainly by the availability of large amounts of cheap electric power.   It
takes about 8 KUH to produce a pound of aluminum from alumina.   This means
that about 2.5-3 KlUl of power capacity are needed for each ton of annual
capacity of aluminum.   It also means that a variation in power costs of 1
mill per KUH represents a change in costs of production of almost 1 cent a
pound, an important consideration with alumrnum selling at 22.5-24 cents a
pound.
30. The cost of transporting alumina to the smelter and crude alu-
minum to the market is also an important factor and rmay be decisive in
determining the most economic location for a smelter in cases where the
difference in cost of power at alternative sites is relatively small. This
has been illustrated recently by the shift in the location of new smelters
in the U.S. from the cheap hydro power of the northwest to the thermal power
in the Ohio Valley where savings in transport costs were considered more
than enough to compensate for the more expensive power. /    In this case
the transport involved was overland, and therefore expensive;   the dif-
ferential in power costs was of the order of only 2 mills; and the Ohio
Valley locations were not only close to rich coal deposits but also in the
center of the major U.S. market for the metal.
B.   The Future Suonly of Aluminum
31. The great importance of large blocks of cheap power means that
with few exceptions new smelters must be based on hydro power.   Except in
those cases where the full capacity of existing hydro developments is not
at present being utilized as in the case of several of Alcan's plants,
this involves the construction of new hydro facilities which generally
takes a considerable time.   A combined aluminum smelter and power plant
/ "The Geography of Aluminum Changes Again", Business Week, June 16, 1956.



- 13 -
may require 5 to 6 years from t-he t-me construction is started until alu-
minum is produced.   In addition to the time required to bring in new
capacity, the size of the plants and the unique requirements for cheap
power limit the number of projects that are generally under serious consi-
deration at any one time.   For these reasons, it is possible to estimate
the maximum future capacity for 5 to 6 years ahead with a considerable
degree of assurance on the basis of announced plans.   All the plans may
not be carried out as scheduled and less aluminum may be produced than
originally planned.   But because of the limitations of time, the planned
figure is unlikely to be exceeded.   These observations refer to aluminum
smelters based on hydroelectric power.   In the case of smelters based on
thermal electric power, the anticipation of future capacity is more diffi-
cult.   In this case, new facilities may be brought into production in a
much shorter time and company plans may give an indication of maximum capa-
city for only a very short period in the future.   H.owever, economic pro-
duction based on thermal plants is generally confined to the U.S. where
coal is cheap, where the consuming market is near the coal and where trans-
port costs to and from the low-cost hydro sites in the northwest are
appreciable.   For the rest of the world hydro power may be expected to
continue as the principal source of power for aluminum.
32.  The best available estimates of future primary alumlinum capacity
are presented in Table 5 and in more detail in Appendix Table V.   These
figures represent in general the maximumr capacity that can be expected to
be reached by 1961 and, with the exception of the U.S. figure, by 1965.
There may be some leeway in the 1961 figures, particularly in the case of
the U.S. and Canada where previous expansion plans were stretched out as
a result of the 1957-58 slump.   Yore capacity probably could be added in
both cases by 1961 if market developments should warrant it.   However,
the U.S figure for 1965 is undoubtedly an underestimate for the reasons
already mentioned.   While the U.S. figure for 1965 is underestimated, the
Canadian industryv may not expand as rapidly as indicated.   The Canadians
produce primarily for export and the actual exparsion undertaken will
depend on how the prospects fcr aluminum exports develop.   None of the
proposed developments in Africa are included in Table 5 since it is assumed
none of them will be in production by 1965.   These and other possible
projects for the period after 1965 are shown in Appendix Table VII.   The
African proiects are discussed in Part IV.
C.   The Future Balarce of Cargacitv and Demand
33. The above estimates of future demand (Table 4) and future capa-
city (Table 5) are compared in Table 6.   If it is borne in mind that
capacity is generally in excess of "normal rates of production", it is
seen that capacity will probably be about in balance with demand by 1961.
Of the major markets the U.`. will be close to balance, with Europe's
growing deficit and the deficit in the "rest of the world" balancing a
good portion of Canada's surplus.   Actually Canada can also be expected
to continue to supply a portion of the U.s. market, as it has traditionally
done, even if the U.S. capacity and demand should be in overall balance.



Table 5
Estimated WorldVPrimarly Aluminum Capacity in 1957, Planned
Capacity for 1961 and Possible Capacity in 1965 based
on Announced Plans for Expansion
(in thousands of metric tons)
CCUNTRY                                  1957         1961         1965
U.S.A.                                    1674        2370         2566 j
Canada                                     740         865         1310
TOTAL NORTH AiERICA                 2414         3235         3876
Austria                                     60          60           60
France & Cameroons V                       170         275          285
Germany                                    163         163          163
Italy                                       63          67           77
Norway                                     10         176          272
Spain                                       12          38           40
Sweden                                      15          15           15
Switzerland                                 32          32           50
United Kingdom                              28          32           32
Yugoslavia                                  22          40           40
TOTAL EUROPE                         697          898         1034
Australia                                   10          10           10
Formosa                                      9          20           20
India                                        8          21           40
Japan                                       66         122          143
TOTAL AUSTRALIA AND ASIA               93         173          213
Brazil                                       4          23           55
Peru                                                                  9
Surinam                                                              55
TOTAL SOUTH AflERICA                    4          23          119
GRA2ND TOTAL                        3208         4330         5242
2/ Excluding Soviet Sphere.
j An obvious underestimate due to absence of announced plans.   Recent
trend in U.S. to thermal based plants has probably influenced long-
range plans by reducing time required to bring in new capacity.
/ Includes 45,000-ton smelter at Edea in Cameroons which commenced
production in late 1957.
4/ Power facilities constructed for expansion to 1,030,000 tons.
Expansion to 1,310,000 tons depends on market conditions.



Table 6
Balance of Estimated Demand & Capacity
Primary Aluminum
(thousands of metric tons)
1956   1957   1958   1959   1960   1961           1965
WlORILD
Demand
(a) trend line    2700   2900   3100   3300   3700   3980            5450
(b) actual        2700   2500   2700
Capacity31           2810   3210   3570"                 4330          5240
Balance -            +110   +710   +870                  +350         - 210
U. S. A.
Demand            2/
(a) trend line    1610   1740   1860   2000   2200   2360            3200
(b) actual        1610   1600   1650   1900o-
Capacityj            1540   1670   2000                  2370          2570
Balance              -70   + 70   +350                   + 10         - 630
Europe
Demand
(a) trend line     850    920    990   1070   1150   1250            1700
(b) actual         850    835    850
Capacity3/            610    700    700*'                  900         1030
Balance e            -240   -135   -150                  -390         - 670
Canada
Demand.
(a) trend line      85      90     97    104    110    120            155
(b) actual          85      71     74
Capacity              565    740    770                   865          1310
Balance l            +480   +669   +696                  +745         +1155
Rest of World
Demand           2/
(a) trend line     155    170    188    205    236    250             365
(b) actual         155    169    184
Capacity3/             95    100    100*'                 195           330
Balance -            - oO   - 69   - 84                  - 55         -  35
estimated.
/ Excluding Soviet Bloc.
2/ Trend line assuming uniform rates of growth based on projections in Table 4.
3/ Actual balance through 1958, difference between trend line and projected
capacity thereafter.   Capacity projections as in Table 5.



-4 -
34. Between 1961 and 1965, as Table 6 indicates, expansion plans fail
to keep up with the estimated growth of demand and by 1965 the result is a
considerable deficit on a world basis.   This is caused by the rapid deve-
lopment of deficits in Eulrope and the U.S. which are greater than Canada's
growing export surplus.   However, whereas the European deficit arises
from a lack of a suitable economic basis for a large expansion of domestic
aluminum production, the U.S. deficit is in part fictitious, being simply
due to the lack of announced long-range plans.   Nevertheless it does
serve to highlight the fact thiat U.S. producers must either plan for a
considerable expansion of domestic capacity in the early 1960's or an in-
crease in imports from Canada.   After 1965, and depencling on how quickly
construction is started, there is the additional alternative of cbtaining
supplies from foreign smelters in Africa or South America in which U.S.
producers themselves participate. 1/  Although the potential for expanding
domestic production may be sufficient to supply the bulk of domestic re-
quirements for some ti-me to come, it may be expected that the U.S. industry
will, to an increasing extent, seek to supply its growing needs with metal
from beyond its borders.   The recent and growing interest of U.S. pro-
ducers in foreign projects is some evidence of a movement in this direction.
Hovever, the full impact of su,ch a shift may not be felt till the late
1960's.   By that time the decisions of U.S. producers can be expected to
have had an im-portant effect on the pattern of aluminum trade.
35. In the following discussion, however, we are concerned mainly
with the development of markets and capacity up to 1965.   During this
period it is assumed that U.S. domestic oroduction is expanded to meet the
major part of the U.S. requirements and attention is concentrated on the
European import gap and the ways it may be filled.   In this discussion
the position of the Canadian industry is central and the U.S. market is
involved mainly through the volume of its imports from Canada.
D.    urope's Growing Need for ImpDorts
36. The probable pattern of development of Europe's need for imports
is shown in some detail in Table 7.   The estimates of demand and capacity
for 1965 are as indicated in Table 6.   Since there are no announced plans
for capacity for the years beyond 1965, the estimates for 1970 are based
on two arbitrary assumptions.   It is assumed that production within the
Common M-arket area will increase by only 45,000 tons because of the lack
of sites for the economical production of aluminum and also because of the
expected availability of supplies from abroad.   The second assumption is
that production in the "rest of Europe" will increase by 125,000 tons
during this period.   This could be expected to take place mainly in Norway,
though there might also be sorne expansion in Austria and Yugoslavia.
37.  As is evident from Table 7 not only will the U.K. continue to be
a major and growing importer but the Cormron 3iarket countries may also be
/ Reynolds and Kaiser are considering participation in African projects,
Alcoa is constructing a smelter in Surinam.   U.S. producers also partici-
pate in some Canadian oroduction since Reynolds acquired a controlling in-
terest in British Aluminium in 1959.



Table 7
EuroPean Import Recuirements for Primary Aluminum in 1956
and Estimates for 1965 and 1970
(in thousands of metric tons)
1956          1965             1970
Europe
Demand                850           1700            2600
Supply                610           1030            1200
Balance                      -240           -670           -1400
United Kingdom
Demand                280             520            750
Supply                 30             30              30
Balance                      -250           -490           - 720
Common Market
Demand                420            B80            1400
Supply                360             525            570
Balance                      - 60           -355           - 830
Rest of Europe
Demand                150            300             450
Supply                220            475             600
Balance                      + 70           +175            + 150
1/ Excluding Soviet Sphere.
Source: - Tables 4, 5 and Appendix Table I (for estimates of supply in
1970 see text, Pa:ra.36).



- 15 -
expected to require substantiaL amounts of aluminum 5from abroad with a
level of imports exceeding that of the U.K. by 1970.   Although the "rest
of Europe" will be producing a surplus of alumirium on the basis of Norway's
large and expanding producticn., this will not be sufficient to prevent a
great expansion in the import requirements for Europe as a whole.   As
Table 7 indicates these requirements are estimated to nearly triple between
1956 and 1965 and grow almost 6( times between 1956 and 1970. This represents
an average rate of growth in iimport requirements of riaore than 13% per year.
38. These estimates are of course rough approximations and, like all
estimates, are based on assump.ions on varying value.   In this case the
underlying estimates of supply are firmer than those for demand. Although
Europe's production might not reach the levels anticipated, it seems im-
probable that it would exceed these levels.   On the other hand, if the
use of aluminum. should "catch on" in Europe under the stimulation of an
assured adequate supply and the example of uses developed in North America,
and accordingly, if the gap in levels of consumption between Europe and
North America were to be narrowed, demand might grow more rapidly than
anticipated.   In specific terms, an increase in the average rate of ex-
pansion of the European market from 8 to 9%c per year would increase the
import requirements by 150,000 tons in 1965 assuming no change in the sup-
ply conditions.   Wlhether such an increase would or would not take place
is largely a matter of  guesswork at this point.   But in any event it is
well to keep in mind that the quantities involved are large and rapidly
growing.   Under the assumptions of Table 7, the import requirements in
1965 are expanding at a rate of about 100,000 tons a year.   In antici-
pating ways in which these requirements will be supplied, both their size
and their rapid expansion must be kept in mind.



- 16 -
IV.  FILLING THE GAP
39. There are several possible sources for Europe's growing require-
ments of aluminum.   Canada is the principal one, at least until such time
as African production may be developed.   Canada is the traditional sup-
plier of Europe's imports, which have been accounted for mainly by the U.K.,
and its position as a low cost producer with the capacity to rapidly expand
production by a considerable emount nake it a logical source of supply for
European requirements.   Nowhere else in the world can so much new capacity
be brought in so quickly and at such low additional cost.
40. Another important source for the latter part of the 1960's is
Africa.  UTith great resources of bauxite and huge hydroelectric potential,
Africa is bound to become an important source of aluminum in the near future.
The fact that a number of proposed smelters lie within the Common Market
area has made projects in Africa particularly attractive to European pro-
ducers.   Although there is little doubt that large aluminum smelters will
be developed in Africa, the timing of these projects is as yet uncertain.
Their execution requires the mobilization of large sums of capital and this
task has not been made any easier by the present conditions of over-supply
in the industry and the reduction in the Canadian export prices in 1958.
41. The U.S.S.R. is still another potential supplier of aluminum to
liestern Europe.   The sharp increase in Russian exports to the West in
1957 raised considerable concern over the possibility of increased supplies
from this source.   Although IJ.S. exports to the U.K. were significant in
1958 and showed a sharp increase over previous years, this can be regarded
as a temporary development associated with the general conditions of over-
supply in the industry and the acquisition by a major U.S. producer
(Reynolds) of interests in a major U.K. fabricator (Tube Investments).i/
It is not expected that the IJ.S. will become a supplier of aluminum to
Europe.   In the following sections the prospects for supply from Canada,
Africa and U.S.S.R. will be considered in more detail and in relation to
one another.
A.   Aluminum from Canada
(i) Characteristics of the Canadian Industry:
42. Canada is reputed to be the world's lowest cost producer of
aluminum ingot.   Such evidence as is available appears to confirm that
Canadian costs are below U.S. costs largely as a result of lover power
costs.      In addition to its favorable cost position, the Canadian industry
1 Subsequently Reynolds and Tube Investments acquired a controlling in-
terest in British Aluminium waich has a smelter in Canada.   It is not
expected that Reynolds will continue to ship Annerican metal to the U.K. in
preference to metal from British AlumLniumns Canadian smelter.
?i Financial analysts have estimated that the Aluminium Company of Canada
may enjoy an advantage of 2-3 cents/pound in manufacturing costs over U.S.
producers.   Aluminum the Industrv and the Four North American Producers,
First Bcstcn Corp., 1951; D.B. ?'iacurda, "Aluminium Ltd.", F.S.Smithers & Co.,
Cct. 1958.



- 17 -
can expand its capacity quickly with relatively low additional investment.
The industry's present capacitty is 780,000 metric tons per year with Alcan
accounting for 700,000, and British Aluminium, 80,000 tons.   In addition,
some of the investment has already been made for another 530,000 tons of
capacity.   Alcan has announced that when its present power proiects are
completed by the end of 1959, it will have the power basis to increase
capacity by 210,000 tons for an average investment of about $500 per ton,
roughly half the total cost of new capacity including power and smelter.
This would bring the company's capacity up to 910,000 tons.   The rest of
the industry's potential increase, 320,000 tons, is accounted for largely
by the possible further expansion of Alcan's Kitimat plant in British
Columbia to its eventual capacity of 500,000 tons and the potential doubling
of British Aluminium's smelter in Quebec.   Neither of these expansions are
being actively considered at the present time.   In addition to the metal
that could be produced from increased cap 9ity, it should also be noted
that the Canadian industry is at present V operating at about 2/3rds of
its existing capacity.   In other words, at the present time about 250,000
tons more could be produced without additional investment.
43. The third essential fact about the Canadian industry is its posi-
tion as the world's major exporter of primary aluminum.   The industry ex-
ports roughly 85% of its output.   Its principal markets are the U.K. and
the U.S.   In recent years it has supplied about 11% of U.S. requirements
of primary aluminum and about 80% of U.K. requirements.   Until the recent
slump these two markets accounted for about 90% of Canadian aluminum ex-
ports.   In 1957 and 1958 this proportion fell to 80% as unused capacity
appeared in the U.S. and stiff competition developed from other producing
countries for the slumping U.K. market.   The remainder of Canadian exDorts
are distributed widely arould the world among many small and growing mar-
kets as indicated in Table 8 and, in more detail, in Appendix Table IV.
The most importart markets are in Europe and it is interesting to note that
while shipments to the U.K. declined drastically in 1957 and 1958, shipments
to the Continent, though still small, doubled in this period.   In 1958
they accounted for 12% of Carnadian exports with most of thern Going to the
Common Market countries.
44.  As an exporter of primary aluminum with relatively minor interests
in fabricating plants abroad, the Canadian industry is vulnerable to gen-
eral slumps in demand such as occurred in 1957 and 1958.   In many markets
it fills the gap between duoLestic production and total requirements and
when conditions of over-supply occur it tends to suffer from the natural
inclination of countries to reduce imports.   In the U.S. where Alcan rt-
gularly supplied large amounts to integrated U.S. producers who required.
additional metal either to compensate for supplies they were obligated to
2/ Address by Nathanael V. DEavis, President, Aluminium Limited, to New York
Society of Security Analysts, Nzarch 24, 1958.
V/ July 1959.



- 18 -
make available to independent fabricators V or simply because finishing
capacity exceeded ingot capacity, the impact was alleviated by the exist-
ence of long-term supply contracts with Kaiser and Alcoa.   Under these
contracts the U.S. companies were obligated to take Canadian aluminum even
while their own plants were operating well below capacity.   The Kaiser
contract ran out in 1958 and the contract with Alcoa has been spread out so
that in the first part of 1959 with the U.S. industry still running at less
than full capacity, Canada's exports to the U.S. were sharply reduced. /
The general position was also reflected in a further reduction in the rate
of Canadian operations in 1959 while production in the U.S. was increased
considerably.
45. The Canadian experience in the recent slump was probably aggra-
vated by the trend towards vertical integration in the U.S. industry which
had been underway for several years.   The Anaconda, Harvey and Ormet
smelters which came into operation in the last two years with a combined
capacity of about 230,000 tons all represent new primary capacity integrated
with existing fabricators.   There is no doubt that these developments have
at least in the short-run adversely affected the market for Canadian metal
in the U.S.
46. The belated Canadian reaction to slumping markets in general and
the increased development of primary capacity in particular was to cut the
price of aluminum which it did by 20 (to 22±¢ U.S.) in April 1958.   This
might be interpreted as a reccgnition that the previous price had been suf-
ficiently high to encourage fabricators to erect their own smelters and
place those who did not at some disadvantage when competing with integrated
producers.   However, its effect has been somewhat blunted in the U.S. by
Alcan's reluctance to follow a hard competitive line in the face of demands
by U.S. producers for increased tariff protection.   7/10th of a cent of
the April cut was restored in August 1958 by U.S. companies with Alcan
adjusting its prices accordingly.   However, in markets outside the U.S. the
Canadian price has remained at 22#1¢ (U.S.) c.i.f. port of entry and as long
as Canada has unused capacity and capacity for which part of the investment
is already in place, and as long as there is the possibility that the
development of new primary capacity elsewhere will prevent Canadian mills
from reaching an economic level of production, there seems little chance
that this price will be increased.   Price is certainly one of the most
important instruments the Canadians have in their struggle to regain their
markets, round out their capacity and improve their economic position.
1/ 35% of government-aided primary aluminum expansion program covering the
years 1950-55 must be made available to independent fabricators.   For 1958
this worked out to be roughly 11% of the combined capacity of Alcoa, Kaiser
and Reynolds - or about 195,000 tons.
/ In the first 5 months of 1959 Canada's aluminum exports to the U.S. were
about 2/3rds the level of the same period in 1958.



- 19 -
47. A second reaction cf Alcan to recent developments has been an
increased emphasis on the development of fabricating facilities by subsidi-
aries and affiliates abroad.   In the case of the U.S. where Alcan has no
subsidiaries, an example of this trend is the formatior) of a partnership
with an important U.S. consumer operating in Canada. 17
(ii) Prospects for Canadian Exports:
48. In spite of the present difficulties, with the renewed expansion
of aluminum demand and the mobilization of idle capacity in the U.S. which
are both already well underway, the prospects for the rapid recovery in vol-
ume of Canadian exports to its traditional markets appear good.   In fact,
it would seem reasonable to assume that by the mid-1960's Canadian exports
will have substantially regained their forner position in both the U.S. and
U.K. markets.   For nurposes of illustration, assume that by 1965 Canadian
metal supplies 75% of U.h. requ,irements end 10% of U.S. requirements of pri-
mary aluminum.   These figures may be compared with 80% and 11% for recent
past and would imply that Canadian exports to these areas grow at a slightly
slower rate than that at which the market expands - or somewhat below the
8% and 7% rates assumed for the period 1956-1965. /
49. In the case of the U.K. the above estimate allows for a more rapid
expansion of imports from other areas.   In the case of the U.S. the figures
imply that U.S. capacity must be expanded by some 300,000 tons more than is
at present being planned.   This may be a reasonable expectation because, as
pointed out previously, U.S. thermal-based smelters do not require a long
lead time.   On the other hand, Canada's favorable cost position and the
location of much of Canadian smelting capacity near the St. Lawrence and
close to the heart of the U.S. market would seem to indicate that the esti-
mate for U.S. use of Canadiar metal is not overly optimistic.
50.  In the case of Canada's exports to the Commonwealth countries and
Latin America Canada's share of the market is generally large but the mar-
kets themselves are still very small.   The Canadians are expecting a rapid
expansion of exports going to t;hese areas and indeed such a trend has been
evident in recent years in spite of the slump in demand elsewhere.   (See
Table 8 and Appendix Table IV).   In part the increased rate of expansion
of these markets will tend to compensate for the reduced rate of growth
anticipated for the TJ.K. market.   To some extent the two developments are
related as a significant part of the U.i\.'s aluminum imports are re-exported
in fabricated form to these same markets.  WIith the rise of domestic
/ In June 1959 Aluminium Limited and Chryrsler Corp. of Canada formed
Chryslum, a jointly-owned subsidiary.   The new company will lease Alcan's
Beauharnois, Quebec, smelter (capacity, 35,000 tons) and supply all of
Canadian Chrysler's needs plus some tonnage to Chrysler in Detroit.  Aluminum
shipped to the U.S. by Chrysl1u  is to be sold at the U.S. price.
/ Recent Canadian estimates of the growth of shipments to the U.S. and U.K.
for the period 1955-65 are 7-4- and 6% respectively.  T1ininm and Mineral
Processing in Canada, John Davis, Royal Commission on Canada's Economic
Prospects, Ottawa, 1957.



Table 8
Shipments of Canadian Primary Aluminum
1956, 1957,1958, and projections for 1965
(in thousands of metric tons)
II 2/
1956     1957     1958      1965     1965_
North America
Canada                     83       75       73       155      155
United States             194      196      194       320      320
Europe
United Kingdom            217      158      145       390 )
Rest of Europe             27       44       53       280 )   435
British Commonwealth          9       11       21        40       40
Latin America                10       13        16       30       30
Other                         6       13       10        20       20
Total                       546      510      512      1235     1000
1/ Assuming Canada supplies 10% of U.S. requirements, 75,2S of U.K.
requirements, doubles 1958 shipments to minor markets and fills the
entire European deficit (670,000 tons).
21/ Assuming Canadian capacity expanded to 1,000,000 tons and that
Canada supplies 10% of U.S. requirements, doubles shipments to minor
markets and sells remainder of metal available for export in Europe.
In this case Canadian shirments wiould be 235,000 tons short of meeting
Europe's import requirements.



- 20 -
fabrication this pattern of trade will tend to be supplanted by direct ship-
ments of primary aluminum from Canada.   For purposes of illustration it is
assumed that the markets for Canadian aluminum in the Cormonwealth countries,
Latin America and in other areas outside of North America and Europe will
double in the period 1958-65.   This implies an average rate of growth of
about 11% per year.
51.  If Canadian shipments to the U.S. and U.K. develop as assumed and
if the newer markets in Latin America, Asia and Africa grow as expected, to
what extent can the Canadian industry supply the increasing demands of
;estern Europe outside of the U.K.?   To deal with this question two pro-
jections of the disposition of Canadian production in 1965 have been made as
shown in Table 8.   Projection I indicates that if Canadian capacity were to
be expanded to a level of about 1,300,000 tons, which appears to represent
rounding out present facilities to their maximum planned capacity, Canadian
supplies would be just sufficient to meet European import requirements in
1965.   However, in the face of a continuously expanding world market with
European import requirements increasing at a rate of about 100,000 tons a
year, this would cease to be true shortly thereafter.
52. Although under a reasonable set of assumptions Canada could con-
ceivably supply European impor-t requirements up to 1965, Canadian exports
might not in fact reach the levels or the distribution assumed in Projection I.
The markets might not develop as rapidly as anticipated; Canada's share of
the U.S. market might be lower than expected or a portion of European re-
quirements might be supplied from Africa and/or the U.S.S.R.   However, even
if developments fell short of -those indicated in Projection I the Canadian
industry would not necessarily be left with idle capacity.   The industry
is in a position to expand quickly on short notice and capacity can be ex-
pected to be increased in line with market prospects.   Since an appreciable
part of the investm:ent is already in place for an expansion to about 1,000,000
tons it would seem that this level of oDerations would represent a minimum
figure for Canadian production in 1965.   Projection II in Table 8 indicates
a possible distribution of exports with Canadian production at a level of
1,000,000 tons and assuming the same level of shipments to all markets ex-
cept Europe.   It will be noted that in this case Canadian supplies would
fall short by 235,000 tons of filling Europe's assumed import requirements
(670,000 tons).   This could of course be partly made up by reduced Canadian
shipments to other markets but in general it would seem to allow considerable
leeway for any possible over-estimation of future markets on the one hand or
the appearance of large supplies from Africa or the U.S.S.R. on the other.
To summarize briefly, the Canadian industry appears to be in a good position
to supply Europe's requirements up to about 1965 but able to adjust to con-
.         ditions if requirements do not develop as quickly.
53.  Little can be said at this time about the Canadian developments
after 1965 when new supplies w11l be needed to meet growing world demand.
Canada still has a great potential for expansion based on vast untapped hydro-
electric resources which could be developed for the production of aluminum.
Alcan has estimated these unused resources to be on the order of 20 million
horsepower or roughly enough to produce 5,000,000 tons of aluminum.   On the



- 21 -
other hand, new production from Africa appears in the offing and increasing
supplies may be expected from this second potentially great exporting area
in the late 1960's.   It should be pointed out in this connection that
Aluminium Ltd., Alcan's parent organization, has important interests in
Africar bauxite.   It has been mining bauxite in Guinea since 1952 and is
planning to construct an alumina plant in the area.   It is also involved
in several of the groups studying smelter projects in Africa.   As the in-
dustry grows and expands from continent to continent there is no doubt that
further expansion in Canada will take into account the way developments in
Africa progress as well as the manner in which world markets grow.
B.  The African Projects
54. The attraction of Africa for the aluminum industry is based on the
existence there of the world's largest reserves of high grade bauxite to-
gether with excellent sites for the generation of hydroelectric power.
Bauxite is presently being exported from Ghana and Guinea.   There are plans
for greatly expanded operatior,s in Guinea and an alumina plant is being con-
structed in that country at Fria.   A small (45,000-ton) aluminum smelter is
in operation in the Cameroons which can probably be expanded but major de-
velopments in aluminum smeltirig are still in the planning stage.
55. There are four major proposals under consideration to produce
aluminum in Affrica.   Each is combined with a large hydroelectric develop-
ment and in each case the combined power and aluminum investment is very
large.   Taken together these 4 proposed projects represent a combined
smelting capacitty of nearly l,,000,000 tons without taking into account the
possibility of expansions in some cases beyond the initial stage.%/ Although
some preliminary work is being done in connection with several of the pro-
J ects, none are yet actively under construction and there are as yet no
plans for construction sufficiently firm to provide a basis for estimating
future output.   Considering the time required to construct the dams, power-
houses, and smelters, etc. and considering the present state of the plans,
it is highly unlikely that any quantity of aluminum will be produced from
any of them before 1965 or 1966.
56. In each case a number of producers have been involved in the plan-
ning and study of the projected developments.   Those so involved have
included all the leading European, British, Canadian and American companies
IJ Brief comments on each project are found in Appendix Table V.  The
planned capacities are as follows:
Inga (Belgian Congo)                       450,000 tons
Konkourb (Guinea)                          150,000
Kouilou (French Lquatorial Africa -
Middle Congo)                     230,000
Volta (Ghana)                              120,000
950,000 tons



- 22 -
with the single exception of Alcoa. 2    Some producers have interests in
several projects.   It is difficult to say at this time which project is
most likely to be constructed first or what the order and timing of the suc-
cessive developments might be.   The final decisiorns depend on mobilizing
industrial and financial support behind some particular scheme or schemes
and this in turn depends in large degree on the market prospects for aluminum.
However, the element of common involvement on the side of the producers, the
large financial requirements, and the risks and uncertainties inherent in
constructing large industrial enterprises in primitive and to some extent
politically unstable environments will probably limit the number of projects
that may be undertaken at one time, at least in the initial phases of deve-
lopment.
57. Although it may serve no useful purpose to try to anticipate
investment decisions that will probably be made shortly, it is of interest
to deal briefly with the market prospects for African production.   As
pointed out in the previous section, an expanded Canadian industry might be
able to supply Europe's needs up to 1965.   However, it was also emphasized
that the Canadian industry was in a position to expand at short notice and
so could adjust fairly rapidly to market conditions as they developed.   As
a consequence, if the market for Canadian metal should not grow as rapidly
as anticipated this would not necessarily result in a condition of over-
supply in Canada.   Cn the assumption that the level of production for which
considerable investment (in power) had already been made represents the
minimum the Canadians intend to produce in 1965 (1,000,000 tons), there
should be a sufficient market for new African production of 100-200,000 tons.
After 1965 the market for African aluminum should increase rapidly.
58. For the period 1965-70 European import requirements are expected
to increase by some 700,000 tons.   At the same time it is anticipated that
the U.S. industry will require 1,300,000 tons on top of its 1965 level of
consumption.   Even if the U.<. market should expand much less rapidly the
requirements for this period mray be expected to tax US§. resources and the
likely result is a shift in favor of imported metal. ~I This could come
mainly from. Canada or Africa.   If Canada supplied a large proportion of
U.S. requirements, Canadian shipments to Europe might tend to be replaced
by metal from Africa.   On the other hand, the involvement of U.S. producers
in Africa might lead to shipments of aluminum from Africa to the U.S.   In
any event it would appear that the need of both Europe and the U.S. to im-
port aluminum could easily result in a market for African metal of 1,000,000
tons by 1970.
59. In the above discussion it has been assumed that the European im-
port requirements will be supplied either by Canada or Africa.   There is
also the possibility of imports from the Soviet Bloc.
v/ Those involved in the various plans include: Pechiney-Ugine (France),
AIAG (Switzerland), VAv (Germany), Montecatini (Italy), British Aluminium
(U.K.), Aluminium Ltd. (CanadEL) and Reynolds and Kaiser (U.S.A.).
V/ See para. 34.



- 23 -
C.   Aluminum from Russia?
(i) Recent Experience:
60. The fact that Russia cannot be ignored as a supplier of aluminum
to lestern Europe first became evident in 1957.   In that year while the
industry suffered from the general conditions of over-supply described ear-
lier, greatly increased amounts of Russian metal appeared in the U.K. at
prices appreciably below those for metal from, Canada, the U.K.'s principal
supplier.   Although Russian shipments accounted for only S,0 of the total
U.K. imports of aluminum that year, their timing and their terms of sale
aroused a considerable reaction.   The Canadians applied for anti-dumping
duties on the Russian metal and at the end of 1957 introduced "loyalty"
discounts of 2% for their U.K. customers.   U.S. producers, although not
directly affected oy Russian exports, were quick to recognize what they
considered to be a threat to thie "stability" of the industry.   By late 1958
the situation was considerably less tense.   The Russians agreed to limit
sales in the U.K. for the next 12 months to 15,000 tons, their 1957 level
of shipments.   This made anti--dumping duties unnecessary and seemed to in-
dicate that the Russians had no intention, at least for the present, of
becoming a maior aluminum exporter.   In addition, Russian prices tended to
move upward, closer to the Canadian level.   For the entire year 1958 Russian
sales in the U.K. declined to 'Less than 12,000 tons and shipments for the
first 4 months of 1959 have been running at about that rate.
61.  The U.K. experience differs from that of Western Europe as a whole
only in degree as indicated in Table 9.   The figures shown differ from
those just cited because they include shipments from Hungary, Poland and
Czechoslovakia in addition to Russia's exports.   Thus the total level of
shipments from all Soviet Bloc countries has not amounted to more tharn 3%
of Europear consurmption and the volume of these shipments showed some de-
cline in 1958.  I$ith the slowing down of Russian exports to Western Europe
and the general recovery of aluminum markets there has been an increasing
tendency to discount the possibility of large scale shipments from this
source.   A popular explanaticn of the increased shipments of 1957 is that
they represent surplus aluiminum which arose from a shift in the Russian
military program from planes to missiles.   Idlitary uses have probably been
absorbing the bulk of Russian aluminum output.   However, this is considered
to be a temporary, surplus in view of the generally low level of aluminum
consumption by other sectors.   This view has received some support by a
recent statemert of a high Russian official claiming that the Soviet Union
has a serious aluminum shortage which is likely to continue for a number of
years and which should require increasing the plans for aluminum production.;/
He claimed that:
"On account of the inadequacy of aluainum Lthe Soviet 'Union is/
forced to limit its application in the electrical industry, in
x Mr. Averki B. Aristov, a Communist Party Presidium member at 21st Party
Congress, February 1959.  Reported in New York Times, February 9, 1959.



Table 9
Euruean1/ Inpors cf Aluminum from Soviet Bloc Countries
(in metric tons)
1955       1956        1957       1958
Belgium-Luxembourg           -        6,910       5,890      5,530
Germany, Fed. Rep.         3,720      8,610       2,090      2,540
Netherlands                  460        190         960      2,230
United Kingdom             2,520        940      17,360     14,270
Others                       280      1,680         540        -
Total                      6,980     18,330      26,840     24,570
1/ OEEC countries only.
Source: OE3C Foreign Trade Statistics.



- 24 -
machinery construction and also in other branches of the national
economy.   Consequently Athe Soviet Union loses/ in a significant
degree on such matters as the weight of machines, metal construc-
tion, the speeds of railroad, automobile and other-kinds of
transport, on the expenditure of fuel and sufferZsl' large losses."i
62. It should of course be recognized that much of the reaction of
lestern producers to Russian exports in 1957 was not based on the fear that
Russian shipments would take over a large part of the Duropean market dis-
placing traditional suppliers -. but rather the fear that Russian tactics
would force the price down. V    The prospect that such tactics might be
repeated in the future depends on the condition of supply in the market and
the size of Russian shipments.   In times of over-supply there is always the
chance that Russia- may be able to disrupt the market to some extent by
"dumping".   However, in a rap:idly expanding market these disruptions cannot
be of a long duration and for the analysis of future market conditions the
essential question is whether Russia may become a supplier of aluminum in
substantial amounts - say over 100,000 tons - or remaln, as at present, a
marginal supplier.   If it is expected that Russia may try to ship 100-200,000
tons a year to Vestern Europe by 1965 this would be a factor of significance
in assessing the outlook for the other suppliers.
63. Vhether in fact substantial Russian exports are to be expected is
of course very difficult to determine.   There is little relevant informa-
tion available and accordingly the question can only be dealt with in an
indirect way.   If the Russians do plan to become a major exporter, it
might be expected that this decision would be reflected in the production
goals they have announced for 1965.   It might also be expected that such a
decision would make economic sense in terms of the quality and location of
bauxite and power resources and the alternative fields in which exports
might be developed.
(ii) Russian Plans for Expansion:
64. The Soviet Union publishes no figures of actual production.   Such
estimates as are available are constructed by adding successive planned in-
creases to the few actual figures available for the immediate post.-war period.
It is not possible to check the extent to which planned goals have been met
so that the farther the figures are extenlded, the greater the chance for
error.   Table 10 presents what appear to be the best data available on the
level of Soviet production in the recent past together with an estimate of
L/ Ibid.
2J One U.S. producer has even gone so far as to blame the Russians for cut-
ting the U.S. price:  "Wiithout selling a pound of aluminum in the United
States, the Soviet was able to cut U.o. price by forcing Aluminium Limited
to act Lby selling aluminum more cheaply in the U.K. markel/.   W4orld Trade
irn the Aluminurn Industry, July 1958, Reynolds 2 etal Company.



Table 10
Tentative Estimates of Russian Primary AlLuinum Production
(In thousands of metric tons)
Year          Production                     Basis
1945              89               Shirnkin 2/ - based on
scattered facts author
believes likely error 5%.
1950             180               4th 5-Year Plan called
for do bling 1945 out-
put. 2
1955             500               5th 5-Year Plan called
for production 2.6 times
1950 level announced that
production reached 2,8
times level. J
1958             550               Assumed production at 90%
of capacity reported by,
Revue de l'Alu-inium. 4~L/
1965           1,55C               7-Year Plan calls for pro-
duction 2.8 times 1958. '/
/ D. B. Shimkin, MIinerals a Key to Soviet Power, Harvard 1953.
2/ Reported in Shinkin - op. cit.
y Reported by T. Shabad, American Metal Market, Sept. 16, 1958,
and F. Baer, Engineering & Mining Journal, IMlay 1959.   Original
source apparently.   Tass - April 24, 1956 Article 4 of chapter
"Industry".
A/ Revue de ltAluminiLn, Jan. 1959, (See Appendix Table VI).
S/ Targets of the 7-Year Plan for Soviet Econovy 1959-1965,
Theses of N.S. Khrushchev's Report to the 21st Congress of the
C.P.S.U., Soviet Booklet #43, London, Dec. 1958.   This is roughly
90% of 1965 capacity as estimated by Revue del'Aluminium, op. cit.
(Appendix Table VI).



- 25 -
the goal planned for 1965.   The figures for 1950 and 1955 are considered
subject to error of as much as 20%.  /  The estimate for 1958 is based on a
study published in the Revue de l'Aluminium, January 1959, and the 1965
figure is 2.8 times larger 'n accordance with the production goal announced
by Premier N. Khrushchev. /   The 1965 estimate is probably subject to more
than 25% error in relation to the actual goal, which may in turn differ con-
siderably from& the level final:Ly achieved.
65. The Russian plans ca:Ll for a very rapid growth of aluminum (over
15% per year) and even making allowance for the approximate nature of the
figures, the 1965 goal is going to be high by most standards.   By compari-
son it is almost equivalent to present U.S. consumption.   It would also be
equivalent to the estimated consumption of the U.K. and the Common Market
countries combined in 1965, or to almost one half the estimated U.S. con-
sumption at that time.   Is it likely that this quantity can be consumed by
Russia and the countries of the Soviet Bloc?
66. In 1957 Russia exported over 50,000 tons of aluminum to other
countries in the Soviet Bloc.  This metal went mainly to Eastern Europe
with less than 1,000 tons going to China, a potentially important market for
the Russians.   The volume of this trade might well be 100-200,000 tons by
1965, adding 50,000 tons to this as representing exports to lV"estern Europe
would leave 1,300,000 to 1,400,000 tons for Russia's own consumption. Con-
sidering the rapid economic growth projected for the Soviet Union, the low
level of present aluminum use, and the indication that there may be a
scarcity of copper and other metals for which aluminum might be substituted,
there is no doubt that Russian consumption of aluminum can be expected to
grow very rapidly if supplies are readily available.   In-view of the goals
of the present 7-Year Plan it does not seem implausible for the Russian
economy to be consuming 1,300,000 to 1,400,000 tons of aluminum by 1965. 2/
However, even if this level of consumption is achieved, it might well be
that uses will not develop as rapidly as production and that fairly large
surpluses may become available for export from time to time.
2/ T. Shabad in The Soviet Aluminum Industry, a study published by the
American Metal Market, October 1958.  Although figures shown in Appendix
Table I are from a different  source they are within this margin of error.
2/ Targets of the 7-Year Plan for Soviet Economy 1959-1965, Theses of
N. S. Khrushchev's Report to the 21st Congress of the C.P.S.U., Soviet Book-
let 7rl43, London, December 1958.  This is roughly 90% of 1965 capacity as
estimated by Revue de l'Aluminium, January 1959.
2/ Allen Dulles, Director of the U.S. Central Intelligence Agency in his
speech before Edison Electric Institute, April 8, 1959 (NTew York Times
April 9, 1959) estimated that whereas Russian industrial production was 40%
of the U.S. level in 1956, by 1965 it is expected to reach 55% of the corres-
ponding U.S. level.   Russian consumption of 1,300,000 to 1,400,000 tons of
aluminum in 1965 would be 40-45%0 of estimated U.S. consumption at that time.



- 26 -
(iii) Russia's Competitivre Position:
67. Continuous and substantial Russian exports to Western Europe would
only make sense if Russian resources of bauxite and power were of such qua-
lity and so located that the costs of producing and exporting aluminum were
competitive in the long run in world markets.   Exporting temporary surpluses
that might appear due to planning errors, etc. is one thing and in such cases
price may not be particularly important.   But if the Russians are to become
major exporters it seems only reasonable to assume that over the long run
they must operate as other commercial suppliers do.   The Russians must be
able to sell for extended periods at world market prices.   They must be
able to meet the competition from Canada and Africa.
68. Very little is known concerning the competitive position of
Russian aluminum production.   However, it does appear to be based in large
part on low grade bauxite with an increasing emphasis on substitute aluminum
bearing materials; the transportation involved in assembling materials and
delivering them to the markets appears to be high; and the major expansior,
in the industry is planned to take place in Siberia, many thousands of miles
by rail from the markets of Western Europe.   The location of the Russian
plants seems particularly sigrnificant.   (See Appendix Table VI).   Cf the
estimated total capacity for 1965, 5% is located in the Leningrad area with
easy access to western markets, 22% is near the Black or Caspian Seas in
south western Russia, 13% is located in the Urals, far from the European
border, and 60% is still further eastward in Siberia.   80% of the capacity
being built or planned for construction between now and 1965 is to be located
in Siberia.   With the great bulk of Russian production a very long way from
European centers of consumption, it is difficult to see how the Russians can
be competitive over the long run with aluminum produced from the much richer
ores of Africa and the Caribbean at points readily accessible to ocean
transport.
69.  In addition to the cuestion of the cost position of the Russian
industry, the question may also be asked as to whether the heavy investment
required to produce aluminum would represent a sensible use of investment
resources in order to earn foreign exchange.   In this connection there are
indications that the Russians have been shifting power sources from hydro
to thermal plants in order to reduce investment outlays and obtain quicker
results.   It would seem to be questionable whether primary aluminum with its
heavy investment requirements would be among the most suitable major Russian
exports frmn the long run economic point of view.
70. The above arguments may be summarized as follows: Russia's plans
for greatly increasing its aluminum industry do not necessarily imply the
intention to become a major exporter of aluminum to the Vest.   The informa-
tion that is available about t,he location of the Russian industry and the
quality of its raw materials would seem to support this view.   Russian pro-
duction for the European market would seem to operate under a number of dis-
advantages as compared with production in Canada or Africa.   However, the
rapid increase in consumption the Russians are attempting to achieve may be
expected to generate surpluses from time to time and although shipments to
the West might exceed 100,000 tons in some years, it is expected that in
general they will be below this level.



- 27 _
D.  A Probable Pattern of D,e,lopment
71. On the basis of the above discussion it seems reasonable to expect
Canada to be the principal supplier of European import requirements up to
about 1965.   African supplies; may enter the European market at about this
time or shortly thereafter.   In the late 1960's African production may be
expected to provide an increasing share of European requirements and there
may be some shift of Canadian exports from Europe to the U.S. market.
Russian shipments to Europe may be expected to fluctuate but in general they
are not expected to exceed about 100,000 tons per year.
72. With the prospect of a rapid broadening of demand for aluminum there
is bound to be a certain flexibility in the market.   Periods of surplus
capacity will tend to be short-lived and mistakes in the timing of new invest-
ment will tend to be minimized.   As pointed out previously the estimates of
demand may well be exceeded.   It is difficult to predict the development of
new uses.   However, with a strong supply position and aggressive promotion
of aluminum, European consumption in particular might grow more rapidly than
expected and approach more closely the North American levels of consumption.
E.   Price Considerations
73.  The pattern of development described above involves an increase in
world trade in aluminum.   The Canadians dominate this trade today and most
of the metal s,hipped between countries moves at the Canadian export price of
22-O (U.S.),   even though the price of aluminum in many domestic markets is
appreciably higher.  /  In an industry characterized by large producers
administering stable prices, ft can be expected that the Aluminium Company
of Canada will continue to re1;ain its position as "price leader" in the export
field and that the price of aluminum will be largely determined by Alcan's
price policy for some time to come.
74. As has already been pointed out (para. 46) there were good reasons
for the price cut made by Alcan in 1958 and there are good reasons to expect
that the company will not increase prices as long as this would tend to
encourage the development of niew capacity elsewhere which might hinder the
Canadian mills from reaching full production.   Cr another hand, it is pos-
sible that Alcan's cost positior, which can only be improved by the rounding
out of the present facilities, would allow some further reduction in price
if that were considered to be in the company's best interests.   Ihether such
I/ Canadian sales in the U.S. are an exception.   In August 1958 the price of
Canadian metal sold in this market was increased 7/10 when U.S. producers
raised their prices by that anount.   (See para. 46).
2/ For example, although the 'J.S. domestic price is 24.7¢ per pound for pri-
mary pig, recent U.S. exports of alumrinum, have been at the Canadian price of
222 0.



- 28 -
action would result in more favorable market prospects is difficult to judge.
In view of the recovery in world aluminum markets now underway, the delay in
starting the African projects and the prospects for growing European import
requirements in the next few years which cannot readily be supplied from
other sources, the arguments for a further general price reduction do not
appear to be particularly strong at this time.   In the longer run, of course,
the trend in the price of aluminum moving in international trade will be
influenced by the cost conditions prevailing in the new producing areas whose
output will be required to meet the growing demand for the metal.



APPENDIX A
Differences :in the Aluminum Consumption,
Lurope and the U.S.
1.  An important characteristic of the growth of world aluminum con-
sumption since the 1930's has been the increasing disparity between the
levels of consumption in the U.S. and in Europe.   This disparity does not
extend to metal consumption in general but is a characteristic of the greatly
differing patterns of metal consumption in North America and in hurope.
These differences can be illustrated in several ways.   Table A-1 compares
the growth in consumption of major rmetals in the U.K., France and Germany
compared with the corresponding, growth in the U.S. from 1938 to 1956.   The
lag in growth of European aluminum consumlption is of course in part a reflec-
tion of the more rapid expansion of the U.S. economy during this period.
However, the figures make clear the unique position of aluminum since no
other metals show nearly the sarne extent of lag behind the growth of consump-
tion in the U.S.
2.   Tables A-2 and A-3 show the per capita levels of metal consumption
in the U.S., U.K. and the Common Mtarket countries for both pre-war and
recent periods.   The great differences in the pattern of metal consumption
between the U.S. and the European countries are well brought out.   The per
capita consumption of copper, lead and zinc in some European countries ex-
ceeded that in the U.S. both before the war and, with the exception of lead,
in 1956.   In the case of aluminum, however, while U.S. consumption wTas
below the Luropean average in the late 1930's, in 1956 U.S. consumption was
2 to 3 times that of Germany, France and the U.K. and 6 to 7 times that of
the NTetherlands and Italy.
3.   Table A-4 indicates the differences in the patterns of use of
aluminum between the U.S. and Europe.   The principal difference is seen to
be in the much greater use of aluminum in the building industry in the U.S.



TABLE A-1
TABLE A-1
INDICES OF CONSUMPTICN GROWTH
1938 - 1956
Growth of U.S. Consumption=100
Steel    Aluminum      Copper   Zinc    Lead    Tin
United Kingdom. 72         :31          54       52       38     97
France           92         21           54       74       78     91
Gernany          49          5           21       34 41           33



TABLE A-2
TABLE A-2
COMPARATIVE LEVELS OF METAL CONSUMPTICM
UP1ITED STATES, UNITED KTIrNGDOM AND COMIEVMON MARKET
(In Pounds per Capita)
1935 - 1938
STEEL    ALUMINUM   COPPER   ZINC   LEAD
United States              670       2.0       10.7   So    8.1
United Kingdom             470       2.1       12.4   10.2  15.9
Common Market              350       2.3        6.9     5.8    5.7
France                  275       1.4        6.0     4.7   5.7
Germany                 540       4.1        9.2     6.5    6.8
Belgium-Luxembourg      380       .8         7.7    26.6  ll.8
Netherlands             255        .1        2.1    3.2    6.7
Italy                   120       1.0        4.8     1.8    2.8



TABLE A-3
TABLE A-3
COMlPARATIVE IEVELS OF IvETAL CONSUMPTICN
UNITED STATES, UNITED KINGDOM AND COMMCN TARKET
(In Pounds per Capita)
1956
STEEL    ALUMINUM 2  COPPER    ZINC    IEAD
United States          1330      25.6       15.0    11.7   13.9
United Kingdom          835      12.8       17.5       9.9    11.1
Common Market           610       7.1        7.8       7.4     5.9
France                625       8.1         8.3      7.7     6.1
Germany               936      10.5        9.5       9.5     7.7
Belgium-Luxembourg    651       4.0       16.4      22.7   10.3
Netherlands           521       3.5        4.5       4.3     8.4
Italy                 264       4.2        4.8      2.8      2.5
/ Primary and secondary.



TABLE A-4
TABLE A-4
U.S.A. & EUROPE
PATTERN OF ALUIMIINUM CONSUMPTION BY SECTORS
Europel/  (1955)   U.S.A. (1956)    Pounds per
lbs.per         lbs.per    capita ratio
%      capita      %   capita     of U.S. to Europe
Transport               24.0     1L5       19.3   4.1             2.7
Electricity             15.0       .93     12.8  2.7              2.9
Packaging               11.0      .68       5.1   1.1             1.6
Household Appliances    9.8       .61      15.9  3.4              5.6
Mlachinery               9.6      .60      11.4   2.4             4.0
Buildings               6.0        .37     22.7  4.S             13.0
Steel & Chericals        5.0      .31       5.6   1.2             3.9
Other                  19.6.      1.2       7.2   1.5             1.25
TOTAL      100        6.2    100    21.3              3.4
4 OEEC countries.



STATISTICAL APP DIDIX
Table I      11orld Production of Primary Aluminum
Table II    lVorld Consumption of Primary Aluminum
Table III    Internation.al Trade in Primary Aluminum
Table IV     Canadian EqDorts of Primary Aluminum
Table V      Details of 'Estimated World Primary Aluminum Capacity
in 1957, Capacity Planned for 1961, and Possible
Capacity in 1965, Based on Announced Plans
Table VI     U.S.S.R. - Estimates of Primary Aluminum Capacity
in 1958, Capacity under Construction, and Planned
Capacity for 1965
Table VII    Projects at Various Stages of Planning and Develop-
ment that Might Materialize after 1965, Primary
Aluminum Capacity



TABLE I
TABLE I
,IJorld Production of Primary Aluminum
(In thousands of metric tons)
1938   1943   1950   1952   1954   1955   1956   1957   1258
Un:ited States          130    835    652    850   1325   1420   1523   1495   1425
Canada                   65    450    360    453    509    551    653    506    545
Brazil                   -       -      -        1      2      2       6     17      12
TOTAL A£iVERICA:        195   1285   1012   1304   1836   1973   2092   2018   1982
Germany                 161 2  204 1/  28    101    129    137    147    154    137
Framce                   45     47      61    106    120    129    150    160    169
Italy                    26     46      37      53     58     62      64     66      64
Austria                   4     46      18     37      48     57      59     57      57
Norway                   29     24      45      51     61     72      93     96    122
Spe,in                    1      1       2      4       4     10      14     15      16
Sweden                    2      4       4      8      11     10      13     14      14
Switzerland              27     19      19     27      26     30      30     31      32
United Kingdom           23      57     30     29      32     25      28     30      27
YuEoslavia                1       2      2      3       4     12      15     18      22
TOIAL EUROPE:           312    450    246    419    403    5,4    613    641    660
Formosa                   5     15       2      4       7      7       9      8       9
India                    -       1       4      4       5      7       7      8       8
Jaran                    18    108      25     43      53     58      66     68      85
TC`IAL ASIA:                            2      51      6      22      8              2
OCEAPIA: Australia          -   -                              1       9     11      11
AFRICA: Cameroons        -      -       -      -       -      -               8      2
TOTAL FREE WO,GRLD:     537   1859   1289   1774   2394   2590   2796   2762   2787
U.S.S.R. V               50     62    209    230    360    400    430    530    550
East Germany             -      -        2     15      21     26      30     28      28
Czechoslovakia           -      -       -      -        3     25      21     18      18
Hungary                   2     10       7     15      28     37      30     26      38
Poland                       -      -          -        3     20      21     20      23
Roumania                 -      -       -              -       6      10     10      10
North Korea              -      13       1     _-                     -      -       -
China (Mlanchuria)                      -      -      -       -        5     10     30
TOTAL SOVIL1 SPHERE:    53      94    219    260    415    514    547    620    697
GRAND TOTAL:            590    253   1508   2034   28 09 3104                0
2  Pre-war Germany - figures from 1950 on refer to V,est Germany.
/ Estimates may be subject to considerable error from 1950 on (see text Part IV C
snd Table 11).
Sources: Metal Statistics, l,etallgesellschaft A.G., Frankfurt.  For 1958 figures:
Yenr Book of the American Bureau of lhetal Statistics, June 1959.



TABLE II
TABLE II
World ConsumDtion of Primary Alwminum
(in thousands of metric tons)
198   1943   1950   1952   192;  195    1956   1957   1958
United States            81    796    823    966   1260   1582   1609   1608   1650
Canada                    6     36      59     82     73      83     83     71      74
Braizil                  -      -        7      7     17       9     19     20      20;
lexico                   -      _        3      2      5       8      8     10*    10*
Cthler America            1      3     13       4     16     14      16     15*    15*
TOTAL -AiERICA:          88    g      905   1061   1371   1696   1735   1724   1769
Belg.-Lux.                2      1       5     13     17      26     33     27      41
Germany                 173    249 -   50      92    133    174    173    186    190*
FrEnce                   31     32      55     90     99    109    132    153    144
ItaLly                   26     53     48      52     61     62      72     80      60
Mietherlands             -       1      4       6      8       8      9      8       8*
Austria                  -      -        6     16     26      34     36     34      34
DJermark                  1      2      3       3      3       4      3      4       4*
Finland                  _      -        1      2      1       3      2      2       2*
Nlorway                   1      2      6      12     14      14     15     17      17
SpELin                    1      2      4       5      7      11     16     20      27
Sweden                    7      7     14      23     22      30     28     29      32
Switzerland              12     10     12      28     27      35     37     38      30
Uni-ted Kingdom          45    212    184    224    229    291    281    217    237
Yugoslavia               -      -        3      3      4       9     13     18*    18*
Otiher Europe             1     -       2       2      2       2      2      24'    2*
TO7AL ELROPE:           300    571    397    571    653    812    852   8,3   846
Inclia                   -       1      6       5      8      13     10     13      15
Japan                    50    150      19     33     46      50     66     75      82
Othier Asia              -      -       3       3      4       6      8      8       8*
T COAL ASIA:             50    151      28     L1     22 6                  28    105
CC1ANIA: Australia       -              6       9     11      17     20     20'   2 6
Union of S. Africa       -      -        1      2      4       5      5      6t      6*
Otlher Africa            -                       1  1  1      1      2      2*-    2*
TU'AL AFRTGA:            -      -        2       -     5       6      7      8*      8*
TO:AL FREE i$ORLD:      438   1561   1338   1685   2098   2600   2698   2481   2728



-2 -                              TABLE II
1M    _2&    1950   1952   1954   1955   1956              1958
U. S. S. R.*             57    110    215    225    380    410    440    480
East Germany*            -       -       2      14     20      25     30      30
Czechoslovakia*           4       2     14      15     18      20     20      20
Hwugary*,                 3      11      6      10     14      15     10      15
Gthier East Europe*       1       1      2       3      3       5       5      5
Ch'.na*                   2      -       2       3      3       5       5     10
TCri'AL SCVILT SPHERE:*-/ 67    124    241    270    438    480    510        6
GRAND TCTAL:            505   1685   1579   1955   2536   30        3208   31
I/ Partial data from Year Book of the American Bureau of Metal Statistics, June 1959,
adjusted in some cases to make f:igures consistent with previous series.
g/ Pre-war Germany and Austria - fi;ures for 1950 on refer to .lest Germany.
E estimates may be subject to cons:iderable error.
* Estimates.
Source: Metal Statistics, Yetallgesellschaft A.G., Frankfurt.



TABLE III
TABLE III
International] Trade in Primary Aluminum
HAJOR EXPORTERS              NT EXPORTS (in thousands of metric tons)
193   1950  ]-91  1952  1953  1954  1955  1956  1957  1958
Canada              59   305   322   374   417   425   460   462   432   428
Norway              29    39    40    34    46    45    61    79    72   108
Austria              1    14      7    11    26    21    25    24    23    32
France              14    16      7     5    38    15    21      6    12    21
Japan              -27    23      7     7    10      8    14    -     -9     4
NORTH AIERICA
(Canada & U.S.)     55   145   212   259   146   234   304   297   255   244
MAJOR IIvIPORTERS            NET DiPORTS (in thousands of metric tons)
EUROPE & NORTH ANERICA
United Kingdom      46   138   178   239   170   190   259   226   184   212
United States        4   160   110   115   271   191   156   165   177   184
Benelux              2    10    20    19    15    25    34    42    35    48
Germany             11     5      9     1   -10     6    40    36    34    64
Sweden               5      8    11    15    15    13    18    20    16    15
Switzerland        -18    -7      3     2   - 5      1     5     7     5    -6
Italy               -     10    -3    -       5    -7      1     9    16    -4
EUROPE /
(asTa wchole)       -     95   160   228    81   150   251   237   194   184
COl'UMION MARKET    -       9    19    15   -25      9    54    80    73    87
BRITISH COi4HQONFEALTH             2'    2/    2/    2            2/
Australia            ..     6     9/  12-    6-      9 9   13 -   12-   10
India               *-      2     3     2     1      2     6     3    15
South Africa         ..     1     2     2     3      4     5     5     7
LATIN AMRICA
Argentina /          ..    13     6     3     4    16    15    20    12
Brazil               ..     7    11     6     7    15      6    13    13
Mexico               ..     3     3     2     5      5     8     8      9
/ OEEC countries only.
/ Years ended June 30.
3/ Includes sheet as well as ingots.
-  net position in balance.             ..   negligible
Sources: - Metal Statistics - 1Metallgesellschaft (basic source).
OEEC Statistical Bulletins (for 1957 & 1955).
U.K. - The Mineral Industry of the British Empire and Foreign
Countries, Statistical Sumnary (for British Cormmonwealth and
Latin America).



TABLE IV
TABLE IV
Canadian Exports of Primary Aluminum
(in thousands of metric tons)
19L3    1954    1955    1956    1957    l958
United Kingdom      171.4   191.5   231.7   217.4   157.8   144.9
United States       211.8   180.1    175.7   193.5   196.2   194.0
383.2   371.6   407.4   410,9   354.0   338.9
Europe
Belgium             0.8      4.0      4.5      2.7      2.8      g.8
F'rance             -        -        -        1.4      1.4      1.4
Germany             3.5      3.6      7.2      4.8    17.2    25.9
Italy               2.5      3.7      4.0      4.6    10.0       2.6
Netherlands         4.6      7.5      S.6      8.4      4.5      1.0
Spain               neg.     1.2      -        1.1      2.7      4.7
Sweden              4.4      neg.     0.8      0o6      3.2      4.3
Switzerland         2.2      5.3      2.6      3.0     2.1       2.2
18.0    25.3    27.7    26.6    43.9    52.9
British Commonwealth
Australia           4.0      6.9    10.0       4.6      6.8    14.6
South Africa        1.9      2.5      o.6      1.9      2.9      3.2
India               1.0      2.1      1.6      2.3      1.7      3.0
6.9    11.5    12.2       8.8    11.4    20.8
Latin America
Argentina           -        1.2      -        3.7      2.7      neg,
Brazil              2.7      4.9      1.5      1.8      5.1      5.5
Mexico              2.7      3.0      4.6      4.1      5.5    10.8
5.4     9.1      6.1      9.6    13.3    16.3
Far East
Hong Kong           0.4      o.6      1.2      1.0      1.5      2.3
Japan               neg.     1.2      _        1.1      4.6      neg.
0.4      1.3     1.2      2.1      6.1      2.3
Rest of World         3.1      5.7      5.2      3.7      7.0      8.1
Total               417.0   425.0   459.8   461.7   435.7   439.3
Source: Dominion Bureau of Statistics.



TABLE V
'TABLE V
Details of Estimated tWorLd l Priimary Aluminum CaPacity in 1957,
Capacity Planned for 1961. and Possible Capacity in 1965,
Based on Announced Plans
(in thousarnds of metric tons)
1957         1961          1965
NORTH LAERICA
U. S. A.
Alcoa
Hassena, N.Y.                          102           135           135
Badin, N.C.                             43            43            57
Alcoa, Tenn.                           143           143          143
Point Comfort, Tex,                    109           127          127
Vancouver, Wash.                        88            88            88
Wenatchee, Wash.                        99            99           120
Rockdale, Tex.                         136           136          136
Evansville, Ind.                        -            136           136
TOTAL:                            720           907          942
ReVnolds
Listerhill, Ala.                        71           176           270
Longview, lAlash.                       55            55            55
Jones Hills, Ark.                       99            99           99
Troutdale, Ore.                         83            83            83
Corpus Christi, Tex.                    86            86            86
Arkadelphia, Ark.                       50            50            50
Massena, N.Y.                           -             91            91
TOTAL:                             444           640          734
Kaiser
Mead, Wash.                            160           160           160
Tacoma, Wash.                           37            37            37
Chalmette, La.                         225           225           225
Ravenswood, W.Va.                       33           132           200
TOTAL:                             455           554          622
Anaconda
Columbia Falls, lMlont.                 55            55            55
1/ Excluding Soviet sphere.



- 2 -                               TABLE V
1957         1961          1965
Harvey Machine Co.
The Dalles, Ore.                       -             50            49
Ormet Corporation
Omaal, Ohio                            -            164           164
TOTAL U.S.A.                    1674          2370          2566 l/
CANADA
Alcan
Arvida                                330           330           330
Isle M4aligne                         105           105           120
Shawinigan Falls                       65            65            65
Beauharnois                            35            35            35
Kitimat                               170           250           500
Mew Eastern Capacity                                 -            100
TOTAL:                           700           785          1150
Baco
Baie Comeau                            40            80           160
TOTAL CANADA                     740           865          1310
TOTAL NORTH AM{RICA             2414          3235         3876
EUROPE
AUSTRIA
AIAG, Lend                                 8            8             8
VAW, Ranshofen                            52           52            52
TOTAL:                            60            60            60
FRANCE AND CA EROONS
Pechiney                                130           180           1C0
Ugine                                     30           50            50
Cameroons                                10            45            45
TOTAL:                           170           27           285
1/ An obvious underestimate due to absence of announced plans.   Recent
trend in U.S. to thermal based plants has probably influenced long-
range plans by reducing timLe required to bring in new capacity.
j Power facilities constructed for expansion to 1,030,000 tons.
Expansion to 1,310,000 tons depends on market conditiona.



- 3 _                                TABLE V
1957         1961          1965
GERMAMY (w)
AIAG, Rheinfelden                        43            43           43
VAW                                     120          120           120
TOTAL:                           163          163           163
ITALY
SAVA, Porto 1 arghera                    23            23           23
SAI, Borgofranco                          4             4            4
INontecatini                             36            40           5C
TOTAL:                            63           67            77
NORfiAY -/
Ardal og Sunndal
Ardal                                  28            64           96
Sunndal                                40            5G           50
DM
Eydehavn                                9             9            9
Tyssedal                               17            17           17
Naco, H yanger                          J14            14           14
Mosjoen                                  -             22           88
TOTAL:                           108          t76           272
SPAIN
Aluminio Expanol                          2            13           15
Empresa Nacional del Alurinio (Endasa)  10             25           25
TOTAL:                            12           38            40
S.AEDE
Svenska Al. Kampaniet                    15            15           15
SWITZERLAND
AIAG
Chippis                                28           28            28
Steg                                   -             -            18
Aluminiumfabrik Martigny                  4             4            4
TOTAL:                            32           32            50
/ Capacity shown for 1961 planned for 1959 - Sunndal expansion completed
in 1958.



TABLE V
1957         1961         1965
UNITED KINGDOM
British Aluminium Company                32           32           32
YUGOSLAVIA
Lozovac                                   5            5             5
Kidricevo, Strnisce                      15           30           30
Razine, Sibenik                           2            5             5
TOTAL:                            22           40           40J
TOTAL EUROPE                     697          898         1034
ASIA AND AUSTRALIA
AUSTRALIA                                   10           10            10
FORMOSA                                      9           20            20
IDDIA
Indaluco                                  5           16            26
Aluminium Corporation                     3            5           14
TOTAL:                             8           21           40
JAPAN
NKK                                      32           53            74
Showva Denko                             20           40           40
Sumitomo Kagaku                          14           29            29
TOTAL:                           66           122          143
TOTAL ASIA AND AUSTRALIA          93          173          213
L]ATIN AMERICA
BRAZIL
Elquisa, Ouro Preto                       2            9             9
Cia Brasileira de Aluminio (CBA)          2           14           46
TOTAL:                            4            23           55
/ Excludes 55,000-ton project to be financed by Russians - Russian
assistance withdrawn in Spring 1958.   It is assumed here that the
project will not be realized before 1965.



TABLE V
1957         1961         1965
PERU
Cerro de Pasco - Montaro "River                                    9
SURINAM
Brokopondo                                                        55
TOTAL LATIN AME,RICA:                  4           23          119
GRAND TOTAL:                        3208         4330         5242



TABLE VI
TABLE VI
U.S.S.R.
Estimates of Prinary Aliurinum CapacitY in 1958,
Capacity under Construction, and Planned Capacity for 1965
*                                 (In thousands of metric tons)
Estimated    Planned    Estimqated
Plant                             Ca2pacity     or under   Capacitty
1958     Construction Planned
for 1965
I. European Russia
Northwest - Leningrad Area
Based on local deposits of low grade
bauxite and nephelite.
Kandalakska (1954-5)                            25           -            25
Nadvoitsy (1955)                                20           -            20
Volkhov (1932)                                  45           _            45
Southwest - Ukraine and Transcaucasia
Based on bauxite and alumina shipped
from Urals - 1500-2000 miles away and
to some extent on bauxite from Hungary.
Plans to develop deposits of alunite
and nephelite in area.
Sumgait (1955)                                  30           20           5m
Stalingrad                                      -           200          200
Yerevan (1950)                                  40           -            40
Zaporozhye (1933-reconstr.1949)                100           -           100
Total European Russia                       E           220          480
II. Urals
Based on local deposits of bauxite.
Large shipments of bauxite and alumina
from this area to plants in other parts
of Russia.
Kamensk (1939)                                 120           -           120
Krasnoturinsk (1945)                           120           -           120
Total Urals                                240           -           240
tII. Siberia and Kazakhstan
Based on alumina from the Urals,(Stalinsk).
Bauxite 650 miles from site of Pavlodar alu-
mina and aluminum plant, plans to develop
deposits of nephelite (Krasnoyarsk), and
sillimanite (Irkutsk).
Irkutsk                                                     300          300
Krasnoyarsk                                                 400          400
Pavlodar                                        -           250          250
Stalinsk                                       100           -           100
Total Siberia and Kazakhstan               100          950       1,050
TOTAL U.S.S.R.                                   600        1,170        1,770
Source: Revue de ltAluminium, January 1959 and 3 Articles by T. Shabad,
American Metal Market, Sept. 12, 13, & 16, 1958.



TABLE VII
TABLE VII
Projects at Various Stages of Planning and fevelonment
That 14iiht Materialize_afterj16
Primary Aluminum Capacity
(in thousands of metric tons)
AFRICA
Angola
In August 1958 French producer, Pechiney, reached agreement with
Aluminio Portugues (Angola) SARL to construct smelter in this
Portuguese territory.  NIo construction schedule announced.
1st stage                        25
Full capacity                    50
Belgian Congo
Inga Project - Belgian Aluminium Syndicate, British Aluminium
Company, Pechiney-Ugine, AIAG (Swiss), VAVT (German), Montecatini,
Reynolds and Aluminium Limited associated in Aluminga Syndicate
to study possibilities for constructing smelter.   Bauxite
deposits have recently been discovered in the Congo.
Capacity                        450
Camerocns
Fdea - 45,000-torn smelter now in operation.   Capacity could
probably be doubled, although there are no announced plans
for such an expansion.                                              45
French Eauatorial Africa - M1iddle Congo
Kouilou project, originaLly considered by the French as an
alternative or second stage to Konkour6, may be expected to
assume a higher priority as result of Guinea's changed status.
To use bauxite from Guinea.
Capacity                        230
Ghana
Project on Volta River uLider study for some time.   Surveyed
by Kaiser engineers in 1958 who recommended constructing
project to produce 120,000 tons instead of the 210,000 tons
originally considered.   Plans calls for a 4-stage program
requiring more than 5 years.  Local bauxite deposits.              120



- 2 -                             TABLE VII
TABLE VII (Cont'd)
Guinea
.
Konkourb project, large local bauxite deposits, originally
planned for construction by mid-1960's by international
group (France, Canada, Germany, U.S.A., U.K. and Switzerland).
Plans postponed following Guinea's withdrawal from French
Union.
Capacity                       150
(Potential capacity           230)
AUSTRALIA
Australia
Plans being made to develop Queensland bauxite (200-
million tons economic grade) on Cape York Peninsula.
Commonwealth Aluminium Co. (Consolidated Zinc and British
Aluminium) planning 500,000-ton alumina plant and 250,000-
ton aluminum smelter.   No decision made as between using
INTew Guinea hydro power (245 miles fron plant) or thermal
power from open cut Blair Athol coal field.   Plans very
tentative.                                                        250
LATITh AMERICA
Venezuela
The Venezuelan Developmernt Corp. has budgeted 1l.5 million
to spend on preliminary plans for a 25,000-ton smelter in
connection with the Caroni River Hydro scheme.   Smelter to
be expanded later to 50,000 tons.   Timing indefinite.              50