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COMPETITIVENESS OF THE U.S. MINERALS AND METALS INDUSTRY Committee on Competitiveness of the Minerals and Metals Industry NATIONAL MATERIALS ADVISORY BOARD COMMISSION ON ENGINEERING AND TECHNICAL SYSTEMS NATIONAL RESEARCH COUNCIL NATIONAL ACADEMY PRESS Washington, D.C. 1990

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NATIONAL ACADEMY PRESS 2101 Constitution Avenue, N.W. Washington, D.C. NOTICE: The project that is the subject of this report was approved by the Governing Board of the National Research Council, whose members are chosen from the councils of the National Academy of Sciences, the National Academy of Engineering, and the Institute of Medicine. The members of the committee responsible for the report were chosen for their special competences and with regard for appropriate balance. This report has been reviewed by a group other than the authors according to procedures approved by a Report Review Committee consisting of members of the National Academy of Sciences, the National Acad- emy of Engineering, and the Institute of Medicine. This report was supported by the U.S. Department of the Interior, Bureau of Mines under Grant No. GO 1 78055. The National Academy of Sciences is a private, nonprofit, self-perpetuating society of distinguished scholars engaged in scientific and engineering research, dedicated to the furtherance of science and technol- ogy and to their use for the general welfare. Upon the authority of the charter granted to it by the Congress in 1863, the Academy has a mandate that requires it to advise the federal government on scientific and technical matters. Dr. Frank Press is president of the National Academy of Sciences. The National Academy of Engineering was established in 1964, under the charter of the National Academy of Sciences, as a parallel organization of outstanding engineers. It is autonomous in its adminis- tration and in the selection of its members, sharing with the National Academy of Sciences the responsibility for advising the federal government. The National Academy of Engineering also sponsors engineering programs aimed at meeting national needs, encourages education and research, and recognizes the superior achievements of engineers. Dr. Robert M. White is president of the National Academy of Engineering. The Institute of Medicine was established in 1970 by the National Academy of Sciences to secure the services of eminent members of appropriate professions in the examination of policy matters pertaining to the health of the public. The Institute acts under the responsibility given to the National Academy of Sciences by its congressional charter to be an adviser to the federal government and, upon its own initiative, to identify issues of medical care, research, and education. Dr. Samuel O. Thier is president of the Institute of Medicine. The National Research Council was organized by the National Academy of Sciences in 1916 to associate the broad community of science and technology with the Academy's purposes of furthering knowledge and advising the federal government. Functioning in accordance with general policies determined by the Acad- emy, the Council has become the principal operating agency of both the National Academy of Sciences and the National Academy of Engineering in providing services to the government, the public, and the scientific and engineering communities. The Council is administered jointly by both Academies and the Institute of Medicine. Dr. Frank Press and Dr. Robert M. White are chairman and vice chairman, respectively, of the National Research Council. Library of Congress Cata'oging-in-Publication Data National Research Council (U.S.) Committee on Competitiveness of the U.S. Minerals and Metals Industry. Competitiveness of the U.S. minerals and metals industry: report of the Committee on Competitiveness of the U.S. Minerals and Metals Industry, National Materials Advisory Board, Commission on Engineering and Technical Systems, National Research Council. p. cm. Includes bibliographical references and index. ISBN 0-309-04245-3 1. Mineral industriesUnited States. 2. Metal tradeUnited States. 3. Mineral industries. 4. Metal trade. 5. Competition, International. I. Title. HD9506.U62N34 1990 338.2'0973dc20 90-39804 CIP Printed in the United States of America

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NATIONAL ACADEMY OF ENGINEERING 2101 Constitution Avenue N W Washington D C. 20418 Mr. T S Ary Director Bureau of Mines U.S. Department of the Interior 2401 E Street, N.W. Washington, D.C. 20241 Dear Mr. Ary: Office of the President I am pleased to transmit a report on The Competitiveness of the Minerals and Metals Industry, prepared by the National Materials Advisory Board of the National Research Council (NRC). As with all reports of the NRC, the report is the responsibility of the committee, but its review has been monitored by the Academies' Report Review Committee. The National Academy of Engineering (NAE) has long been concerned about the competitiveness of U.S. industry in an increasingly integrated global economy. The U.S. minerals industry was selected for study after an initial workshop in February 1986 that highlighted the increasing competitive pressures experienced by the industry. At the workshop it became apparent that a much larger effort would be required to assess the future health of the industry. In June 1987, the Assistant Secretary for Water and Science of the Department of the Interior requested that we consider a study focused on the opportunities that would significantly improve the ability of U.S. producers to compete with foreign producers and the opportunities that exist for advanced materials and new technology to improve operating efficiency in the minerals industry. The issues raised by the Assistant Secretary were parallel to the concerns of the NAE and resulted in the present study funded by the Bureau of Mines. The minerals industry contributes significantly to the nation's economic strength and represents a multi-billion dollar enterprise that employs on the order of one half million U.S. workers and provides much of the materials foundation for U.S. manufacturing. The report stresses that although the domestic industry is currently competitive, this NAE't~25

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competitiveness may be transitory. The competitiveness of the industry is based largely on non-technological measures that have already yielded many of their possible benefits. As a result, the domestic industry must in the future focus increasingly on other measures, most notably the use of technology. The minerals and metals industry although unique in some respects is very much like most basic industries. It is noteworthy that the report echoes many of the recommendations of studies of other industries including the need for new mechanisms for conducting cooperative research and development between industry, universities, and the government. It is our hope that the Bureau of Mines which has recognized the importance of maintaining the competitiveness in the U.S. minerals and metals industry will find the recommendations in this report useful in the formulation of policies and programs that can achieve this goal. Sincerely, Robert M. White President

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COMMITTEE ON COMPETITIVENESS OF THE U.S. MINERALS AND METALS INDUSTRY ALVIN W. TRIVELPIECE (ChairmanJ, Oak Ridge National Laboratory, Oak Ridge, Tennessee ROBERT R. BEEBE (Vice Chairman), Homestake Mining Company, San Francisco, California GEORGE S. ANSELL, Colorado School of Mines, Golden NATHANIEL ARBITER, Consultant, Vail, Arizona PATRICK R. ATKINS, Aluminum Company of America, Pittsburgh, Pennsylvania R. STEPHEN BERRY, University of Chicago, Chicago, Illinois PETER CANNON, CONDUCTUS, Sunnyvale, California JAMES ECONOMY, University of Illinois, Urbana JAMES A. FORD, Consultant, Johnson City, Tennessee NORMAN A. GJOSTEIN, Ford Motor Company, Dearborn, Michigan BRUCE A. KENNEDY, P. T. Pelsart Management Services, Jakarta, Indonesia WILLIAM W. LEWIS, McKinsey and Company, Washington, D.C. JAMES S. MOOSE, The World Bank, Washington, D.C. HAROLD W. PAXTON, Carnegie Mellon University, Pittsburgh, Pennsylvania JOHN E. TILTON, Colorado School of Mines, Golden A. DOUGLAS ZUNKEL, A. D. Zunkel Consultants, Inc., Vancouver, Washington Liaison Representative GEORGE WHITE, Bureau of Mines, Washington, D.C. NMAB Staff Lance N. Antrim, Project Officer Robert M. Ehrenreich, Staff Officer Courtland S. Lewis, Consultant/Writer Paul B. Phelps, Editor Mary W. Brittain, Administrative Officer Aida C. Neel, Senior Secretary Klaus M. Zwilsky, Staff Director v

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NATIONAL MATERIALS ADVISORY BOARD JAMES C. WILLIAMS (Chairman), General Electric Company, Cincinnati, Ohio BERNARD H. KEAR (Past ChairmanJ, Rutgers University, Piscataway, New Jersey NORBERT S. BAER, New York University, New York, New York ROBERT R. BEEBE, Homestake Mining Company, San Francisco, California FRANK W. GROSSMAN, Lockheed Missiles & Space Co., Inc., Sunnyvale, California JAMES ECONOMY, University of Illinois, Urbana JAMES A. FORD, Consultant, Johnson City, Tennessee ROBERT E. GREEN, JR., Johns Hopkins University, Baltimore, Maryland JOHN K. HULM (Retired), Westinghouse Research Laboratories, Pittsburgh, Pennsylvania FRANK E. JAMERSON, General Motors Research Laboratories, Warren, Michigan MELVIN F. KANNINEN, Southwest Research Institute, San Antonio, Texas RONALD M. LATANISION, Massachusetts Institute of Technology, Cambridge ROBERT A. LAUDISE, AT&T Bell Laboratories, Murray Hill, New Jersey WILLIAM D. NIX, Stanford University, Stanford, California DONALD R. PAUL, University of Texas, Austin JOSEPH L. PENTECOST, Georgia Institute of Technology, Atlanta JOHN P. RIGGS, Hoechst Celanese Corporation, Summit, New Jersey MAXINE L. SAVITZ, Garrett Ceramic Components Division, Allied-Signal Aerospace Co., Torrance, California DALE F. STEIN, Michigan Technological University, Houghton EARL R. THOMPSON, United Technologies Research Center, East Hartford, Connecticut JAMES R. WEIR, JR., Oak Ridge National Laboratory, Oak Ridge, Tennessee NMAB Staff Klaus M. Zwilsky, Director Stanley M. Barkin, Associate Director Mary W. Brittain, Administrative Officer Vl

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Abstract This report of the Committee on Competitiveness of the Minerals and Metals Industry contains comprehensive assessments of the recent history and current structure of the global minerals and metals industry and of the competitive status of the U.S. industry within that global marketplace. The industry contributes significantly to the nation's economic strength and military security, representing a multibillion dollar enterprise that employed 500,000 U.S. workers in 1989 and provided the material foundation for U.S. manufacturing. The report assesses the technologies currently in use by the domestic industry and recommends research and development (R&D) needed to pursue future technologies. Projected trends in demand for metals are examined in light of increasing demand for and substitution by new materials. The nation's industrial and academic capabilities for R&D in these fields are evaluated, and human resource issues are discussed quantitatively. Federal support of mining- and metals-related R&D across all agencies is summarized. The federal role in support of this industry is discussed in depth, with a particular focus on the role of the Bureau of Mines. Minerals and metals policies of some other nations are briefly reviewed. Mechanisms for improving the development and implementation of new technologies by the domestic industry are suggested. Finally, a number of recommendations are directed at government, industry, and academe recommendations that are intended to foster the development of partnerships among these three sectors for the pursuit of technology to improve the competitiveness of the U.S. industry. v''

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Preface Throughout the 1980s a dominant theme heard in Washington and in corporate boardrooms across the nation was concern about the declining competitiveness of U.S. industry. The decline of exports, jobs, and market share in one industry after another became almost a litany, as the nation's leaders struggled to understand the decline and find ways to reverse it. One of the hardest-hit industries was the minerals- and metals-producing indus- try, a diverse group of mining companies, mineral processors, and metal fabricators. The industry was facing intense competition not only from low-cost foreign producers of commodity minerals but also from alternative materials such as plastics, ceramics, and optical fibers. By late 1985, after four consecutive years of heavy losses, observers were predicting the "death of mining" in the United States and a very dim future for U.S. metals producers. This prospect was of concern not only to the industry but also to many people in government, and in particular to the U.S. Department of the Inte- rior and the Bureau of Mines. In June 1987 the Assistant Secretary of the Interior for Water and Science wrote to the president of the National Acad- emy of Engineering (NAE) requesting a study of "the implications of materials science and engineering to the minerals producing industries." The NAE turned to the National Research Council (NRC), which initiated a study by the National Materials Advisory Board (NMAB) under the sponsorship of the Bureau of Mines. Following discussions with Bureau of Mines representatives, NMAB developed a tentative set of objectives for the study. Essentially, the study would (1) IX

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x PREFACE seek to identify significant new technologies that might improve minerals production and processing, (2) attempt to gauge their likely impact on the competitiveness of the domestic industry, and (3) recommend ways to improve the development and implementation of technologies throughout the indus- try. The intent was to build on the parallel NRC study on Materials Science and Engineering for the l990s and determine where and how science and technology could exert significant leverage to lower the cost or improve the performance of the products of the materials industry. An important underlying focus of both studies was on identifying ways in which the federal govern- ment can contribute to the effective application of technology in industry. The Committee on Competitiveness of the Minerals and Metals Industry was formed by the NRC. The membership of the committee was selected to bring balanced and broad-based expertise to bear in addressing these issues. As the committee was beginning its deliberations, however, conditions in the minerals and metals industry changed. In 1987 both prices and the demand for metals turned sharply upward. At the same time, the value of the dollar was declining against many major currencies, increasing demands for U.S. minerals. These trends generated a sudden and very welcome surge in profits for U.S. minerals and metals producers. Drastic restructur- ing undertaken over the preceding years had significantly reduced the size of the industry, but for the short term at least what remained of the industry was suddenly in an improved financial situation. Having seen numerous cycles of profit and loss in the past, however, committee members remained concerned about the long-term implications of this business revival. Nevertheless, the change in climate prompted the committee to take a step back from the immediate situation and address the longer-term technological basis of the industry and its interactions with its "support base" in government and academe. Thus, to the initial focus on specific technologies was added a second focus on long-range structural improvements to generate technology and put it into practice in the minerals and metals industry. The committee organized itself into three working groups dealing with the structure of the industry, patterns of supply and demand, and the role of science and technology. The committee's efforts respectively became the basis for Chapters 1, 2, and 3. The committee as a whole participated in the formulation of institutional issues (Chapter 4), policy issues (Chapter 5), and of course in the recommendations (Chapter 61. The committee also held two workshops "Changing Patterns of Supply and Demand" and the "Role of Science and Technology in the Competitiveness of the Minerals and Metals Industry" and sought advice from many individuals in govern- ment, industry, and academe. Perhaps the overriding conclusion of the committee is that, through cut- backs in funding for industry and academic research and development (R&D), through a loss of boldness in the R&D sponsored or performed by government

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PREFACE Xl laboratories, and through a lack of cooperation among the various sectors of the minerals and metals community, the "technology pipeline" for the domestic industry has all but dried up. Most of the committee's recommendations are intended to reopen that pipeline and stimulate a strong, steady flow of new technologies by fostering a three-way partnership between government, industry, and academe that will produce a coherent national program of mining and minerals R&D. We believe that the committee's recommendations represent a roadmap for ensuring that the United States can continue to remain strong in providing competitive raw materials. This report is offered with the hope that its recommendations will be adopted by those who are responsible for decisions that will determine the future of the vital U.S. minerals and metals industry. ALVIN W. TRIVELPIECE, Chairman ROBERT R. BEEBE, Vice Chairman Committee on Competitiveness of the U.S. Minerals and Metals Industry

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Acknowledgments This study on the competitiveness of the diverse minerals and metals industry could not have been accomplished without the contributions of many individuals. The work of the committee was supported by the Bureau of Mines of the U.S. Department of the Interior, and we acknowledge this support with thanks. T S Ary, Director of the Bureau of Mines, maintained an active interest in the committee throughout the study. David S. Brown, Associate Director for Information and Analysis, and his deputy, Hermann Enzer, provided invaluable information to the committee. David R. Forshey, Associate Director for Research, and John Breslin, Chief of Staff for Research, supplied background and pertinent information requested by the committee. The chief of the Office of Mineral Institutes, Ronald Munson, also provided valuable information, as did Steven Hill, director of the Salt Lake City Research Center, and Lewis Wade, director of the Twin Cities Research Center. The Bureau of Mines Chief Staff Officer, John D. Morgan, pro- vided valuable information related to policy from the minerals and metals standpoint. Additional information was supplied by James Donahue, chief of the Budget Office; William Schmidt and Philip Meikle, research program managers; and by many commodities specialists at the Bureau. Presentations to the committee by experts from industry, academe, and government provided information that was instrumental in establishing the framework for the study. They are Paul H. O'Neill, Aluminum Company of America; John Alic, Office of Technology Assessment; Dodd A. Carr, In- ternational Lead-Zinc Research Organization; William Dennis, American . . . x'''

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XIV ACKNOWLEDGMENTS Iron & Steel Institute; William Drescher, International Copper Association; Douglas W. Fuerstenau, University of California at Berkeley; Carl Peterson, Massachusetts Institute of Technology; Bruce Tippen, University of Ala- bama; Dick J. Wilkins, University of Delaware; John C. Williams, U.S. Department of Commerce; William R. D. Wilson, Northwestern University; Jenifer Robison, Office of Technology Assessment; Hans Landsberg, Resources for the Future; William A. Owczarski, Office of Science and Technology Policy; David Bussard, U.S. Environmental Protection Agency; Simon D. Strauss, consultant; and Paul C. Maxwell, Committee on Science, Space, and Technology, U.S. House of Representatives. The committee is also grateful for the information provided on academic programs, enrollments, and faculty members in the relevant fields by Eileen Ashford from the South Dakota School of Mines and Technology. In addition, the committee appreciates the assistance of the many indi- viduals in government agencies, including the National Science Foundation; U.S. Geological Survey; U.S. Department of Energy; National Institute of Standards and Technology; Defense Advanced Research Projects Agency, U.S. Department of Defense; National Oceanic and Atmospheric Administration; and the Minerals Management Service of the U.S. Department of the Interior. The committee also wishes to thank John A. White and John Larsen-Basse of the National Science Foundation for their assistance and for the information they provided. Several industry associations are thanked for their help. They are the American Iron and Steel Institute, International Lead-Zinc Research Organization, International Copper Association, Nonferrous Metals Producers Group, American Mining Congress, Mining and Metallurgical Society of America, and the Mining and Excavation Research Institute. The committee acknowledges and thanks the participants of the two workshops. The workshop on "Changing Patterns of Supply and Demand" was attended by R. O. Muth, ASARCO, and John K. Hammes, Citibank, and the workshop on the "Role of Science and Technology in the Competitiveness of the Minerals and Metals Industry" was attended by Roshan Bhappu, Mountain States Research and Development; David Bollin, Pincock, Allen, and Holt; Maurice A. Cocquerell, Acres Davy McKee Engineering; Maurice Davidson, Newmont Exploration; Terry P. McNulty, Hazen Research, Inc.; Ronald An Miller, Aluminum Company of America; Hayden Murray, Indiana University; M. D. Salamon, Colorado School of Mines; and Donald Steeples, Kansas Geological Survey. The committee also wishes to acknowledge discussions with the several executives of mining companies who gave their candid assessments of the structure of the industry and their views on the future of research and development in the mining industry. The committee is especially grateful for the assistance of George White,

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ACKNOWLEDGMENTS XV Director of Special Projects, Bureau of Mines, who served as liaison to the committee. He obtained a great deal of information for the committee both in terms of Bureau reports and legislation and in presentations related to the structure, mission, and program of the Bureau. Finally, we extend our appreciation to the staff of the National Materials Advisory Board for their support. They are Lance N. Antrim, project offi- cer; Robert M. Ehrenreich, staff officer; Courtland S. Lewis, consultant/ writer; Paul B. Phelps, editor; Mary W. Brittain, administrative officer; Aida C. Neel, senior secretary; and Klaus M. Zwilsky, director.

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Contents EXECUTIVE SUMMARY ... Technology and Competitiveness, 3 Recommended Actions, 7 1 U.S. MINERALS AND METALS INDUSTRY IN A CHANGING GLOBAL CONTEXT....................................... World Minerals and Metals Industry, 9 Trends in the U.S. Industry, 14 Revival of the Minerals and Metals Industry, 18 References, 24 2 SUPPLY, DEMAND, AND COMPETITIVENESS ...... Overview of the Minerals and Metals Industry, 26 Trends in Mineral and Metal Production, 30 Trends in Metals Demand, 35 Competitiveness of the U.S. Industry, 44 9 ......... 26 3 ROLE OF SCIENCE AND TECHNOLOGY IN MINERALS AND METALS COMPETITIVENESS ISSUES 56 Background, 57 Exploration Technologies, 58 Mining Technologies, 62 Mineral Processing Technologies, 65 Metal Extraction Technologies, 68 Research Agenda, 75 References, 78 xvii

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. . . XV111 4 RESOURCES FOR RESEARCH AND DEVELOPMENT Industry Research and Development, 79 Federal Role in Minerals Research and Development, 81 Academic Research Resources and Capabilities, 87 Issues Affecting Future Research and Development, 94 Reference, 99 5 FEDERAL ROLE IN TECHNOLOGY AND COMPETITIVENESS . . . . . . . . . . . . . . . . Minerals and Metals Policy in the U.S. and Abroad, 102 Role of the Bureau of Mines, 108 Opportunities for Action, 1 13 6 RECOMMENDATIONS.............. Industry and Academe, 123 Bureau of Mines and Other Agencies, 125 APPENDIX Biographical Sketches of Committee Members INDEX CONTENTS .... 79 100 .123 .131 135

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COMPETITIVENESS OF THE U.S. MINERALS AND METALS INDUSTRY

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Frontispiece: California hand jig, c. 1860; California placer gold gravity rocker, c. 1860 (Courtesy N. ArbiterJ; Gold operations: Round Mountain, NV and McLaughlin, Lower Lake, CA (Courtesy Homestake Mining Co., photographer Mickey BrimJ