STATE DEPARTMENT ASSISTS EUROPEAN MERCURY CARTEL

Mr. LEMKE. May I ask, has the State Department and the Commerce Department in your judgment, given aid and assistance to the cartel? Mr. WILLISTON. I think I can answer that one very nicely. Possibly you will appreciate the story.

Directly after VE-day-it was about January of 1946-the State Department brought over from Spain three representatives of the cartel and escorted them across the country so that they would have an opportunity to look over our own domestic mines and to find out the type of equipment we were using. They got quotations of American manufacturers of furnace equipment. Whether they bought any or not, I do not know. I know they have copied one.

The head of the cartel was in my office in San Francisco at that time and he made the statement that the cartel expected to recover their proportion of the American market.

I asked him what that proportion was, in his opinion, and he refused to answer.

Now, I know. It is all of it.

But you asked what the State Department's relations with the cartel were. They deliberately brought them over and escorted them across the country.

Mr. LEMKE. At the Government's and taxpayers' expense?

Mr. WILLISTON. I do not know that but it was at a time when no one could come in from Spain without approval of the State Department, and I heard in Washington that it was a conducted tour.

Mr. LEMKE. Am I to conclude, then, that our free-trade policy really consists of a cartel policy behind closed doors? Mr. WILLISTON. I do not know.

Mr. LEMKE. The two are inconsistent, are they not?

Mr. WILLISTON. Well, you have to remember that the quicksilver industry is a very small and a very unimportant industry. We cannot make very much noise. We do not get much attention. But as I mentioned before, they like to try things out on us first because we make good guinea pigs.

Mr. LEMKE. I might state, though, if there are enough little fellows that make a noise, and after all our policy is the noise made by all of us, not just one, we may finally get justice for America.

Mr. WILLISTON. I hope so.

COMMENTS ON DOMESTIC MERCURY ORE RESERVES

Several additional questions were contained in your letter.
Mr. LEMKE. I wish you would touch on those, if you will.
Mr. WILLISTON. All right.

I think I have covered No. 1, No. 2, and No. 3.

No. 4 is the average consumption, production, and reserves during the prewar period, the war period, and the postwar period.

Before the war, when we had approximately 100 mines in operation, it was a byword in the industry that no mine had more than 6 weeks' proven supplies. That is due partly to the way the mercury deposits occur. They are frequently small, very complex geologically, and in following the ore you may mine appreciable parts of that reserve.

During the war most of the quicksilver producers who were able to produce substantial quantities during the war, plowed back into their mines almost all or a great proportion of their earnings. As a result, quicksilver reserves in the United States during the war years and during the latter part of the war years increased tremendously. Where we had a reserve of possibly 6 weeks' supply only for the average mine in the prewar period, there were at least three or four mines, at the close of the war, that had reserves on a basis of prewar grades and prewar costs of from 5 to 10 years more than the industry has ever had since 1890.

Since the war is over and the price dropped it has been necessary to go into the reserves and cut the hearts out of them, to take the high-grade hearts, leaving what would have been excellent ore before the war.

Many of the mines have finished that high-grading, and when those mines go down now the high grade is gone and some of it is marginal stuff that is left in such physical condition that it cannot be recovered at all.

Mr. RUSSELL. Mr. Williston, for the benefit of the committee here, speaking about the ores, it is commonly known as cinnabar. Mr. WILLISTON. Mercury sulfide.

Mr. RUSSELL. And it is usually colored a red or pink and the mercury is obtained through the roasting of that?

Mr. WILLISTON. Yes, sir.

As far as color is concerned, Chinese vermilion is ground mercury

ore.

COMMENTS ON MERCURY CONSUMPTION AND PRODUCTION

I might say in regard to your No. 4 question about consumption, production and reserves, our reserves were higher at the end of the war than they have been since 1890. Our consumption in the prewar years was about 25,000 flasks of which about 20,000 flasks were domestically produced.

During the war years the consumption rose to 55,000 to 60,000 flasks a year. During the war, domestic production almost exactly equaled total requirements of the United States, Great Britain, and Russia, and in addition an equal amount of metal was imported from abroad, part of it from Spain, so it made 100 percent in excess of war requirements. That has really been our downfall. There has been too much quicksilver produced, due in part, at least, to the fact that the armed services overestimated their requirements, and while we were able to fulfill their requirements they went abroad to buy the 100 percent overage, which has filled the stock piles to more than their minimum requirements.

Mr. LEMKE. Did I understand you to say before that they bought it at a higher price than they could have gotten the domestic product? Mr. WILLISTON. Oh, yes. They bought from Franco Spain at an equivalent price of approximately $300 a flask, while they paid domestic producers $190 a flask, and then took back most of the profit that

we made.

Mr. RUSSELL. May I interject right there?

Mr. WILLISTON. Yes, sir.

Mr. RUSSELL. Probably several members of the committee do not exactly know what you mean by a "flask." Of course, the mercury comes off in what we would term nearly a liquid form. In other words, it is put up in flasks.

Will you give the information to the committee as to the way it is stored in the flask, and the like?

Mr. WILLISTON. The mercury ore is roasted in the furnace. The sulfur is burned off, the mercury carried over and collected in the condenser system and collected as virgin mercury. It is condensed in flasks with a weight of 76 pounds and 1 ounce net.

The reason for the odd figure is that the 76 pounds and 1 ounce is 100 Spanish arrobas and two flasks make a mule load so what we are really talking about in flasks is a half a mule load for a Spanish mule.

MERCURY PRICES DURING WORLD WAR II: GOVERNMENT MISMANAGEMENT CAUSED EXTREME FLUCTUATIONS

Mr. MARTIN. I am interested in your statement about the price at which they bought this supply abroad.

How recently was that purchase made?

Mr. WILLISTON. There were two principal purchases. One was in the early part of the war, when they bought 35,000 flasks at the going rate which would have been equivalent to $300 a flask, laid down in New York, although it was left in England so it did not have the higher freight and transportation rate. The amount that they purchased in 1945, after or about the time that Germany had gone out of the picture and while the Japs were still fighting, we purchased at a price of about $145 or $150.

At that time our domestic price was down to $125, I think; so it was about $25 above the price here.

Mr. RUSSELL. I believe the highest paid in 1943, domestically, was about $196. It went down in 1944 to a little over $100 a flask, then in 1945 it varied between $108 and $95.

Yet in 1943 and 1944, on the London market, mercury was selling for approximately $281.

Can you tell us the reason for that?

Mr. WILLISTON. The London price was the British Government controlled price. The British Government was the only one who could import quicksilver to the United Kingdom. They would buy from Spain at whatever price they had to pay, and they kept the pegged price of $281. It was a controlled price. Sometimes they bought above it and sold it for less. Sometimes they bought for less and charged the British manufacturers more.

Now, the very extreme variation in the quicksilver price over the years 1943, 1944, and 1945, is something that makes the quicksilver producers very unhappy. The reason for it is this:

In the fall of 1943, the new mercury battery developed for the use of the Signal Corps in tropical countries was first invented. The requirements, preliminary estimates, were huge. At the last meeting of the Quicksilver Advisory Committee of the War Production Board, of which I was a member, we were told there was this new use coming up which would require large amounts.

Sixty days later Metals Reserve Company cancelled all quicksilver contracts, domestically, and the price in January of 1944 was dropping

at the rate of $10 a day. It went from $190, not to $100 as you mentioned, but some sales went as low as $85.

The market slowly rose to $110 or $115 during the early part of the year.

In August 1944 the new Government mercury battery plants were built and there was immediately a large demand for mercury and no place to get it because 80 percent of the industry had shut down.

I guess the Government didn't know just where to go to get their mercury. They did not want to admit to the domestic producers they had made a mistake but the market started to rise in December of 1944. Several of the members of the Mercury Advisory Committee to the War Production Board wrote to the War Production Board and said, "There is a great demand for mercury. We do not understand it. Do you need more metal?"

In January and February and March, those men were answered by the War Production Board saying, "No; the quicksilver situation is in good shape. We do not need any more metal.”

Yet at the very time that one branch of the Government was writing to domestic producers and saying, "We don't need any more metal," the State Department was arranging to buy 75,000 flasks from Spain.

Mr. MARTIN. At what price?

Mr. WILLISTON. At a price above our price.

Mr. MARTIN. This last winter, January?

Mr. WILLISTON. No; that was 1945. There have been no Government purchases since the war, as such. There were 50,000 flasks of German material that came over to this country and eventually went into the stock pile which cost nothing. That helps reduce the stockpile price. The Government has been selling metal rather than buying since then.

Mr. MARTIN. By "the Government," do you mean the RFC?

Mr. WILLISTON. It is a little hard to say which branch of the Government it is in Japan that has been selling. It has been sold in this country through the U. S. Commercial Co.

Mr. RUSSELL. That is under what?

Mr. WILLISTON. It comes from Japan and the money received for the quicksilver sold in this country is transmitted to Japan to help pay occupation costs of the American Army in Japan.

Mr. MARTIN. How about the deal from Korea?

Mr. WILLISTON. I think that would come in the same category. It was Korean material shipped over, sold in the United States, fortunately partially reexported, and the money received for it was used for occupation expenditures in Korea.

Mr. RUSSELL. There is a committee set up known as the SCAP to handle that transaction.

Mr. WILLISTON. Yes. I am not too familiar with that.

STATE DEPARTMENT SOLD CAPTURED MERCURY AT APPROXIMATELY ONETHIRD MARKET PRICE

Now, some of the conquered German material, that was sold by the War Assets Administration, I believe, in Belgium and if I am correct that branch of War Assets was under the control of the State

Department, since it was material outside of the country. That ma

terial was sold to an American broker at $37 a bottle. That is, I think, below the cost of production of even the most economical of the foreign producers, with low labor costs.

Mr. MARTIN. Would that be some form of dumping?

Mr. WILLISTON. It was brought to the United States and a few of the quicksilver producers thought it might be dumping, so it was taken up with the Justice Department and I think the importer was bluffed out because the actual antidumping laws could not have been used in that case. It was reexported, though.

NO MERCURY PURCHASED BY MUNITIONS BOARD

Mr. MARTIN. I was interested in the dates of those transactions in foreign trades primarily because of the stated policy of the Munitions Board in their supplemental report of January 23, 1948.

I notice that this statement of policy by the Munitions Board is limited to their operations over the 6 months preceding the statement, on January 23, 1948.

In that they make the statement that all materials have been purchased at not higher than current market prices, and in most instances at prices a bit lower than current market prices.

Mr. WILLISTON. Well, during the war it was the U. S. Commercial Company, or BEW that handled all of the import material. The Munitions Board was not active in those days. At the conclusion of the war, almost or all of those stocks of metals which had not been used and a lot of the oxide which it had been converted into were turned over by the Army to the Munitions Board. So far as I know the Munitions Board has bought no mercury during its whole existence. The RFC has. The U. S. Commercial has dealt in it. The Board of Economic Warfare dealt in it. I don't think they made any purchases, however, because this came in as war-surplus material.

ENORMOUS POTENTIAL REQUIREMENTS FOR MERCURY BATTERIES NOT PROVIDED FOR IN MUNITIONS BOARD STOCK-PILE OBJECTIVES

Mr. MARTIN. Have you had any part in the policy-making regarding the acquisition of metals, in particular with reference to the minimum estimate of the needs or estimate of minimum needs for emergency purposes?

Mr. WILLISTON. No. I am the chairman of the mercury subcommittee of the Nonferrous Metals Advisory Committee to the Munitions Board, and I have made some recommendations to the Munitions Board at various times and I have kept them posted.

Mr. MARTIN. Recommendations as to what would be the minimum safe margin?

Mr. WILLISTON. No. I have never been given and am not authorized to get any knowledge as to what those stock piles are. What I did do was draw to the attention of the Munitions Board the fact that their original stock pile quotas, or objectives, were set in January of 1943 or 1944 and were based on war requirements for the first 3 years of the war. At that time consumption was 50,000 or 55,000 flasks a year, during the war, and they had not been changed to take into account the greatly increased consumption in the last year of the war where for one use alone consumption was 75,000 flasks a year.