After a speculative rise of about 20 percent in the fall of 1939, the price of copper declined to a level in August 1940 only about 7 percent above the pre-war price. As the Army and Navy placed large armament orders in the late summer a wave of forward buying by fabricators to cover their greatly increased requirements provoked a rise in price to 12 cents per pound, about 8 percent above the price a few weeks earlier. The price of all but a small part of the copper production has remained at the 12-cent level during the past 9 months as a result of warnings and suggestions and the cooperation of the leading producers. Foreseeing a large increase in demand for copper, the Price Division cooperated during the fall with the Raw Materials Division in arranging for large importation of Latin American copper. Owing partly to an unexpected high rate of growth in demand in the winter and spring there has developed in the past few months an acute shortage of copper. Failure to foresee the rapidity of this increase resulted in what now appears as an unfortunate delay in launching plans for obtaining additional domestic production by guaranteeing a higher price for the additional increments of high-cost output and by providing Government financial assistance for plant expansion where necessary. Such plans are now being vigorously prosecuted. During the late summer of 1940 the price of zinc increased about 14 percent under the same influences as those acting on the price of copper. An informal ceiling at 7.25 cents per pound was established in September by suggestions and warnings, and has prevailed continually during the last 9 months. This price, which represents a 49-percent increase over that prevailing in August 1939, was, perhaps, allowed to go somewhat too high. The large price rise has, however, induced an expansion of capacity of about 20 percent. The price increase in zinc has lead to a larger expansion of output than would have occurred from the same proportionate increase in the case of many other materials. This is due to the fact that in the summer of 1940 there were many unused smelter blocks which have been reconditioned under the stimulus of the high price. The Price Division has cooperated with the Raw Materials Division in encouraging expansion of smelter capacity. The Division has also recommended stock piling of foreign concentrates. Until the last month or so supplies of lead have been adequate to care for all demands. When unexpected influences threatened large price increases in the fall of 1940, these were checked by informal suggestion. In April 1941, when signs of approaching shortage became apparent, the leading lead producers acceded to a request from the Division not to raise prices any further. In spite of numerous infractions of the ceiling prices on scrap iron and steel, scrap aluminum, and scrap zinc, the average prices of these scrap metals have been kept at considerably lower figures than would have obtained in the absence of action by the Division. In the case of iron and steel scrap the Division checked the price rise before it got out of hand. In the cases of aluminum scrap and zinc scrap the Division moved too slowly and prices got out of hand before ceilings were established. Chart 103 shows prices on aluminum and aluminum scrap, the runaway markets and the drastic reduction called for by the ceiling. It should be borne in mind that part of the reduction was due to the 3-cent fall in the price of virgin aluminum during 1940. When ceilings were placed on secondary aluminum ingot and aluminum scrap, the flow of scrap was diverted to foundries and other industrial users who disregarded the ceiling prices. Scrap receipts of the regular smelters dropped sharply. With insufficient power to enforce ceiling prices, the only way to deal with this situation was through priority control of the flow of scrap. After a long delay such priority control was finally adopted by the Priorities Division of the Office of Production Management. The Price Division is now delaying needed price action in copper and brass scrap and secondary ingot in order to avoid a similar situation in the much larger and more complicated red-metal-scrap markets. The Priorities Division is being urged to adopt priority control of the flow of copper and brass scrap. A shortage of sulfite pulp, resulting from restriction of our imports from Scandinavian countries, had boosted the price of this commodity about 75 percent before formation of the Defense Commission. Thereafter this price was stabilized by the Price Division and the average price of pulp and paper has been held to a small increase. This case is a notable example of the successful use of the device whereby an agreement not to advance prices is secured from one or more individual producers of prominence and then announced to the others. AUG. SEPT. OCT. NOV. DEC. JAN. FEB. MAR. APR. MAY JUNE JULY AUG. SEPT. OCT. NOV. DEC. JAN. FEB. MAR. APR. MAY JUNE JULY PRIMARY INGOT........ CHART 103 Price increases on several cotton-textile products in the past 12 months, amounting to approximately 65 percent on combed yarn and standard constructions of grey goods and averaging over 20 percent for some other textile products, are explainable in several ways. Existing legislation and its administration have led to a rise of between 30 and 40 percent in different grades of raw cotton. (See charts 104, 105, 106, 107.) An appreciable increase in the prices of intermediate goods was deemed desirable to stimulate production. The increase was, however, permitted to go too far in the spring of this year. As a result mil! margins outstripped any figure attained since 1920. Cents 30 85 80 75 70 63 60 55 50 45 40 35 30 25 20 CHART 105 MONTHLY AVERAGE PRICES OF CERTAIN COTTON GOODS JASO 1939 Combed Broadcloth -Carded Broadcloth Standard Print Cloth Sources: Standard Print Cloth:- Dept. of Agriculture Carded and Combed Broadcloth: Textile Institute and 64300-41-pt. 1—20 Cents Per Pound 90 CEILING I ND J F M A M J J A S O N D J F M A M J J ASOND 1940 1941 CEILING Sources: Sheel.ngs Class "A" and "C" -Cotton Textile Institute and Daily News Record JASO ND J FMAM J JA SON D J FMAM Osnaburgs, P.W.-Bureau of Labor Statistics and Journal of Commerce Cents Per Pound 75 CEILING CEILING CEILING CEILING 70 65 60 55 50 45 40 J JASOND 1941 35 30 25 20 15 10 |