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Executive Summary
The United States has consistently maintained that a strong domestic
minerals and metals industry is an essential contributor to the nation's eco-
nomic and security interests. Despite competition from foreign firms, the
domestic industry has the potential to remain strong, but this potential can-
not be realized without active support for the technological base of the
industry. This base is threatened by the failure of industry, academe, and
government to maintain the partnership that has contributed to a U.S. com-
parative advantage in technology for much of this century. A strategy of
applying a technology-based comparative advantage can contribute to the
competitiveness of the domestic industry, but its success requires rebuilding
of the industry-academe-government partnership. All three groups must
support the partnership, and the Bureau of Mines, as the responsible federal
agency, must take an active role in maintaining it.
The United States has a fundamental interest in maintaining a competi-
tive minerals and metals sector that will continue to contribute significantly
to the nation's economic strength and military security. The industry repre-
sents an $87 billion enterprise that employs over 500,000 U.S. workers and
provides the material foundation for U.S. manufacturing. Although the
intensity of use of metals (i.e., per unit of gross national product) Is ex-
pected to decline gradually over time, the long-term outlook is that contin-
ued growth of the economy will ensure increasing markets for metals. Met-
als in general continue to be very competitive with respect to alternative
materials. Penetration of nonmetallics into traditional markets for metals
will be slow and will take place largely on a part-for-part basis that limits
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COMPETITIVENESS OF THE U.S. MINERALS AND METALS INDUSTRY
the exploitation of the potential benefits of nonmetallics in competition
with metals currently in use.
The United States is among the world's largest consumers of nearly
every metal, much of which is imported. In 1988 the nation had a net trade
deficit of $22.3 billion in nonfuel minerals and metals. Since many of the
world's mineral resources are located in areas where political instability
and/or economic manipulation represent a potential threat to supply, it is
essential for the United States to ensure some degree of independence from
foreign control over supply and costs through domestic participation in this
industry. Congress, through successive legislative acts, has established a
national policy to encourage a strong domestic industry. It specifically
noted the importance of encouraging mining, mineral, and metallurgical
research as part of this policy. The research and development (R&D) sup-
porting the technology base for the industry has been a cooperative responsibility
of industry, academe, and government.
The U.S. share of the world market for most major metals has slipped
steadily over the past two decades; however, the domestic minerals and
metals industry continues to compete on an international basis. The United
States is among the world's largest producers of many important metals and
still has substantial domestic reserves. One of the primary competitive
advantages the United States enjoys over its strongest industrial competi-
tors, Japan and Western Europe, is its domestic resource base. The domestic
metals industry supplies about 50 percent of the metal used by the U.S.
manufacturing industry, and the degree of competitiveness (defined in terms
of market share, profitability, capacity utilization, and/or growth) varies
across the particular metals subindustries.
The industry reached its present level of profitability after a protracted
period of recession. The recession was accompanied by heavy financial
losses, restructuring, rationalization, and capacity reduction. Factors that
led to the turnaround included commodity price increases, favorable cur-
rency exchange rates, and reduced labor costs along with new applications
of technology.
Unless a strategy building on areas of U.S. comparative advantage Is
.
pursued, the current competitiveness of the domestic industry versus for-
eign competitors is likely to be transitory. Nontechnological measures (such
as plant closings, reduction of the labor force, and wage concessions) have
already yielded most of their possible benefits. The potential for future
gains in profitability from such adjustments is now much lower. As a
result, the competitiveness of the domestic industry must in the future de-
pend increasingly on other measures, most notably technology. The pervading
message of this report is the need to improve the technology base of the U.S.
minerals and metals industry by increasing the amount and quality of research
and development, as well as the speed with which the results are transferred
to industrial applications.
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EXECUTIVE SUMMARY
TECHNOLOGY AND COMPETITIVENESS
A technology-based strategy can improve the long-term competitiveness
of the minerals and metals industry. Technology can contribute to competi-
tiveness by increasing productivity or product quality, by addressing cir-
cumstances unique to a process, company or country, or by assisting producers
to adapt to changing consumer demand. A technology-based competitive-
ness strategy requires a continuing commitment to the development and
application of technology. While the United States does not lag behind
other nations in the relevant science and technology, the research has been
insufficiently imaginative and communication between academic researchers
and the engineers who deal with industrial problems has been poor.
Industry
While technology was not the only factor and would not have been suffi-
cient alone, its importance was demonstrated in the recent recovery of the
industry, in which new applications of technology played a very important
role even though the technology used was for the most part off the shelf, a
result of past R&D in the United States and abroad.
Although technologies can diffuse rapidly across international and cor-
porate boundaries, it is still possible to create a comparative advantage from
investments in R&D. One advantage comes from being the first to apply a
technological advance, since a 2- to 3-year lead time usually accrues to the
originator and first implementor of the technology. The rapid diffusion of
the technology reduces but does not eliminate this advantage. Another
advantage comes when the technology is related to special conditions not
prevalent elsewhere (e.g., high labor costs, unique ore deposits, national
environmental standards).
Instead of innovative new technologies that could contribute to a com-
parative advantage, most technological advances in the industry have been
incremental stepwise improvements of existing equipment and processes-
rather than major breakthroughs. Incremental advances are certainly beneficial,
but they may not be sufficient in the face of strong foreign competition
based substantially on nontechnological factors. In such an environment,
breakthrough technologies are needed (i.e., discontinuous advances that al-
low the domestic industry to capture sizable gains by applying entirely new
technology) while competitors attempt to wrest incremental improvements
from existing technology.
Industrial laboratories and research staffs in most of the minerals and
metals companies have been cut back substantially and in some cases elimi-
nated. Similarly, suppliers to the industry often cannot afford the research
needed to develop new products. Because of the relative health of the U.S.
industry at present, there is a widespread perception among industry manag-
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COMPETITIVENESS OF THE U.S. MINERALS AND METALS INDUSTRY
ers that further advances in technology are (at least temporarily) less urgent.
As a result, industry has limited interest in the adaptation and application of
technologies derived from research performed by government or academe.
Much of the industry's lost R&D capabilities would be difficult and
costly to restore in their original form. Collaborative research, particularly
in the development of a shared technology base, could yield better results in
terms of the competitiveness of the industry. Regardless of the form, how-
ever, a strong domestic capability for generating and applying technology is
indispensable for future competitiveness. The industry itself must play the
lead role in restoring and maintaining its ability to develop, receive, and
implement new technologies.
Academe
The academic infrastructure for research and education in support of the
minerals and metals industry has declined substantially over the past de-
cade. Research programs are generally small, poorly funded, narrow in
focus, and directed at incremental advances, thereby limiting the capability
of colleges and universities to perform basic research leading to useful new
technologies for minerals and metals production.
Student enrollments (both graduate and undergraduate), degrees, and the
number of programs and faculty have all declined by large margins, and the
survival of several programs is in doubt. The supply of B.S. graduates
(especially those who are U.S. citizens) appears to be lower than current
industry demand. If present trends continue, colleges and universities will
be unable to meet the industry's need for well-trained engineering person-
nel to solve future problems.
Government
Historically, government and academic laboratories have made many sig-
nificant contributions to the research base for minerals and metals, while
industry has focused more intently on the application of research results to
operational and site-specific projects. In response to low metal prices and
intense foreign competition, the R&D focus of many companies has become
even more near term in scope. At the same time, federal support for research,
both at government and university laboratories, has declined.
The Mining and Minerals Policy Act of 1970 (P. L. 91-631) declared that
it was the continuing policy of the United States to foster and encourage
private enterprise in the development of strong domestic mining, mineral,
metal, and mineral reclamation industries. The State Mining and Minerals
Resources Research Institute Program Act of 1984 (P.L. 98-409) calls for
the Secretary of the Interior to perform, or verify the performance of, a
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EXECUTIVE SUMMARY
s
number of functions that could greatly improve the competitive outlook of
the U.S. minerals and metals industry. These functions, which would be
implemented through the Bureau of Mines, include interagency coordina-
tion of mining and minerals research programs, interagency coordination
and consolidation of data bases for the purpose of indicative planning, cata-
loging of all current and projected federally funded research relating to
mining and mineral resources, and development of a national plan for research
in these fields by a Committee on Mining and Mineral Resources Research.
To date, these functions have not been performed in any consistent or delib-
erate way. Indeed, the Department of the Interior does not provide strong
support for the Bureau's interests and programs.
The partnership between industry, academe, and government has weak-
ened in the past several decades to a point where the pipeline of basic
research in areas critical to the future competitiveness of the industry is
drying up. The committee found that the mining and minerals research
conducted by the government and in universities is not well coordinated
with the long-term needs of industry. This situation must change; it is the
basic research of today that will be the foundation for the technologies of
tomorrow and that will support the strong domestic minerals and metals
industry envisioned by the Mining and Minerals Policy Act. The Department
of the Interior and the Bureau of Mines in particular are well situated to
improve the research base for industry by rebuilding the collaboration in
mining and minerals R&D. In addition to conducting research in its own
laboratories and directing research funds to academic institutions, the Bureau
can foster communication and collaboration among researchers to improve
the applicability and timeliness of research.
Bureau of Mines
The Bureau of Mines has been and remains the only federal agency
concerned primarily with the needs of the minerals and metals industry.
Bureau support of R&D relevant to the needs of the industry contributed
substantially to its growth and competitiveness throughout much of this
century, particularly in the early decades. However, the Bureau's techno-
logical contributions have had less impact in recent years. Its R&D budget
was lower in 1989 (even before inflation is taken into account) than it was
in 1980. Some 40 to 50 percent of the Bureau's research is devoted to mine
safety, health, and environmental protection, further limiting the funds available
for technology to improve productivity.
The federal government can play an important role in helping the U.S.
minerals and metals industry maintain a strong competitive posture interna-
tionally. The Bureau of Mines is presently the only federal agency positioned
to provide that assistance. If the Bureau is to play a more active and
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COMPETITIVENESS OF TlIE U.S. MINERALS AND METALS INDUSTRY
effective role it will need to collaborate more closely with academe and
industry.
Government-Academic-Industrial Cooperation
Both the 32 Mining and Minerals Resources Research Institutes (Mineral
Institutes) and the 6 Generic Mineral Technology Centers (GMTCs) located
at colleges and universities could be quite valuable for supplying the U.S.
industry with well-trained manpower and technological advances. How-
ever, increasing their value will require stronger support, coordination of
the research efforts within broad targets for research, a more critical approach
to the selection and evaluation of projects, and elimination of less success-
ful efforts in favor of promising new ones.
The Mineral Institutes and GMTCs are not well supported by the federal
government. They are poorly funded, which hampers their ability to educate
students and to perform needed research. The GMTCs suffer from a lack of
strategic planning and rigorous evaluation of their research programs. Pro-
posals funded under both of these programs tend to reflect the interests of
researchers rather than the needs of the industry.
The relationship between government and industry in minerals and met-
als issues has often been an adversarial one. A variety of restrictions (anti-
trust, environmental, etc.) have been placed on the minerals industry with
little or no consultation or involvement with industry experts. At the same
time, however, the technology-forcing aspects of environmental regulations
have sometimes forced companies to become more productive, albeit at
heavy capital costs.
Foreign mineral producers generally work more closely with their gov-
ernments in negotiating trade, environmental, and other policies. Indeed,
the involvement of foreign governments has sometimes provided their industry
with a competitive advantage in the international market through such policies
that recognize the interests of their minerals and metals industry. The
interests of the U-S. minerals and metals industry, on the other hand, are not
represented in many governmental decisions on tax, trade, environmental,
and other relevant policies. Closer relationships are being forged between
the U.S. government and industry in the highly visible high-technology
fields but not in the minerals and metals field.
In order to strengthen the international competitiveness of the domestic
industry, a new and more positive relationship is needed between agencies
of the U.S. government and the minerals and metals industry. Collaborative
efforts are needed to develop technology for waste minimization, reduction
of environmental impacts, and remediation of contaminated waste sites.
Government and industry should work together productively as partners to
explore other research needs and should establish better communication
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EXECUTIVE SUMMARY
links on policy issues. All concerned should recognize that some of our
international competitors do not impose such heavy burdens or else they
subsidize the producers who must implement them.
RECOMMENDED ACTIONS
The committee believes that the following recommended actions for in-
dustry, academe, and government can make a significant contribution to the
long-term economic health of the domestic minerals and metals industry.
Industry commitment is essential to the development and maintenance of a
technology-based competitive advantage, but there are essential roles for
academics and government as well. In particular, the Bureau of Mines has
a key role to play in the conduct of research and the gathering and dissemination
of information. Actions by any individual party will not be sufficient; to be
effective all three groups must act in concert. The Bureau should be a
leader in the development of a coordinated effort by government, industry,
and academe to maintain and improve the competitiveness of the industry.
Industry must make greater use of the opportunities for collaborative
research. Existing industry associations are underutilized and deserve greater
support as a mechanism for conducting research. Opportunities for estab-
lishing research consortia to pursue basic research should be examined in
light of changes made over the past decade in the laws and regulations
guiding such consortia.
Academic research must address basic scientific and engineering prob-
lems of the mining and metals industry. Universities must seek funding from
different sources in order to assure stability for long-term research. The
federal government must contribute to this stability by committing to sup-
port funding of university research through the Mineral Institutes and the
GMTCs. Academic programs must not be conducted in isolation; greater
coordination among university researchers and greater collaboration between
academe and industry are necessary. The Bureau of Mines should take a
lead role in promoting coordination among government-supported research
institutions and in facilitating the transfer of technology from research to
industry.
The Bureau must increase its emphasis on productivity, not at the expense
of its other research responsibilities but in synergy with them. Research
should be pursued in areas that would provide a base for a national com-
parative advantage, emphasizing domestic strengths such as an educated
work force and geological features that are unique to or more commonly
located in the United States. Topics of high priority include the study of
ore genesis and deposition, in situ mining, intelligent mining systems, and
improved energy efficiency in processing. In addition, research on safety,
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COMPETITIVENESS OF THE U.S. MINERALS AND METALS INDUSTRY
health, and the environment will be of greater benefit to the United States,
with its stricter environmental regulations, than to its competitors.
The Bureau should make a substantial commitment to conducting basic
and exploratory research on "breakthrough" technologies that could con-
tribute to competitiveness and to safety, health, and environmental con-
cerns. This research should address new concepts with the potential to
revolutionize the entire process from mining to metals extraction, and it
should have a long-range focus on high-risk, high-payoff topics. This work
should be coordinated with other Bureau research but should be programmatically
separate.
The Bureau's commitment to information and analysis must be continued
and strengthened. Emphasis should be placed on the dissemination of data
and analysis, and opportunities for electronic access should be pursued.
The Secretary of the Interior should promote the inclusion of the Bureau in
interagency groups that address issues related to minerals and metals, nota-
bly matters of international trade, national security, and environmental pro-
tection.
The Bureau must increase its activity in the broader research commu-
nity. It must actively support the Mineral Institutes and GMTCs and must
work with academic researchers to focus research on topics that contribute
to long-term national interests. The Bureau should also encourage the in-
volvement of industry associations in defining goals and opportunities for
academic research. In order to facilitate the role of the Bureau, the admin-
istration should support requests for funding of the Mineral Institutes and
GMTCs rather than waiting for Congress to act.
The Bureau should seek outside advice on the direction and quality of its
programs. An advisory committee established under the Public Advisory
Committee Act should be established to advise the director on the direction
and content of Bureau programs, including information needs, industry needs
and opportunities, advances in technology, and priorities. In addition, visit-
ing committees should be established to review the quality and content of
the internal research programs of the Bureau, providing their advice to the
research directors of the Bureau's laboratories and to the director.
A national minerals and metals community forum should be convened
regularly to identify major technical and policy problems facing the indus-
try. This forum will increase communication between representatives of
industry, academe, and government as well as foster collaboration among
these groups. In order for the domestic minerals and metals industry to
survive, there must be long-term commitment to a continuing reevaluation
of the problems and opportunities facing the industry.
Representative terms from entire chapter:
domestic industry
