STATEMENT OF WILLIAM S. STORY, EXECUTIVE VICE PRESIDENT, THE INSTITUTE OF SCRAP IRON & STEEL

Mr. STORY. I am William S. Story, executive vice president of the Institute of Scrap Iron & Steel. Our offices are at 1729 H Street NW., here in Washington. The Institute of Scrap Iron & Steel is composed of over 1,300 scrap processors, brokers, and other members who handle more than 90 percent of the iron and steel scrap shipped to steel mills and foundries for remelting into new steel. Virtually all of our members qualify as small business.

I want first to express the deep appreciation of the institute to Senator Douglas, the author of S. 3400, and to this committee for their interest in the matter of scrap iron and steel consumption, and particularly auto scrap consumption. For those of us involved in the problem on a day-by-day basis, and who realize only too well its complexity and its effect on many sectors of the national economy, it is heartening and encouraging to learn that the Senate of the United States shares our concern and is demonstrating an earnest willingness to examine possible solutions.

With your permission, Mr. Chairman, to conserve the valuable time of the committee, I would like to submit the opening portions of my statement for the record and go directly to the comments on S. 3100 itself which begin on the blue pages of the text you have before

you.

Senator MUSKIE. Without objection and that portion of the statement which you are skipping over will be included in the record. Mr. STORY. Thank you.

(The full statement is as follows:)

PREPARED STATEMENT OF WILLIAM S. STORY, EXECUTIVE VICE PRESIDENT, INSTITUTE

OF SCRAP IRON & STEEL

I am William S. Story, executive vice president of the Institute of Scrap Iron & Steel. Our offices are at 1729 H St., N. W., here in Washington. The Institute of Serap Iron & Steel is composed of 1300 serap processors, brokers, and other melabers who handle more than 90 per cent of the iron and steel scrap shipped to steel mills and foundries for remelting into new steel. Virtually all of our members qualify as "small business."

I want first to express the deep appreciation of the Institute to Senator Douglas, author of S. 3400, and to this Committee for their interest in the matter of serap iron and steel consumption, and particularly auto scrap consumption. For those of us involved in the problem on a day-by-day basis, and who realize only too well its complexity and its effect on many sectors of the national economy, it is heartening and encouraging to learn that the Senate of the United States shares our concern and is demonstrating an earnest willingness to examine possible solutions.

We deal with a product that is almost unique in the way it is marketed. Scrap metal is not sold-it is brought by consumers. The price is set by the mills and foundries who are the industry's only customers. No discounts, no bargain sales, no dollar days offered by the scrap processor can persuade a mill to buy scrap-unless they want it.

The chief competitor of scrap is pig iron and now, in increasing tonnages, pelletized iron ore. Technological advances in steelmaking processes have made mills recently less reliant on scrap. New furnaces originally designed to use less scrap and more pig iron (made from iron ore) are growing in use.

Any reduction in scrap use falls hardest on auto scrap. The reason is that autos have about one-third of their weight in non-ferrous materials-copper, lead, rubber, plastic-that is poison in the steelmaking formula. New scrap processing techniques can produce almost pure steel from auto scrap. But, the

fact remains, that given a choice, steelmakers prefer to avoid this material which is susceptible to contamination.

I would point out, however, that in the past two years when steel mills and foundaries bought more than 30 million tons of prepared scrap annually, they included in their purchases more than 6 million tons of auto scrap. Obviously, auto scrap does have a market and scrap processing is hardly a dying industry. My comments are not intended to be critical of technological progress in the steel industry. Progress is never achieved without someone getting hurt. The inventory of the umbrella put the sedan chair bearers out of business.

Transportation costs, and markets, are the two key reasons for the unsightly backlog of old cars in the nation. It is expensive to haul old cars from autowreckers to scrap processors. It is also expensive to bring them in from the backyards, gas stations, empty fields and gullies-and, as I will show later, sometimes legally difficult to do so.

We are discussing here a product manufactured from a car which cost $2000 and more when new, but worth to the steel mill or foundry-after the scrap processor has finished all preparation-only $20-$25.

More cars are being sold each year and the buyers are keeping them a shorter time. To those who cry, "We must do something about the growing number of discarded cars," I would point out that it is the scrap industry that is doing something constructive about them now-and in the face of more than a few problems.

One of these is the fact the difference between the three distinct branches of the salvage industry is not clearly understood. There is a difference between the junk collector and auto wrecker or graveyard operator and the scrap processor. This difference was acknowledged by the Senate Committee on Public Works in its report accompanying the Highway Beautification Act of 1965.

The junk collector assembles and stores all manner of waste material and sells it to processors.

The auto wrecker acquires wrecked and discarded cars and sells the parts from them. The stripped auto hulk is a by-product of his primary business.

The scrap processor buys unprepared iron and steel scrap from the junk man and the hulks from the wrecker. He uses very expensive and highly specialized machinery to produce a raw material remelting by steel mills and foundries to make new iron and steel products. He is the funnel through which all scrap must pass before it can be recycled to the consumers. The Institute is grateful to Senator Douglas and to this Committee for recognizing the dynamic contribution its members make to the manufacture of iron and steel.

It should be obvious, we believe, that since the scrap processor is dealing in materials which are discarded and which many mistakenly consider useless, he is making a most significant contribution to the beautification of this Nation. Just think what our roadsides and open areas would look like if there were no scrap industry.

Indeed, many of our members, long before the Highway Beautification Act of 1965, at their own expense, undertook to shield their yards from the glances of passersby by fences and plantings. They did this in spite of the fact that almost all scrap processors are located in heavy industrial zones.

But, decorating a scrap processor's yard is relatively easy. Their locations are fixed and certain; their numbers are limited. It's another matter, however, when it comes to moving unsightly abandoned cars and screening off junked cars, and rust-ridden hulks stored by backyard mechanics on their own property. Frankly, the problem of abandoned car removal and disposal is a far greater problem to many cities and counties than beautification. It involves the police. health and sanitation authorities, zoning boards, and State agencies. As an example, I request permission to append to my statement a summary the Institute prepared, titled, "Why Reading, Pennsylvania Has An Abandoned Car Problem." It will show how a local scrap processor, and Institute member, who wants to process these discarded vehicles is stymied in his efforts by legal redtape and a maze of local and state regulations. There's the matter of a clear title to the car. Who can give it, how long does it take, and what does it cost to get it? If the car is on public property. will the police move it, or will the sanitation department move it? Can the police take it immediately to a scrap processor or must they hold it for a month or more in a city-owned and operated pound? If the car is on private property, an eyesore to the public gaze, how can this casual collector be persuaded to get rid of it? Can he not use his own property as he sees fit? Or, how long must

a car rest on private property before it can be legally removed, if no one owns it?

These are

I have deliberately set forth these elements in terms of questions. problems that concern our members every day, and the answers vary from State to State and from city to city. There is little, if any, uniformity.

I turn next to one of the most important factors involved in this problemthe matter of conservation.

Scrap iron and steel are manufactured resources.

They eliminate or lessen

the need for iron ore, limestone and coke in the production of steel. To that extent, they extend the life of our supplies of these domestic natural resources which are great, but not limitless. It makes good sense to husband them to our greatest advantage.

A few moments ago I said that the scrap processor was an indispensable link in the transportation system of his country a man in the middle. As I explained, on the one hand, obstacles are put in the way of his acquiring the raw materials he is seeking to process; and on the other, obstacles of competition and distribution affect his ability to sell and deliver his product. Moreover, in the last several years, he has met a lack of understanding from yet another source... city planners and urban renewal authorities. While doing commendable jobs within narrow limits, they tend to show a callous disregard for the processor they have displaced and are indifferent to the problem of his relocation.

I have tried to sketch very briefly some of the factors affecting the creation of the problem you are considering in this legislation. A more exhaustive treatment will be found in a publication of the United States Department of Commerce, entitled Iron & Steel Scrap Consumption Problems, issued in March of this year.

Mr. STORY. The institute supports the overall objectives of S. 3400 which as we see it, are to conserve a vital, manmade resource of this Nation and to enhance the attractiveness of the country's roadsides. We have supported Senator Douglas in his efforts to attain these goals in the bills he offered last year.

We feel very strongly, however, that while this should be a matter of concern to the Federal Government, it is not one which demands still another Federal subsidy program and yet another expensive bureaucracy to administer it.

It appears to us that the bill inherently asserts that the scrap processing industry is incapable of alleviating the situation. We deny this. Private industry is bringing relief now through more sophisticated scrap processing equipment of all types, through greater individual efforts to improve further the quality of the product, and through closer cooperation and understanding of mutual needs between the processor and his consumers.

We do believe there is a need for industry-Government cooperation in some new areas in the expansion of programs which the Government. has already begun with the full endorsement and complete cooperation of this industry.

In short while we agree completely with the aims of S. 3400, we cannot support some of the means proposed to gain them.

We believe that the scrap problem in this country can be solved if Congress addresses itself to the primary bottlenecks. These are at the consumption end of the scrap cycle, where processed scrap is reconverted into raw steel and at roadblocks that exist in collecting the car hulks and getting them to the processor. As the middleman in this cycle, I can assure you that the existing privately owned processing facilities now have the capacity to convert every auto hulk into scrap. For these reasons we would like to suggest six areas in which action by the Federal Government would be welcome and would, we feel,

be positive steps in the ultimate solution of the problem concerning all of these.

These six are: tax incentives at the point of consumption; additional research: breaking the bottleneck created by present auto titling laws; expanding the export market: improving transportation facilities: and recognition by the community of the public service performed by each scrap processor.

Let me elaborate on these six points:

1. Through the tax structure, steel mills and foundries should be given the opportunity to write off a greater proportion of the cost of using automobile scrap.

For example if a steel mill buys a ton of auto scrap, either baled, sheared, or shredded for $25 a ton it could be allowed to write off as a cost of raw materials the $25 plus another $5 or $10. This approach could be based on consumption of auto scrap in any given year over and above consumption in a base year or period.

With the chance to write of more than the actual cost, mills and foundries would have incentive to consume more. Translated into demand and price, this could work its way downward to auto wreckers and individuals who hold discarded cars or plan to discard them.

Scrap reacts directly to the law of supply and demand. Increases in its use will require the processor to obtain more cars for preparation. You see, scrap is not made on purpose, like loaves of bread. It is a material that just happens. The needs of the scrap processor for more raw material will, of course, force him to pay more to get it into his yard.

Instead of abandoning a car on the streets, a man might feel it worth his while to get it to a scrap processing yard. The auto wrecker would probably find it pays him to haul more of his stripped cars to the processing yard.

All this could happen with an enlarged market for auto seray achieved through greater mill and foundry use of the product. The tax credit incentive would be a telling effort in the removal of old ear blight.

I might note that this proposal is not new with us. We offered it lest year at the White House Conference on Natural Beauty. Our feeling is that, if any sort of federally initiated incentive is to be given, it should go to the consumers of the product to help them expand the market.

Obviously there are some practical political problems with this approach. I would like to suggest, therefore, an additional concept, that of meeting the serious problem of high transportation charges on scrap by providing the railroads and other carriers some type of assistance which will help them move material to processing yards, and also move the finished product to steel mills and foundries. A transportation assistance program of this nature would be far more easily handled than some of the other schemes that have been proposed.

There is no need to spend money for scrap processing facilities, since ample capacity exists today to do the job. The tax approach and the transportation approach over any sort of cash subsidy program to members of the secondary materials industry are, we feel, approaches which could be employed in what we regard as a relatively short run situation.

2. We do agree with S. 3400 in its provision for funds for research and development. While we do not believe in uncontrolled spending, and we acknowledge that the Federal Government is now engaged in many worthwhile scrap research programs, we feel there should be no arbitrary limit placed on expenditures in this area.

The institute has already organized its own Scrap Metal Research and Education Foundation and is now establishing priorities for various projects. This industry feels that, in cooperation with Federal agencies, it would be extremely valuable to pursue further research into expanding the use of auto scrap by foundries and steel mills and to work in the field of using additives in steelmaking heats to counteract deleterious effects of contaminating metallies, a program being pioneered by in a small way the steelmakers themselves. It would also be useful to examine the impact of the changing technology of scrap processing on the industry itself.

We are frank to admit that research projects of the scope outlined tre beyond the capability of any individual seran firm and of the institute. We would welcome the cooperation of Government agences and other industry organizations in getting them underway.

3. As you know State auto titling laws are not uniform. A scrap processor will not accept a car for scrapping unless it is accompanied by a clear title, or a certificate from the appropriate governmental agency freeing the car for scrapping and relieving the processor of any future liability.

The BDSA study recognized that, in many States, the titling or detirling procedures are so cumbersome that auto wreckers and processors find they cannot afford the time-or the money involved. After all, when a scrap processor gets only $20 to $25 a ton for a baled-up car, and must pay transportation, he een ill afford $1 or $2 for transfer of title.

Therefore we suggest examination of quicker, less expensive, uniform legal means for detitling ears intended for scrapping.

4. Over the years the scrap industry has contributed significantly to this Nation's favorable balance of trade by exporting an average of 6.3 million tons a year for the past 10 years valued at $225.3 million annually.

We can do more if the Government's export assistance program were specifically directed toward encouraging the newly developed countries to install electric furnaces or cupolas as part of their growth

programs.

Both these units use scrap almost exclusively. These furnaces can turn out steel to be used for structural materials which these nations will need for local construction, not for shipping back to this country to compete with domestic steel products.

Serap to feed these furnaces will have to be imported.

The United States is the most obvious source since its supply is the

greatest.

5. Transportation costs are a major if not the major block to the free flow of scrap into yards and then out to consumers. We have contended before the Interstate Commerce Commission and in the courts that scrap suffers discrimination, in rail rates with its chief competitor, pig iron, which enjoys in many instances more favorable treatment. It is still true that it is cheaper to ship a ton of scrap from Baltimore