Ch. 3— Minerals Supply, Demand, and Future Trends • 85 



those that are targets of speculators (e.g., the pre- 

 cious metals) undergo drastic and often unpredict- 

 able swings in price. Although attempts at forming 

 mineral cartels similar to Organization of Petro- 

 leum Exporting Countries (OPEC) in order to 

 stabilize prices have generally failed eventually, 

 e.g., attempts by Morocco to control the produc- 

 tion and price of phosphate rock and the Interna- 

 tional Tin Council's effort to stabilize tin prices, 

 they nevertheless can trigger serious price disrup- 

 tions.' Speculative surges, such as that encountered 

 by silver in 1979-80, also can have tremendous im- 

 pacts on price structure. 



In addition, unforeseen supply interruptions or 

 the fear of such interruptions can drive the price 

 of commodities up. The short-lived guerrilla inva- 

 sion of the Zairian province of Shaba in 1977 and 



1978, had a psychological effect on cobalt con- 

 sumers that sent prices up from $6.40 per pound 

 in February 1977 to $25 per pound in February 



1979, although the invasion caused little interrup- 

 tion in production and Zairian cobalt production 

 actually increased in 1978 (figure 3-3).'' Threats of 

 a possible cutoff of the supply of platinum-group 

 metals from the Republic of South Africa, result- 

 ing from U.S. sanctions against apartheid, recendy 

 caused similar increases in the market price of 

 platinum. 



Figure 3-3.— Cobalt Prices, 1920-85 



uT 40 



*S. Strauss, Trouble in the Third Kingdom (London, U.K.: Min- 

 ingjoumal Books, Ltd., 1986), p. 116; see also, K. Hendrixson and 

 J. Schanz, Jr., International Mineral Market Control and Stabiliza- 

 tion: Historical Perspectives , 86-601 S (Washington, DC: Congres- 

 sional Research Service, 1986). 



'Office of Technology Assessment, Strategic Materials: Technol- 

 ogies to Reduce U.S. Import Vulnerability, OTA-ITE-248 (Wash- 

 ington, DC: U.S. Congress, 1985), pp. 97-104; see also, W. Kirk 

 "A Third Pricing Phase: Stability?" American Metal Market, Aug. 

 23, 1985, pp. 9-12. 



1920 1930 1940 1950 1960 1970 1980 1990 

 Year 

 Cobalt is a good example ot how mineral commodity prices 

 can be affected by tfie fear of a supply interruption. Althougfi 

 supplies of cobalt were only briefly interrupted during the 

 Shaba guerrilla uprising in Zaire, the psychological impact on 

 traders caused cobalt prices to si<yrocket from 1978 to 1979. 



SOURCE: F. Manheim, "Marine Cobalt Resources," Science, vol. 232, May 2, 1986. 



Such commodity price fluctuations pose signifi- 

 cant economic uncertainties for investors in new 

 mineral developments, including seabed mining. 

 Macroeconomic cycles coupled with microeconomic 

 disruptions within the minerals sector make plan- 

 ning difficult and the business future uncertain. 



NonmetaUic minerals, while not completely im- 

 mune from downturns in the business cycle, as a 

 whole have fared better than metals in recent years. 

 The prices of phosphate rock, sulfur, boron, diato- 

 mite, and salt have all increased at a higher rate 

 than has inflation since 1973, whereas only the 

 prices of tin (temporarily) and certain precious me- 

 tals have matched that performance among the non- 

 ferrous metals.^ However, all mineral prices fluc- 

 tuated greatly during that period. 



'Strauss, Trouble in the Third Kingdom, p. 140. 



STATE OF THE MINING INDUSTRY 



The downturn in the world minerals industry 

 into the 1980s had a combination of causes: 



• First, there has been a long-term (but only re- 

 cently recognized) trend toward less metal-in- 

 tensive goods. 



• Second, growth has slackened in per capita 

 consumption of consumer goods and capital 

 expenditures. 



Third, developing countries' economies have 

 not expanded to the point that they have be- 

 come significant consumers, while at the same 

 time some of these countries have become low- 

 cost mineral producers competing with tradi- 

 tional producers in the industrialized countries. 



Fourth, petroleum companies diversified by 

 investing in minerals projects that turned out 



