[House Hearing, 108 Congress]
[From the U.S. Government Publishing Office]




                    SPIKE IN METAL PRICES, PART II

=======================================================================

                                HEARING

                                 of the

                      COMMITTEE ON SMALL BUSINESS
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED EIGHTH CONGRESS

                             SECOND SESSION

                               __________

                     WASHINGTON, DC, MARCH 25, 2004

                               __________

                           Serial No. 108-59

                               __________

         Printed for the use of the Committee on Small Business


 Available via the World Wide Web: http://www.access.gpo.gov/congress/
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                      COMMITTEE ON SMALL BUSINESS

                 DONALD A. MANZULLO, Illinois, Chairman

ROSCOE BARTLETT, Maryland, Vice      NYDIA VELAZQUEZ, New York
Chairman                             JUANITA MILLENDER-McDONALD,
SUE KELLY, New York                    California
STEVE CHABOT, Ohio                   TOM UDALL, New Mexico
PATRICK J. TOOMEY, Pennsylvania      FRANK BALLANCE, North Carolina
JIM DeMINT, South Carolina           ENI FALEOMAVAEGA, American Samoa
SAM GRAVES, Missouri                 DONNA CHRISTENSEN, Virgin Islands
EDWARD SCHROCK, Virginia             DANNY DAVIS, Illinois
TODD AKIN, Missouri                  GRACE NAPOLITANO, California
SHELLEY MOORE CAPITO, West Virginia  ANIBAL ACEVEDO-VILA, Puerto Rico
BILL SHUSTER, Pennsylvania           ED CASE, Hawaii
MARILYN MUSGRAVE, Colorado           MADELEINE BORDALLO, Guam
TRENT FRANKS, Arizona                DENISE MAJETTE, Georgia
JIM GERLACH, Pennsylvania            JIM MARSHALL, Georgia
JEB BRADLEY, New Hampshire           MICHAEL MICHAUD, Maine
BOB BEAUPREZ, Colorado               LINDA SANCHEZ, California
CHRIS CHOCOLA, Indiana               BRAD MILLER, North Carolina
STEVE KING, Iowa                     [VACANCY]
THADDEUS McCOTTER, Michigan

                  J. Matthew Szymanski, Chief of Staff

                     Phil Eskeland, Policy Director

                  Michael Day, Minority Staff Director

                                  (ii)


                            C O N T E N T S

                              ----------                              

                               Witnesses

                                                                   Page
Holmes, Ms. Constance, National Mining Association...............     4
Cowan, Mr. Ed, Beck Aluminum Corp................................     6
Rupp, Mr. Joseph, Olin Corporation...............................     8
Lindstedt, Mr. John, Artistic Plating Co., Inc...................    10
Vincer, Ms. Charlotte, Riverside Spring Company..................    13
Loftus, Mr. Patrick, High Steel Structures, Inc..................    15

                                Appendix

Opening statements:
Manzullo, Hon. Donald, Chairman..................................    28
Prepared statements:
    Holmes, Ms. Constance, National Mining Association...........    34
    Cowan, Mr. Ed, Beck Aluminum Corp............................    43
    Rupp, Mr. Joseph, Olin Corporation...........................    49
    Lindstedt, Mr. John, Artistic Plating Co., Inc...............    54
    Vincer, Ms. Charlotte, Riverside Spring Company..............    69
    Loftus, Mr. Patrick, High Steel Structures, Inc..............    71

                                 (iii)

 
                     SPIKE IN METAL PRICES, PART II

                              ----------                              


                        THURSDAY, MARCH 25, 2004

                  House of Representatives,
                                Committee on Small Business
                                                   Washington, D.C.
    The Committee met, pursuant to call, at 9:35 a.m. in Room 
2360, Rayburn House Office Building, Hon. Donald Manzullo 
[chairman of the Committee] presiding.
    Present: Representatives Manzullo, Kelly, Akin, Bradley, 
Udall, Napolitano and Bordallo.
    Chairman Manzullo. Good morning, and thank you for being 
here today as we examine further the spike in metals prices, 
and the effects on small manufacturers.
    Can you all see the chart back there? Well, most of you 
can. Just twist your necks. If you could tilt it just--that is 
good, that is good.
    This is the 57th hearing the Small Business Committee has 
had on American manufacturing issues since 2001. We especially 
want to thank several of our witnesses who have traveled great 
distances to be with us here today.
    Earlier this month our Committee held its first hearing on 
the issue of steel shortage by emphasizing the plight of 
manufacturers struggling with the sudden and unexpected surge 
in steel pricing.
    Unfortunately, this phenomenon was not limited to steel 
alone. Other metal workers, such as those in copper, nickel, 
and aluminum industries, are also facing historically high 
rates for the raw materials they need to fill orders, keep 
their shops open, provide jobs, grow our economy, and feed the 
families.
    For example, the price of copper soared to an eight-year 
high of nearly $3,000 a metric ton at the end of February. The 
price of nickel has more than doubled in the last year. Since 
September of 2003, the price of aluminum has gone up an average 
of 15 cents per pound.
    As we stated in our last hearing, these manufacturers are 
stuck between purchasing the raw materials they need at these 
inflated prices, and filling orders they have already set 
prices for contractually. While some shops have been able to 
pass these increases along to their customers, many cannot, and 
it is threatening their very livelihoods.
    The charts we have today, as well as attached to our 
statement that can be picked up at our press table, document 
some of the global factors contributing to these spikes.
    Chart number one shows that while steel scrap imports into 
the United States have remained relatively stable over the past 
four years, steel scrap exports have nearly doubled.
    Christy, do you want to put the second chart up there?
    Chart number two shows the correlation between U.S. steel 
imports, which have steadily declined over the past six years, 
and exports, which again have remained relatively stable.
    Chart three shows the five countries that import the 
largest amount of U.S. scrap steel. China has become the 
number-one recipient of U.S. steel scrap, receiving 3.5 million 
net short tons of scrap in the year 2003. You can see just by 
looking at these charts the phenomenon that is occurring 
worldwide.
    Similarly, chart four--you are pretty good on those charts, 
Christy. It reminds me of, do you remember the old Johnny 
Carson Show, where he used to put up the directions to the guy 
with the car lot? You don't remember that, Christy.
    [Laughter.]
    Chairman Manzullo. I just turned 60 yesterday, so you have 
got to bear with me. I am having a very difficult time. I can't 
believe I feel so good, I am 60 years old, you know?
    Similarly, chart four shows China's insatiable need for 
steel and the raw materials to produce steel. Chinese steel 
consumption is in the blue there, and the Chinese steel 
production is in the barber-pole stripe next to it. And you can 
see where China is falling way short of what their actual needs 
are. And obviously, the gap between what they produce and what 
they are consuming you can see continues to grow. And that is 
where the steel is going.
    In 1996 Chinese production and consumption of steel were 
about equal. In 1999 China started consuming more steel than it 
could produce, and that need has grown exponentially in the 
past five years.
    Production of automobiles in China is up 70 percent in one 
year. That is the growth of just that one particular industry. 
And most of that, I think 99 percent of that, is for domestic 
consumption.
    The thought then becomes what can we do about it. There is 
no easy fix for this, because we are dealing with a wide 
variety of market forces and global issues acting in unison 
causing these increases.
    That said, there are several steps that we, as a nation, 
can take to ensure we are doing all we can to make certain 
American manufacturers are on a level playing field with their 
counterparts abroad.
    First and foremost, the Administration must continue to 
fight unfair foreign trade practices. Many foreign countries 
are flouting international trade rules to get an unfair 
competitive advantage over U.S. manufacturers. This unfair 
advantage has increased the demand for their foreign products, 
which has increased their demand for U.S. steel and other 
metals, which increases the U.S. price for those commodities.
    China specifically manipulates its currency, and directly 
subsidizes its corporations to give them an unfair advantage in 
the buying power over U.S. companies. The Administration must 
continue to crack down on foreign currency manipulation, and 
should support the U.S. manufacturing sector's effort to 
proceed with a Section 301 trade case against China for pegging 
its currency to the U.S. dollar.
    In addition, Congress should pass HR 3716--that is 
Congressman Bill English's bill--to allow U.S. petitioners to 
file countervailing duty trade cases against non-market 
economies, which would allow us to get tougher on China's trade 
abuses. I believe that law was changed not to allow that remedy 
in 1974.
    The Administration should also review all existing anti-
dumping and countervailing duty orders placed on foreign 
imports of steel into the U.S. to see if they are warranted, 
considering the tightened markets in America.
    In addition, the Administration should immediately begin a 
study to consider the validity of imposing export controls on 
U.S. scrap steel. The Administration does not support export 
controls. It should draft a plan to negotiate the removal of 
current export restrictions on scrap steel and coking coal 
products imposed by Russia, the Ukraine, Venezuela, and China.
    Failure to remove the foreign export restrictions should 
result in a hiatus in the WTO accession process for Russia and 
the Ukraine.
    We must also work to lower energy costs for U.S. steel and 
metal producers. One of the factors driving up costs for U.S. 
steel and metals is the surging energy prices. The Senate must 
pass HR 6, the Energy Bill, with the President signing it into 
law, so that we can increase energy production in this country 
and lower the production costs for steel producers.
    We must also assess this problem within the context of our 
national security. The Department of Defense, and the Bureau of 
Industry and Security, and the Department of Commerce must 
examine whether the steel and metal shortages in America will 
have an adverse effect on our defense industrial base and our 
national security. They must determine whether the U.S. 
Government needs to enact the Defense Production Act to 
restrict the export of certain critical metals or raw materials 
necessary to defend the United States from its enemies. We must 
also garner a comprehensive review of the situation.
    The Administration, through the Department of Commerce or 
the U.S. International Trade Commission, via a Section 332 
investigation, should examine more closely the reported 
shortages of scrap steel and coking coal to determine the 
effects they have had on production problems, and the overall 
competitiveness of the U.S. industry.
    Folks, time is of the essence. And we must begin taking 
action to bring metal markets back into balance.
    Our manufacturers are holding onto the thinnest of threads, 
and they need our help to remain the thriving backbone of our 
economy.
    Given the opportunity, these companies can and will recover 
what has been lost. But they can't do it themselves. Our 
government must pave the way.
    Congressman Kelly, did you want to have a short opening 
statement? Because I know this matter is of critical importance 
to you, also.
    [Chairman Manzullo's statement may be found in the 
appendix.]
    Ms. Kelly. It is a matter of critical importance to me.
    I don't have an opening statement, except to say that 
Chairman Manzullo and a number of us are trying to really work 
on this issue. The broad extension of shortages and high cost 
into the U.S. economy is something that is very worrisome to a 
number of us.
    I want to say that I spoke with someone in the White House 
recently. I know that they are aware of this. There are a lot 
of people trying to work on it. It is not an easy problem. It 
is something we are going to try to work through, but because 
it is complex, it is going to take more time than we would 
like. And we, here in this Committee, feel the urgency.
    And Chairman Manzullo is a very good band leader on this. 
So I look forward to the testimony of this panel.
    But I also want you to know that we are trying to work on 
it. And everything you say here today will help give us some 
tools to work that battle with.
    Thank you.
    Chairman Manzullo. Thank you, Mrs. Kelly. The rules are the 
testimony is five minutes. When you see the yellow light you 
have one minute; when you see the red light, I start to get 
excited. And if somebody gives me a gavel, I can begin to tape 
the gavel.
    Our first witness is Constance Holmes. Ms. Holmes is a 
senior economist and Director of International Policy of the 
National Mining Association. You can understand why she would 
be the first witness, because it all starts in the mines, 
doesn't it, Connie?
    Ms. Holmes. It does, indeed.
    Chairman Manzullo. And we look forward to your testimony. 
You are going to have to pull that microphone up real close to 
you and speak very close into it. Thank you.

 STATEMENT OF CONSTANCE D. HOLMES, NATIONAL MINING ASSOCIATION

    Ms. Holmes. Thank you very much. We really appreciate the 
opportunity to be here today. And we couldn't agree with you 
more that the manufacturing industry, most especially the small 
manufacturers that are the backbone of our economy and job 
creation, is absolutely vital to our nation and to our national 
security.
    But we also need a very strong mining industry to support 
that manufacturing base. And because United States 
manufacturers have to have access to metals and raw materials 
that are available domestically to protect them from the 
uncertainties brought about by increasing dependence on imports 
and the vagaries of the world market.
    The strength of these two industrial sectors are vital for 
our national security and our economic security.
    I do have to preface my statement, Mr. Chairman, by telling 
you that our information that we use here today is based 
entirely on public record and historical information.
    You asked us to talk for a bit, to discuss the reasons that 
prices for raw materials, including base metals, have risen to 
current levels from the low prices that have been the norm over 
the past several years.
    As you know, the base prices aren't set in negotiations 
between a supplier and a buyer, as some commodities are. 
Rather, they are established on the basis of supply and demand 
on a global market, through a commodities exchange, like the 
London Metals Exchange. And in the past five years, these 
prices have been very, very depressed due to a global surplus 
in supplies of metals and raw materials.
    In the past year, however, we have seen the market for 
these commodities move up quickly, and move from a supply 
surplus to a supply deficit. Strong economic growth, led by the 
phenomenal growth in China that you have so aptly illustrated 
in these charts, has increased the demand for all metals, raw 
materials, and energy. And again, as an aside, we agree with 
you on HR 6.
    But because we have had several years of surplus, and the 
accompanying low prices that that surplus has caused, 
investment in mining and the mining infrastructure has been 
very limited, not only globally, but particularly here in the 
United States.
    Globally, the reason is, in part, those low commodity price 
levels. But in the United States, where exploration 
expenditures last year were 66 percent lower than five years 
ago, and applications for new permits have fallen by 73 
percent, there is a systemic reason.
    U.S. Government policies have actively discouraged, and 
sometimes even prevented, exploration and development of our 
nation's great natural resource base. It has even been 
difficult to replace reserves as they are being mined out, even 
if you are trying to replace them at a local mine, existing 
mine.
    Two recent studies have shown that the U.S. is 
unfortunately ranked among the lease attractive places for 
mining investment. The top reason is the difficult, expensive, 
and very, very lengthy time frame associated with obtaining 
permits to explore, develop, and operate mining-related 
facilities, whether it is for a new facility, or whether it is 
to expand existing operations.
    And as you know, when a board of directors is faced with a 
multi-million-dollar decision, an investment choice between a 
location in the U.S., where it might take four to more than 10 
years to put a mine on line, versus the same type of mine where 
return can start in one or two years, unfortunately the choice 
isn't going to be in the United States. That hurts U.S. mining, 
and it hurts U.S. manufacturing, whether large or small.
    Until recently a decline in domestic mining wasn't really 
viewed as being very significant, because demand for raw 
materials can always be satisfied either by buying from stocks 
in existing warehouses, or buying increasing imports.
    But as we have seen all too well, the ability to meet our 
requirements this way is very temporary. As global demand has 
improved, most metal markets have moved into a deficit, and 
demand growth has greatly exceeded the ability to increase 
supplies.
    But to make sure that manufacturers do not face a shortage 
of metals and other raw materials over the long term, it is 
imperative that we develop and implement a national minerals 
policy that allows our mining companies access to resources for 
development, and assures that these resources can be developed 
in a timely, socially and environmentally responsible manner.
    We have to address the permitting issue, reform the mining 
law, and reduce regulatory uncertainties. Actions that will 
help turn the U.S. from the least attractive location for 
investment to the most attractive location. We have to reverse 
the decline in mining, and reverse the need for our 
manufacturers to increase dependence on imported raw materials.
    In the short term, there is likely to be an increase in 
metals and raw materials production brought about by these 
current high price levels. Some of the increase may be in the 
U.S., but most is going to be off shore.
    But as a matter of economic security, we need a long-term 
solution to make certain that our manufacturers, our small 
manufacturers and our creators of jobs, and our large 
manufacturers, have the materials that they need to remain in 
business and remain competitive.
    And although we haven't discussed national security issues, 
it goes without saying that we must maintain a strong 
manufacturing and mining base for those reasons, as well.
    Mr. Chairman, thank you, and we look forward to working 
with you and members of the Committee to find the solutions 
that will help provide additional supplies of our needed raw 
materials to power U.S. economic growth and jobs.
    Thank you.
    [Ms. Holmes' statement may be found in the appendix.]
    Chairman Manzullo. Ms. Holmes, I wanted to do something a 
little bit unusual here. Could you just take one minute to talk 
about copper?
    Ms. Holmes. Yes.
    Chairman Manzullo. Because that will segue into our next 
witnesses.
    Ms. Holmes. All right, very good. The situation in the 
copper industry is not unlike the situation in every other 
metals and mining industry in the nation.
    Over the last five years, due to extremely low commodity 
prices for copper, we have reduced our mining levels by 
approximately 45 percent, since the highs were reached in 1997. 
It just simply has not been profitable for any mining industry 
in the country over the last several years.
    The industry could be, and it is a very strong industry. It 
could come back in the United States, clearly. However, we do 
need to address the mining issues that I discussed in order to 
encourage and allow the copper industry and all of the other 
metals and mining industries in the country to be able to 
expand production, and do it as they always do, in an 
environmentally sound way.
    Chairman Manzullo. Thank you very much. Our next witness is 
Ed Cowan, Vice President of Manufacturing of Beck Aluminum 
Corporation in Mayfield Heights, Ohio. Where is Mayfield 
Heights?
    Mr. Cowan. Cleveland.
    Chairman Manzullo. Cleveland, okay. We look forward to your 
testimony. Thank you.

      STATEMENT OF EDWARD COWAN, BECK ALUMINUM CORPORATION

    Mr. Cowan. I saw the gavel, I am speaking fast.
    I am here today representing Beck Aluminum. We have two 
small manufacturing facilities, one in Cleveland, Ohio, and one 
in Lebanon, Pennsylvania. In the Sales and Marketing Group we 
have about 100 employees.
    We are pretty typical in our business, and we are in the 
secondary aluminum business. That raw material represents about 
80 percent of our product costs.
    And incidentally, secondary metal, just to put everybody up 
to speed, refers to metal made out of scrap or primary metals 
made out of ore.
    Our customers are mainly casters, and their raw material 
costs account for between 50 and 75 percent of their selling 
price, depending on the size and complexity of the castings.
    We came here today to give our opinion on what we think has 
happened.
    I will give you a little price history very quickly. The 
base alloy for our industry, the vanilla of the aluminum 
business, is A-380. The current price for that vanilla is 86 
cents a pound. A year ago it was 73 cents a pound, two years 
ago it was 72 cents a pound. The increases in price that you 
see there are not as significant as you see in the other 
metals.
    In the 99.7 price over the same period, we went from a 
current 82 to 68 a year ago, and 67 two years ago. And 
incidentally, those aren't straight-line increases. If you look 
at the back of the charts that we have, they bounce around 
pretty well.
    A lot of people are blaming the metals price hike in 
aluminum on the Chinese purchasing scrap in the U.S. I think it 
is partially true. I think the real answer is there is a scrap 
shortage over here whether they take metal or not. It appears 
to me that this country could use about, oh, 9.75 billion 
pounds of aluminum scrap per year, of which we are getting 
about 8.25. And that billion and a half shortage is being 
absorbed by the primary producers who mix metal in to make 
certain alloys.
    Our business is getting what we need. What we have done is 
we stole some metal from those guys so we can make our product, 
and the price goes up. But the real bottom line is, we see 
about a billion and a half pound shortfall of scrap needed in 
the U.S.
    With that in mind, if there is a scrap shortage, how can 
the Chinese afford to buy scrap from our country? Well, the 
real answer is, and it is going to seem funny, there is a duty 
on primary aluminum in China. They put a duty on it because 
actually Chinese costs for production of aluminum are very 
high. They have high alumina costs for raw material. They have 
a high power cost. Obviously labor is low, but that is not the 
major concern for that.
    So what we have is, since their prices are arbitrarily high 
or artificially high for primary, they can afford to pay more 
for scrap. Because you can substitute scrap for some of the 
primary consumption.
    Now, in the last few months I have visited a lot of places 
in Boston, and I visited one in Baltimore yesterday to make the 
trip worthwhile. And every place I went to has a container 
going to China, of mostly low-grade material. I saw one place, 
I saw where they had pictures of warehouses--and one of our 
suppliers has just gotten back from China--where the warehouse 
is full of mixed metals, with women hand-sorting the metal. And 
I was told they make between $25 and $75 a month. I don't know 
if those wages are right, but if it is, we are going to have a 
heck of a time competing on those mixed metals and sorting it.
    In January this year, it looked like China imported about 
41,500 metric tons of scrap. That is less than they did a year 
ago. But I think the real answer was that the cupboard was bare 
here, and there wasn't that much scrap to export, since we have 
been so busy.
    But there had also been a percent-and-a-half duty on scrap 
going into China. They rescinded that duty in January of 2004, 
so the spread between the primary metal and scrap is even 
wider. It makes our scrap even more affordable.
    Incidentally, the Chinese imported last year about 650,000 
metric tons of aluminum scrap. That is almost identical to the 
1.5 billion pound shortfall that we had. I should tell you that 
only about 40 percent of that material comes from here.
    I have seen prices all over the map in my 30 years. I have 
seen prices as low as 30 cents, and I have seen prices over a 
dollar, and that was back in 1989. But what happens is that 
small companies like us have a problem when these prices get 
high. If Beck Aluminum has to finance 30 million pounds of 
sales a month, and we have to pay for 45 days of sales, that is 
about $30 million at 65 cents. If it goes to 85 cents a pound, 
that is $38 million. Our bank doesn't increase our line because 
the price of aluminum went up. We have to shrink our business. 
It makes it very difficult.
    A more disturbing fact to me I have seen this time is the 
fact that we have got a lot of parts going to China. Why are 
they going to China? We know they have high aluminum costs. 
What they do is have a subsidized casting cost. The companies 
are getting paid extra to export castings back here, whether it 
is for General Motors, a wheel, or to make a part. We had a guy 
lose a part to make a chalkline extender. It was a really cheap 
part, and they had to close the plant because it went to China.
    We also have our competitors going over there. China is 
looking to have our competitors go over there and build plants 
to help them recycle better. It may be a good idea, it may be a 
bad idea. But it seems to me that since we have the best 
technology, to go help them doesn't seem like a really good 
idea.
    Now, as much as I am against duties, and I am against 
duties, is that I think that we have to look at what is 
subsidized coming over here. Because if we lose our customers, 
we are going to lose our scrap, we are going to lose the base. 
And if that casting is subsidized, we should find out what it 
is and do something about it.
    Thank you.
    [Mr. Cowan's statement may be found in the appendix.]
    Chairman Manzullo. I appreciate your testimony.
    Our next witness is Joseph Rupp, President and CEO of Olin 
Corporation, in the copper industry, from Norwalk, Connecticut. 
And we look forward to your testimony.

         STATEMENT OF JOSEPH D. RUPP, OLIN CORPORATION

    Mr. Rupp. Thank you, Congressman. I also represent, and am 
Chairman of the Board of Directors of the Copper and Brass 
Fabricators Council, and I appear before you today in both of 
those capacities. The Council represents between 80 and 85 
percent of the total production of copper and copper-based 
alloy brass mill products, and there are 20 companies that are 
members of that.
    Copper scrap and copper-alloy scrap, along with copper 
cathode, are the most critical raw materials for the Council's 
companies. We need large volumes of these materials at stable 
prices on a continuing and ongoing basis.
    Between October of 2003 and March of 2004, as you have 
already stated, the price of copper has increased from 78 cents 
a pound to $1.32 a pound, or an increase of 69 percent. And the 
other two major elements of that copper scrap have gone up at 
the same rate.
    These rapidly-increasing prices are explained by the 
scarcity of copper scrap and copper-alloy scrap, as well as 
copper cathode. Attachment four contains two tables that tell 
you what is going on from a copper scrap point of view in the 
United States.
    And similar to what my colleague just testified, what has 
happened in the United States from 1996 to 2003, the exports of 
copper-based scrap have grown from 397,000 metric tons to 
735,000 metric tons. And basically what has happened is the 
amount that was consumed in the United States, which used to be 
39.4 percent supply exported, has now gone to 65 percent of 
U.S. consumption in 2003.
    There is a huge shift that has been occurring. More and 
more copper-based scrap has been leaving the United States, and 
the price of copper cathode has grown. Cathode pricing, as a 
result of the shortages, has seen premiums over Comex levels 
rise to levels we have never experienced before.
    There have been some spot shortages of copper-based scrap, 
and it appears possible that U.S. stocks of copper cathode 
could be depleted this summer.
    It would be difficult to over-emphasize how devastating the 
high prices and shortages of copper scrap and alloy scrap have 
already been, and might be in the foreseeable future. When we 
analyzed the data presented in some of the attachments, the 
picture arises that the major pressure on the global system is 
stemming from China. China has an insatiable demand for copper 
scrap, copper-alloy scrap, and cathode. This intensity has been 
seen in the high prices and the immediate payment in cash 
offered by Chinese agents to United States scrap dealers.
    The Council's members cannot compete on these terms, not 
because we are not efficient, but because the Chinese firms 
have unfair advantages that we do not have. And I am referring 
to the Chinese Government's serious under-valuation of the yuan 
versus the United States' dollar. The suspected refund to 
Chinese importers of copper-based scrap of most of the value-
added tax when downstream products made from that scrap are 
subsequently exported from China. And lastly, other reported 
subsidies.
    It is also important, the imports of copper-based scrap 
into China are not being properly classified and valued, and 
consequently not the full imports duties and taxes are being 
paid.
    These difficulties are made worse by the trade deficit of 
the United States with China. A major issue for us is the cost 
of transportation from the west coast of the United States for 
copper scrap is less than it is for transportation of copper 
scrap from the midwest of the United States to the west coast.
    One other aspect of the situation that should be 
emphasized. The escalating costs and threats to import material 
availability cascade down the supply chain. They affect the 
lives of workers of many companies. Some of our customers have 
told us that imports from China of downstreamed copper and 
copper-alloy products are at prices that are equal to or less 
than the material cost of the same products that are produced 
in the United States. This is having a negative impact on our 
customers, as well as our Council's members.
    In the area of free-cutting brass rods, screw machine 
companies in the industrial states of Illinois, Michigan, Ohio, 
Pennsylvania, and Indiana, and other places across this 
country, are left without customers for their end-use products. 
These small businesses are usually second- or third-generation 
family-owned companies with sales of $5 to $20 million, and 
employees of 20 to 150. The parts for faucets, valves, and 
industrial components that these companies produce from the 
free-machining brass rod cannot compete with the low-priced 
parts imported from China, and the sales of the United States 
parts are lost.
    With respect to other products such as copper tube, 
counterfeiting has arisen. These products are manufactured in 
China, labeled as being of United States origin, and sold in 
third-country export markets that traditionally have been 
supplied by the U.S. It is aggravating that this is occurring 
at a time when our economy is starting to improve.
    In conclusion, we are grateful to the Committee's attention 
to these difficult circumstances. And we thank you, 
Congressman, for this opportunity to appear before you today.
    [Mr. Rupp's statement may be found in the appendix.]
    Chairman Manzullo. I appreciate your testimony.
    Our next witness is John Lindstedt, President of Artistic 
Plating Company in Milwaukee, Wisconsin, representing the 
nickel industry.
    And I am a Marquette Warrior. I graduated from law school 
there in 1970. Doesn't that impress you?
    Mr. Lindstedt. I am a Badger fan, Congressman.
    [Laughter.]
    Chairman Manzullo. You can still testify.
    Mr. Lindstedt. Thank you, sir.
    Chairman Manzullo. A little bit of rivalry there, huh?
    Mr. Lindstedt. Just a little.
    Chairman Manzullo. If you want to pull that microphone to 
you as close as possible, it will help out. We look forward to 
your testimony.

     STATEMENT OF JOHN LINDSTEDT, ARTISTIC PLATING COMPANY

    Mr. Lindstedt. Good morning, Mr. Chairman and members of 
the Committee.
    Artistic Plating is an electroplating job shop providing 
gold, silver, nickel, tin, and copper finishes for a range of 
industries, including power distribution, automotive, defense, 
and medical.
    I am testifying today on behalf of the National Association 
of Metal Finishers, the American Electroplaters and Surface 
Finishers Society, and the Metal Finishing Suppliers 
Association.
    Like numerous other industries, metal finishing plays a 
significant value-added role in the manufacturing supply chain. 
Virtually all metal products in commerce require the service of 
my industry.
    The metal finishings industry's role in corrosion 
protection alone in the U.S. provides about a $200 billion 
annual economic benefit.
    My company's experience on the metals shortage issues 
reflects very serious challenges faced by the larger metal 
finishing industry and related sectors. I will put it simply. 
At this point, the impact of intense price pressure on metals 
is one of the most troubling hurdles we face, even in the 
context of the long list of other excess overhead and cost 
factors that are dramatically diminishing our ability to 
compete. None of these costs have risen as dramatically as the 
cost of nickel.
    The price of nickel for my company has increased by over 
300 percent from 2002 to 2004. This is so, even in the light of 
several cost containment strategies we have pursued, including 
the formation of a holding company with several other metal 
finishing firms in the Milwaukee area, to share administrative 
services and to make bulk purchases. This organization 
purchases 300,000 pounds of nickel per year, and therefore we 
have one of the lowest prices in our region.
    The price increases we have experienced would be a lesser 
challenge if my material needs for nickel and other metals were 
relatively low. Yet no single overhead cost constitutes as 
large a cost to the firm as metals materials, so the impact 
price increases for nickel is magnified in every job that I 
quote.
    Nickel surcharges and price increases in the light of the 
current manufacturing dynamics cannot be passed on. Price 
increases equate to rapid job losses at my company and those of 
my peers. As a consequence, my firm is caught in a very 
destructive and rather agonizing dynamic.
    In this cost/price freeze I face many production costs that 
are beyond my control, and continue to rise, while at the same 
time the price of my service continues to be forced down. To 
remain viable I have reduced staffing levels by over 40 
percent, ceased any unnecessary purchasing, and have not 
installed any new capital equipment in over four years. This is 
unsustainable in the long term.
    The phenomenon of metals pricing challenges results from 
the short supply of nickel and other metals. There are two main 
reasons for this.
    First, the shrinking American manufacturing base is not 
generating enough scrap to feed our own domestic needs.
    And secondly, the exploding manufacturing appetite of Asia, 
as you have so amply shown in your slides.
    I would like to leave you with at least one specific 
recommendation that would provide some relief.
    Under our current regulatory framework for managing the 
nation's industrial waste, we are literally throwing metals 
away. I have spent over a decade under two administrations with 
my top colleagues in industry and leading decision-makers at 
the USEPA, to study the metal byproducts that we in the metal 
finishing industry generate from treating metals in our 
affluent under the Clean Water Act. The resultant treatment 
sludge, under these regulations, is defined as hazardous; and 
thus, the majority of these metal-laden products are shipped to 
expensive hazardous-waste landfills.
    In an extensive waste benchmarking study conducted by the 
USEPA, greater than 50 percent of all metal treatment sludges 
are chemically non-hazardous by USEPA definition, but continue 
to be a listed hazardous waste, based on a set of prerequisites 
that were developed 25 years ago, and are no longer true.
    The average metal finishing facility throws away an 
estimated $40,000 annually in these metals. The typical 
regulatory cost to meet these requirements is in the range of 
6.5 percent of gross sales.
    Additionally, two of the primary metals involved are nickel 
and chromium. Both strategic materials for defense for which 
this country has no reserves.
    U.S.E.P.A. has been working on a rule to address this issue 
for several years now. And we are informed we may see a 
proposed rule package by the end of the year. This is a modest, 
yet promising, effort on the larger challenges we face. It is 
disappointing that it has taken this long to substantiate and 
reconfirm the policy rationale for modernizing these set of 
regulations.
    At this point, if all goes well, it will take another four 
to five years before this initiative may provide relief. This 
time needs to be shortened, and I would like to recommend this 
change in regulations as a challenge for the Committee to 
consider.
    Thank you.
    [Mr. Lindstedt's statement may be found in the appendix.]
    Chairman Manzullo. John, if you could have your Washington 
rep contact Joe here on our staff, we could prepare a letter to 
send to the EPA. I presume they are in the comment portion of 
the regulatory process now, is that correct?
    Mr. Lindstedt. They haven't quite published it in the 
Federal Register. We are told hopefully about November.
    Chairman Manzullo. All right. But if you could have your--
which group would it be? The metal finishers?
    Mr. Lindstedt. It would be, the term here in Washington is 
the SFIC, Surface Finishing Industry Council.
    Chairman Manzullo. Okay. If you could have somebody there 
contact our staff, get hold of Joe, and then we would be glad 
to work with them on putting in some regulatory comment.
    Mr. Lindstedt. Thank you.
    Chairman Manzullo. Thank you. Our next witness is a 
constituent from Rockford, Illinois. And I can't remember, 
Charlotte, where we first met, but it was at one of our many 
forum, or fora, whatever it is, back home on manufacturing 
issues.
    Ms. Vincer. It was one of the Chamber meetings, I think it 
was.
    Chairman Manzullo. Was that the one in Belvedere?
    Ms. Vincer. Yes, it was.
    Chairman Manzullo. And you came forward, and we talked 
about some of the problems going on. And Charlotte is the owner 
and sales manager of Riverside Spring Company in Rockford.
    Charlotte, you are testifying here on the continuous 
shortage of steel, and the price continues to rise. We held our 
first hearing on this issue, when was it about, on March 10. 
And at that time, people from the steel manufacturing sector 
and the scrap sector prophesied, to use that term, or 
forecasted, whatever it is, that the scrap shortage would see 
some amelioration, and that the price of steel had peaked at 
that point.
    So we look forward to your testimony so we can measure 
their evaluations.

    STATEMENT OF CHARLOTTE VINCER, RIVERSIDE SPRING COMPANY

    Ms. Vincer. Thank you, Mr. Chairman and members of the 
Committee.
    I truly appreciate this opportunity to share the effects 
the steel crisis has had on my small business, and many others.
    My name is Charlotte Vincer. I am the Sales Manager and 
Partner of Riverside Spring Company, a small family-owned 
spring and wire form business located in Rockford, Illinois. I 
am proud to say we began this business with one machine and one 
customer, 15 years ago.
    Over the years we have had considerable growth and positive 
profit margins. However, we have all felt the impact of the few 
years through the economic downturn. And I, of course, like 
many, did not feel comfortable when NAFTA came into play.
    Today I wish to share with you how the steel prices have 
affected my business. I will tell you that what damage our 
business has sustained through the years of lost customers, by 
the consuming force of Asia and other countries, cannot even 
come close to the magnitude of the blow we have taken from this 
crisis.
    Our profit margins have been cut nearly in half, and we are 
exhausted from the endless task of providing proof to our 
customers to the explanation of why we have to pass this 
increase on to them.
    My dear friend, Scott Sommers, President of Freeway in 
Rockford, hit it right on the head. He said, ``It all sounds 
good when our customers are willing to aid and work with us to 
combat this problem, but this is not a very value-added way of 
spending our day.''
    Something else that is very hard and imposed upon us is not 
knowing until the ship date what our cost or surcharge will be 
is absolutely pathetic, to say the least.
    To further our aggravation, all contracts from our steel 
suppliers have been broken. How do we quote anything, not 
knowing or having our costs in control?
    Also, to begin to search for new business at this moment is 
nearly impossible.
    By choice, I did not want to be repetitive by providing 
graphs or inflated proof of my rod and wire costs, as I am 
certain you have been saturated with much of that. I will tell 
you, however, my business is at a crossroads of enormous 
perplexity, humbly asking for a swift resolution to this 
problem. Flooded with calls from other small manufacturers, I 
am not alone by emphasizing that we do not have the leisure to 
wait six to eight months for this crisis to fix itself. And if 
it does fix itself, what is preventing this from repeating in 
2005 and the years to follow?
    I know you are well aware that many small manufacturers and 
people in general in America have lost the majority of their 
jobs, customers, to China. Non-replaceable sources that have 
closed their doors took our profits in search of cheaper labor, 
no insurance costs, OSHA regulations, et cetera.
    Now, China's economy is exploding, with our lost profits 
and inflating our steel costs to build up their economy. Adding 
salt to the wound, forcing us to raise our prices to our 
existing customers, putting them one step closer to considering 
China as a cheaper source. I hate to say this, but I see a 
pattern.
    In reevaluating the past, the honest thing to do is to 
first admit there has been a crisis for a long time. And 
although there may have been some recovery on the horizon, 
further disruptions such as this will only result in complete 
desolation of the few of us that are left.
    I, for one, cannot bear the thought of 15 years of hard 
work wiped out, and more so because this problem could not be 
resolved in a more expedient manner.
    I am just a small, simple business owner who can only offer 
no solutions of my own to this matter. To be quite frank, this 
is why I am coming to you. All I can do is to confirm what 
others before me have brought to your attention. There is a 
definite need for tougher trade policies, making certain from 
now on other countries understand that trade is going to be 
fair. And that the manipulation of the currency to the demise 
of our economy is not acceptable.
    Once again, there is an ongoing problem with health care, 
and itself has been an open sore in need of a long-time 
healing.
    Furthermore, we need tax breaks, especially for the 
manufacturers that are remaining in America. Sticking it out 
through this tangled mess, and with little strength that they 
have left to be the backbone of America, are driven to rebuild 
the manufacturing sector and provide much-needed jobs. 
Personally, I don't want more loans, government or otherwise. 
God knows I struggle to pay the ones I have.
    Make no mistake, these are very challenging times for us, 
and it is taking every ounce of our energy, time, and finances 
to hang on.
    What I am hoping for is there is no more talk, only instead 
bold and speedy action to relieve this enormous burden so that 
we can get back to business. Six months or more of battling 
prices between our vendors and customers has been fatiguing.
    In closing, Mr. Chairman, I just want to add this. With my 
deepest sincerity, I am praying for the leaders of this great 
country. I am praying that God will give you the wisdom to make 
the right decisions, which will determine whether my doors will 
be open or closed within the very near future.
    Thank you.
    [Ms. Vincer's statement may be found in the appendix.]
    Chairman Manzullo. Charlotte, what are the kinds of springs 
that you make?
    Ms. Vincer. We make compression extension torsion springs 
and wire forms of all types.
    Chairman Manzullo. And how many employees do you have?
    Ms. Vincer. We have five.
    Chairman Manzullo. That qualifies as a small business.
    Our next witness is Patrick Loftus. Patrick is testifying 
on behalf of the High Steel Structures out of Lancaster, 
Pennsylvania, and also in conjunction with the American Road 
and Transportation Builders Association.
    Patrick, we look forward to your testimony.

     STATEMENT OF PATRICK P. LOFTUS, HIGH STEEL STRUCTURES

    Mr. Loftus. Thank you, Mr. Chairman. I appreciate the 
opportunity to be here.
    I actually wear three hats today. One is as President of 
High Steel Structures, who is a bridge fabricator in Lancaster. 
We build the superstructure for highway and railway bridges And 
we are technically not small; presently we have about 800 
employees. But I also am past-Chairman and Executive Committee 
member of the National Bridge Alliance, and that represents 
about 120 member firms who are fabricators, and our average 
size is less than 100 employees per firm.
    On the ARTBA side, I am President of the Material and 
Services Division. ARTBA is a large organization, as you know, 
with over 5,000 members, representing most of the highway and 
bridge construction industry. But the M and S Division is 
smaller participants: people who do rebar, guardrail, small 
firms. Many WBEs, Women's Business Enterprises, and many DBEs, 
Disadvantaged Business Enterprises. So we have a broad 
constituency. And we speak today from a consensus view of the 
industry.
    Steel is the largest component by far in the product that 
our company makes. And the recent unexpected increase in price 
has just left us frankly reeling. We are not sure where this 
takes us.
    We won't go through the reasons for the increase, because 
those have been amply cited. But our prices have increased 
anywhere from 30 percent to 80 percent over the last year, 
average this year have gone up about 40 percent in price.
    Those of us in the highway and bridge business recognize 
that price changes are part of life, and we assume considerable 
risk because we are in a fixed-bid business. So we have to take 
a project provided to us by the DOTs, evaluate what is involved 
with it, review the drawings, and submit a fixed price to the 
general contractor for that work, based on the known conditions 
and scope of the contract, as defined.
    What has happened recently is the prices skyrocketed, and 
we have no way to compensate for that, because most of the 
projects on which we are bidding may be eight to 10 months 
later before we can actually order the steel. We have to do the 
detailed engineering drawings and submit those, and have them 
approved by the DOT, before we are even in a position to start 
to procure the steel. During that time the prices have changed 
dramatically.
    And I will give you two examples specifically of how that 
impacts us. In my company that I preside over, we presently 
have about $126 million worth of backlog, a substantial amount 
of work on the books, most of which we bid in 2003.
    Our cost overruns on the purchase of the steel material for 
that work would presently be in the neighborhood of $16 to $17 
million, over and above what was in the bid when we estimated 
it.
    Now, those bids were based on firm commitments from the 
steel mills, from the steel suppliers. They have simply 
defaulted on those and said they will no longer honor them, and 
therefore we are stuck with that.
    If you take it to a slightly smaller scale, some of our 
member firms--we have a very good WBE supplier that works from 
Pennsylvania who presently has, within the state of 
Pennsylvania, about $10 million in steel backlog that she took 
under contract in 2003. For her to purchase that steel today 
will cost her in the neighborhood of $16 million. So she is 
going to be in a loss position of $6 million on her present 
existing backlog.
    By definition, a WBE can only have a net worth of $750,000. 
She does not have a strong balance sheet to fall back on. She 
is not allowed to. So this would bankrupt here, literally. If 
she were to continue and perform on this work, it would 
immediately put her out of business, if her lending 
institutions would allow her to do that.
    And that is an immediate crisis that we are facing in the 
construction industry, is that we have a large number of small 
suppliers and material installers using steel, whether they are 
WBEs or DBEs or simply small business, that simply will not be 
able to honor their contracts, and will be forced to either go 
into bankruptcy or default. They have no choice.
    So it is an immediate and severe crisis. We have had a 
number of meetings with state DOTs and federal highway, trying 
to resolve this.
    Chairman Manzullo. Patrick, let me interrupt you. Rebar. Do 
you want to talk about that?
    Mr. Loftus. Yes. It has gone up dramatically in price. It 
is probably a 70- or 80-percent increase. It is the same 
situation.
    Chairman Manzullo. And its impact on road construction.
    Mr. Loftus. It is huge. A lot of the rebar is installed by 
small firms, and a lot of it is installed by DBE firms. If you 
take a project like the Woodrow Wilson Bridge project, the 
contractors there have to look very seriously at that. And they 
would have bid that back in May of 2003. They won't actually be 
receiving the steel material until this year, at a greatly 
escalated price. In all likelihood, they will not be able to 
perform under that contract.
    We are in exactly that position with the steel 
superstructure for Woodrow Wilson. The price has increased 
about $6 million beyond what we had anticipated. And we put the 
contractor on notice that we will not be able to perform that 
contract.
    So what we have asked Federal Highway for, for all of the 
steel products in the Federal Highway-funded projects, is to 
look at this as a changed condition. When you bid a project, 
you have a set of plans and specifications, and you are 
responsible for the risk involved with that. But if there is a 
changed condition, something that you could not have foreseen 
or have anticipated--a soil problem, an environmental problem--
that substantially alters the terms of the contract, you have 
the option to go back and amend that.
    So we have asked Federal Highway to put forth an emergency 
escalation clause as a changed condition, that would allow 
current contracts that were bid prior to March 1 of this year 
with material that is received after January of this year, to 
allow those to be considered a changed condition, and adjust 
the price for those projects.
    Absent that, you will have, this summer, many projects 
grinding to a halt, with suppliers and steel fabricators simply 
not able to fulfill the contracts, and the work cannot proceed.
    So it is an urgent crisis. You said earlier time is of the 
essence. It could not be more essential, because the 
fabrication for this summer's heavy construction work should be 
going on now to have it ready to install during the summer. 
Absent some price escalation from Federal Highway, this will 
not happen. We are going to have projects all over the country 
shutting down.
    Our own company has 45 projects that are at risk today in 
seven states and the District of Columbia.
    Chairman Manzullo. Road projects.
    Mr. Loftus. Yes. National major crisis. You can see 
construction just stopping.
    Chairman Manzullo. If you could, when you get back home, 
quantify those as best as you can in a letter, on your 
letterhead, to supplement your testimony? Because I know how 
fluid what is going on here, the point they are showing that 
there is a shortage of steel with which to make rebar, 
therefore impacting the highway construction industry, and 
therefore not being able to actually do the building itself. If 
you could put that in a one- or two-page letter and get that to 
Joe by fax, I want that to be made part of your testimony.
    Mr. Loftus. I would be happy to do that. We have submitted 
written testimony, and we do have an economic analysis 
conducted by Dr. Buchner of ARTBA that is available, and we 
will submit that, as well.
    Chairman Manzullo. Thank you, Patrick.
    Mr. Loftus. Thank you.
    [Mr. Loftus' statement may be found in the appendix.]
    Chairman Manzullo. Congresswoman Napolitano.
    Ms. Napolitano. Thank you, Mr. Chair. And I know I don't 
have to repeat this, but Chairman Manzullo has been at the 
forefront of bringing this to the attention of Congress and to 
this Administration. I think he has done a great job.
    I would also like to submit for the record the statement 
from CIF Stamping that was submitted for the record. I don't 
know if you have it.
    Chairman Manzullo. It will be made a part of the record, 
without objection.
    Chairman Manzullo. The testimony of the witnesses, the 
complete written testimony will be made part of the record.
    Anybody wishing to augment the testimony of the hearing, if 
you could get that in to Joe within the next two weeks. Now, 
listen very carefully. It cannot exceed two pages, and the type 
cannot be less than 10-point. There is a reason we do that, 
okay. And that includes if you want to put a graph on there, 
only one page. So that limits you to three pages totally. And 
we will make that part of the record.
    Congresswoman Napolitano, we will restart the timer for 
you.
    Ms. Napolitano. I guess CIF Stamping is disqualified, 
because he has got three and a half pages.
    Chairman Manzullo. Well, all right. Well, four pages, thank 
you.
    Ms. Napolitano. Well, the reason that I asked him to submit 
is because we did form a manufacturing task force. I advised 
you of that before. So they are bringing in information from 
not just themselves, but from others.
    But I certainly would want to tell everybody that we know, 
we feel it, we hear it. And yet, unless this Administration 
works on the base issues, on the core issues, there is nothing 
we can do except hold hearings and pass the information on.
    I could ask a ton of questions, but we already know. We 
have heard testimony from other individuals. Chairman 
Manzullo's task force on manufacturing. We have talked to the 
individuals. And you are right, ma'am, it goes beyond talking; 
it is now in the action phase. And that has to do with whether 
or not this Administration is going to move in protecting the 
U.S. manufacturer. Because we have lost a lot of it, and we are 
in danger of going below the danger zone that we may not be 
able to continue manufacturing our most basic necessities here 
in the United States, especially for defense.
    So I really don't have questions. I hear your pain. I have 
read a lot of your testimony. I know in my own area the small 
manufacturers are going out of business. They cannot afford the 
price. And if they are tied into their price that they are 
receiving for an order, and they have to pay beyond the price 
for their metal, they are in deep trouble.
    So I understand. I know, I hear a lot of the issues. And I 
am not sure whether, Ms. Holmes, whether you have any idea. And 
I know you say this might be a bubble, but how do we deal with 
it until that bubble bursts?
    Ms. Holmes. You are right, Madame Congresswoman. It is an 
extremely difficult, difficult situation that everyone is 
facing.
    The answer for our industry, for the mining industry, which 
provides the products that all of my colleagues' companies and 
manufacturers must have to exist competitively here in the 
United States has been facing similar difficult times over the 
last four to five years, brought about by essentially, as I 
mentioned in my testimony, a global surplus of commodity metals 
and base minerals.
    And such a surplus that here in the United States, and 
that, coupled with government policies that have discouraged 
our maintaining our mining base. Mining itself is almost at 
that point that you were referring to, the point of no return. 
And we have got to address that in the long term, as we pointed 
out in our statement, by going back and looking at the policies 
that discourage mining, and discourage a stable mining industry 
that is needed in turn to be able to supply our good customers 
with the products that they need to remain competitive and 
remain in business, whether it is a small manufacturer or a 
large manufacturer.
    And we certainly know that it is very, very difficult for 
small manufacturers especially to operate in these terms of 
fluctuating, extremely fluctuating price levels for their base 
products.
    But the answer is really a greater supply here in the 
United States. That is a long-term answer, though.
    Ms. Napolitano. And I am hearing, we have done a lot of 
aluminum can recycling, we have done a lot of other kind of 
paper, and newspaper, and cardboard. Why have we not begun to 
focus on metal recycling?
    Ms. Holmes. Others can certainly answer this question much 
more adequately than can I. But I do know that our companies, 
copper and brass and nickel and metal, metals of all types, are 
recycled as much as the law allows.
    One of the colleagues, I think you were here when you heard 
the testimony about some EPA regulations that prevent using 
materials that could possibly be recycled. And that is 
certainly something that we have to look at.
    But we are recycling as many of the commodities as we 
possibly can.
    Ms. Napolitano. Is it possible, then, that you could submit 
to this Committee the information on those past policies that 
we may be able to address, so that we can begin at least to 
understand where we can have a starting point for that 
particular area?
    Ms. Holmes. We certainly will. And we will submit those in 
very short order. Thank you.
    Ms. Napolitano. Mr. Chair, there are several other 
questions, but I would like to defer to my colleagues.
    Chairman Manzullo. Thank you. Congressman Akin?
    Mr. Akin. Thank you, Mr. Chairman. A couple quick 
questions.
    First of all, in the case of the rebar, I used to work for 
a steel company, and rebar was something we didn't have a whole 
lot of extra margin in. So if you had a choice of selling a ton 
of rebar or selling a ton of oil-tempered wire or something, 
you would get a lot more margin off the other.
    Do you think the conditions have made it a lot harder for 
things like rebar, which are sort of lower-end products? Has it 
made it particularly tight in terms of supply there?
    Mr. Loftus. I think it has. You are correct. The bridge 
steels that are higher in alloy content, and a higher price 
accordingly, those we are able to get, but at a greatly 
elevated price. But on some of the lower more commodity grades 
for guardrail or rebar, the shortages, availability is much 
more acute.
    Mr. Akin. We used to say the test it had to pass was if you 
threw it in some water and it sank, it was okay. It was kind of 
basic stuff you------.
    Mr. Loftus. It was steel.
    Mr. Akin. Yes, yes. Where the alloy things and all are a 
lot fancier materials. So you do have that sort of effect that 
the more expensive products, you can get them. The price is 
high. But some of them you just literally can't get.
    Mr. Loftus. That is correct.
    Mr. Akin. Then a question relative to the mining side of 
things. I have been trying to get at the same thing that the 
Chairman has been working on. And what are the things that make 
our industry less competitive in this country? I have had a 
chance to ask that question to a lot of different people. What 
are the highest-price--in other words, the reason you shift 
businesses overseas is because it is cheaper over there. It is 
quite simple. So what is it that makes us less competitive?
    Now, the answer that I have gotten back from most people is 
the high cost of health care probably hurts us, in terms of 
being competitive in America, more than taxes or any other 
policy. Is there anybody here that would say that health care 
is not the number one cost-driver?
    You made reference, Constance, to some policies relative to 
mining. Are there federal policies which tend to close down 
mines more than just the cost of health care? Or are there 
other things that are major cost factors here?
    Ms. Holmes. Our companies face exactly the same types of 
cost structures, as far as concerning employee health benefits, 
et cetera, that any other company in the United States faces. 
And it is a tremendous, tremendous problem that must be dealt 
with, both in the short and the long term.
    We also have other cost issues related to bonding for the 
mining that we must do, the bonds that we must obtain and that 
are much more difficult now to obtain. But we are also facing 
some real problems in making certain that we have the resources 
available so that we can maintain current production levels, as 
well as try to expand those production levels. And that goes 
back to some of the extremely long times and expensive times 
that we are experiencing in permitting.
    But day-to-day operations, certainly health care costs are 
a big factor.
    Mr. Akin. So if you had to rate all of those things, you 
had to pick, if you could fix one of them, what would be the 
best one to fix?
    Ms. Holmes. Clearly, you have to address all of them in 
concert.
    Mr. Akin. That is nice. You ought to run for office, you 
know.
    [Laughter.]
    Ms. Holmes. But, in the short term, clearly you are talking 
about some operating costs, amongst which health care costs are 
very important. But in the medium to long term, and obviously 
it affects the short-term capability as well, our companies are 
putting the issues with permitting as the number one top issue 
for them.
    Mr. Akin. Is that for iron ore mining?
    Ms. Holmes. It would be for just about all types of metals 
and minerals mining in the United States, yes.
    Mr. Akin. Permitting. And the government has to give you a 
permit before you can open a new mine?
    Ms. Holmes. Many of the mines and most of the resources are 
located on federal lands. And so clearly, the permitting 
process that you must go through to obtain access to those 
resources and then go on must be, it is a federal, state, and 
local government activity, yes.
    Iron ore, I will have to supply an answer specific to iron 
ore for the record.
    Mr. Akin. Okay. You might be encouraged to know at least 
the House has passed at least four versions of putting a cap on 
medical punitive damages. We have had a little trouble with the 
other body, but we have passed it about four times over here. 
We recognize that is a problem, and we are trying to get at at 
least part of that situation.
    Thank you very much, Mr. Chairman.
    Chairman Manzullo. Congressman Bradley.
    Mr. Bradley. Thank you very much, Mr. Chairman. I apologize 
for being late. I had a number of New Hampshire constituents in 
my office, so they had to come first.
    The question I had, and perhaps it was already addressed by 
the panel, and if so I apologize. But what are the 
possibilities of United States companies being able to ramp up 
steel production, in particular? Or have we lost so much of the 
base of this industry over the last several years due to 
economic conditions and other things, that it just is unlikely 
that this industry can be a growth industry in our country?
    And if the answer to the question is we could grow again, 
what are the types of regulatory policy changes that would 
enhance the ability to produce these basic materials in our 
country?
    Mr. Loftus. With all due respect, sir, I think we have got 
the wrong panel here to answer that question. You really need 
the steel supplier.
    Ironically, in the plate market, which is what we use 
primarily in bridges, there is adequate capacity to produce 
steel. But the shortages of both scrap for the mini-mills and 
coke at the moment for the integrated mills to produce raw 
steel is lacking. So the capacity is there, but the 
availability of the raw materials is not adequate at this time.
    What the solution to that would be is beyond my area of 
expertise. Whether there would be changes in the environmental 
regulations for coke production, for instance, might make a big 
difference. But I don't feel qualified to answer that.
    Chairman Manzullo. Jim, would you yield?
    Mr. Bradley. Yes.
    Chairman Manzullo. Wilbur Ross, the President of ISG, when 
he testified here about three weeks ago, said that his company 
is ramping up to increase steel production of I think 750,000 
tons. Was that per year? So that partially answers the 
question.
    Mr. Bradley. Okay, thank you. I have nothing further.
    Chairman Manzullo. Let me ask a question here. We all know 
the long-term things that have to be done in order to help out 
the cost of doing business in this country. Those are a luxury 
at this point.
    If you had it within your power to do something within the 
next 30 to 60 days, one or two things that would dramatically 
impact your industry, what would it be?
    And Ms. Holmes, if you want to--you know, the reason we 
pick on you is because you are mining, and everything starts 
with you. So we look to you for the most basic of answers, and 
can't go very well without you.
    Ms. Holmes. Well, let me see. In the next 30 to 60 days, it 
is extremely difficult. But I will say that affecting the basic 
mining industry and our costs, just as will affect all costs 
here--and it is not quite on the subject of the panel, I 
understand. But high costs of doing business, of course, affect 
our profitability.
    The thing that can probably help the country the most is to 
pass an energy bill. I mean, because while everyone is faced 
with very, very high costs of raw materials, and we are all 
faced with the vagaries of the world's supply markets and the 
ups and downs of price levels, at the same time that companies 
are experiencing these high metals and raw material costs, we 
are also experiencing extremely high costs for energy. And 
anything we can do to bring those down, through passage of a 
sound energy bill, which I know has been done on the House side 
and we are still waiting, is an important thing to do, along 
with all of the other things that my colleagues might suggest.
    Chairman Manzullo. Mr. Cowan?
    Mr. Cowan. Well, I know what I would do instantly, because 
there is no such thing as instantly.
    But we are more concerned about jobs that are leaving. I 
think I heard the same thing from the copper people. I think 
what happens is that, the little job people supply to bigger 
customers. Their big customer, without mentioning any 
automotive name by name, go to every supplier and say you must 
reduce your costs.
    Chairman Manzullo. Hey, look, General Motors just 
announced, and I will say it, that they are going to increase 
by tenfold the amount of outsourcing that they are going to do, 
requiring their T-1 customers to import stuff from China.
    Mr. Cowan. Absolutely.
    Chairman Manzullo. And somebody is going to have to wake up 
to the fact in this country, that the job is going to be so 
poor-paying, there won't be anybody left here to buy their 
cars.
    Mr. Cowan. Let me bring a point------.
    Chairman Manzullo. Let me finish, and then I will give you 
as much time as you want.
    When the Japanese come to this country and set up shop, 
Nissan and Toyota, what we have seen is that they are insisting 
on buying more and more American materials to put in their 
automobiles, and the American manufacturers are putting in more 
and more Chinese stuff. And the Japanese want to do that for 
several reasons.
    Number one, they are thinking long range. They want to make 
sure that the people are here in this country for the jobs to 
buy their cars. And second of all, they want to be able to meet 
the NAFTA requirements of 62-1/2 percent U.S. content.
    What we find in Rockford, which I still consider to be the 
fastener industry, used to be the fastener capital of the 
world, we have lost so many fastener shops it is incredible. 
But it is the Japanese automobile manufacturers in this country 
that are putting to shame many of the U.S. manufacturers by 
insisting on high quality, faster made, in this country.
    We have people contacting us all the time on why are the 
big three sending us all kinds of directives saying, by the 
way, what portion of what you supply us is coming from China. 
And by the way, you can save a lot of money when we put these 
cost restraints on you by buying the stuff from China. I guess 
that is a little bit of an editorial, but that goes to explain 
why the people in my biggest city, Rockford, Illinois, has 11-
1/2 percent unemployment.
    I guess I will ask you the question all over again, Ed, 
without the clock on.
    Mr. Cowan. You just gave my answer, and that is great. 
Because what I really see in this thing--and I will use the 
name GM--the buyer doesn't care if there are some subsidies 
given by the Chinese Government on a casting coming over. He 
just wants to know what your price is. And everything is based 
on price.
    I mean, if they would recognize that a subsidized casting 
price is not going to be there forever, it is going to go away, 
but once we lose that job we have lost it forever, maybe people 
would think a little bit differently.
    But I don't know how you identify that number, what it is, 
how much it is, and what the penalty is. But the pressure is 
on. The little guy isn't moving his jobs to China; he is moving 
the jobs to China under pressure from the big guys. Everybody 
should know that.
    Chairman Manzullo. This is why Congressman English's bill 
that would reverse the 1974 law in this country to allow 
countervailing duties against the Chinese, based upon the 
Chinese subsidizing their industries, is extremely important.
    So let me give you your answer. And that would be to enact 
Phil English's bill that would allow those actions to take 
place immediately.
    Now, who is here from Pennsylvania? Pat, you are here from 
Pennsylvania.
    Mr. Cowan. We have a plant in Pennsylvania, also. Lebanon, 
Pennsylvania.
    Chairman Manzullo. You are in Lebanon, Pennsylvania. Who is 
the Member there, do you know?
    Mr. Cowan. No, I do not. I live in Cleveland.
    Chairman Manzullo. Okay.
    Mr. Cowan. But there is one comment. I mean, I have seen 
aluminum jobs go to China that, I am pretty good at math, if 
aluminum is 80 cents a pound and it is a five-pound casting, 
you have got four dollars worth of aluminum. And you can't sell 
it for $4.20.
    There is something else going on that somebody has to 
identify.
    Chairman Manzullo. That is why, if you look at our opening 
statement, we put the list of the possible recommendations. We 
are going to be presenting those to the International Trade 
Administration within the Department of Commerce as soon as 
this hearing ends. And we will continue those discussions with 
them.
    Mr. Rupp.
    Mr. Rupp. Congressman. Short term what we believe needs to 
happen is exactly what my colleague has just talked about. We 
believe that the subsidies that are coming from, particularly 
from China, that the Administration needs to undertake a WTO 
dispute settlement case against them for illegal subsidies.
    We have got the exact same issue going on. And that is what 
is fueling the scrap that has basically doubled the scrap that 
is being exported out of this country.
    Ultimately it is impact on jobs. My company, for example, 
shut down a facility in Indianapolis, Indiana last year, where 
we used to employ 800 people, because of the inabilities to be 
able to compete. In our industry that I represent, we have 
another company that shut down a facility in Paramount, 
California last year, another company that is just trying to 
come out of Chapter 11 and trying to survive.
    For us in the short term, we believe that some help in 
stopping the rapid export of our material out of this country, 
such that we could--it is copper-based scrap, Congressman, 
copper-based scrap. We believe some short supply issue could 
assist us in trying to stop this rapid escalation of material 
out of here until we can get our feet on the ground.
    We also believe that the exchange rate on the yuan is not a 
short-term solution, but a longer-term solution that would be 
helpful to us. But the most significant issue we believe is 
that there are subsidies that are going on that need to be 
attacked.
    What is happening is our material, we can't--if you are 
Chinese and you want to buy a pound of material, you can get 
subsidized. I can never match you on price. And so what happens 
is the material leaves this country, and starts the whole 
escalating effect. And that is why the price of copper at 70 
cents a pound, when it goes to $1.40 a pound, it is a problem.
    I have been in the industry for 30 years. The penny got 
changed in 1980 because the price of copper was $1.40. The 
penny used to be made of 95 percent copper, 5 percent zinc. It 
is now made out of zinc and copper-plated, because the 
government couldn't afford to spend that kind of money to make 
a penny.
    So what has happened is we can't stand for the prices to 
stay up at these levels that they are staying. And what will 
happen is, as China continues to be subsidized, what will 
continue to occur is we will lose our customer base, ultimately 
our business, and ultimately jobs. And it has happened, I mean, 
in the rod side of our business it has happened dramatically in 
the screw machine shops right now.
    Chairman Manzullo. John?
    Mr. Lindstedt. Congressman, in the short term, I think the 
biggest impact that would help manufacturing is energy costs. 
And it ties in with the regulatory issue.
    Part of the reason we have such high energy costs in this 
country is, that it take 10 years to permit a power-generating 
facility. Currently the EPA is looking at more air regulations 
on the discharges from facilities that are going to raise the 
cost of our energy. And it ties into, I guess, a longer ethical 
question.
    We live in a society where we have demanded clean air, 
clean water, wonderful health care, et cetera, et cetera. And 
then for some reason, we put on moral blinders, and we send 
this work overseas in the guise of cost.
    I invite you to look at the current March, 2004 National 
Geographic article on China. And if I hear one more time that 
we have fair trade and they have the same environmental 
regulations we do, I want to get sick. Look at that article. 
Look at the costs imposed on the people of China for cost. It 
is morally wrong, what is happening in this country.
    And the only person I have heard speak to it in this 
current political campaign is Senator Edwards from North 
Carolina. He made a very strong statement about that, and it 
really played in the heartland of the U.S. Look at the results 
of the Wisconsin primary elections.
    We have to wake up. We can't speak out of both sides of our 
mouth. And the price pressures from up above are unbelievable. 
I mean, it is price, price, price.
    Chairman Manzullo. Charlotte?
    Ms. Vincer. I completely agree with John here about trade 
policies not being too fair.
    Yes, we are a small company, and we are pressed upon by our 
big customers to have price reductions continually. And that is 
just so tough. It is just so hard on us. And there are so many 
other companies that are going through the same thing.
    Again, health care is a big issue. For my little company, 
the sad part is we all had to let it go, and let our spouses 
take us on. We did that years ago. We haven't been able to 
afford health care since.
    Chairman Manzullo. That means you can't grow.
    Ms. Vincer. Thank you. We have had one employee, and laid 
her off, eight months ago or so. Actually, longer than that. 
But we couldn't keep her.
    Another sad part is my father had to go, who is a partner 
in the company, and find another job that had better health 
care.
    There is a lot of issues. I don't, again, I am just a small 
person in this big-potato world, however. And I would just like 
to say I appreciate everybody at this panel has had very, very 
good points. And I am thankful that you invited me.
    I would just ask that we would please get to a resolution 
as quick as possible.
    Thank you.
    Chairman Manzullo. Patrick?
    Mr. Loftus. I would have two suggestions in the short term. 
Both are very specific, and both are very urgent.
    The first would be to pass an adequately-funded highway 
bill. The TNI Committee I know has been working on that, and 
what we really need is a good, strong six-year bill that will 
adequately support highway funding out into the future, so the 
states know what they are going to have to deal with. What we 
have experienced in the last year is uncertainty on their part 
as to what will the funding levels be, so they have not let 
some of the longer-term major projects, and it has severely 
hurt the industry.
    So we need a new bill, and we need it adequately funded, 
and we need it now.
    The second thing is even more specific. I would ask you to 
encourage Secretary Mineta and Administrator Mary Peters of the 
Federal Highway to put in and allow and encourage a short-term, 
limited-duration, emergency escalation clause for existing 
contracts in steel construction. Absent that, we will see more 
headlines like this one about steel crisis and bankruptcies.
    This week one of the best fabricators in this country, 
Haven Steel, declared bankruptcy. They could not make their 
payroll; they sent their people home. That is very unusual. But 
they were completely out of cash because their lending 
institutions would not allow them to continue. They were paying 
more for their steel raw material than they were being paid for 
it after fabrication.
    Now, that is in a building, it is not a bridge. But that 
same condition is right around the corner. And this is time-
sensitive critical that we need escalation on existing 
contracts, or you are going to see other defaults, other 
bankruptcies, and construction brought to a screeching halt. 
And we need that help now.
    So we would ask you to please contact Secretary Mineta and 
Mary Peters, and ask them to adopt this policy.
    Chairman Manzullo. Congresswoman Napolitano.
    Ms. Napolitano. Thank you, Mr. Chair. And again, I just 
can't tell you how important that is to my area.
    I was interested in the dialogue over sludge, over the 
possibility of utilizing the minerals that, what was it you 
indicated was not being recouped?
    Mr. Lindstedt. Yes, ma'am. In my industry we deposit metal 
on other metals, and there is some of that metal in an aqueous 
solution in our rinse stream which we extract from our 
processes, under the requirements of the Clean Water Act.
    The metals are many in that stream. The most common ones 
are copper, nickel, chromium, tin, and zinc. And under the 
existing hazardous waste requirements in the country, they are 
defined, they are listed as a hazardous waste. Whether they 
chemically are or not. And that was based on a set of 
prerequisites that the USEPA looked at back in 1980. And the 
data that they were looking at was data that was gathered from 
our industry, most of it pre-1950, when it was a very different 
world.
    So they decided that that product was a listed hazardous 
waste. Someone decided it is hazardous. And we are now required 
to take this product, encapsulate it in concrete, and bury it 
in the ground. This product, most metals in there are somewhere 
between 3 to 6 percent by weight, on a dry-weight basis.
    Now, if you were in the mining industry and I said I had a 
mine that had 3-percent copper by weight, they would be rushing 
to that site to take it. And every day we throw it away. 
Thousands and thousands of pounds.
    We have been working with the agency for over 10 years to 
show to them that over 50 percent of the product that comes out 
of my industry is not a hazard by their chemical definition. In 
other words, if we laid it on the table here, there is nothing 
in that product, if it didn't come from my industry, that would 
make it a hazardous waste. But they have defined it that way.
    And we have been encouraging them to look at that, change 
the definition, and allow the hazard listing to leave. If the 
hazard listing leaves, we can send it to multiple facilities 
within the United States that are currently not permitted to 
handle a hazardous waste, and they can recycle it.
    We are desperately trying to get them to recycle that 
material. I mean, often the public thinks that we do a 
wonderful job of recycling in this country, and honestly, we do 
a pitifully poor job. It kind of makes you feel good when you 
recycle a milk carton. But when we throw away millions of 
dollars of metals that would have some impact, it is rather 
disappointing.
    And the process takes so long. If they passed that law 
today, it would take another four or five years, under the 
current regulatory regime, to make that effective, where we 
could actually change it. And we talked about permitting. It is 
absolutely bizarre. It makes no sense. Why 10 years to permit a 
power plant? Why five years, when we are crying about metal 
prices, and we are encapsulating in concrete, and we put it in 
the ground, must we wait another five years to get at it?
    I don't know. I mean, it is a strange set of circumstances 
driven by a lot of agendas on the environmental side. And we 
are not talking to take a hazardous waste and us it; we are 
talking about a non-hazardous product that we desperately need.
    Ms. Napolitano. Thank you, Mr. Chair. I think maybe we need 
to start asking some questions of some of our agencies as to 
why this has not happened, why they have not re-reviewed how 
they determine it is hazardous. What data are they using. And 
to maybe force the issue and have them bring them up to date.
    Chairman Manzullo. We appreciate that. You know, it is 
obvious what is going on here, is that over a period of time, 
with respect to the mining industry, there has been a decrease 
in demand based upon cheap foreign products coming on the 
market.
    Decreased demand means that the mining operations have 
decreased proportionately, and that when the increased demand 
comes along, because some of the mines have shut down or some 
have scaled back, then for them to gear up it takes a 
tremendous amount of time for that to take place.
    Having all these hearings on manufacturing, we have been 
doing it because somebody has to focus on this industry. This 
is a thousand-piece puzzle, the whole issue of the restoration 
or maintenance of manufacturing in this country
    Connie, when mining increases, that is a lot for 
Caterpillar. We have a $101 million Caterpillar presence in our 
Congressional District, in the Speaker's district, just below 
us, and obviously Ray LaHood's district. And so one fuels the 
other, and those are tremendous, high-paying jobs.
    And in the midst of all of this, we have all these 
regulations that are so disjointed.
    The good news is that Dr. John Graham, who is the head of 
the Office of Regulatory Information, within the Office of 
Management and Budget, put out a press release just about a 
month ago, whereby his office is undertaking a study of every 
regulation that supplies to manufacturing. It is a mammoth 
study. And Dr. Graham is a good guy. Really devoted, he has got 
a great mind, the ability to analyze a lot of things going on 
at any given time. And his job there, and his goal--and he did 
this on his own, of course along with the President's push on 
it--is to try to harmonize the numerous regulations that impact 
businesses, oftentimes not only with multiple permits, but 
different requirements. If you satisfy one agency, you break 
the regulations of another agency.
    You have been tremendous witnesses. You spoke from your 
hearts. Your recommendations, along with the recommendations 
that we have set forth in our opening statement, as I said 
before, not only are they up for the press that it is here, and 
a lot of industry press is here who are very much interested in 
this; but also within the International Trade Administration of 
the Department of Commerce itself.
    We want to thank you for coming here, and this hearing is 
adjourned.
    [Whereupon, at 11:02 a.m., the Committee was adjourned.]

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