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4. Control of the world mineral industry
The copper oligopoly
Concentration in the iron and uranium sectors
Historically, the main agents of the mining developments in the Third World in general and Africa in particular have been private companies from the major capitalist countries, even though they were constantly supported by their respective states. Mineral specialization in the Third World thus developed within the framework of an international extension of the oligopolistic structure of the advanced capitalist economies of Western Europe and North America. Up to the late 1960s, the world mineral and metallurgical industry (the socialist countries apart) was closely controlled by a handful of Western mining and industrial groups, to the extent that foreign control of the mining sector was seen in Third World producing countries both as the essence of foreign domination and as its major symbol. Nationalization of foreign mining capital always appeared as the first prerequisite of the economic programmes of national liberation and anti-imperialist movements. But it was only in the late 1960s and early 1970s that large scale nationalization became feasible and effective in a great number of Third World countries. The changes in the world political and economic system which had progressively occurred during the preceding decades created a more favourable context for the economic expression of political national sovereignty in the newly independent states of Asia, Africa and the Arab world as well as in 'free' Latin America. Nationalization of natural resources was no longer doomed to be a desperate attempt, like the oil nationalizations in Mexico in the 1930s or in Iran in the 1950s The big companies of the advanced capitalist countries are no longer able to control the mining activity in the Third World as a whole. Powerful state enterprises have been set up in the main producing countries of Asia and Latin America which have gained a far from negligible position on the world market, at least for some minerals like iron ore and copper. Yet capital and production in the mineral and metallurgical industry is still quite highly concentrated at the world level, although it varies from one mineral to another; and if the space open to the Third World producers tends to widen, the big Western mining and industrial groups still hold a strong position.
The aluminium oligopoly
Technical and economic concentration is certainly the highest for the aluminium industry. Six big companies, comprising three US (Alcoa, Kaiser and Reynolds), one Canadian (Alcan) and two European (Pechiney and Alusuisse), ran the industry from the Second World War to the 1970s, with more than 60% of world output. All are vertically integrated, from ore extraction to metal fabrication. They extract and smelt bauxite, and refine the alumina obtained to produce aluminium, in many developed and developing countries. Between them, these six companies control 50% of the ore extraction capacity of the whole capitalist world, 70% of its smelting capacity and 66% of its refining capacity, as well as the marketing networks.
Such a situation has historical roots. Since the end of the nineteenth century, two enterprises, Alcoa in the USA and Pechiney in Europe, based their monopoly position on the exclusive control of the patents relating to the Bayer process for alumina and the Hall-Heroult process for aluminium. A long period of technological monopoly enabled these enterprises to acquire hydroelectric facilities and bauxite deposits while increasing their production scale. When their monopoly of the technology ended, they found themselves in a position of economic monopoly, based on increasing returns to scale. Alcoa's monopoly position in the USA had been eroded in the late 1920s with the setting up of the Alcan enterprise, but it was decisively challenged only after the Second World War, when the US government favoured the creation of the Reynolds and Kaiser enterprises by selling to them, at a low price, the aluminium plants it had built during the War.
On the world scale, however, the oligopoly position of the big companies began to be threatened during the 1970s. On the one hand, the nationalization of bauxite fields in some Third World countries reduced the major companies' control of the capitalist world's extraction capacity, because the local governments now control about half this capacity, even though in most cases nationalization has been only partial. On the other hand, during the 1970s, the aluminium industry attracted other big enterprises from the advanced countries, mainly British and US mining groups (Rio Tinto-Zinc, Amax, Anaconda, Noranda) and European or Japanese industrial companies. Yet the six major companies still play a predominant role in the world aluminium industry. The International Bauxite Association (IBA), which was founded in 1974 by seven producer countries (Australia, Guinea, Guyana, Jamaica, Sierra Leone, Surinam and Yugoslavia), never worked as a cartel like OPEC. Because of the individual strategies of Australia and Brazil - the latter is not a member although it is an important producer - the IBA had a very limited impact on bauxite pricing and processing.
Additionally, in those countries which have developed local processing of bauxite into alumina, such as Jamaica, Surinam and Guyana, the smelters are in general under the control of the big aluminium companies. The enterprises of new competitors from developed economies, are still small compared to those of the 'majors' (Pechiney has 100,000 employees, Alcan 61,000, Alcoa 45,000, Reynolds and Alusuisse 35,000 each and their activities are much less integrated and internationalized. Some independent enterprises, such as the Canadian Noranda, have their own mines and smelting facilities, but most of them are dependent on the six 'majors' for their bauxite or alumina needs. Also, their plants are usually located in one or two countries while those of the 'majors' may be found all over the world. The 'majors' therefore, still control a large proportion of world aluminium output in the main producing countries, in the Third World as in the advanced economies, except in Japan and to a lesser extent in Italy. Their relative significance is also very high in world alumina output but the location of the smelters is different from that of the aluminium refineries; smelters are more often located in bauxite producing countries. Table 4.1 shows the locational distribution of the foreign investments of the six 'majors':
Table 4.1 Location of foreign investments of the 'majors'
Source: US Bureau of Mines
Foreign investments still obey a classic locational rule even if since the late 1960s traditional regional zones of influence have been opened to investors from other developed countries. For bauxite and alumina, the North American 'majors' invest mainly in the Caribbean, South America and Australia, while European 'majors' invest in Europe and Africa. In the recent period, however, the North Americans have also invested in Europe and Africa, and the Europeans in the US and Australia. Vertical integration is thus no longer limited to specific areas, but rather tends to develop on a world scale. Jamaican bauxite still supplies the North American smelters, which, however, also use African and Australian ores. Alcan, instead of processing locally the bauxite extracted from the Guinean mine of Boke in which it is associated, sends the ore to Ireland where it is processed into alumina, which is then sent to Britain to be refined into aluminium. With the entry of new operators into the industry, new international trade flows developed during the 1970s outside the internal networks of the 'majors', although these still participate in such development either as sellers or as buyers of bauxite and alumina.
The copper oligopoly
Economic concentration is quite important here too, although less high than for aluminium.
On the one hand, vertical integration of the successive production stages is relatively less developed. Here, mining groups limited themselves historically to ore extraction and its first processing into pure metal and rarely developed the fabrication of metal products. Contrary to what happened for iron ore and bauxite, investment here was determined more by the profit prospects of the mining activity itself than by the search for mines and smelting facilities or for ore supply security. Copper extraction was developed from the outset by the mining, rather than the industrial, private enterprises of Western countries; and the absence of integration between the production of the metal and its use in downstream industries is still true. Even the first stages of the transformation of the metal into finished products, such as the processing of copper cathodes and ingots into wire, rods, sheets or tubes, are largely autonomous. Thus, in 1969 only 30% of the North American fabrication capacity was controlled by integrated producers, and the proportion is certainly smaller today.
More importantly, integration is also very weak between the stage of ore extraction and the stages of smelting and refining. In the United States where the copper market is highly concentrated, private industry has never been fully integrated; such big concerns as Anaconda, Kennecott, Asarco and Phelps Dodge have their own mines, smelters and refineries but others, such as Amax or Cerro do not possess any mines. Amax, Asarco and Cerro control 19% of the US smelting capacity and 32% of its refining capacity, but only 5% of its ore output. Other big companies such as Duval, Cyprus and Cities Service control an important share of ore production but have no smelting or refining plant. West European and Japanese private enterprises are even less integrated. For example, Nippon, Sumitomo, Mitsubishi and Mitsui control almost all the Japanese smelting and refining capacity, which is quite large, without owning any mines. This holds true also of Norddeutsche Affinerie and Union Minière which are the biggest producers of refined copper in Western Europe.
The relative weakness of vertical integration implies that the barriers to entry are relatively low at all stages of the production process. Competitors coming from other industries and the state enterprises of the Third World producing countries could, in theory, enter the copper industry at any one stage since their competitive position does not require control of the other stages, backward or forward. Entry at the smelting and/or refining stage is, in particular, much easier for copper than for the aluminium or iron and steel industries. Technological barriers are relatively low because of the long standing and stable character of the smelting and refining technology. As for the financial barriers, the cost structure is such that they are higher for ore extraction than for mineral processing.
Since vertical integration is less highly developed in the copper industry, it is not surprising that the horizontal concentration is lower than for other metals.
Extraction of copper ore is, in fact, characterized both by a growing technical concentration and a declining economic one. In the US and in Canada, which are the main producing countries of the Western developed world, copper markets are quite highly concentrated. Five groups predominate on the US market: Kennecott, Asarco, Phelps Dodge, Amax and Anaconda; together, they produce about 1.5 million tons. The remaining US production is shared among other relatively large firms: Magma Copper, three middle-sized enterprises and two subsidiaries of oil concerns. In Canada, the International Nickel Company shares the copper market with three US enterprises: Utah, Falconbridge and Texasgulf.
On a world scale, however, the degree of concentration of the industry decreased during the 1970s. In 1948, seven mining firms - four US (Kennecott, Anaconda, Phelps Dodge, Amax) one European (Union Minière) and one South African (Anglo-American) - controlled 70% of the copper output of the Western world. But their share dropped to 54% in 1970 and to 23% in 1978. Meanwhile, Union Minière and Amax have been replaced among the big seven by Newmont Mining and Asarco, two other US mining enterprises.
This decrease in the degree of concentration of the copper industry is mainly explained by the nationalization of Western mining capital in Third World countries. Such was the case for Anaconda and Kennecott in Peru and Chile, for Union Minière in Zaire and for Amax and Anglo-American in Zambia, during the late 1960s and early 1970s. These nationalizations resulted in the setting up of state enterprises in the producing countries. Inheriting the assets of all foreign companies operating within the country, these state enterprises are usually relatively large and hold a monopoly position in the local market. Today, the eight biggest Western firms in the industry (the seven mentioned above plus the British firm Rio Tinto-Zinc) control only 27% of the ore extraction capacity of the capitalist world, while 24% of this capacity is under the control of the four state enterprises, Codelco (Chile), Zimco (Zambia), Gecamines (Zaire and Southern Peru). The production capacity of each of these enterprises is now more important than that of the big UK and US mining concerns. Nationalization, which left such big transnational companies as Kennecott, Anaconda and Union Minière with only their domestic mines, clearly reduced the concentration of capital in the world copper industry. But such a reduction has been favoured by other factors as well.
Investment in mining by enterprises which specialized in smelting, refining or metal fabrication brought about some diversification of the supply sources for the ore. In particular, the Japanese firms played a decisive role in multiplying mining investments during the 1960s and the 1970s. As they did for iron ore and bauxite, Japanese industrial entrepreneurs financed the opening of new copper mines and offered long term guarantees for outlets, without necessarily investing directly. This strategy made possible the opening of 13 copper mines in eight countries between 1966 and 1973, and in 1975, more than half Japan's imports of copper ore were supplied by mining exploitations which were, at least partly, financed by Japanese institutions. West German firms in the copper industry applied a comparable strategy, particularly in Africa and in the South Pacific.
The traditional oligopoly has been also challenged by the entry into the copper industry of mining firms from other sectors and of some of the biggest oil enterprises such as Exxon or Atlantic Richfield.
Concentration of capital is higher in copper smelting and refining than in copper extraction, although it is still lower than in the aluminium industry. In 1979, the 15 biggest enterprises in smelting represented 73% of the smelting capacity of the Western world. The state concerns of Chile, Zaire and Zambia had equal relative shares in smelting and in ore extraction, but the share of the eight UK and US 'majors' was higher for smelting than for ore production, since they controlled 35% of the smelting capacity of the non-socialist world as against 24% for the big state firms of Chile, Zaire and Zambia. Also, West German and Japanese enterprises, which did not control any copper fields, were among the main smelting firms of the world.
Also in 1979, the 15 main copper refining concerns represented 63% of the refining capacity of the capitalist world. The relative share of the eight US and UK majors, which usually smelted and refined copper, was around 34%, the same as in smelting, while that of the state firms of Chile, Zaire and Zambia was only 16%, which was lower than in smelting.
The smelting and refining capacity of the capitalist world was distributed between the main enterprises as is shown in Table 4.2.
Table 4.2 Copper smelting and refining: the main firms (1979)
|Firm||Smelting capacity||Refining capacity|
|(000 tons)||(%)||(000 tons)||(%)|
|1 Zimco (Zambia)||840||10||745||8.3|
|2 Asarco (USA)||839||10||693||7.8|
|3 Codelco (Chile)||665||8||486||5.4|
|4 Gecamines (Zaire)||536||6.3||230||2.6|
|5 Kennecott (USA)||463||5.5||525||5.9|
|6 Phelps Dodge (USA)||430||5.1||487||5.4|
|7 Nippon Mining (Japan)||428||5.1||432||4.8|
|8 Mitsubishi (Japan)||302||3.6||266||3|
|9 Anaconda (USA)||296||3.5||229||2.6|
|10 Enami (Chile)||265||3.1||153||1.7|
|11 Rio Tinto (UK)||233||2.8||235||2.6|
|12 Newmont (USA)||231||2.7||217||2.4|
|13 Noranda (Canada)||220||2.6||435||4.9|
|14 Norddeutsche (FRG)||215||2.5||247||2.9|
|15 Amax (USA)||214||2.5||245||2.9|
|Total Western world||8,460||100||8,970||100|
Source: UNIDO, Mineral Processing in Developing Countries, 1982.
The concentration of capital in smelting and refining has also decreased during the 1970s. Nationalization of foreign companies in the Third World affected not only the fields but also the smelting and refining facilities. The relative weakness of vertical integration also facilitated the entry of other mining concerns and oil companies in smelting and refining activities. The reduction in the degree of concentration of capital which these factors entailed favoured the growth of the world market. For refined copper, most international trade takes place outside the networks of the big mining enterprises, again because of limited integration between mineral processing and metal fabrication. The concentration of capital is still less developed at this last production stage. For instance, the 22 main enterprises in the fabrication of finished copper products control only half the total production capacity of the Western world. But the international market for semi-finished copper, such as ore concentrates and blister, developed only recently, outside the closed circuits of the traditional mining concerns, because of the entry of new investors and the rapid growth of smelting and refining capacities in Japan. The rigid oligopoly established in the copper industry during the 1950s and 1960s by a few big British and North American mining enterprises has, therefore, been progressively dismantled. Competition between the advanced capitalist countries and, more decisively, the nationalization of foreign assets in the main producing countries of the Third World have replaced such an oligopoly with a much less unequal distribution of control within the capitalist world.
The main copper countries of the Third World set up a producers' association, the Intergovernmental Council of the Copper Exporting Countries in 1967 in Lusaka, Zambia. The Council was initially composed of four countries only, Chile, Peru, Zambia and Zaire, but during the 1970s they were joined by: Indonesia, Australia, Mauritania, Yugoslavia and Papua New Guinea. Less ambitious than OPEC, the Council meant to be only an instrument for co-ordinating the pricing and production policies of its member states, but it never succeeded in formulating a common stand. Australia and Papua New Guinea, which were not actually full members, never wanted to oppose the consuming countries and their big industrial and mining enterprises. Furthermore, as we shall see, if the main Western mining groups had been forced to withdraw from their South American and African fields, they nevertheless succeeded in keeping real control of the mining production process in the big producing countries of Africa.
Concentration in the iron and uranium sectors
The world iron and steel industry showed a similar evolution in terms of concentration of capital and production. There is actually a strong oligopoly in each advanced capitalist country but there is not an international steel oligopoly as there is for aluminium and copper. The internationalization of capital is not very highly developed in the steel industry, as production capacities in every advanced economy are under the control of national capitalists, and foreign investments in Third World countries are not so important. The internationalization process here is based on the progressive specialization of the national steel industries in the framework of an increasing international division of labour. Yet the steel industry, which has been limited for a long time to Western Europe and North America, developed on a large scale in the other Western countries, in Japan, in the socialist economies and even in the Third World, in the so-called semi-industrial countries as well as in some OPEC economies. This dual movement of relocation and specialization of the steel industry has put an end to the big Western steel enterprises' monopoly on the international market for iron ore, which they owed to their ownership of mines exclusively supplying their own home-based plants. As new outlets appeared, new operators became interested in acquiring or developing iron ore fields, UK and US mining companies or Japanese steel makers. The nationalization of foreign mining assets in some producing Third World countries, especially in South America, and the development of government investment led to the setting up of sometimes very powerful state firms, such as the Brazilian Companhia do Vale Rio Doce (CVRD).
For iron ore too, a producers' association has been established, but the fact that Brazil, which is by far the biggest exporter, did not join it, together with the conservative stand of Australia, excluded from the start any possibility of collective action on the international market.
The picture is quite different on the world market for uranium. Here, there is no oligopoly in the classical sense, as from the beginning, uranium prospecting and production activities attracted a wide range of economic and political operators: private oil, mining or industrial enterprises, but also government agencies or administrations from the advanced countries. Nevertheless, there is a more or less secret international cartel for uranium, in which the main producing Western firms participate. The concentration of capital is relatively very important in ore processing and in the production of nuclear fuelled electricity.
The biggest producer of enriched uranium in the world is a US government agency, the Energy Research and Development Authority. The other producers are multinational state agencies of Western Europe, and the USSR and South Africa.
Likewise, the production of nuclear fuelled electricity, that is, the design and construction of nuclear power stations, is monopolized by a small group of operators. A few private industrial firms in the USA (Westinghouse, Combustion Engineering, Babcock Wilcox, General Electric), West Germany (Siemens, Telefunken, Brown Boveri) and Sweden (ASFA-Atom) share the international market with the state agencies of France, Britain and Canada. But the two US firms, General Electric and Westinghouse, hold a dominant position, either directly or through their European licensees. The technical process developed in Canada is, however, seriously competing with those of the US, and the policies of nuclear development in such countries as India, Pakistan, Argentina or South Korea have been greatly helped by Canadian assistance.
With the exception of Namibia, the extraction of uranium ore in Africa is, at least in part, under the formal control of the local state. But as we shall see, government participation in the capital of mining enterprises does not mean that the state exerts real economic power and because the uranium processing technologies are very sophisticated and highly monopolized, the position on the international uranium market held by the firms and governments of the consuming countries is very strong.
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