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In the popular imagination, the 1920s were a period of excitement, advance, growing affluence and short skirts. Here, Trevor Tarring looks at the key features of the decade for metals trading and Metal Bulletin
In the popular imagination, the 1920s were a period of excitement, advance, growing affluence and short skirts.
In the USA, the keynotes were jazz, Prohibition, Model T Fords and the Charleston, until the market ran into the Wall Street Crash in 1929. As always, the popular imagination is only partly right.
If things were that good, why did the UK have a general strike for nine days in May 1926?
It followed a couple of years of falling living standards and union strikes and was triggered by coal mine owners attempting to push through wage reductions, which the miners’ unions naturally resisted. The strike was conducted in a typically British class-conscious way, with the upper and upper-middle classes lining up to join the forces of law and order in strike-breaking activities that alleviated the shortages of foodstuffs and fuel the strike was designed to cause. A group of undergraduates established a record non-stop time for the train journey from Oxford to London; fortunately they found out how to stop the train before it reached Paddington.
Metal Bulletin lost three issues because of strikes, but reverted to the trusty Gestetner cyclograph to get a single sheet report out on two of those dates. Their postal distribution was, of course, much delayed. However, growth was still the order of the day at Metal Bulletin.
Having outgrown the East India Avenue offices almost as fast as it outgrew its predecessors, in 1924 the company moved to Mark Lane EC3, where it remained for 13 years.
Leslie Tarring was not sorry to move. At East India Avenue, junior staff were on duty on Saturday mornings, but Quin was not. Inevitably, things got a bit boisterous. Tarring was engaged in a game of “off-ground he” when he made a desperate leap from the top of a filing cabinet which resulted in him breaking a pane of glass in an office partition. That absorbed a week’s pay for repairs.
Metal markets rode a sine wave down as accumulations of material for the war effort were worked off, then up as the post-war reconstruction boom kicked in. At mid-decade, the metal markets were down again before a brief recovery also died in the 1929 crash. Between the last year of the first world war and 1921, when the effect of the release of wartime accumulations was most strongly felt, world production of each of the main non-ferrous metals roughly halved, except for copper which fell 60%. Steel output was much steadier. This was also when sterling came off the gold standard for the first time.
A feature of the period was the resurgence of cartel activity that had been in abeyance during the war, while, in the UK, prices were subject to government control, though LME trading continued after a short break in late 1914. The Americans got round their increasingly effective anti-trust legislation by describing their cartels as operating only in the export markets.
In 1919, the Copper Export Assn was quietly formed. It operated a kind of buffer stock policy. Its initial purchases and their subsequent sale in 1922-23 were quite successful. So when prices were down again in 1926 they readily formed Copper Exporters Inc, whose manifesto has proved a model of specious argument for many subsequent similar organisations:
“The purpose of the organisation is to endeavour to eliminate in foreign countries the harmful speculation that causes wide fluctuations in price unwarranted by the industrial factors in European markets and tends to destroy confidence in the integrity of such price and the stability of the business […] Under the operation of Copper Exporters Inc. an effort will be made to sell direct to consumers and prices will be established in accordance with general business conditions as they develop from day to day”.
This roughly translates as “We will stamp out merchants and the LME”.
The power of the cartels With their own domestic and South American capacity, and the British-owned mines in Spain and the Belgian-owned mines in the Congo going along with the scheme, the cartels had effective control of world mined supplies. However, they did not, except for a brief moment, have control of price; nor did they get rid of merchants and the LME.
In aluminium, the pre-war Alliance Aluminium cartel resumed activity after the first world war, carving up European and other export markets among its members. During the 1920s these included all the European producers, but the sole US producer did not compete on price.
Running counter to this was a longstanding anti-trust action against Alcoa, forcing it eventually, in 1928, to divest its Canadian subsidiary. This became the independent exporter to the world, Aluminium Ltd. A couple of years later, at the depths of the Depression, it too became a member of the Alliance.
Tin also had a cartel set up in 1920 – the Bandoeng Tin Pool. A small town in what was then the Dutch East Indies, Bandoeng (now in Indonesia) has been in the news again recently in connection with moves to influence tin prices. Like the Copper Export Assn, it bought when prices were low, sold back when they rose and did a reasonable job for the producers; it had run its course by mid-decade.
New investment There was then a wave of investment in the new large-scale tin production method of dredging, so by 1928 prices were on the back foot again. A Tin Producers’ assocation was formed, which again bought in the trough of prices following 1929 and was able to sell back as the arms race built up in the 1930s. Much more significant was its use of production restrictions by association members to address the severe production/consumption imbalance of the time. A European zinc cartel was formed in May 1928, but quickly fell foul of the 1929 crash.
Historical perspective allows us to note that the doctrinaire love of centralised trading that impelled the post-WWII Attlee government to delay resumption of trading on the LME until eight years after the war ended had its parallels in 1918. The government moved swiftly in November 1918 to set up a Ministry of Supply to take over from the Ministry of Munitions, which had had draconian powers over metal distribution and prices.
In Germany, by contrast, wartime controls were swiftly removed. Under the post-Armistice settlements, Germany had, of course, lost Alsace-Lorraine and its iron ore and steel industry to France, whose capacity doubled as a result.
On the LME, the wartime prejudice against foreigners, especially Germans, began to ease as the newly formed national champions, British Metal Corp and Henry Gardner, took over some of the activities and properties of the pre-war UK branch of Metallgesellschaft .
The post-war reconstruction boom was certainly good for metals and for Metal Bulletin. The early 1920s saw a regular 1:1 ratio between advertisements and editorial, which is good going for a business newspaper. It also standardised the practice, growing through the war years, of running an outspoken leader on issues affecting the industry and markets.
In April 1920, this moved from the front of the paper to page 8 of a 16-page issue. In July 1928, without further explanation, prices for “Old metals” started appearing weekly on Tuesdays, curiously enough in the lead section. The half-dozen quotations covered the major non-ferrous metals, including aluminium, and steel. Interestingly, it was a little earlier, in 1928, that the first article expressing fears about a major crash appeared. Yet copper prices reached a peak level early in 1929 that was not surpassed until 1947.
Global changes On the wider world scene, Latin America, still politically immature, consolidated its position in world base metals and silver production. Russia suffered a famine due to climatic conditions, aggravated by fighting between Red and White Russians and the collectivisation of farms under the chaotic administration of the early years of the Bolshevik regime.
In Ireland, pressure for Home Rule which began during the War led to armed conflict and the eventual separation of Ulster from the independent Irish Free State. Benito Mussolini, most fascist of the Axis leaders of WWII, came to power in Italy. In the USA, Britain, France and some other countries, public radio broadcasting began. Hollywood signalled its cultural dominance of the era with the silent film Four Horsemen of the Apocalypse. The League of Nations was formed in 1920 with high ideals and limited powers.
As the decade opened, metal prices were still buoyed up by high wartime consumption, but the modern equivalents reflect the inflation that had occurred during the conflict.