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13 February 2019

A Flawed Ambition


This article was written by Trevor Tarring. All views and opinions are strictly his own.


For this tale I am going back to what, for many, must appear more like prehistory than history. But in that it ultimately goes back to human nature it is, perhaps, impossible for it ever to go wholly out of date.

The story is about a minor metal - bismuth - and its timing is the 1950's. Key elements of the background show how far removed from today's  markets that was. In the UK the end of World War II was not immediately followed by a wholesale return to prewar markets. Postwar pressures on the then Labour Government, coupled with ideological urges, meant that state control of many metal markets continued for up to almost a decade after the end of the war. LME trading of copper, for example, was not permitted until 1953. Price changes were spasmodic and mainly influenced by the US market.

Against this background there were quite a few who thought that the old order of eternally fluctuating metal prices might be made to give way to something new. One of those was a man called John Lennon who ran a small minor metal-based company called Mining and Chemical Products (MCP for short, no matter what other use for this acronym you may have!). This was owned by a Bolivian family - the Aramayos -  whose wealth was derived from their ownership of tin mines. When these were expropriated by the Bolivian Government in 1958 they took as much money as they could out of the company and invested it in industry abroad, and particularly in MCP.

By far the major part of MCP's activity was in buying, smelting and marketing bismuth, that odd metal with a melting point in alloys less than that of boiling water. This explains its widespread use as a fusible plug in fire prevention systems. Another quirky feature is that it expands on cooling, making it a preferred material for anchoring tools in, for example, perforated metal jigs. At that time the use of the metal in indigestion remedies in France was quite important, until decimated by the withdrawal of Government funding. Another oddity is its use in pearlescent cosmetics. Nowadays its use is growing thanks to its ability to replace lead where the latter's toxicity is a worry and in the manufacture of acrylonitrile. 

It was Lennon who on September 8 1953 introduced the idea of open-endedly pegging the price of bismuth - at 16/- (£0.8) per lb in the UK, $2.25 per lb in the USA (on which front he depended on Asarco buying into the idea of stability). However, it is doubtful if the story would have been as weird as it is were it not for a man called Gerard Hodge who succeeded Lennon on his retirement in 1954. Hodge's early career was as a tax inspector in India and it was only in mid-life that he decided to return to the UK and enter a potentially more lucrative career, which, as Lennon's successor, he did. It was from this controlling position in the bismuth firmament that he raised the idea of a stable bismuth price from an ambition to a religion.

There is reason to believe that the motivation for Hodge to embark on this unusual initiative was a wish not to be outshone by his brother, Julian Hodge, who was making a great name for himself as a financier. With his base in Cardiff he became known as "the Welsh Wizard", amassing a personal fortune at one time of £60m.

Of course economic conditions at the time were rather different from today. Currencies did not fluctuate. For the whole 11 years of the totally pegged bismuth price, the $/£ exchange rate was $2.80. And structurally neither the mine producers of bismuth (South Korea was one of Hodge's main suppliers of ore) nor the diversified consumers (for whom bismuth purchases were not a top-priority concern) had that much interest in challenging what he was doing. On the consuming side the use of bismuth in acrylonitrile production was getting into its stride and in any other environment than the one Hodge was sustaining would have put upward pressure on bismuth prices.

Two years into the game there was a small glitch when Metal Bulletin marked its bismuth price up to 16/6d.per lb based on information from traders who had done small deals at that level, not least to test the solidity of Hodge's grip on the market. Hodge responded by clarifying that his 16/- price was for ton lots and 16/6 for smaller, 2cwt (2 hundredweight - i.e. 10% of a ton) lots. After that it became accepted that, despite the creeping inflation in the broad economy, Hodge was really going to maintain his 16/- price.

Of course, nothing is forever and by July 1964 even Hodge had to concede an increase to 17/- per lb., still less than was called for by inflationary moves over the preceding decade. So acceptance of his message of stable pricing was still pretty established.

However elsewhere in his firmament another bright idea was brewing. Although it only began to become known somewhat after the event, Hodge was now looking at the possibility of bringing cadmium into the stable price fold. So he went to Japan to sell the idea to the people whose support would be the most necessary.

Again, it is only with hindsight that we can piece together a picture in which Hodge left Japan without any support for his cadmium price idea and with bismuth  chafing at the bit of the 17/- price. Unluckily for him it was at this juncture that his plane from Tokyo crashed spectacularly on take off with the death of all on board.

Without Hodge and under pressure from several growing applications, notably acrylonitrile, bismuth prices began climbing and by 1968 had reached £1 3s 4d or £1.166. Since then both bismuth and cadmium have shown typical minor metal price patterns -  fundamental instability from week to week, punctuated by occasional dramatic leaps or drops.    

 


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