More Deflation

When the Korean war set off a surge of inflation, few commodity prices shot up faster than those of such critical metals as tin, chromium and copper. In the shake-out that started in commodities almost a year ago (TIME, Oct. 20), the overpriced metals began losing some of their altitude. Last week, in the wake of the Korean truce, they were dropping again. Lead and zinc were selling near their June 1950 levels; tin had fallen 35.8% below its February high of $1.21 1/2 a Ib.; chromite ore was down 42.6% to $56 a ton and still falling.

Another big shakeout came in copper, once one of the most critical shortages. As free trading in copper was resumed on the London Metal Exchange for the first time in almost 14 years, spot copper, which had been artificially pegged by the British government at 31-c- a Ib., nosedived to 26.3-c- on the first day. Before the week ended, the price was back up to 28-c-, but coppermen felt that this was only a short reprieve. Britain has not yet begun to sell copper from its null stockpile, and Chile, which has kept 65,000 tons off the market in fond hopes of getting 36-c- a Ib., now is anxiously ready to sell at the world price. In the U.S., copper futures contracts have already fallen as low as 26-c- a Ib. (pre-Korea copper sold at 19-c-).

The big price drop in metals will help U.S. manufacturers cut their costs. But it will work a corresponding hardship in the producer nations. In Malaya, where tin is one of the main props of the economy, 54 tin mines have shut down in the last few months, and more are on the verge of closing. Turkey is also feeling the pinch. For more than two years, Turkey has sold more than two-thirds of its output of chromite (used to harden steel) to the U.S. The dollars it earned have helped to pay for the capital-works program which is lifting Turkey's backward economy by its bootstraps. But with U.S. chromite demands and prices on the downgrade, this source of dollars is drying up.

To help tide Turkey over its exchange shortage, the International Monetary Fund last week broke its rule limiting purchases of any nation's currency in a single year to 25% of that nation's quota. It bought $20 million worth of Turkish lire, 46.5% of Turkey's quota, in exchange for $10 million in U.S. dollars, two million British pounds and 18 million West German marks, currencies that Turkey has not been able to earn in trade.

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