Economic History Review, 2nd ser. X X X I X , 3 (19861, pp.

392-410

The Rise of Big Business in the World

Copper Industry 1870-1930'
By CHRISTOPHER SCHMI'TZ

B y any measure, the world copper industry between the 1870s and the
1920s was characterised by the growth of large corporations. Assessed in
lerms of market share, the extent of vertical integration, or the accumulation
of capital, the leading producers appear to have increasingly dominated the
industry. By 1929, the capital assets of the leading United States copper firms
alone stood in the region of $1-5 billion, while the leading four firms in rhe
industry (also American) controlled more than 50 per cent of world produc-
tion. This, coupled with the growing presence of multinationals like
Anaconda, Kennecott, and Rio Tinto in Latin America and Africa, led
to continuing fears being expressed about the monopoly position of these
enterprises.
Recent research on the rise of the large-scale business corporation has
reorientated analysis away from monopoly profit motives and more in the
direction of responses to market imperfections, coupled with technological
imperatives. In particular the work of Alfred Chandler and Oliver Williamson
has emphasized the role of the large firm as an efficiency instrument, internaliz-
ing functions previously performed by the market. Increasingly, from this
viewpoint, resource allocation and intermediate product exchange would be
conducted within firms in order to minimize the transaction costs of using the
market price mechanism.
Chandler and Williamson in large measure derive their generalizations from
the experience of manufacturing industry. Consequently, the growth of big
business in the copper industry provides a valuable opportunity to assess
recent theories of corporate growth in relation to extractive industry. It is the
contention of this paper that technological pressures, rather than transactional
considerations, have been more significant in the mining and smelting sectors
than Williamson might allow, even though the refining and fabricating sectors
of the copper industry probably conform more closely to his views.4 It is
possible to show that in the mining industry the rise of big business resulted
Earlier versions of this paper were delivered at La Trobe University, the University of Lceds and the
International Mining History Conference, University of Melbourne, 1985. I am grateful for numerous
comments from participants at these meetings; also for advice from Roger Burt over a longer period of
time.
A. I).Chandler, The Visible Nand: The Managerial Revolurion in Amencan Business (Cambridge, Mass.
1977); 0. E. Williamson, Markets and Hierarchies: Analysis and Antitrust Implications (New York, 19751;
0. E. Williamson, 'The Modern Corporation: Origins, Evolution, Attributes', Journal 011 J ~ C O ~ I O ~ I L C
Literature, XIX (1981), pp. 1537-68.
L. Hannah, The Rise ofthe Corporate Economy (2nd edn. 1983), p. 3 .
Williamson, Markets and Hierarchies, pp. 2-4, 60-1, 82-6.

392
 BIG BUSINESS A N D COPPER, 1870-1930 393
from the logic implied by a series of geological and technological consider-
ations.

I
The extent of business concentration in the copper industry after 1870 can
be assessed at a number of levels. First of all, the size of firms as represented
by their capital assets suggests a strong momentum towards large-scale activity.
Allowing for data deficiencies which make it difficult to construct comparable
long-term indicators of asset growth, it is possible to contrast the size of
leading firms in the mid-nineteenth century with those of later periods. The
leading copper firm in Cornwall and Devon (the world’s main producing area
until 1857) was Devon Great Consols. In January 1866, when it stood just
before a long period of decline, this mine had a market valuation equivalent
to $2.98 million.s In contrast, the market valuation of the issued stock of
Calumet & Hecla, the leading U.S. (and at times leading world) producer to
1883, grew from a median point of $4-9 million in 1870, to $10.6 million in
1874 and $23 million in 1 8 8 0 . Thereafter
~ the growth of industry capital can
be measured in broad terms by reference to Table I .
The trend towards the growth of large firms accelerated after 1869, when
a new tariff in the United States heavily increased duties on imported c o p p e ~ . ~
Behind the shelter of this legislation, the Lake Michigan producers, particu-
larly Calumet & Hecla, rapidly increased their market share, while maintain-
ing domestic prices by dumping copper overseas.s During the I 870s Calumet &
Hecla accounted for around 52 per cent of United States output, and dominated
the domestic American market until the early 1880s, when mining at Butte,
Montana commenced on a large scale. A savage price war through the 1880s
led to the emergence of the Butte producers, led by the Anaconda and
Boston & Montana firms, as market 1eade1-s.~ Outside the rapidly growing
and protected American market, few copper firms grew to substantial size
before the 1930s. In Spain, the Rio Tinto and Tharsis companies, working
large low-grade ore-bodies, commanded nominal assets which, together, stood
in the region of about $22 million in the late 1 8 8 0 s . ’ ~Until 1900, the
other major producing regions, Chile, Germany, Australia, and Japan were
characterized by firms with far smaller capital assets than the leading firms in
the United States. Even with the spread of investment capital into large-scale
mining prospects in Russia, Chile, Katanga, and Northern Rhodesia, between
1900 and 1939, the scale of capitalization of non-U.S. copper firms still lagged
far behind that of firms like Anaconda. Apart from any question of capital
G. C. Goodridge, ‘Devon Great Consols’, Transucrions of rhe Devonshire Associaria, XCVI (1964), pp.
228-68.
W. B. Gates, Michigan Copper und Bosra Dollars (Harvard, 1951)pp. 224-7.
F. W. Taussig, Tariff History of the Wnired Stares (New York, 8th edn. 1931), pp. 219-21.
* 0. C. Herfindahl, Copper Costs and Prices, 1870-1957 (Baltimore, 1959), pp. 70-2,246; Gates,Michigun
CoPPrn, PP. 39-63.
K . R . Toole, ‘The Anaconda Copper Mining Company: A Price War and a Copper Corner’, Pucijic
Norrhwesrem Quarrerly, XL (1949), pp. 312-29.
W. R . Skinner, Mining Manual for 1887 (1887), pp. 376,, 435.
I ’ By 1937, the largest non-U.S. copper firm was the Rhodesian Anglo American-Nchanga Consolidated-
Rhokana group, with combined assets of $87.4 million.
394 C H R I S T 0 P H E H S C H M 1’1Z

Table I. Leading Corporations in the Copper Industry, 1898-1929

IJnitcd States (assets in $m)*

Anaconda 52.5 170.2
United Copper 50.0
Greene Cananea 15.0
(:bile Copper
AS A R C 0 I 18.6
Calumet & Hccla 57.0 57.8
Copper Kange 40,9
Phdps Dodge 49.4
Greenwatcr Copper 34.0
Kennecott Copper
Guggenhcim Exploration 36.9
Utah Copper 25.0
United Kingdom ($m equivalent)
Rio Tinto
Caucasus (hpper
Great Cohar
Rhodesian Anglo-American
Roan Antelope
Japan !$m equivalent)
Suniitomo
Mitsubishi Mining
I‘urukawa
Belgium ($m equivalent)
Union Miniere
du Naut Katanga
Australia ($m equivalent)
Mount Lyell 4.4 7.0 6.3 12. I
Chillagoe 7.3 5.3 5.7
Mount Elliott 3.6 6 .I X.5
* Assets equal nominal capitalization plus debenture issues. Anaconda I 898 includes assets o l whollv
owned subsidiaries; 1909 includes assets of Amalgamated Copper Co. Calumet (Ir Hecla I 8y8 represents
median market valuation of issued stock; on the same basis 1909is $64m. Chillagoe 1898 represents asset5
of Chillagoe Mining & Railway Co. Ltd.
.Sc~urccs: Srock Exchange Year Book (1895-1948);W. G . Skinner, Mtnrng Manual (1887-19301; K . I*.
Nash, Australasian Joinr-Stock Compantes Yearbook (Sydney, 1899-1913 ) ; A. D. H. Kaplari, Btg Business
In a Competifrve system (Washington, 1954), pp. 145-9,

markets or institutional factors favouring a higher degree of business concen-

tration in the United States than elsewhere, from the early 1880s onwards the
United States was both the world’s leading producer and consumer of copper. I L
The high degree to which United States copper producers operated within a
domestic market, at times relatively unaffected by world market forces,
undoubtedly aided their growth.
The increasing size of the leading firms was paralleled by the growth in
their market shares. On trend, from the 1880s to the late 1920s the leading
four firms increased their share of world mine output from around a third to
over a half (Table 2). After 1930, when the United States leadership of the
industry faced a growing challenge from the African copperbelt, the extent
of market control by the top firms declined. In the sphere of smelting and
I 2 In 1883 the U S. overtook Chile as the world’s leading mine producer of copper, a position it
maintained until the late 1970s During the period 1892-1929 the U.S. accounted for 50-65 per cent of
world output and some 35-45 per cent of total consumption; Metallgesellschaft A-G, Metul S t u t t m \
(Frankfurt-am-Main, 1894-1937).
 B I G B U S I N E S S A N D C O P P E R , I 870- 1930 395
Table 2. Mine Production of the Eight Leading World Copper
Firms as a Percentage of World Output, I 8 g O - I g 3 5
Kunk iffirm: 1890 I 900 1912 I923 I928 I935
First 11.0 15.9 15.5 21.2 21.1 16.9
Second 10.5 7.4 11.3 19.0 19.5 13.4
Third 9.8 7 .I 8 .o 6.2 6.5 7.7
Fourth 8.2 3.8 4.0 4.4 5.9 7.5
Fifth 5.8 3.7 3. I 3.5 3.5 6.6
Sixth 3.8 3.2 2.4 3.3 3.4 5.6
Seventh 2.2 ',.3 2 -I 3.2 3. I 4.3
Eighth 1.8 2.2 2.0 2.9 2-6 2.7
Firm 1-4 39.5 3'4.2 38.8 50.8 53.0 45.5
Firms 5-8 13.6 11.4 9.6 12.9 12.6 19.2
Firms 1-8 53. I 45.6 48.4 63.7 65.6 64.7
Coeff. C* 0.045 0.041 0,047 0.091 0.094 0.068
* Coeff. C = Herfindahl's coefficient 0 1 industry concentration, calculated from the shares of the top
eight tirms.
Sources: 1890, R. P. Rothwell, ed. Mmeral Industry, 1893 (New York, 1894), pp. 236-48; Mlneral
Resources of the Untted States, 1894 (Washington, 1895), pp. 33-58.
1900, T. R. Navin, Copper Mining and Management (Tucson, 19781, p. 396.
1912-7.$,0. C. Herfindahl, Copper Costs and Prices, 1870-1957 (Baltimore, I959), pp. 165-7.

refining, where capital costs and economies of scale were greater than in
mining, the control of the leading firms was even more pronounced. In 191I ,
the United Metals Selling Co. group (including Anaconda-Amalgamated, the
Lake mines, the Arizona Copper Co. and Greene-Cananea) controlled 31 per
cent of United States and 22 per cent of world refinery output. The American
Smelting and Refining Co. (ASARCO) group (including Utah, Nevada Con-
sols, Ray, and Cerro de Pasco) controlled 24 and 17 per cent respectively,
while Phelps Dodge (with its Arizona mines) controlled 13 and 9 per cent. l 3
With these three United States groups controlling some 48 per cent of world
capacity, two German groups, the American Metal Co. (Metallgesellschaft)
and Aron Hirsch und Sohn, between them controlled a further 13 per cent.
In 1921, after rapid war-time expansion, the leading three United States firms
controlled 74 per cent of world refining capacity, while the American Metal
Co. (transferred from German to United States control in 1917) controlled
another 8 per cent, and Japanese refineries a further 8 per cent.13 By 1926
total United States capacity had contracted to around 50 per cent of the world
level and following major refinery construction in Europe, Africa, and Canada,
to 36 per cent in 1932.'~
The increased size and growing market share of the leading copper firms
arose partly through internal growth, but largely through merger activity. In
the United States the three leading groups in the industry, Anaconda, ASAR-
CO-Kennecott, and Phelps Dodge, all grew rapidly from the late 1890s by
an active process of horizontal and vertical integration. Indeed, particularly
during the great merger movement of I 898-1902,'~at a time of rapid expansion
I) Mining Magazine, v ( I ~ I I )p., 464.
I* R . Allen, Copper Ores (1923),pp. 18-19.
I s W . Y. Elliott et al. International Control in the Non-Ferrous Metals (New York, I937), p. 479.
I h N. Larnoreaux, The Great Merger Movement in American Business, r895-1904 (Cambridge, 1985), pp.
1 - 5 , r5S; R. L . Nelson, Merger Movements in Amencan Industry, 1895-1956 (Princeton, 1959), pp. 71-105,
129-38, 144-53,
396 C H K I S T 0 1’H E K S C H M I T Z

in electrical technology and demand for copper, these giant firms increasirlglv
seemed to epitomize the leading edge of the trust movement.
ASARCO was incorporated in April 1899 with a capital of $115 million,
bringing together a number of trans-Mississippi lead smelters. Promoted by
interests which included the copper-broking Lewisohn brothers of New Y ork
and Henry H. Rogers of the Standard Oil Co., by 1901 it had come largely
under the influence of the Cuggenheim family. With the construction of a
plant at Garfield, Utah, in I907 ASARCO entered copper smelting, in competi-
tion with Anaconda. Thereafter its interests in copper mining and smelting
grew steadily. In I904 the Guggenheims staked a claim in the development
of the first of a new generation of giant, low-grade (porphyry) copper mines,
with the incorporation of the Utah Copper Co. The Guggenheim Exploration
Co. (1899) also pioneered the development of two large Chilean porphyry
deposits, at Braden (El Teniente) and Chuquicamata (the latter being sold 10
Anaconda 1923-29). In I907 the Guggenheims sold most of their ASAKCO
stock and in 1915 the main part of the Guggenheims’ own copper interests
were consolidated into the Kennecott Copper Co. (including Utah, Nevada,
Ray, Chino, and Braden). Vertical integration continued with the acquisition
of firms like the Alaska Steamship Co. and in 1929 the Chase Co., a leading
fabricator. By 1937 Kennecott was the largest United States copper producer,
with around 36 per cent of domestic mine production.
From its origins at Butte, Montana in the mid-187os, the Anaconda Com-
pany came to represent the prime example of large-scale, integrated enterprise
in the world copper industry by 1929 (Figure I ) . Through the 1890s it
integrated horizontally into adjacent claims at Butte and vertically into timber,
water, transportation, smelting and refining concerns. Its greatest spurt of
corporate growth occurred during the great merger boom at the turn of the
century, when the giant Amalgamated Copper Co. was floated, in April 1899,
with an initial capital of $75 million (increased in 1901 to $ 1 5 5 million), in
order to consolidate a large number of mining, smelting and refining inter-
ests. I H The Amalgamated Copper Co., promoted by a powerful combination of
Standard Oil interests (H. H. Rogers, J. D. Ryan and William G. Rockefeller)
allied with the Lewisohn-Bigelow group and the National City Bank, at once
dominated the United States and world copper markets through a complex
corporate network. Throughout the life of the Amalgamated Co., Anaconda
remained at the heart of the structure. On the liquidation of the former, in
June 1915,Anaconda (having already absorbed many of the Amalgamated
enterprises in 1910-15)assumed full control. Thereafter, through the 1920s,
with capital assets passing half a billion dollars, the corporation made major
acquisitions overseas, for instance obtaining in 1923 a majority stake in
Chuquicamata, Chile, the world’s largest copper mine. It also consolidated
its integration into fabrication in 1922, with the purchase for $45 million of
the American Brass Co.
Outside the United States, the network of control between copper firms
D. Lynch, The Concentration of Economic Power (New York, 1946), p. 1 3 5 .
InF. E. Richter, ‘The Copper Mining Industry in the United States, 1845-1925’,~uarter!vJounia/01
Economics, x1.1 (19271, pp. 236-91, 684-717; ‘The Amalgamated Copper Company: A Closed Episode in
Corporation Finance’, Qu. .7. Econ. xxx ( I ~ I S - I ~ )pp.
, 387-407.
 BIG BUSINESS AND COPPER, 1870-1930 397
Figure I, Anaconda: Corporate Growth, 1875-1929
Anaconda Silver Mining Co
j 1875)

.rwisohr) Bros

ANACONDA MINING CO Railroad j 1892 )

(1891) $12 5 m
( 1 8 9 5 $30 m ) Blackfoot Land & Devclopinent
Lewisolin Bigelow Co j 1894 ) $2 5171
iiiterc!sts

Buttr & Boston $2111

AMALGAMATED COPPER
Unitctl Metals Selliiicj I
CO ( 1899 ) $75 ni
C O ( 1900 ) $5171
~

Butte Coalition Mining Co

i
( 1901 $155 m) ( 1906 ) $1 5m
7- ( Iiq 1 9 1 5 ) I
Trenton Mininq & Red Mctal Mining Co $1 2 5 m
Developinmt Co $ 1 m
Inspiration Consolidated
Diamond Coal & Coke Copper Co ( 191 1 ) $1 6m
Co $1 5 m
Parrot Silvei & Copper -
Co $23m
Mountain Tratlincj

j 1912)

I Too& Valley Railway Co Grrenc Cananea Copper Co

Nli,imi Copper Raritan I c w n i t i ~ i 8
l Mcxico j 1906 ) $ 5 0 m
o 1908 $3rn ) Transportation Co
I Raritan Copprr Works j N I )
I Andes Copper Co j 1916 )
~ i r ~ ~ ~ l orrs
tiriq $50m Potrcrillos Chile
I
I
Chile Copprr Co j 1923 ) $1 35m
mtional Smrlting & ANACONDA COPPER
nc) Co ( 1908 ) $1 Om
'

MINING CO ( 1 9 1 0 ) - Chuquicamata Chilr( 51 "0 purchasrd

from Guygenheims $ 7 7 m 98"k
$150 m
control by 1929 )
itrrnatiorial ILead
Refininq Co Silcsia Holding Co j 1926 )
Lead zinc coal in Poland

Anicrican Brass C o
( 1899 )
Detroit Brass & Rolling
Mills Co ( 1927 )

COP Brass Co -Anaconda

Sources: Stock Exchange Year Book (1913-48);W. G . Skinner, Mining M u n u u l (1896-1949); I. F.

Marcosson, Anaconda (New York, 1957); F. E. Richter, 'The Amalgamated Copper Company: A Closed
Episode in Corporation Finance', Qu. .I. Econ., xxx (1915-16), pp. 387-407. Tamarack was absorbed by
Calumet & Hecla in 1917 and Old Dominion was increasingly associated with Phelps Dodge after 1918.
398 C H R I S T O P H E R S C H M I ’r Z

generally occurred through less obvious channels. The London and Paris
Rothschilds, for instance, held a large interest in Rio Tinto and other Iberian
producers from the late 1880s, effectively owned the Boleo mine in Mexico
from 1885, and in 1895 exercised an option to buy 25 per cent of the Anaconda
stock for $7.5 million (although this interest was soon sold).l” A number of
German firms, including Metallgesellschaft , Aron Hirsch und Sohn, and Beer
Sondheimer , also commanded diffuse networks of control through many areax
of the world’s mining and metal-trading businesses before 1914. ’The most
prominent of these, Metallgesellschaft, operated through a number of major
subsidiaries such as the American Metal Co. (1887) and the Australian Metal
Co. (1898).
Whilst subject to variation, the profits of the major copper corporations
were generally large up to 1930. By the end of that year total accumulated
dividends from United States copper companies stood at $2,317 million. 1o
Despite the impressive growth and profitability of big business in the world
copper industry in the 60 years to 1930, it can be argued that that growth
cannot be fully understood simply in terms of attempts to control the market.
It is vital to set against the appearance of market domination the fact that the
leading companies seem to have been increasingly unable to set prices and
control supply for more than a few short-lived periods. Amongst primary
commodity prices, those for copper are particularly unstable and through the
period 1870 to 1939 were becoming more volatile on trend.21The question of
price stability and the nature of the price system itself will be considered
below. Meanwhile, business concentration in the copper industry, if not
following directly from market control, should be approached in the context
of the technological and resource-base complex within which this industry
was set.

I1
The economic exploitation of copper minerals over at least the past two
centuries has followed a broad pattern of mining progressively leaner ores
from increasingly large individual deposits. This has arisen through a combina-
tion of shallow, relatively easily won vein deposits, such as those in Cornwall,
becoming exhausted by the later nineteenth century and the contemporaneous
development of cost-cutting technology in mining, concentrating, and smelt-
ing processes. The decline in average ore grades (Table 3) has been paralleled
by shifts in the major types of ore-body being exploited. In geological terms,
I ” Engineennge MiningJournal (Sept. 1895), p. 294; (Oct. 1895), p. 389; (June 1896), p. 561. The

British and French Rothschilds together held 30.8 per cent of the issued ordinary capital of Rio ‘Tinto in
1905,rising t o 36.2 per cent in 1929; C . Harvey, The Hio Tinro Company, r873-r954 (Penzance, 198 I 1, p.
I 10; B. W. E. Alford and C. E. Harvey, ‘Copper Merger: The Formation of the Rhokana Corporarion,
1930-32’,Business Nisrory Review, I.IV (1980), p. 338.
zll Annual returns of North American mining company dividends, in Eng. 6’ Min. 3. (1908-311.
From the early nineteenth century, the coefficient of variation for the London price of standard grade
copper (electrolytic wirebars from 1915) shows a clear trend of increasing instability; 1840-9 the C. V. was
5.7, 1870-9 it was 1 3 . 3 , 1900-9 17.1, 1930-9 2 2 . 5 , and by the 1960s was 36.6. For the period 1870-99, J .
R . Hanson 11, ‘Export Instability in Historical Perspective: Further Results’,Journal of Economic Hismy,
XL (1980), pp. 17-23, suggests that in a group of I 8 primary commodities only beef and coffee prices were.
overall, more volatile than copper prices.
 BIG BUSINESS AND COPPER, 1870-1930 399
Table 3. Declining Copper Ore Grades, 1800-1930
(per cent copper)
I 800 9.27 average yield English ores
1850 7.84 average yield English ores
1870-85 6.56 average yield English ores
I 886- I 905 2.96 average yield Calumet & Helca ores
I 906 2.50 average yield United States ores
1915 I .66 average yield United States ores
1925 1.54 average yield United States ores
I930 1.43 average yield United States ores
Source: W . Y . Elliort er. al. Internmiond Control in the Non-ferrous Metals (New York, 1937), p. 374.

there are three main forms of copper ore-body: massive sulphide,22 strata-
bound, and porphyry deposits. Massive sulphide deposits, usually found in
veins or infillings in sedimentary and volcanic rocks, typically have a high-
grade metal content (around 4 to 20 per cent copper in the period up to I939),
but with a few exceptions are relatively limited in extent (containing from
several thousand to several million tonnes of ore) and almost always have a
well defined cut-off point where they meet the non ore-bearing, or “country”
rock. Due to their accessibility and ease of working, especially where subject
to secondary enrichment and o ~ i d i z a t i o nvein
, ~ ~ deposits of this type provided
the major source of copper mined until the early twentieth century, for
example from the mines of Cornwall and Devon, and of Butte, Montana.
Strata-bound deposits are less common than massive sulphides but form
generally medium to large bodies (ranging from around a million to 250
million tonnes of ore, commonly averaging 3 to 6 per cent copper, up to
1939). The Kupferscheifer worked in the Mansfield mines of Germany and
the stratiform deposits of the African copperbelt are the best examples of this
type which, like massive sulphides, tend to have a fairly well defined cut-off
against barren country rock. Finally, there are the low-grade “porphyry”
deposits (typically running at about 0.45 to 2.5 per cent copper), which are
commonly very large (from IOO to 2,000 million tonnes of ore in the 1930s).
These huge, low-grade, disseminated orebodies are not usually distinguished
by a sharp cut-off between payable ore and barren rock, but rather large
tracts of ground in which there is a gradation from relatively high-grade
mineralization to material well below the economic definition of payable ore
(in the 1930s a cut-off point of about 0.7 per cent copper). This gradation is
of significance both in respect of theories concerning the relationship between
ore grade and size of orebodies and in the technology required to exploit these
deposits.
In general terms it is apparent that there is a fairly strong negative correlation
between ore grade and size of deposit. Data relating to 87 leading copper
mines/prospects up to 1930-1 have been assembled and the average grade
plotted against total copper content (defined as past production plus, in
the case of mines/prospects in operation 1930-1, projected reserves). 24 This
2 2 Massive, not in the sense of large scale, but in the strict geological sense of discrete mineral

aggregations.
23 Weathering of original (sulphide) ores, by atmospheric action and percolating groundwater, can
concentrate the copper content in an enriched zone, and render them easier to smelt.
24 Regression analysis of the data (where G = average percentage grade and T = copper tonnage in
orebody) yields the following results:
log. T = 3.73937 - 2.8948 log. G r’ = 0.5943
(0,19252) (0,25074)
Full details of the data set may be obtained from the author.
400 CHRISTOPHER SCHMITZ

indicates (Figure 2 ) that certain broad groupings of minedore-bodies were

exploited between the early nineteenth century and the 1930s. First, the
Cornwall and Devon group consisted of relatively small but high grade mines,
working principally between about I 800 and 1870, within the overall limits
of about 4.5 to 1 2 per cent copper in ore-bodies containing up to 50 thousand
tonnes of copper. The next group is a high-grade Australian group, including
mines in South Australia and Queensland, worked mainly between the 1840s
and 1870s, at about 17 to 22 per cent copper and containing 13,000 to 52,000
tonnes of copper. A scattering of points with a trend towards lower grades
and higher volume deposits then represents mines working into the early
twentieth century. Two major groupings complete the picture; the stratiforrn
African copperbelt deposits, being opened up between 1907 and 1930, with
grades of from 3 . 3 to 7.5 per cent and reserves of around 2 - 3 to 14 million
tonnes of copper, and the important porphyry group, represented by 12 mines
in 1931 (nine in the United States and three in Chile). These ranged in grade
from 0.95 per cent (Miami, Arizona) to 2 . 1 8 per cent (El Teniente, Chile) and
in terms of deposit size at 1931,from 450 thousand tonnes (Copper Queen,
Arizona) to 22.5 million tonnes (Chuquicamata, Chile). Also plotted is a
pyritic sub-group, represented by large, low-grade deposits in Iberia and at
Mount Lye11 in Tasmania, which are not porphyries but which contained on
average less than three per cent copper.
Although there are localized exceptions to this model, such as the copper
district of northern Michigan, where the larger deposits tended to exhibit
higher grades,25in general, as mining companies have moved towards exploit-
ing lower grade ores (as they increasingly must), then they have encountered
disproportionately larger scale ore-bodies. This is particularly true of the
porphyry coppers where a geological proposition known as Lasky’s Law
suggests that where there is a gradation from relatively rich to relatively low
grade material in a deposit, the tonnage of ore increases geometrically as grade
decreases arithmetically.26 This is illustrated (Figure 2) by the example of
Bingham mine in Utah, which moves through time (1899 to 1970) towards a
lower grade and higher tonnage. Amongst non-porphyries, where there is a
sharper cut-off from ore to barren rock, the relationship appears to be less
clear although in general it would appear to hold true, for example with the
Anaconda mine at Butte from I907 to 1964.

111
l‘he implications of this relationship during the last century have been
profound. Not only has more of the world’s supply of new copper had to
come from lower grade and larger bodies of ore, but also mining companies

l S W. S . White, ‘The Native-Copper Deposits of Northern Michigan’, in J . D. Ridge, ed. O w I)t.postrs

in rhe linrrvd Slules, 19-73-1967 (New York, 1968), I , pp. 306-7.
S. G . Lasky, ‘How Tonnage and Grade Relations Help Predict Ore Reserves’, Eng. &‘ M v . .7. (April
IgSo), pp. 81-5.
 BIG BUSINESS AND COPPER, 1870-1930
Figure 2. Major Copper Deposiu, I 800-193 I : Grade and Tonnage
South Crofty, Burra

K apurida

HIGH GRADE AUSTRALIAN

GROUP ~ 1 8 4 2 - 8 0
Peak Downs

Botallack
& DEVON
.. . ..CORNWALL
GROUP TO ~ 1 8 7 0
*

... .. .. ... . . . .
.... ... ....*.. %.+,. . ..
. ,
* Devon Great
. ... Consois
’)c
(‘Try
M t Elliott,
Wnllaroo XI
Moonta
Prx t i sir ti t h a t Roios’
COPPERBELT
GROUP 1930
Bcsshi.

An IcIope
San Domingo Mallsfelti
.Anaconda ( 1907 )
Great Collar‘
C;llurn?t 8 H ~ c l ; l Anaconda ( - 1 964 )

I-lidtlen Creck,
5

Bingham ( 1970 )

I I I I 1 I
3000 10000 100 000 1 imillion 10 million 100 million

SIZE OF DEPOSIT : tonnes of copper contained

( both log. scales )
402 CHRISTOPHER SCHMITZ

have had to finance larger-scale and more capital-intensive projects, each of

which has tended to yield its return over longer periods of time, thus further
increasing the true cost of finance. This trend was clearly emerging even in
the second half of the nineteenth century, as larger-scale ore-bodies were
encountered in the mines of the western United States and the pyritic deposits
of Iberia and Tasmania. However, the trend was sharply accelerated by the
growing prominence of the huge porphyry deposits, opened up after 1904 (by
1928 these contributed around 40 per cent of annual world mine production”),
and by the development of the Northern Rhodesian stratiform deposits in the
late 1920s.
As early as the 1870s, the opening up of a larger ore-bodies required a new
scale of finance. In Spain, the Rio Tinto mines with their estimated 200 million
tonnes of ore were purchased in 1873 by a consortium of British and German
investors for C3.85 million, with further initial investment required (for
example on a railway) to the extent of around 22 million. To cover this outlay
the company had to commence working on a large scale and by 1884 was the
leading copper producer in the world, processing over a million tonnes of ore
*”
a year. Capital investment in Spain was, however, limited (compared with
the United States) by the generally labour-intensive nature of the operations.
In Tasmania in the early 1890s, the Mount Lyell Co. was opening up a huge
pyritic orebody, which prompted the normally flamboyant chairman, Bowes
Kelly, to counsel the 1894 A.G.M. that while production of rich silver ores
had produced high returns “it is necessary that shareholders should always
remember that the enduring and lasting value of the mine, from which we
expect regular dividends in the future to come, exists in the enormous mass
of low grade ore”.29 A similar sentiment, that the working of large-scale ore-
bodies must go hand in hand with long-term and large-scale capitalization,
was expressed in 1895 by Marcus Daly, chairman of the Anaconda Mining
Co, on the occasion of increasing its capital from $ 1 2 . 5 million to $30 million: ’(’

The policy of the Company from the beginning has been not so much to realize
immediate returns as it has been to try to lay the foundation for a long life of activity
and usefulness. For this purpose, the profits of the Company have been expended
in the enlargement and betterment of the plant until today, in its remodelled,
reconstructed, and completed state, it stands without a peer among the copper
producers of the world. It can be truthfully said that in all the history of copper
mining, no enterprise on so large a scale was ever before projected.
When Daly had first become interested in Anaconda in 1880, he quickly
appreciated the need for heavy capital investment, in order to compete with
the Michigan mines which were nearer the markets of the eastern seaboard
and which dominated the United States copper market. Only a large through-
put would ensure sufficiently low unit production costs and to achieve this he
had to convince his backers, J. B. A. Haggin, G. Hearst and L. Tevis, to
provide an initial personal investment of $4 million. At first “the magnitude

27 A. 9. Parsons, The Porphyty Coppers (New York, 1933), p. 6 .

Harvey, Rio T h o , pp. 18-35; S. G. Checkland, The Mines of Tharsis (1967), pp. I 13-5.
2 y University of Melbourne Archives, Mount Lyell Mining & Railway Co. Papers, 21511, minutes of

A.G.M. 29 Nov. 1894.

”’ I. F. Marcosson, Anaconda (New York, 1957), pp. 88-9.
 BIG BUSINESS AND COPPER, 1870-1930 403
of Daly's plan took Hearst's breath away",31 but within a decade the scale
was justified as Anaconda took the leadership of the domestic industry from
Calumet & Hecla.
The background to rising capital costs in mining in general, lay with the
continual need for technological change. As mines worked deeper and tackled
larger and lower-grade ore deposits, the traditional skills of miners had to be
supplemented by rock-drills, explosives, ventilation, and improved under-
ground haulage, whilst at the surface better milling techniques, capable of
handling larger volumes of ore, had to be i m ~ l e m e n t e dIn
. ~addition,
~ as the
world's mining frontier passed to new regions in the late nineteenth century,
mines came to be established in increasingly remote areas, with high costs of
labour, power, and materials. 'The cost of shipping the product to an increas-
ingly distant market, as well as necessitating higher investment on transport
infrastructure, also encouraged more mines to integrate vertically into smelting
capacity, since this effectively reduced the cost of shipping each unit of metal.
With the development of the porphyry copper deposits after 1904, the trend
towards higher levels of capital investment and the impetus to large-scale
business activity was accelerated, not only because of the huge initial in-
vestments required but also the lengthened time scale over which those
investments would be realized. In addition, longer lead times were often

Table 4. Porphyry and Non-porphyry Copper Producers, 1912-16

Ore Reserves, Ore grade, Ore costs per Years' life
million ionnes per cent ion ($)
I . Nun-porph-vnes
Cape Copper (S)13 0.162 4.6 2
Namaqua Copper (S)'" 0.051 7. I 4.47 3
Hampden-Cloncurry (A)'" 0.299 6.9 21.54 3
Great Cobar ( A ) i 2 2.74 2.5 8
Mount Lyell (A)'.' 3.12 2.4 7.00 10
Mount Morgan (A)" 3.13 4.2 11.94 I0
Mount Elliott (A)" 0,455 12.3 27.70 I2
2. Porph-yries
Nevada Cons. tU)15 50.5 I .48 I67 17
Miami (U)14 35.1 0.95 I .88 32
Ray (U)13 78.4 I .65 2-38 33
Utah (U)13 268.0 I .07 I .60 35
Chino (U)" 90.0 I .40 I44 38
El Teniente (C)'" 113.7 2.50 78
Chuquicamata (C)Ih 700.0 2.12 2.11 87
Inspiration (U)Is 97.I I .40 I .98 125
Notes: Superscript = year data refer to. Years' life = current rate of output/ore reserves. Differences in
computing ore costs in original sources suggest caution in their interpretation.
Locatims: A, Australia; C, Chile; S, South Africa; U, United States.
Sources: Mineral Industry (1911-18); R. Allen, Copper Ores (1923); A. B. Parsons, The Porphyry Coppers
(New York, 1933);J . E. Carne, The Copper-mining Indusny. . . in New Souih Wales (Sydney, 2nd. ed.
1go8);Queensland Mines Dept. Annual Report (Brisbane, 1912-17);Mount Lyell Mining & Railway Co.
papers (University of Melbourne Archives).

3 l Toole, 'Anaconda Copper', p. 315; M . P. Malone, The Baitle f i x Buite: Mining and Polilacs on the
Northern Frontier, 1864-1906 (Seattle, 1981), pp. 22-53.
'2 For detailed discussion of improvements in mining, milling, and smelting techniques see, A. B.
Parsons, ed. Seventy-five Years of Progress in the Mineral Industry, r87r-1946 (New York, 1947), pp. 1-161,
199-222;H. Barger and S. H. Schurr, The Mintng Industries, 1899-19.39:Ouipui, Employment and Produciiv-
I@ (New York, 1944), pp. 105-41, 222-39.
404 CHRISTOPHER SCHMITZ

necessary before projects would start making a return. At Chuquicamata, the

Guggenheims spent a reported $50 million between 1912and 1922, opening
up the world’s largest copper deposit.13 A comparison of two groups of
porphyry and non-porphyry mines around 1911-16 (Table 4) suggests the
nature of the difference between their expected life spans, as well as highlight-
ing some differences in their cost structures.
Lower costs in exploiting porphyries resulted from the economies of scale
arising through developments in both mining and milling techniques. The
majority of porphyries were worked as open-cuts, borrowing blasting and
steam-shovel stripping techniques from Michigan iron-ore mining. Where
underground mining of porphyries were made necessary by the nature of the
orebody, such as at Miami and El Teniente, block caving techniques were
employed. The net effect of both these was to replace selective by non-
selective methods of mining, in which all material in the mineralized area was
removed, waste as well as metallic ore. In the vein mines of Cornwall,
Australia, and the United States the skilled “hard-rock’’ miner had a central
role in the ore-winning process and much of the work-culture of mining
revolved around his skills in following a tortuous and often deceptive lode.
Excavator and truck drivers displaced the skilled miner and through thc
I 920s further economies were achieved through using increasingly large earth
movers. As early as 1915 some marked differences existed in the costs of
working copper ores by non-selective (open-cut and caving) methods, com-
pared with traditional stoping methods (Table 5 ) .
Table 5. Estimated Mining Costs and Labour Productivity for
Selective and Nonselective Mining Methods, 191s
Average cost per Ton3 ore per
ton ore ($) man-sht/r
Open-cut mines 0.31
Caving 0.52
Open slopes 1.25
Shrinkage stopes 2.68
Square-set timbering 4.83
Source (: W Wright, Mining Methods and Costs at Metal Mines in the United States, United S u r e \
Bureau of Mines Inforination Circular 6503 (Washington, 1931), cited by T J Hoover, The ktonomic3 O /
Mining Non-ferrous Metals \Stanford, 19331, pp I 38-9

Complementing Ihe move to non-selective mining was a revolution in

milling techniques principally brought about by the application of flotation
to copper ores. This process was first tried with these ores at Butte in 1912
and by 1915had been introduced at Inspiration and El Teniente. Its success
there soon led to its being generally adopted by porphyry producers and
moved one mining engineer to comment in 1932 that “the oil flotation
process . . . has meant more to the copper industry, in so far as increased
recoveries and reduced costs are concerned, than any other single factor in
the past twenty years”.34 Downstream in the production process, advances in
smelting and refining moved this part of the industry nearer continuous

” Parsons, Porphyry Coppers, p. 93; Elliot et. al. Inrernatiaal Control, p. 404.
34 P.Yeatman, Choice ofMethods in Mining undMetullurgy (New York, 1gj2),cited in D. W . Fuerstenau,
ed. Froth Flotution: Fiftieth Anniversay Volume (New York, 1962), p. 2 1 .
 BIG BUSINESS AND COPPER, 1870-1930 405
operation (for instance by the growing practice after 1890 of leaving the semi-
finished copper matte in the furnace while it was recharged), at the same
time reducing costs by larger scale working? The net effect of all these
technological changes, and one which reflected the impetus to big business in
the United States industry, was its capital-output ratio, which increased
markedly on trend from 0.76:1 in 1870 to 2.46:1 in 1919 (in 1929 prices).3b
The opportunity cost of not having adopted these technologies is suggested
by one calculation that all the copper produced in the United States in 1929-
30, by the methods known in 1912-15,would have cost an average 12.7 cents
a pound rather than the actual cost of 6.06 cents.37
The opening up of porphyry and large stratiform deposits also increased
the impetus to longer term planning and larger scale capitalization in the
industry, inasmuch as they could be fairly accurately delineated with a
minimum of exploration activity. With just a few exploratory drill holes,
deposits such as Inspiration, Ray, or Roan Antelope, could be fully assessed
in advance of any mining activity. This is in sharp contrast to vein mining
where great uncertainty attached to any forward planning. Indeed, it could
be argued that “permanent” mining corporations, that have become so promi-
nent in the world mineral industry since the end of the nineteenth century,
have largely grown out of particular mining areas where a high degree of
forward planning was possible. The Rand banket reef, the massive lodes at
Anaconda, or the low-grade ores of Spain and Chile, provided a more stable
long-term environment for their respective companies and led to the steady
growth of houses like Consolidated Goldfields, Rio Tinto Zinc, Anaconda,
and Kennecott. For the first time, capitalist enterprise in metal mining could
compete with manufacturing industry in terms of financial planning and long-
term growth. The longer-term strategy of such mining corporations would
also be encouraged, according to Chandler, by the formation of a managerial
hierarchy that itself became “a source of permanence, power, and continued
growth”.38 In this way, firms such as Anaconda were induced to maintain
continuous exploration programmes, to ensure future mining projects of
sufficient scale to match their asset growth.

IV
Whilst economies of scale have propelled successful copper companies
towards a larger scale of operations, they have also been prompted towards
vertical integration, particularly downstream into refining and then into
fabricating, by the desire to instill a degree of control into unstable markets
for their products. As Chandler and Williamson have indicated, the internaliz-
ation of intermediate product exchange within one firm can provide great

Is Between 1890 and 1906 the smelting furnaces at Anaconda were expanded from 50 feet in length
(capacity 122 tons/24 hrs) to 116 feet (270 tons/q hrs), whilst fueliore ratios improved from 1:2.75 to
1:4.1y;W. H . Dennis, A Hundred Years of Merallurgy [1963), p. 135.
3 6 I. Borenstein, Capiral and Outpur Trends in Mining Indusrnes, 1870-1948 (New York, 1954), p. 36.
3 7 Parsons, I’oorphyy Coppers, pp. 13-16; in 1929, equivalent to a gross saving of $132 million on U . S .

domestic copper production.

IR Chandler, Visible Hand, p. 8 .
406 C H R I S T 0I’ H E R S C H M I T Z

advantages over the use of competitive market modes of contracting. Contrac-

tual uncertainties are avoided and transactions costs minimized, and in the
words of Williamson, “the parties to an internal exchange are less able to
appropriate subgroup gains, at the expense of the overall organization”. v’
The move into fabrication owes much to the greater value-added that accrues
there compared with the earlier stages of production and with the lesser degree
of volatility in prices for semi-manufactured products. For example, in thc
period 1912-13, the mean monthly New York price for ingot electrolytic
copper was 15.88 cents a pound compared with a price of 21.88 cents for sheet
copper (the latter thus enjoying a premium of 38 per cent over the raw metal).
At the same time, the price of electrolytic copper fluctuated more widely than
for sheet.-“’ These facts no doubt helped prompt Anaconda to move into
fabrication in 1922 with the acquisition of the American Brass Co, the leading
United States fabricator. On the occasion of the merger, the Anaconda
chairman J. D. Ryan c~mrnented:~’
’The time has come when we cannot compete in the industry if we control only one
stage of the business. Anaconda is not now able to operate its mines at a steady and
economical rate. We have had high prices during periods of scarcity and low prices
during periods of depression. . . . We believe that great benefits will arise by
reason of the proposed merger. The raw material supply will be assured at steady
prices . . . . In this way, from the mine to consumer, there can be one just and fair
profit, and the industry will be stabilized.
One consequence of moving into refining was an immense increase in capital
requirements, not only to equip the plants but for financing the stock of‘
copper necessarily tied up in the process. Because of their high set-up and
running costs, only ten electrolytic refineries were built in the United States
up to 1 9 1 1 . One
~ ~ report in 1908 suggested that the value of copper tied up
in the electrolytic vats (representing a capacity of 400 thousand tonnes per
annum) was around 50 thousand tonnes, valued at about $14.5 million.J3
Only firms the size of Anaconda or ASARCO could afford to finance this
order of fixed capital.
The impression therefore emerges that the growth of big business in the
copper industry owes much to a combination of geological and technological
factors, in conjuction with market pressures, all of which have conspired to
impel large mining and smelting companies to become even larger. This was
in order to be able to finance, in a stable planning environment, the scale of
operations necessary to sustain the growth in the world’s demand for this raw
material.

V
In recent years, the work of Chandler and Williamson has transformed the
approach to the study of big business and the relationships between markets
”1 Ibid. pp. 6-7; Williamson, Markets and Hierarchies, p. 29.
40 The coefficients of variation of monthly prices 1912-13 for electrolytic and sheet copper werc.
respectively, 7.92 and 5.59.
4 1 Marcosson, Anaconda, pp. 175-6.

12 T. R . Navin, Copper Mining and Managemenr (Tucson, 1978), pp. 65-6.

4 1 Ausrralian Mining Srandard, 2 3 Sept. I@, pp. 357-8.
 BIG BUSINESS AND COPPER, 1870-1930 407
and firms.44 In particular, the concept of transactions costs has allowed a
fundamental re-evaluation of the process of vertical integration. Assuming
that the market mechanism of neo-classical economics is only used by firms
at a cost (in essence the transactional costs of gathering market information,
of advertising and contracting), the pressure will be to internalize these
functions within the firm, where it is economical to do This in turn has
only been permitted by, and has encouraged, the development of new forms
of managerial organization as detailed by Chandler.46
The transactions costs incurred by the copper industry in using the market
mechanism have always been high. In common with other primary commodity
markets, that for copper is subject to a high degree of instability, due in large
measure to short-run inelasticities of demand and supply.47 This resulted in
pressure towards oligopolistic business forms and market controls even before
1870, as copper producers sought to reduce the uncertainties and costs attend-
ant on contracting in ever fluctuating market condition^.^^ However, market
control before I 870 rarely, if ever, entailed attempts at vertical integration.
Not only, as Chandler has pointed out, did the slow growth of managerial
divisionalization outside railway enterprises hinder this development before
the 1870s, but also, it is argued here, in the case of the copper industry,
vertical integration was promoted strongly by the move towards larger scale
ore deposits, often increasingly remote from major markets. Once integration
from mining to smelting was effected by such firms as Anaconda, then the
transactions costs motive to integrate into refining and fabrication could
assume larger proportions.
If big business in the copper industry has arisen mainly through the trend
towards larger ore deposits, coupled with the pressures of an inherently
unstable market, there still remains the question of whether these large
corporations have had any significant effect in reducing price competition.
There is a well established body of literature which credits such companies
as Anaconda and Kennecott with having exercised some considerable degree
of oligopoly power through the present century.49It can be argued, however,
that there have been effective limits to such power. These arise from a
combination of the short-run inelasticity of demand and supply (and hence
the volatility of prices), the relatively weak barriers to industry entry, and the

44 See, for example, S. J. Nicholas., ‘Agency Contracts, Institutional Modes, and the Transition to

Foreign Direct Investment by British Multinationals before 1939’,J . Econ. Hisr. XLIII (1983), pp. 675-
86; Y. Suzuki, ‘The Formation of Management Structure in Japanese Industrials, 1920-40’, Business
History, XXVII (1985), pp. 259-82; D. C . North, ‘Transaction Costs in History’, Journal of European
Econumrc History, 14 (1985), pp. 557-76.
4 5 Williamson, Markets and Hierarchies, pp. 29-51
46 Chandler, Visible Hand, pp. 1-6, 9-10, 240 ff.
4 7 R. F. Mikesell, The World Copper Industy: Structure and Economic Analyis (Baltimore, 1979), pp.

154-7.
R . R . Toomey, Vivian and Sons, 1809-1924: A Study of the Firm in rhe Copper and Related Indusmes
(1985), pp. 312-46. An alternative response from the 1870s was the increasing use of hedging contracts on
the London Metal Exchange, to reduce contractual uncertainties within a competitive market context;
Economist Intelligence Unit, The London Metal Exchange (1958), pp. 21-2, 26-48, 65-9.
j9 D. Mezger, C opper in the World Economy (19801, p. 4, argues “the price of copper on the world
market cannot be derived from usual notions of the relationship of supply and demand”, while up to 1934
another source contends that “the years I923 to 1926 make up the only period which we can class as
‘normal’ (competitive) in the history of copper since 1913”; Elliott et al. Intentarional Connol, p. 427.
408 CHRISTOPHER SCHMITZ

high propensity to substitution in the medium term, and the international

nature of the market for copper coupled with the dual pricing system that
prevails.
‘There is a considerable weight of evidence in recent studies that in anything
but the short term, competitive price models provide the best explanation of
the functioning of the world copper market.s0 The dual pricing system itself
assumes great significance in these models. That is, whilst the majority of
copper traded since the late nineteenth century has been sold under contract
by the major producers (particularly in the United States), there remains a
vigorous and influential free market, primarily centred on the London Metal
Exchange. Since 1877 the LME has offered a forum for trading in physical
copper (and more importantly in copper futures), which enables daily prices
to be generated which are widely held to reflect the current balance of supply
and demand in the world market, even though it only handles a fraction of
world supply.s1 Studies such as those of Felgran show that not only have
producer prices tended to follow those of the free market but that the former
have not shown any particular tendency towards greater stability, except
where they have been held considerably below market prices. s 2
In past periods of high prices brought about through market manipulation
by leading producer groups, most notably the Secretan corner of 1887-9 and
the Amalgamated pool of 1899-1900, the evidence suggests that alternative
sources of supply from scrap copper and small, independent mines soon helped
undermine their control. During 1929-30, when the American producers’
combine, Copper Exporters’ Inc. tried to hold the price at nearly 18 cents a
pound in the face of world depression, the main result appears to have been
the rapid development of the Northern Rhodesian copperbelt. S T Also, by the
I ~ ~ O aluminium
S , was becoming a viable substitute for copper in many areas
of consumption. Despite the high costs of establishing large-scale mining and
smelting/refining capacity, it is clear that the barriers to entry in the industry
are weak. Even in the short run there is evidence that high prices will stimulate
large numbers of small mines to commence production (reinforcing flows of
scrap on to the market).S4 In the longer term, even high-cost operations like
those of the Rhodesian copperbelt mines can be stimulated to undertake
development.
As far as predaiory price-cutting aimed at restricting competition is con-
cerned, there is little evidence that this was practised to any significant degree
before the I ~ ~ O Sunless
, one excepts the vicious price war of the mid-1880s
between Calumet & Hecla and Anaconda, which had the more specific aim of
5 o 13. K. Stewardson, ‘The Nature of Competition in the World Market for Refined Copper’, Eronomri

Record, 46 (197o), pp. 169-81; S. D. Felgran, ‘Producer Prices Versus Market Prices in the World
Copper Industry’ (unpublished Ph.D. thesis, Yale University, 1982), pp. 35-6, 58-61; E. C . Hwa, ‘Price
Determination in Several International Primary Commodity Markets: A Structural Analysis’, Inrernationul
hloneraty Fund Staff Papers, XXVI (1979), pp. 157-88.
s t Mikesell, World Copper Industry, pp. 81-93; R . Gibson-Jarvie, The London Meral Exchange (1976).
s 2 Felgran, thesis, pp. 35-6, 58-61.
T 1 Elliott et al. International Conrrol, p. 67.

5 4 C:. J . Schmitz, ‘Small is Sometimes Beautiful: Advantages of the Micro-project in the Australian
Copper Industry, 1953-81’, O’arnbome School of MinesJoumaf, 83 (1983), pp. 29-33, The growing role oC
scrap in the U.S. market is clear; in 1910-24 this was 22.8 per cent of consumption, rising to 3 3 . 3 per cent
1925-39; C. J . Schmitz, World Non-ferrous Metal and Prices, 1700-1976 (1979), p. 34.
 BIG BUSINESS AND COPPER, 1870-1930 409
bringing down the new Butte producer. Indeed, during the 1920s the eventu-
ally disastrous build-up of excess capacity in the world copper industry was
largely brought about because the leading producers failed to restrict the entry
of new capacity by price cutting. The scope that large mining corporations
has for cutting prices is also severely limited due to their continually moving
towards larger-scale and more capital-intensive operations. With the marked
trend to higher volume, lower grade ore-bodies and by integration into
smelting and refining, the capital charge to each unit of production is increased,
and with less elastic capital costs, supply becomes less elastic.5s In certain
circumstances such producers may even be tempted to increase output against
falling prices, to maintain revenue, suggesting the possibility of a backward-
sloping supply curve.
In the late 1950s Orris Herfindahl undertook a study of past price and
market behaviour in the copper industry, in order to answer questions about
the long-term cost and depletion of non-renewable resources. He concluded
that, with a few exceptions, such was the long-run competitive nature of the
world (and United States) copper market, that prices could be taken as a
proxy for costs. He argued that “since the turn of the century, there have
been no periods of collusion that produced price increases as large as those
brought about by Secretan and Amalgamated”.s6 In fact, since 1913 the
copper industry has been dominated by a secular downturn in deflated prices.
Table 6. London Metal Exchange Copper Prices, 1870-1939
Standard grades, i per metric tonne, in current and at 1913 prices
current pnres 191.3 pnces
78.06 67.88
60.25 66.21
53.42 68.49
70% 82.40
66.36 68.41
115.60 59.28
73.40 43.69
43.77 42.09
Source: C. J. Schmitz, World Non-ferrous Metul Production and Pnces, 1700-I976 (r979), pp. 270-2.

A comparison of current and deflated prices (Table 6) suggests that, as far as

copper is concerned, the supposed price depression of the last quarter of the
nineteenth century is largely a myth, but that a pronounced price fall, in real
terms, began during the First World War and continued up to the Second. It
is against this background that attempts to control the market by successive
American-led producers’ groups after 1919must be measured.
Significantly, comparison between the deflated prices which successive
market corners achieved shows a similar steady downward trend. In terms of
1913prices, the Secretan corner topped out at around 593-67 a tonne (on the
London market), while the Amalgamated pool reached 586.75, and the 1929
price plateau of the Copper Exporters’ Inc. only represented the equivalent
of &61.80.~’Thus were all attempts at market control and price fixing trapped
55 Elliott et al. International Control, pp. 430-2.
56 Herfindahl, Copper Costs, p . 154.
57 This despite Copper Exporters’ Inc. controlling some 63-5 per cent of world output 1926-9; ibid. p .
124.
410 CHRISTOPHER SCHMITZ

within the long-term dynamic of technological and organizational change

which inexorably reduced costs and prices. Increasing economies of scale in
conjunction with the transactional economies enjoyed by vertically integrated
firms, as emphasized by the Chandler and Willamson models, resulted in
declining real costs. These were, in turn, largely translated into declining real
prices, with little evidence of sustained super-normal profits being made by
the leading producers. In all, Herfindahl concluded that “there is a body of
opinion that tends to credit the copper industry with a degree of monopoly
power that it does not have”.5RThe continued instability of copper markets
from I 870 to 1930and beyond was a t one and the same time a sign that market
control was not readily attainable and signalled a strong incentive to further
vertical integration for producers.
University of St Andrews
h i d . p. 10