The Strategic Reserve Problem

Background:

Cobalt, which is not produced in the U.S., is essential to a number of industries. (Defense accounted for 17% of the cobalt production in 1979.) Most cobalt comes from central Africa, a politically unstable region. The Strategic and Critical Materials Stockpiling Act of 1946 requires a cobalt reserve that will carry the U.S. through a three-year war. The government built up a cobalt stockpile in the 1950s, sold most of it in the early 1970s, and then decided to build it up again in the late 1970s, with a stockpile goal of 85.4 million pounds. About half of this stockpile been acquired by 1982.