At the turn of the century, an experimental plant in the little town of Spray, N.C., turned out a special alloy of chromium and iron that, when mixed with steel, gave U.S. troops in the Spanish-American war a powerful new weapon -- artillery shells that could pierce enemy armor. This was the beginning of the ferroalloy industry in America, which in every war since has contributed to the supply of armaments.

The industry now says it is dying because of foreign competition. It has asked the White House for special help in the form of tariffs on the grounds of its critical importance to national security.

The case is being watched closely by other businesses that feel pushed to the wall by low-priced imports.

There has been no word yet from the White House, but the petition by the Ferroalloys Association on behalf of the 16 American companies still in business places in conflict two tenets of the Reagan administration: fostering free trade and maintenance of a strong national defense.

Among those reportedly keeping an eye on how the White House reacts is the semiconductor industry, which has begun suffering from Japanese-made imports.

Ferroalloys -- largely mixtures of chromium, manganese or silicon with iron -- are needed for the production of all steel. They are essential for converting steel into stainless steel and other specialty-steel products used for such defense-related purposes as jet engines, naval vessels and nuclear reactors. They also are used in such common household products as stainless-steel knives and forks.

The government has given the industry some help in the past to cushion the blow from imports, which now take more than half of the domestic market. For the past four years, it set what amounted to a minimum price of 38 cents a pound for all ferrochrome imported into the country to give the domestic industry time to get back on its feet. That relief expired last week.

The industry says its survival remains under the threat of imports -- largely from South Africa, France and Brazil--that have cut domestic production to less than 20 percent of capacity. Furthermore, even at full capacity, the domestic industry can meet less than half the nation's needs and, complicating the national defense picture, many of the domestic companies are foreign-owned.

"Without effective import relief, the industry will shrink considerably in size in the near future and will be unable to respond to any future emergency," said George A. Watson, president of the Ferroalloys Association. "A shortfall in the supply of ferroalloys to our basic industries during an emergency would cripple our defense capability and bring our industrial complex to our knees."

With the exception of silicon, however, all the ores needed to make ferroalloys must be imported, forcing the government to operate a large, expensive stockpiling program for national emergencies.

In contrast, many of the countries that export ferroalloys to the United States possess large natural stocks of those ores, which they convert to ferroalloys close to the mines. Roughly, it takes slightly more than two pounds of ore to make one pound of a ferroalloy.

Foreign suppliers maintain that they can undersell American producers because it costs them less to ship one pound of a ferroalloy than it costs companies here to import the two-plus pounds of ore needed to make the ferroalloy. Watson, however, contends that shipping charges are greater on the ferroalloys than the ore because they are more difficult to handle.

He believes that the real problem is "unfair economic benefits" to foreign competitors in the form of government subsidies, pricing aimed at grabbing a share of the market rather than making an immediate profit, and the dumping of excess production at below-market prices.