INDUSTRY & BUSINESS Capital Spending
Turning Point?
N e w Plant a n d Equipment, Millions o f Dollars
500 O r i g i n a l estimate
A c t u a l or r e v i s e d e s t i m a t e
400
300
200
100
4th Qtr
1st Qtr.
3rd Qtr.
2nd Qtr.
1 9 5 7 Source: Department o f C o m m e r c e ; Securities a n d Exchange Commission
4th Qtr.
1958
seems to have been hit in the first quarter—when sales, earnings, and output also hit recession lows. Earlier estiEnd of slump in spending on plant a n d equipment mates of a continued decline now seem to have been t o o pessimistic. The outadds to evidence that recession has passed bottom look now is for a slow but steady pick-up. . M o w ECONOMIC: indicators are just sonal adjustments, for the past spring What lies behind the change in about unanimous in pointing to an end and summer months. trend? Ortainly the improvement in of business recession. The clincher apr Outlays Firmer. The pattern in sales and earnings since last spring has peared last week in latest government the process industries pretty well paral- bolstered chemical firms' confidence. estimates indicating a rise in spending lels that of business as a whole; for in- Over-capacity, which had worried many on capital goods for the rest of the year. stance, chemical producers (shown in executives during the worst of the A boom in spending on new plant chart) now peg their third quarter out- slump, now setnns less of a problem. and equipment was one of the major lays at $362 million, slightly more than Replacement needs are another factor driving forces behind the over-all busi- they had previously expected to spend that has kept spending at a relatively ness expansion that peaked out last during the period. If current estimates fast pace. Chemical firms this year will year. And the sharp cutback in expen- prove correct, the current three-month be writing off about $1 billion worth of ditures that got under way late in 1957 period will be» the best of the year. capital «{nods in their depreciation was an important cause ol business reFourth quarter spending also will be charges. And it's a good bet that decession. Now the latest government ahead of previous estimates, and lastpreciation charges do not adequately survey shows businessmen no longer half total of $708 million will show a cover tlu* amount of plant and equipplan to slash their capital outlays fur- gain of $16 million over the first half. ment actually worn out or outmoded ther. In fact, the bottom may already For the year as a whole, says S E C - each year. On top of this is the presbe past. In I957's final quarter, acsure that technological progress adds to Commerce. outlays will hit $1.4 billion cording to Securities and Exchange right on the nose. This is 19'r behind capital equipment requirements. Even Commission-Department of Commerce the all-time high set last year—and also though present capacity is not fully estimates, spending will be at a rate of utilized, development of new productsslightly below 1956 levels. But in com$31 billion a year, a moderate gain from parison with most years of the, past dec- poly propylene, synthetic fibers, highthe $30.3 billion annual rate, after sea- ade, it is relatively high. The bottom energy fuels among them—calls for a
Capital Outlays Level Out
SEPT.
15.
1958 C & E N
31
I N D U S T R Y & BUSINESS
steady investment in new plants and equipment. Other segments of the process indus tries also are mapping higher spending over the rest of the year. Manufac turers of petroleum and coal products expect to boost second-half spending to $1.45 billion, compared with $1.22 bil lion in the first six months of the >-c\u\ Paper producers will boost spending by $28 million to $315 million in the sec ond half. The rubber industry plans to spend $69 million on expansion iifter mid-year, also a slight gain from 15^58's first half. For manufacturing industries as a group, the second half estimated total of $6.2 billion will show a better than $300 million gain over the previ ous six months. • How Good Are the Totals? Λ note of caution creeps into current estimates, nevertheless. Government experts point out that their previous surveys have consistently overstated actual out lays in looking ahead. Last winter, for example, first half spending by cliemical firms was pegged at $843 million; actual outlays missed that marlv by about 1 8 ' ' . As the business slump deepened, companies cut back: or stretched out their spending plans. So the big question now is whether current estimates of slight improvement will also bo wide of the mark. Unless business shows a definite pick-up, the slight gains now expected might easily be wiped out before the onslaught of economy drives. On the other hand, current indica tions of a rise in spending certainly- sug gest that businessmen are much more confident that the worst is over and that now is the time to redefine long-range expansion plans. And with construc tion costs still trending upward, many companies feel that at no time i n the future will it be cheaper to build new plants or modernize current facilities.
Oxide Producers Meet Ethylene oxide producers from four countries e x c h a n g e information af Scientific D e sign meeting 1 OP-LEVEL production men from two
U. S. firms and three foreign countries got together in northern New Jersey early this month. Object: a two-day, closed-door international confab on ethylene oxide. Sponsor of the confer ence was Scientific Design. Partici pants came from seven firms who license SD's ethylene oxide process, in cluding companies in France, Germany, and Japan, as well as General Aniline & Film and Jefferson Chemical. This month's conference is the brainchild of Scientific Design's execu tive vice president Ralph Landau. And it's an outgrowth of SD's philosophy that any of its licensees, if they* are willing to cooperate o n a reciprocal basis, should have access to all newprocess information developed not only by SD engineers but also by other licensees. In the past. SD acted as a clearing house for engineering data by distributing reports; but Landau de cided that getting producers together for a general bull session might prove much more effective. The big question: Would enough people show up and contribute to make the meeting worthwhile? Parti cipation was voluntary, open only to licensees and at their own expenseGeneral Aniline offered to serve as host at its new Linden. N. J., ethylene oxide—ethylene glycol plant, the most recent SD process unit to go on stream. About 35 people showed up for the conference, which Landau believes is the first of its type ever sponsored by an engineering firm. A new cloud has shown up o n the Conferees heard eight technical pa horizon, too. Borrowing costs have pers—six b y SD staff members, two by soared recently. Interest ratt's on representatives of the French firm. bonds are now higher than at any time Xaphtachimie—on catalysts, plant de since late last year. And with a num sign, and operating techniques. They ber of large bond issues slated for sale also had time for an informal discus this fall, the cost of new capital prob sion to exchange operating data. And ably will rise further. This could put they spent one afternoon touring C A F s a damper on expansion plans. C Ihemi- plant, another visitim; SD's catalyst cal firms have relied heavily on inter Muinufcicturimi facilities and watching nal sources for expansion cash, of a den onstiation of computer applica course. But with earnings depressed tions to plant design and operation. this year, they will be harder pressed Copies of the technical papers were to make do without turning to outside distributed in English or German and sources. French, translation. The meeting went 32
C&EN
SEPT.
15,
I 9 5B
so well that Scientific Design is con vinced that Λ will fay to sponsor SMmilar meetings in the futniure. perhaps abroad as well as ira the U . S. Aired it may expand the iaranat to include other processes it licenses, such AS polyvinyl chloride or maleic anhydride.
Briefs • Congress approves construction o f a S12 million helium plant in the Keyes natural gas field in Oklahoma. Xlhe plant—fifth to ibe operated by tSie Government—will Iha\-e a capacity of 2.00 to 2 9 0 million cubic feet a year, bring total annual output of helium to about 600 million cubic feet. Department of the Interior says even this amount will fall short of expected 1960 desnand. V Standard Oil (Ohio) is putting its S40 million Toledo refinery on stream. The facility will increase the company's crude oil throughput capacity by about 25*"'. produce gasolines, special naph tha, liquefied petroleum gas. kerosine, furnace oil. diesel fuel, jet iruelT aviation gasoline, heavy fuel, and petroleum coke. • Monsanto Chemical's Lion Oil divi sion is planning an expansion at El Dorado. Ark., that will increase rated crude oil throughput from 29.000 to 33.000 barrels a day. Included as part of the multi-million dollar expansion are new hydrodesiiilirurizationi- deearbonization., aaad propylene tetraurner units. • N u o d e x Products, a division of Heyden-Newport Chemical, expands facili ties for producing nickel catalyst and plating salts aï Elizabeth. Ν. J. Nuo dex nickel salts n o w include sulfate, chloride, formate, carbonate- nitrate, and acetate. • Alcoa will have both of its new potlines at Massena. Ν . Υ.. operating, this week. Combined initial capacity: -54.OOO tons of aluminum a \ear. This completes the first phase of a $25 mil lion modernisation and expansion pro gram undertaken by Alcoa to utilize power from the St. Lawrence project of the Power Authority of New York State. • Air Reduction expands gaseoits And liquid ox> sen facilities at Lorain. Ohio, boosts daily output tr&m 40 to 10O tons a day. Meanwhile. Airco has an nounced plaais for a 120 tosi-per-day plant on its property at Bntler. Pa.T to
