Output edges higher as prices soar Production of chemical products continues to inch higher, but the rate of growth has been slowing perceptibly. Last month, total output of chemicals and allied products was 4% higher than it had been in May 1973, Federal Reserve data indicate. For the year to date, production is running 5% ahead of that during the first half of last year. But a comparison quarter by quarter (after allowing for seasonal variations) shows that the gains have been harder won in recent months. Production was 2% higher during the first quarter of 1973 than in the previous three months, then advanced by 1.8% in each of the following two quarters. But growth slowed to just 1% in 1973,s final quarter and in this year's first quarter. In the quarter ending this month, output probably will be only about 0.7 or 0.8% ahead of the first quarter. The lag so far this year centers primarily in inorganic chemicals, agricultural chemicals, and man-made fibers. For all three groups, production during the early part of 1974 has been essentially unchanged from what it was during the final months of last year. With lack of raw materials and plant capacity likely to continue to constrain chemical production during the balance of the year, growth in 1974 as a whole has little chance of matching the 7.6% increase tallied in 1973. Some slackening in demand may show up, as well. Output of textile mills has been slipping, for example. Total industrial production, after declining slightly for four months, edged up in April and May. But May was a mere 0.4% ahead of May 1973 and lower than any month during the second half of last year. Meanwhile, the prices chemical companies are charging for their products continue to bound higher. Last month, according to Bureau of Labor Statistics figures, wholesale prices of chemicals and allied products as a whole averaged 25% higher than 12 months earlier. That's a greater yearto-year rise than registered by any major group of industrial commodities other than fuels and related products (which were up 56%) and metals and metal products (up 28%). Wholesale prices of all commodities were up 16% in May from 12 months before. The price index for chemicals and allied products had climbed gradually all last year, and in December it was 10% higher than at the close of 1972. But with the lifting of price controls, prices have been rocketing: up 6% in March from the preceding month and an additional 4% in both April and May, with plastics and industrial chemicals largely leading the way. The only group of chemicals for which prices have held relatively stable is pharmaceuticals, with only a 5% increase from May 1973 to May 1974. 12
C&EN June 24, 1974
C&EN Talks With...
PPG INDUSTRIES'
Joseph A. Neubauer in a year when most major chemical processing firms are racking up sharply higher earnings, one big producer who doesn't expect to quite match last year's results is PPG Industries. But the reason isn't to be found in its chemical business. A shift to the last-in, first-out method of accounting for inventories was responsible for essentially all of the 19% decline in PPG's first-quarter earnings this year, the company claims. And the sharp drop in automobile production this year also has hit PPG's auto glass business hard, company president Joseph A. Neubauer admits. So he thinks it unlikely that the earnings lost in the first quarter will be entirely recovered during the balance of the year. "But all our other lines are doing amazingly well," Joe Neubauer is quick to point out. Sales of glass for commercial construction and home remodeling are strong, aided by demand for upgraded products like insulating window glass. The coatings business is doing well, with the cutback in car assemblies having had little impact. And in chemical and glass fiber, Mr. Neubauer says, "we are selling just about everything we can make." Chemical earnings have been further bolstered this year by rising prices. PPG hiked the prices it charges for chlorine (by 2 6 % to $100 a ton) and caustic soda (by about 16%) for the second time this year just this month. And prices for chlorine derivatives likewise have been marked up. Another brightening spot in PPG's chemical business is in Puerto Rico. Operations there, plagued by recurrent power failures, now apparently largely overcome, and continuing feedstock shortages, lost $8.5 million in the first quarter, on the heels of a $28 million deficit for all of last year. But they now are moving into the black, Mr. Neubauer claims, and although he is uncertain whether second-half earnings will overcome the first half's losses, Puerto Rico certainly will not be the drag on chemical earnings that it was during the past couple of years. PPG plans to spend about $1 billion on new plant and equipment during the next five years, up from $600 million in the past five. These outlays will be spread pretty much right across all the company's current major product lines. In chemicals, at least, most of it will go into U.S. facilities. Overseas investment in chemicals does not interest the company much.
In chemicals and glass fiber we are selling Just about everything we can make Other than in Canada, in fact, PPG's only stake abroad in chemicals now is a joint venture in Japan. In the past few years, PPG has pulled out of a not particularly successful vinyl chloride joint venture in Italy and closed down its rutile (for titanium dioxide) mining operations in Sierra Leone. "We want to expand in the U.S. and keep up with the parade, and that will just about use up all our available capital," Mr. Neubauer explains. So PPG has tended more to license its technology abroad than invest there. "Licensing helps us recover some of our investment in developing new processes," he notes. "And if we don't do it, somebody else will." Early this year, for example, Mr. Neubauer signed a letter of intent with Soviet Minister of the Chemical Industry L. S. Kostandov that, although only a very preliminary step, may lead to PPG's offering its vinyl chloride knowhow and later other technology for use in the U.S.S.R. (PPG already has one vinyl chloride licensee behind the Iron Curtain in Bulgaria.) Joe Neubauer has worked for PPG almost ever since he graduated from Case Institute of Technology as a chemical engineer in 1932—"that good year when nobody in the class was able to get a job in his profession." He worked for a short time after graduation as a punch press operator and later on a seven day-a-week, 12 hour-a-day shift as night superintendent, trying to start up a defunct magnesium carbonate plant in Elyria, Ohio. Then he joined PPG in 1933, working in various engineering, production, and technical capacities until he was put in charge of PPG's chemical operations in 1957. Nine years later he was named corporate executive vice president and in July 1967 he was elevated to his present post.
