1 ^é \$κ'
OU η Mathieson's Logon predicts 5 % rise i n dollar sales; liftle change in profits or output
ί Ί
as . . .
Chemical Firms Face 1958 OHORT-TERM OR MID-TERM OUTLOOK-
either way it's looked at, the chemical industry is slated for more growth. But how much? In w h a t areas? These are leading questions chemical executives would like answered in these days of stock market jitters. Last week came some predictions. John O. Logan, vice president of Olin Mathieson's Industrial Chemicals Divi sion, looked at 1958 for the National Industrial Conference Board meeting in New York. H e predicts: • Dollar sales will b e u p 57c • Profits, the same as n o w or possibly down. • Production, probably the same as now or a bit higher. Meanwhile, Paul Mayfield, vice president of Hercules Powder, took a longer look for NICB. He says the period 1959 through 1961 will see a continued growth rate—one which should average 7rA a year. This climb should bring chemical and allied prod uct production 4 0 % above 1956's out put. • Short-Term Outlook. Dollar sales for chemicals a n d allied products were up 4°7c for the first half of this year, compared to a similar period in 1956, Logan explains. Predictions call for the last six months of this year to show a 1 0 % increase over the first six months.
If this happens, sales will reach $25 billion, or 9r/, better than 1956. And growth will continue next year. But it should not be a sensational one, continues Logan. It will probably show a 5% rise in total dollar sales. Here's why: • Next year should b e another good general business year, despite stock market jitters. • Chemical inventories in t h e hands of users are abnormally low. • Certain industries, such a s textiles, which have been depressed, will re cover some in 1958. • Excess capacity which resulted from the chemical industry's record capital expenditures the past two years ($3.3 billion) will stimulate m o r e mar ket development and new uses for many chemicals. • Next year will see few chemical price decreases and, very likely, some increases. Opinion varies as to the over-all business outlook. However, adds Lo gan, many think that activity will b e similar to p r e s e n t levels next year. Softness in some areas will be offset by pick-ups in o t h e r s . F e w seers predict a general recession, b u t on the other hand, none e x p e c t s a boom. • Inventories Down N o w . Today customer inventories are abnormally
low. For several months now, buyers have liquidated inventories. The money pinch is one reason; over-ex pansion during t h e 1956—57 construc tion boom is another. W h e n people adjust inventories, Logan points out, they tend to overcorrect. T h e n , after a short period of attempting to operate with inadequate margins, they resume buying on a modest scale to bring supplies on hand u p to a more comfortable level. This situation can be expected this fall—and it should continue into 1958. An out break of price increases or a general business u p t u r n would hasten this process. • Textile Recovery. Many textile makers feel the textile market will go up next year, says Logan. T h e y feel their operations a: not likely to go much lower. M u c h has been done to work off finished goods inventories, and recent production rates in the textile in dustry have been below actual con sumption. Any upturn would be re flected immediately in increased de m a n d s for chemicals such as caustic soda, chlorine, dyes, and synthetic fibers. Increased caustic and chlorine de mands—as well as increases in resins, coatings, and dyes—are expected from the pulp and p a p e r industry. AVhile not in a slump, pulp and paper have SEPT.
3 0.
1957
C&EN
21
Prospects in some chemical consuming industries: • NONFERROUS METALS
An adequate supply of nonferrous metals at more stabilized prices is in prospect for 1958. The price declines in copper, lead, and zinc are serving t o correct the over-supply situation that has plagued these markets in the past few months. Joseph 'Zimmerman Doily Metal Reporter • PETROLEUM
Domestic demand for petroleum product s and specialties will be 2 . 1 % greater in 1958 than the current year. B. L. Ray Esso Standard Oil • TEXTILES
Textiles will end 1957 on a modest ο. ρ turn —the late 1957'rise will extend into 1958. William H. Shatc Du Pont • FOOD Over-all food sales should increase somewhere between 6 to Sr/e. Robert Η. Ρ edit ζ Consolidated Foods Corp. • MACHINERY AND
EQUIPMENT
Many manufacturers think plant expansions may decline in 1958 but that the purchase of n e w equipment to modernize plants and improve productive capacity will increase. C. M. Beach Cincinnati Milling and Grinding Machines • STEEL
Will start off 1958 in high gear, sloxw up a little around May, suffer the usual summer lethargy in the third q u a r t e r , and pick u p with great gusto in the last quarter of 1958. Ύοιη C. Campbell Iron Age
marked time. Converters a n d distribu tors are paring inventories. Logan ex pects an u p w a r d trend will b e resumed. Automobiles, too, may see an upturn in 1958. While the chemical industry will not be as directly affected as some other industries, any increase in new car production will mean increased de mands for paints, rubbers, plastics, and other chemicals. Meanwhile, other depressed chemi cal consuming industries such as agri culture, residential building, and nonferrous metals do not show as clear an outlook. These industries will likely not show further large declines, and in fact, an improvement is possible, adds Logan. • Record Building. New plant ex penditures in 1956-57 will total about S3.3 b i l l i o n - 1 3 % of the chemical in dustry's a n n u a l sales. A general rule says that $1.00 of new plant will gen erate about $1.00 of annual sales. On 22
C&EN
SEPT.
3 0,
1957
this basis, comments Logan, chemical industry capacity will exceed esti mated sales by about 15% at the end of 1957. At the end of this year, ca pacity will have risen to about 2 5 ^ above 1957's sales. But, adds Logan, plant capacity ad ditions do not automatically create sales. "There is nothing like an idle plant: to p u t a forced draft behind de velopment of new uses and markets for a chemical." J u s t how much effect new market de velopment will have on 1958 sales is hard to forecast. There will be more emplnasis placed on sales development and commercialization of 1957's re search results than ever before—an em phasis that will b e increased further in 195S. Products which should benefit from, new markets next year include: • Polyethylene (pipe). • Synthetic rubber (auto springs).
• Lithium a n d boron (high energy fuels). • Urethanes (paints).
compounds
• Price Increases. Chemical prices will show more increases than decreases in 1958, predicts Logan. And, these increases will contribute t o an increase in dollar sales for the year. Chemical prices have not kept pace either with rising costs or with prices in other fields. In June, wholesale chemi cal prices were only 9 % above the 1947-49 average, compared with 17% for all manufactured goods prices. Profit margins of the eight largest chemical companies declined 10% in 1956 and were down another 14% in the first half of 1957. Important too, in the price picture, is the expectation that the present infla tion spiral will continue. This prom ises further increases in labor, raw ma terials, a n d plant replacement costs. Lower operating levels in many plants, as a result of increased capacity, will mean higher fixed charges and will tend to expose rising break-even points, concludes Logan. • Mid-Term Outlook. One question which faces t h e chemical industry is this: Will the 7% annual growth rate from 1947 to date continue through 1961? "I believe we can reasonably expect it t o do so," Paul Mayfield adds to the Conference Board. His predic tion is based on the prospects to de velop new chemical products plus a favorable outlook for growth in im portant chemical groups. Basic inorganic and organic chemi cals, continues Mayfield, should more than double 1952's level by 1961. And these chemical groups should show a 50 r'( growth over 1956's output by 1961. Meanwhile, plastics, syn thetic rubber, synthetic fibers, and mis cellaneous organics—chemicals which make up the industrial organic chemi cal index—should continue to show strong gains during the next few years. Vegetable and animal oils, soaps and allied products, paints, and fertilizers will grow steadily. But these will not accelerate much beyond today's rate— which varies from 0 . 7 5 e ' (soaps) to 3.25'r (oils) per year. Not to be overlooked are the growth impacts expected from new products such as high energy fuels, titanium derivatives, fluorines, a n d adhesives. I t can be assumed, concludes Mayfield. that some of these new products, along with new uses for old products, will make themselves felt in considerable volume during the 1959-61 period.
