Chemical Industry G r o w t h A look a t future chemical industry J O H N M.
CHEMICAL
possibilities shows a potential d o u b l i n g of the in next 10 y e a r s f r o m plastics a n d Fibers a l o n e
WEISS, John M. Weiss & Co., 50 East 41st St, New
STOCKS are
generally
re-
^ garded as growth stocks and up to the present have lived up to that promise. I n illustration we may com pare the results of 1949 and 1954 for 12 of the larger chemical companiesOperating profits before federal in come taxes have increased in the same general w a y as gross sales but with some differences related to the basic activities of the individual company and the t y p e of. products produced. Over the span of the six years shown, admittedly using poor years for industry generally, sales have increased about 907c and profits from operations be fore taxes have almost doubled. This is an extremely rapid rate of growth and we may well speculate as to the prin cipal causes of this growth and as to whether t h e growth is likely to con tinue. Chemical industry has increased largely beyond t h e secular trend by de veloping new products and new uses for old products, thereby opening u p markets which previously had not ex isted. Some of the fields which have been outstanding in this regard are: Plastics a n d resins Plasticizers (mainly used as adjuncts to plastics) Synthetic rubber (elastomers) Detergents (surface active agents) Pesticides, etc. for agricultural use Synthetic fibers Petroleum additives T h e growth of the first five of these is shown by figures taken from the Tariff Commission annual reports on synthetic organic chemicals. Synthetic fibers include old line ace tate and viscose rayon as well as noncellulosic synthetics such as nylon, Or ion, Acrilan, Dacron, and dynel. Fiber figures, also converted to tons, are taken from Textile Organon for Febru ary 1955. It is interesting to note that Acetate 2362
York 17, Ν . Υ.
was stationary through 1953, t h e n dropped to half its former production in 1954, while the increase in viscose was largely due to increased use of yarn for tire reinforcement. Growth in noncellulosic fibers (mainly nylon) h a s been phenomenal. No figures are available for petro leum additives, but the size of the in dustry may be roughly estimated from a paper by W. E. Kuhn of the Texas Co. given before the Commercial Chemical Development Association in 1953. This indicated a present yearly use of about 160,000 tons of chemicals for antiknock compounds and about 170,000 tons for additives to lubricants and greases used in the modern car. In addition, around 860,000 tons of chemicals ( chiefly methanol and ethyl ene glycol) are used in antifreeze com positions. In comparison to these rapidly grow ing lines, figures for a few old line bulk inorganic chemicals have been taken from the reports of the Bureau of the Census. These are more in accord with secu lar growth, except ammonia, because of greatly increased demand for this product in fertilizers. W h y AHied's Sales G r o w t h Has N o t Been as Rapid as Du Pont's
These figures indicate why the growth of sales of such companies as Allied Chemical has been a lesser per centage then other of the chemical com panies. A very large part of their p r o duction has been in staple lines s u c h as these. This picture is changing and many of their new developments are in the faster growing lines which have not as yet been fully reflected in their bal ance sheets. Some other companies have h a d a greater proportional representation in the very rapidly growing fields, such as plastics and fibers, and hence h a v e shown a more rapid rate of growth. Du Pont is a good case in point. It CHEMICAL
AND
ENGINEERING
NEWS
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1 Allied 1 Air Reduction i American Cyanamid
1 Dow 1 D u Pont 1 I j 1 1 1 j Β S 1 g
Profits Before Tax {In m i i i i o n s )
Ratio
(In m i l l i o n s )
Ratio
|
1949
1954
! 954/1949
Î949
-—-
1954/1949
1
$ 363.7 89.5 237.7 200.4
530,8 123.3 397.6 428.3
1.46 1.37 1.67 2.14
$ 56.3 10.3 25.8 42.3
74.6 12.9 51.0 55.8
1.32 1.30 1.98 1-31
I g S I
1687.6 187.5 43.8 341.8 470.1 132.6 - 923.7
1.61 1.55 2.05 2.06 3.34 2.12 1.58
237.4 16.7 4.1 28.1 15.5* 8.3
485.7 31.2 8.4 42.6 60.6 27.9 172.1
2.04 1.87
9 9
2.05 1.52 3.90
1 1 §
3.36 1.18
I 1
(ex Gen. Motors) Hercules Hooker Monsanto Olin Mathieson Rohm and Haas Union Carbide
1024.5 121.0 21.4 165.9 141.5" 62.4 586.0
ι
1
145.9
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M a t h i e s o n sales i n 1 9 4 9 w e r e $ 5 4 . 1 m i l l i o n ; O l i n ' s w e r e $ 8 7 . 4 m i l l i o n . M a t h i e s o n b e f o r e tax i n c o m e in 1949 w a s $ 1 0 . 9 m i l l i o n ; O l i n ' s is e s t i m a t e d a t $4.6 m i l l i o n : N o t e s h o u l d b e m a d e t h a t a l a r g e p a r t of t h e g r o w t h r e p r e s e n t s acquisitions of other companies. b
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of t h e cotton consumption. Admittedly one of the greatest inroads b y noncellulosic synthetics in 1954 was made at t h e expense of rayons. There is obviously, however, still a very broad field for growth of these synthetics. Nylon has reached a plateau and a lesser rate of growth is to be expected in t h e future. Dacron a n d the acrylics are really just starting and will carve out a section of the textile field where their properties prove advantageous.
lias been content t o allow others to produce many of its basic chemicals so long as it has a multiplicity of availa b l e suppliers. It has concentrated on the higher margin materials such as fibers, cellophane, tetraethyllead and neoprene so t h a t profits have increased in a greater ratio than the increase of sales. Plastics M a y Reach 2 to 3 % o f Steel Tonnages in N e x t Decade
Possibilities for t h e future in connection with resins a n d plastics can be indicated by a comparison with steel. AVith a 1949 production of about 77 million tons of steel, the plastics production was only 1.057r of the steel production. I n 1953 with about 112 million tons of steel, the plastics figure, in spite of its growth, only reached 1.36r/f of the steel production. This is ii ratio increase of only 0.39c. In 1954 steel production dropped to S8.3 million tons a n d plastics reached 1.54r/r of this, a ratio increase of 0.5r/r. Over the next five or 10 years it is not too much to expect t h e plastics to reach S t o 3r/f of t h e steel tonnage. This w o u l d hardly affect the steel industry "but could mean that plastics could a t least double their present volume, w h i c h would b e reflected in all parts of t h e chemical industry, from finished plastics down through (but a lesser ratio) the basic products such as sulfuric acid and caustic soda. Synthetic fibers (other than rayon a n d Acetate) also have vast possibilities. In 1949 they amounted t o 18.5c/f of t h e wool consumption and only 2.5r/f of t h e cotton consumption. By 1954 Ihey reached about 89r/r of t h e wool consumption b u t still only about 8.0^ VOLUME
33,
NO.
23
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Plastics a n d Fibers Could Cause Doubling of Industry in 10 Years
These two lines alone, plastics and fibers, could cause a further doubling of our chemical industry over the next decade and when all sorts of new developments are considered, the rate of growth could b e even greater. In the case of many materials, capacity has been or is in t h e process of being increased. There will undoubtedly b e periods where capacity will be in excess of demand for some chemicals with a tendency for selling prices to decline. Such lowered prices however stimulate demand and widen fields of usefulness. W e can therefore expect rises and falls in the industry, but with the longer term trend on a sharply rising volume basis. This rise will naturally not affect all companies equally. A close analysis of individual units and the scope of their actrvities is necessary to estimate the extent to which they may share in the growth of the industry as a whole. The advances of technology may still render certain units obsolete if their management does not direct their activities in the proper channels.
JUNE
6,
1955
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Oil, Rubber, a n d Steel Firms Expand Along Chemical Lines
The growth will also b e shared with other branches of industry w h o are expanding along chemical lines, especially petroleum refiners, rubber companies and, to a lesser extent, the steel companies. All three of these have certain internal advantages which place their entrance into certain branches of the chemical industry on a favorable basis. W e may expect their ventures in the field to increase. U p t o t h e present, these ventures have been quite significant but have not been evident in company reports since no separation of sales is given. Usually, from a total sales standpoint, the tonnage of chemicals is low in relation to t h e sales of steel, of oil, or of rubber goods. Nevertheless, even a small percentage of these items is a consequential figure a n d their contribution to profits is considerably greater than their contribution t o tonnage. There is however ample room for t h e strictly chemical companies to take a major portion of the growth and continually add to their sales volume and profits. The capital requirements will b e tremendous but the flow of depreciation and retained profits will meet a large proportion of the needs. All in all, t h e picture for the chemical industry as a whole is continued growth for the next decade at t h e same or at a greater rate than in t h e past decade. T h e large amount of money spent by t h e industry for research and developm e n t is continually opening up newproducts and n e w uses for old products a n d is insurance of the healthy advancing industrial economy which we expect. 2363
