I N D U S T R Y fi B U S I N E S S
Chemical plant expansion likely to continue Proposal to suspend 7% investment tax credit unlikely to change industry's near-term expansion plans Suspension of the 7% tax credit on capital spending, as proposed by Président Johnson, seems unlikely to put a crimp in the chemical industry's expansion plans for the near future. Most chemical companies polled by C&EN last week say that short-term capital spending would not be affected if the tax credit is suspended. The suspension might have some effect on long-range expansion plans, although the actual impact may be difficult to assess. Some chemical firms think that suspending the tax credit is not the way to combat inflation. Says Carl A. Gerstacker, chairman of the board of Dow Chemical, "Eliminating the 7% investment credit would be a sad mistake that would increase our nation's economic problems rather than solve them. We need more plant capacity now . . . for only a surplus of goods will really control prices. We also need more plant capacity to help meet our balance of payments problem and to provide jobs for our growing labor force. This prescription won't be good for our economic health. Instead, it will spread the disease it is supposed to cure." Κ. Η. Hannan, executive v.p. of Union Carbide, also emphasizes that
On the other hand, J. R. Kennedy, vice chairman of Celanese, says, "We feel the action suggested by the Ad ministration is a step in the right di rection . . . . However, we do not feel these measures slow down the economy as quickly or as effectively as an increase in income taxes would but, obviously, that step is not likely to be taken in an election year." American Cyanamid agrees that the Administration could have taken other steps to cool down the economy—it might have been more appropriate to raise the income tax rates before sus pending the tax credit. The trouble with suspending the tax credit, says Cyanamid's treasurer W. G. Taylor, is that too much time will elapse before the effects of the change are felt. What effect will the tax credit sus pension have on chemical companies' capital spending plans? It varies markedly. For some companies, the proposed suspension will have little effect on capital spending. Olin Mathieson says flatly that the invest ment credit had nothing to do with its expansion plans. Cyanamid points out also that the tax credit was not a strong factor in its "intensive ex pansion program."
Carl A. Gerstacker Spreading the disease the strongest anti-inflationary force is industry's rapidly growing capac ity to supply the needs of the econ omy at the lowest possible cost. Car bide feels that if the Administration thinks it is necessary to increase taxes to decrease inflationary pressures, this should be done by increasing cor porate and individual income taxes.
Manufacturers' capital outlays continue to rise (millions of dollars) Industry
Chemical Petroleum Rubber Textile Paper Primary iron and steel Primary nonferrous metal Stone, clay, and glass Other manufacturing All manufacturing
1965 q u a r t e r s —
' 1st
2nd
3rd
550 790 70 200 220 360 140 160
640 920 90 220 260 440 150 200
630 970 90 260 300 500 160 200
2050 4540
2550 5470
2620 5730
* Estimates made in late July and August 1966. Source: Department of Commerce, Securities and Exchange Commission
28 C&EN SEPT. 19, 1966
, 4th
1st
770 90 300 330 620 220 210
610 940 80 270 300 420 180 190
3040 6720
2620 5610
1140
1966 quarters
2nd
3rd*
, 4th*
750
700
910
1080
1080
1260
100 320 370 540 220 220
130 290 370 540 180 220
140 320 460 640 190 220
3180 6780
3330 6840
3700 7840
Another reason the proposal will have little effect is the accounting procedures used by some firms. Celanese says it has followed a policy of writing off investment credits gradually so that the change will not affect operations to any great extent. Du Pont amortizes the tax credit over an 11-year period. As a result, suspending the credit won't affect capital spending programs. Du Pont's treasurer, H. Wallace Evans, points out that although the 7% credit is significant, it is not so significant that it makes or breaks a program. At the other extreme, Dow says that the tax credit has been a substantial spur to needed expansion; suspension of the credit will reduce expansion in the long term. Carbide says that the tax credit is a very important factor in its operations because it increases cash flow and decreases taxes. Carbide will have to restudy its program to see what effect the suspension of investment credit will have on its operations. Selling Congress. Meanwhile, in Washington the Administration has taken the first step in selling it's proposal to Congress. Last week Administration spokesmen appeared at hearings before the House Ways and Means Committee to explain the President's request to suspend the investment tax credit from Sept. 1, 1966, to Dec. 31, 1967. Lead-off witness was Henry H. Fowler, Secretary of the Treasury. It was a traumatic experience for Secretary Fowler, who only last February had assured Congress that the investment credit should be a permanent part of the tax laws and that "we should be very chary of holding back enlargement of productive capacity." "It is with considerable reluctance and only after very careful study that we have reached the conclusion that this is an appropriate measure at this time," he told the committee. The unforeseen escalation of the war in Vietnam has pushed the demand on our resources to the point where the economy is operating close to the limits of its productive powers. Despite this problem and sharp increases in interest rates and other developments in the financial markets, the level of investment is simply too high and rising, he said. When the President announced his proposal, there were loud outcries of protest in Congress. However, these protests are unlikely to have any effect. That the credit will be suspended and not repealed outright, plus Administration promises to cut spending once appropriations bills have been voted, seems to forecast Congressional approval after a token fight.
World rubber outlook extremely promising ACS NATIONAL MEETING
IJZND
Chemical Marketing and Economics
Rubber consumption in the U.S. this year will top 2 million tons, says Edwin H. Sonnecken, director of corporate planning for Goodyear Tire & Rubber. This will be a 6.3% increase in total U.S. consumption last year. Free World rubber consumption outside the U.S., at about 2.9 million tons, will also be 6.3% higher this year than last. Mr. Sonnecken describes the world outlook for rubber as depending on the outlook for the rest of the world. As he puts it: "Because I'm optimistic about the long-term prospects for most of the world, I'm optimistic about the rubber industry." In the past, many in the industry here and abroad, including fabricators, synthetic rubber producers, and rubber growers, set their sights too low, Mr. Sonnecken told the Symposium on Rubber Chemicals and Marketing Economics. He believes that those who, from time to time, issue warnings about a possible world surplus of rubber likewise are committing the mistake of seriously underestimating the world's capacity to absorb sizable new amounts of both natural and synthetic rubber. Free World demand is now nearly 2.5 times what it was in 1950.
Lively performance.
For the next
10 years, the lively performance of the rubber industry argues strongly for continuing growth at rates comparable to industrial progress in every area of the world. If so, Mr. Sonnecken predicts, world rubber consumption should rise steadily from today's level of just under 5 million long tons to close to 8 million tons 10 years from now. If natural and synthetic rubber imports into the Iron Curtain countries are included, world consumption will be more than 5.6 million long tons this year, or a gain of 6% since last year. World rubber consumption 10 years ago was just over 3 million long tons. The annual growth rate in this decade has been 6.5%. Growth in the U.S. in the past 10 years has been 4.3% a year. Growth in the Free World outside the U.S. has averaged 8.2% a year in the past decade. An analysis of the relationship of rubber manufacturing to gross domestic product shows that the size of a nation's rubber industry is a surprisingly accurate index of a country's industrial development, Mr. Sonnecken
Edwin H. Sonnecken Sights set too low
says. Therefore, wherever industrialization or economic development is accelerated, the growth of the rubber industry is likely to speed up also. Per capita consumption of rubber in the U.S. is 23.6 pounds, while per capita consumption in the rest of the Free World is only 3.1 pounds. He notes that if the rest of the Free World had consumed rubber at the U.S. rate, world consumption would have been 23 million long tons last year instead of 5.3 million long tons. "While it is unrealistic to think of such a sudden increase, it is perfectly reasonable to explore the possibilities for narrowing disparity in consumption and the places where this may occur," Mr. Sonnecken says. In relating rubber consumption per capita to per capita gross domestic product, the U.S. (with more than $3000 gross domestic product per capita) consumes 23.6 pounds of rubber per capita. India, with less than $80 of gross domestic product per capita, annually consumes less than 0.5 pound of rubber per person. Spain, with $500 of gross domestic product per capita, consumes 4 pounds of rubber per person each year. Spain's gross domestic product and its rubber consumption are about eight times that of India. (There are a few exceptions in this pattern. They are mostly small countries bordering larger countries from which they import vehicles and tires. Hence, their rubber manufacturing industry is smaller than might be expected. This happens in SEPT. 19, 1966 C&EN
29
Switzerland, Denmark, and Norway.) Mr. Sonnecken finds that for each 1% rise in gross domestic product, rubber consumption also rises Vie For example, if the per capita gross domestic product of Spain were to double to $1000 per person, its per capita rubber consumption should double, from 4 pounds per person to 8 pounds. Thus, for marketers, the probable size of a market, by country and for areas or regions, can easily be calculated. Looking more closely at rubber, Mr. Sonnecken takes a "plunge into the forest." He finds some towering trunks labeled SBR; some hardy species such as neoprene, nitrile, and butyl; some rapidly growing specimens classified as polybutadiene and polyisoprene; and some promising seedlings christened EPT. And natural rubber trees are still found in abundance.
form most desired by rubber manufacturers. Goodyear, for example, is now processing, packaging, and selling a "vastly improved" form of natural rubber. Mr. Sonnecken says that its qualities are so much superior to the usually available forms of tree rubber that his company has been unable to resist the temptation to label it Goodyear "Supernatural" rubber. Possibilities for oil extension of natural rubber promise to make tree rubber even more competitive than the manmade product in the future. Growth of synthetic rubber consumption will reflect technological as well as economic factors. The best example of this is polyisoprene. Because it comes closest to natural rubber chemically, some people have assumed that its market position vis-avis natural would be determined largely by price. But polyisoprene has characteristics that make it
Stereo rubber's share of market will swell through 1970
I960 1965 1970 Source:
Natural
SBR
Stereo
31% 25 24
58% 53 49
9 14
Other
n% 13 13
Total
100% 100 100
Goodyear Tire & Rubber Co.
Although some of these rubbers are growing more rapidly than others, almost all of them are growing. For example, in the five years through 1965, during which stereo rubber came into major use and the other synthetics were spurred by technological, economic, and political considerations, natural rubber consumption in the Free World grew by 228,000 long tons. This growth was on top of a growth in synthetic rubber use of 1,056,000 long tons. Mr. Sonnecken believes that this pattern will continue. In the next five years, he foresees a growth of more than 200,000 long tons in natural rubber consumption, while synthetic will grow by more than 1 million long tons. A significant development of the next five years may be the advent on a substantial scale of the technological improvement in natural rubber which users have long been asking for, and which forward-looking producers have been seeking to supply. These include quality control, grading, packaging, labeling, and special processing to put such rubber in a 30 C&EN SEPT. 19, 1966
definitely preferable to natural rubber for certain applications, mostly in nontire uses at present. One of the major reasons for the swing to polyisoprene is that users save from 2 to 5 cents per pound in processing and handling costs. If the European experience with radial tires continues to hold, substantial quantities of polyisoprene or natural rubber will be used in carcasses of such tires to provide the needed physical properties. Polyisoprene use is likely to turn sharply upward between now and 1970. Only two weeks ago, Goodyear and Michelin formed a joint venture to build a 58,000 ton-a-year polyisoprene plant in France (C&EN, Sept. 12, page 27). Mr. Sonnecken expects word of additional capacity for polyisoprene in the near future. The continued need for SBR as a "partner" with stereo-type rubber explains the vigor of this "granddaddy" of synthetic general-purpose rubbers. Predictions that SBR might fade away seem not only premature, but altogether wrong. In the U.S., where stereo and other rubbers have made
their greatest gains, SBR should represent about two thirds of all synthetic rubber consumed in 1970. Mr. Sonnecken says that some strong claims have been made that EPT rubber will displace SBR. These are based, he says, on the allegedly low cost of EPT arising from inexpensive feedstocks. However, some breakthroughs in conversion techniques are still needed to make this possible. After that, problems remain in tire building. All the evidence is not in to support a firm growth forecast for this rubber. In the U.S. several developments have occurred in the past year that could have a significant effect on the future of the rubber industry. The radial tire, the automotive safety bill, new Federal Trade Commission guidelines, and state legislative activities are among them. The first section of the car-buying public to switch to radial tires will be those buying high-performance cars. The radial tire will use more raw material per tire than a conventional one of comparable size. The radial contains about 40% more fabric and somewhat more rubber than a conventional tire. It further may strengthen the use of polyisoprene rubber and polyester cord. Interiors redesigned. The immediate effect of the safety bill has been the redesign of car interiors and the resulting demand for soft trim supplied by the rubber industry. Auto makers may soon be spending about $1 billion or so a year on safer interiors. On balance, Mr. Sonnecken says that the effect of the big safety push of 1966 may be to upgrade and accelerate the dollar sales and the tonnage of the U.S. rubber industry. For almost a decade, the rubber industry has been in a trend which has seen unit sales climbing faster than dollar sales. Decline in average unit price has been the result of smaller tire sizes, downgraded product mix, raw material price trends, and modern equipment. Now the industry is in a phase when dollar sales should climb faster than unit sales. Essentially, this represents a reversal of most of the trends of the past decade. World-wise, the rubber industry should continue to keep step with the uptrend in industrialization. For the first time, for example, the Soviet Union has acknowledged the importance of the auto industry and shows every sign of pushing car production. "When one adds up the prospects, country by country, and continent by continent, the world outlook for the rubber industry continues to be extremely promising," Mr. Sonnecken
Search is on for sulfur substitutes ACS NATIONAL MEETING ND Fertilizer and Soil Chemistry
152
Nonfertilizer users of sulfur should put more effort into finding sulfur substitutes, says H. S. Ten Eyck, president of Occidental Agricultural Chemicals. The fertilizer industry, the biggest user of sulfur, spends a lot of time looking for possible substitutes for sulfur. "Perhaps it's time that alternatives for sulfur be found for all its uses excepting the one which means life or death for millions of people/' he says. The fertilizer industry used about 5 1 % of the 23.5 million tons of sulfur consumed world-wide last year. In 1950, 42% went to fertilizer production. This rapid increase in demand for use in fertilizers, especially in the past two years, is a major factor in the accelerated .total demand for sulfur, Mr. Ten Eyck says. The increasing fertilizer demand for sulfur has played no small part in the current shortage of the material, he says. But another large factor in the current predicament is inadequate forecasting. Traditionally, one could check a previous year's consumption figures, add a fixed percentage to it, and obtain the consumption figures for the next year or for five years pretty closely, Mr. Ten Eyck says. "However, " he adds, "I think straight-line forecasts are a thing of the past." The straight-line curve has been transformed into a parabola, since forecasters must now consider population, longevity, qualified economic conditions, changes in living standards, and the like. Mr. Ten Eyck believes that only a partial solution to the sulfur shortage can physically be developed during the next five years. Besides, he adds, since there aren't any more inexpensive sulfur sources, the development of the amount of sulfur required is going to be expensive. The price of sulfur, therefore, will need to be higher than what it is today. In an attempt to alleviate the shortage, efforts are under way to develop substitutes, such as pyrites and nitrophosphates. Mr. Ten Eyck says that there are literally billions of tons of pyrites around the world. However, he says that presently only a relatively small percentage of the total pyrites available is physically, chemically, and economically suited to making sulfuric acid. Also, in many parts of the world, nitrophosphates are not as acceptable agronomically as are ammonium phosphates.
ATTENTION COMPOUNDERS
OF0RMULAT0RS There's undoubtedly a Diamond silicate in our product lineup i d e a l l y s u i t e d to your specific needs ...present or future WT. RATIO
DIAMOND DESIGNATION
FORM
GRADE 33
Liquid Syrupy
1:3.30
Corrugated Fibre Board
1
GRADE 34
Liquid Thin Syrupy
1:3.85
Paper Beater, Sizing Acid-Proof Cements
1 1
GRADE 40
Liquid Thin Syrupy
1:3.22
Water treatment, used in making Coagulant Aids, Briquettes, Oil Reclaiming 1 and Re-refining, Adhesives, Synthetic Catalysts, Silica Gels and Coatings. 1
GRADE 42
Liquid Syrupy
1:3.22
Asbestos Products, Sealants for Containers & Paper Tubes, Solid Fibre Board 1 & Wall Board, Briquettes
GRADE 42 Water White
Liquid Low Viscosity
1:2.54
GRADE JW-25
Liquid Low Viscosity
GRADE 47
(Na 2 0/Si0 2 )
USES
Boiling off cotton, Silk Weighing, Peroxide Bleaching, Liquid Detergents
1
1:2.54
(Same as 42 Water White but not clarified) Bleaching Paper & Textiles
1
Liquid Med. Viscosity
1:2.84
Adhesives, Laminating, Paper Tubes, Fibre Drums, Sealing Shipping Containers, Welding Rod Coatings
GRADE 50
Liquid Syrupy
1:2.00
Detergents, Boiler Compounds, Well Drilling Fluids, Furnace Cements & Coating Formulations
GRADE 52
Liquid Med. Viscosity
1:2.40
Refractory Cements and Hot Tops
GRADE 58
Liquid Heavy Viscosity
1:1.58
Furnace Cements & Mild Detergents, Oil Reclaiming & Re-refining
GRADE 60
Liquid Very Heavy
1:1.87
Furnace Cements & Soap Making
GRADE 49-FG
Liquid Med. Viscosity
1:2.58
Foundry Cores & Molds, Hot Tops
Granular
Na20 : S1O2 1:1
Laundry & Dairy Detergents, Cleaning Compounds including Metal Cleaners, Concrete Floor Cleaners, Paint Removers, Ore Flotation
Granular
Na20 : S1O2 1:1
Dishwashing Compounds, Detergent Formulations, Laundry & Dairy Detergents, Cleaning Compounds including Metal Cleaners, Concrete Floor Cleaners, Paint Removers, Ore Flotation
UNIFLO® 1 (Sodium Metasilicate 1 Pentahydrate) ANHYDROUS SODIUM METASILICATE SODIUM 1 ORTHOSILICATE
Na20 : S1O2 Flake
Laundry Detergents, Heavy Duty Cleaning Compounds including Metal Cleaners
Find one you like? A phone call, wire or letter will get you free laboratory evaluation samples, pronto.
Diamond Chemicals DIAMOND ALKALI COMPANY. 300 UNION COMMERCE BLDG.· CLEVELAND, OHIO 44115
SEPT. 19, 1966 C&EN 31
