industry/Business
Chemical producers see no decline in economy Most firms feel current economic nervousness is more psychological than real, look for strong growth to continue "The economy is as strong, or even stronger, than we thought it would be just a few months ago. I have seen nothing to change my prediction of 1973 being another year of major growth for the chemical industry." So says Charles Reeder, Du Pont chief economist. And his confidence seems to reflect a general chemical industry attitude—an attitude somewhat in contrast to the recent spate of gloomy economic talk and the current downward drift of the stock market. The Dow Jones Industrial average has lost 100 points already this year. The fundamentals of the economy in general, and of the chemical industry in particular, are still very firm, accord ing to chemical industry observers. They look upon the current economic nervous ness as being more psychological than real. And, as Mr. Reeder puts it, "I don't see anybody around here [at Du Pont] changing any plans because of it." He expects production of chemicals and allied products to grow 11% this year, following the 10% gain posted last year. Persistent problems with inflation, uncertainties over the Government's
Inventories move up well before chemical recessions Chemical production indexa
Ratio of inventories to shipmentsa
160
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1.70
150
I —
-J ; l
140
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f
À
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150
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' 80 1966
ν
i
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I ^Recessions*/ * 1968
1970
1.30 1972
• For chemicals and allied products, b Periods of zero or negative growth in chemical production.
8
C&EN March 12, 1973
Phase III program, and the unstable international monetary situation are the main factors behind the sudden worry that the current boom may run out of steam as early as the end of this year. So far the worst that is expected is a short and mild minirecession, maybe early next year. But even such a modest setback as this seems, at the moment, to be unlikely for chemical makers with in the next year. Leading indicators for the industry are still pointing firmly upward. For instance, the industry's inventory situation alone almost assures continued strong growth for chemical makers. In ventories, and the ratio of inventories to shipments, tend to start building up quite markedly as much as a year before a recession sets in. Today chemical in ventories are stable and the ratio of inventories to shipments is still on the decline. Chemicals and allied products in ventories totaled $6.7 billion at the end of the recession year of 1970. By the end of 1971, a year of modest growth, they were still at $6.7 billion. And by the end of 1972, a year of very rapid growth, they had moved up only minimally to $6.8 billion. This means that the ratio of the industry's inventories to its monthly shipments has fallen steadily from 1.64:1 at the end of 1970 to 1.30:1 at the end of 1972—and it is still declining. Another strong indicator pointing to continued big growth for the overall chemical industry is the current outlook for the textile industry. Richard Karfunkel, who used to be economist for Du Pont's fibers division and who now works for a Wilmington, Del., brokerage house, points out that what he calls the textile economy usually leads the over all economy and the chemical industry by about two quarters. He sees no sign of any peak for textiles for at least three quarters. Hence he sees no indication of any peaking for the chemical industry for at least five quarters. More specifically, Mr. Karfunkel ex pects noncellulosic fiber production to grow at a sustainable 12% rate this year following the catchup gains of more than 20% in both 1971 and 1972. The 12% increase this year will boost capacity utilization from 88% last year to a very high 92% in 1973. Another encouraging sign for chemical makers is the continuing strength of the construction market—a very major out let for chemicals. Housing starts this year should reach 2.25 million, down only about 5% from last year, according to the latest semiannual survey by Ad
vance Mortgage, a subsidiary of First National City Corp., New York City. The survey points out that earlier fears of overbuilding in 1972 were unfounded. A very high 98% of the 2 million homes and apartments completed last year have been absorbed by the market. Chemical makers can currently point to a host of other positive economic factors—higher consumer spending, high auto production, and unweakening plastics demand, for instance—that indicate a continuation of uninterrupted growth for chemical output well into 1974 at least. The chemical industry is massive. And once it builds up momen tum, as it has in the past year or so, there is no way for it to revert from strong growth to stagnation in less than a year. And today there apparently aren't even any early signs of such a drastic slowdown.
INTERNATIONAL
Euratom research gets new lease on life When the European Atomic Energy Community (Euratom) was set up in 1958, its primary objective was to create conditions for the speedy establishment and growth of a nuclear industry in the European Economic Community. To ward this end, Euratom set out to co ordinate and promote nuclear research for peaceful purposes. But for a variety of reasons, political and financial among them, the reality of events hasn't matched up to the ideals of Euratom 's founding fathers. Recently, research programs have been kept financially alive on a year-to-year basis, and morale among the workers at the four establish ments of Euratom 's Joint Research Center has been sinking. Last month, ministers of the enlarged EEC—Belgium, Denmark, France, West Germany, Ireland, Italy, Luxem bourg, the Netherlands, and the U.K.— gave Euratom's research a new lease on life when they agreed to support a va riety of projects during the coming four years (through 1976). Indeed, if all the items under discussion are finally adopted, the budget could total about $260 million in addition to existing pro grams already under way. The road to agreement, however, was a bumpy one. And it took a marathon night-long session in Brussels in an atmosphere of internecine strife to ham-
