INDUSTRY
&
BUSINESS
Chemicals Complex in Puerto Rico Expands Commonwealth Oil Refining forms new company to make ethylbenzene What hard-driving Puerto Rican industrialists hope will one day be a Texas-sized petrochemical complex on their island has just received another nudge toward reality. Commonwealth Oil Refining (Gorco) has formed Poly chem, Inc., to operate an ethylbenzene plant which will be built next to Corco's refinery at Guayanilla Bay on Puerto Rico's southern coast. Beginning the second quarter of 1967, the $4.5 million plant will separate some 15 million gallons a year of the styrene precursor from feedstock from Corco's just-completed aromatics plant (C&EN, Aug. 30, page 36). The Corco refinery thus continues to attract satellite plants to what could eventually become a $415 million chemical process industry center. The center would employ some 15,000 people to make all the key petrochemicals en route to finished products such as nylon 6 and 66; polyester resins, fibers, and film; styrene emulsions, latexes, and lacquers; acrylonitrile-butadiene-styrene resins; polyvinyl chloride; stereoregular rubbers; polyolefins; ammonia and urea; and agricultural chemicals. So far, the island is admittedly a long way from any such massive plant complex. Yet the commonwealth's Economic Development Administration, which has been sparking industrial development with an aggressive sales and financial enticement program, and Corco's president, Sam Casey, who has moved his company specifically into contention as a prime force in that growing industrialization, can count these gains to date now ' feeding on the basic Corco refinery: • Union Carbide Caribe, in an over-the-fence deal, gets part of its ethylene from Corco refinery gases (it cracks its own naphtha for the rest)
will get benzene and hydrogen from the aromatics plant to make 30 million gallons a year of cyclohexane. This plant isn't under construction yet, but should be shortly in a spot set aside within the aromatics plant.
to make ethylene oxide, ethylene glycols, and oxo alcohols. • Commonwealth Petrochemicals, a wholly owned Corco subsidiary, gets naphtha from the parent refinery next door for an aromatics plant that has an annual capacity of 104 million gallons of benzene, 48 million gallons of mixed xylenes, 10 million gallons of toluene, 10 million gallons of o-xylene, and 10 million gallons of aromatic solvents. Output from this plant goes largely to Asiatic Petroleum Corp., a Royal Dutch/Shell affiliate, for sale in Europe. The plant is now operating at full capacity, and it shipped the first boatload last month. • B y the end of next year a 50/50 joint venture between Corco and Bataafse Petroleum Maatachappij (another Royal Dutch/Shell affiliate)
• Hercor Chemical, a 50/50 venture between Corco and Hercules, will be making 100 million pounds a year of p-xylene by the middle of next year in another over-the-fence deal. The plant will use feedstock from the aromatics plant. In addition to these plants bordering the Corco refinery, Puerto Rico Chemical, a Hooker subsidiary, will get part of the o-xylene made at Guayanilla Bay for its phthalic anhydride plant now nearing completion on the north coast at Arecibo. The
Satellites Mêwa Growing PetrocHemiœls3pm|)l^ Crude and Unrefined Oils from Venezuela
1 Plants in operation
Typical Refinery Products Sold to Marketers in Puerto Rico and Europe
Commonwealth Oil Refining Co. Guayanilla Bay 115,000 • Bbl./Day Refinery Unfinishec Naphtha
Plants under construction
Naphtha
Refinery Gas
Commonwealth Petrochemicals, Inc. Guayanilla Bay
H2
Union Carbide Caribe Guayanilla Bay
Ethylene Oxide Ethylene Glycols Oxo Alcohols
Benzene Toluene Asiatic Petroleum Corp.
Xylenes o-Xylene Aromatic Solvents 182,000,000 Gal./Yr.
Plants committed but not yet staned
>aie in Europe
*uerto Rico Chemical Co. Subsidiary of I Hooker Chemical Arecibo ,
Phthaiic Anhydride 50,000,000 Lb./Yr.
Hercor Chemical Corp. | 50/50 Hercules/Corco J p-Xylene Guayanilla Bay 1 100,000,000 Lb. /Υι Sale 3ataafse Petrofeum rtaatachappJJ/Corco
Polychem, Inc. Guayanilla Bay
Cyclohexane 30,000,000 Gal./Yr.
Ethylbenzene 15,000,000 Gal./Yr.
Sale 1
OCT. 2 5, 1965 C & E N
25
Union Carbide Realigns Market Research Commercial research department supports itself by charging profit centers on a project basis
Corco's President Sam Casey Broad hints about future plants first o-xylene is scheduled to be shipped to it next month. Cyclohexane points the way to cyclohexanone and cyclohexanol and eventually to nylon; p-xylene leads to dimethylterephthalate and polyesters; and ethylbenzene is just a step from styrene. None of these derivatives is firmly committed for the island yet, but Mr. Casey hinted about as broadly as he could (at a dedication ceremony for the aromatics plant, attended by some 300 specially invited Corco guests from the mainland) that sty rene and polystyrene may not be too far off. Chances are good that any styrene/ polystyrene project would be a joint one, judging by Corco's petrochemical history to date (with Hercules in pxylene and with Royal Dutch/Shell in cyclohexane). In fact, the ethylbenzene plant itself is also a likely candidate for some kind of joint ven ture before it begins running. Corco originally announced the cyclohexane plant as solely a Corco project, for ex ample, but picked up Royal D u t c h / Shell as a partner before construction. Sam Casey says with no reticence at all that some similar arrangement (but with an unspecified partner) could overtake ethylbenzene. Pending any such joint venture— or a commitment to styrene/polystyrene—Corco plans to market the ethyl benzene in the U.S. If it does, it will be the first Corco petrochemical to be so marketed. It will also be Corco's first venture as a petrochemical mer chant. As to who might be on the buying end, even on α short-term basis, Corco will only say simply, "We have several prospective customers." 26
C&EN
OCT. 2 5, 1965
Union Carbide's commercial research department (formerly the market re search department) is showing man agement in the chemicals division that market research is essential to divi sional decision making. And it is proving it by supporting itself finan cially. Under a new setup, the com mercial research group charges a fee for its efforts on a project basis. Previously, each profit center within the division was charged an overhead rate for market research and could call on this group as often or as seldom as it desired. The overhead charge was set in proportion to the sales volume of the various profit centers. Thus, those profit centers that seldom used mar ket research might have been paying more than their share of the cost of market research. The reverse was also true. Management in the chemicals divi sion, in a continuing effort to improve operating efficiency, felt that its mar ket research department could in crease its efficiency and service. Car bide's management believed that mar ket research was necessary, but prob lems continually cropped up with the apportionment of services and charges. Some marketing groups were not getting the service that they were involuntarily paying for; others
Carbide's T. W. Carmody "A move in the right direction . . ."
were getting much more than they were supporting. Self-Support. At that point, V. H. Boden, manager of product planning and marketing administration, and Edwin Y. Chung, manager of the com mercial research department, came up with the concept of a self-supporting department, which could prove its usefulness in terms of dollars. Under the new concept, the com mercial research department charges for projects on a cost-per-man-time basis. This cost is calculated from the total costs of the commercial research department. For example, when this new organizational concept was voiced, the department consisted of a manager, six analysts, and a support ing statistical staff, with a total yearly budget of $180,000. General Aniline & Film is also changing the financial support struc ture of its market research depart ment. But the change is a reversal of Carbide's change. Formerly, one third of the financial support of GAF's market research department came from solicited projects from the dyestuffs and chemical divisions on a costper-man-time basis. The other two thirds was part of the budget of the commercial development department. However, the department is now a corporate function, serving all divi sions, and its support is now part of the corporate budget. It has ex panded responsibilities—marketing re search, economic research, R&D guid ance, and screening studies for mer gers and acquisitions. Some other chemical producers— Du Pont, Stauffer Chemical, Olin Mathieson, Allied Chemical, Ameri can Cyanamid, Dow Chemical, and Monsanto, for example—generally support their market research depart ments as part of departmental, divi sional, or corporate budgets. Changes. Mr. Chung says that to increase efficiency, Carbide's com mercial research department had to take a marketing approach and be come market oriented. Now, an ana lyst also operates as a coordinator for one or more marketing groups ("cus tomers"—as Mr. Chung calls them) within the division.
The analyst-coordinator finds out what projects are needed by the customers and keeps in close contact with them throughout the course of the project. In turn, since the customers are paying on a man-time basis, they make sure that they are informed at all times, and also make sure that the analysts are kept busy. Frank Cleary, who manages the chemicals division's marketing of printing ink raw materials, provides an example of how the new department works within the framework of the division. Mr. Cleary was responsible for a program to pinpoint new marketing opportunities for Carbide in the printing ink industry. He sat down with an analyst from the commercial research department to review the program and asked the analyst to prepare a proposal. The proposal was to include the cost of various phases of the commercial research program, timing, and suitable check points during the course of the study. While every marketing manager would like the most complete study possible, the significant thing about this proposal was that it had to be tailored to the price Mr. Cleary was willing to pay. The study turned up a number of opportunities for Carbide to fill needs in the printing ink industry! "These are being worked on now and we hope
PROMOTERS. Edwin Y. Chung (left) and V. H. Boden promoted the new marketing system in which Carbide's profit centers are charged on a project basis
to fill them in the near future," Mr. Cleary says. "With this new orientation on the part of the commercial research department, an analyst can have an integral part in the planning and development of a marketing program/' he says. Not Limited. "The new commercial research department isn't limited to conventional market research (supply and demand data) as it was in the past," Mr. Chung says. It now pro-
vides broader services at the customer's request, he adds. For example, the department might also be asked to perform a marketing research profile on a product—an analysis of how to distribute it and where. In one case, the department even set up a market development program. And in cooperation with a marketing group, it accepted orders for the product. Mr. Chung adds that this broader base is aided by the fact that, with
Earnings Through First Three Quarters Continue Higher Than Last Year's Company
Abbott Laboratories Aluminum Co. of America American Cyanamid Baxter Laboratories De Soto Chemical Du Pont Eastman Kodak" Hercules Powder Kaiser Aluminum & Chemical Koppers Mead Johnson Monsanto Nalco Chemical Olin Mathieson Owens-Corning Rohm & Haas Sun Chemical Upjohn
Net Sales 1965 1964 (Millions of dollars)
$177.1 860.8 641.0 47.1 75.2 2243.0 973.4 398.5 425.5
$158.5 764.3 578.2 39.7 64.4 2062.0 827.9 399.2 378.8
265.4 92.0 1099;6 66.3 661.1 239.2 262.8 54.1 178.4
245.5 79.7 1010.3 55.8 607.5 217.0 244.9 48.4 154.1
Per Cent Change
+11.7% +12.6 +10.8 +18.6 +16.7 + 8.7 +17.5 - 0.2 +12.3
.
+ 8.1 +15.4 + 8.8 +18.8 + 8.8 +10.2 + 7.3 +11.7 +15.7
Net 1ncome 1964 1965 (Millions of dollars)
$18.4 56.1 67.9 2.8 4.3 313.0 165.7 29.9 27.0
$17.2 44.5 59.9 2.2 3.9 338.0" 122.7 28.3 21.0
8.7 4.3 98.2 6.2 36.7 14.2 28.9 1.1 26.4
7.7 2.9 87.0 4.8 30.1 13.0 26.5 0.9 20.7
Per Cent Change
+ 6.9% +26.0 +13.3 +27.2 +10.2 - 7.3 +35.0 + 5.6 +28.5 +12.9 +48.2 +12.8 +29.1 +21.9 + 9.2 + 9.0 +22.2 +27.5
Earnings Pe r Share 1964 1965
$1.39 2.53 3.08 1.00 1.26 6.63 2.05 1.55 1.51
$1.31 1.99 2.74 0.75 1.13 5.71* 1.52 1.47 1.13
3.64 0.73 3.17 1.25 2.79 2.11 5.62 0.75 1.86
3.28 0.50 2.82 0.98 2.30 1.94 5.15tf 0.58 1.46
a Includes income from General Motors stock. i> Comparable earnings from Du Pont sources. Total earnings of $7.19 per share reported for first d Adjusted to reflect nine months of 1964 included $1.48 per share from investment in General Motors stock, c Thirty six weeks ending Sept. 5. 3% stock dividend on Dec. 15, 1964.
OCT. 25, 1965 C & E N
27
one exception, none of the analysts in the department were trained in market research. Instead, their backgrounds include sales, market development, production, and chemical research. Mr. Chung says that this diversity of background brings a fresh approach to the commercial research function, and extends the capabilities of the group. The department recently acquired a new customer—the chemicals division's research and development department. R&D has requested commercial and economic research support for some of its activities. Mr. Chung feels that, in general, his group can provide two services—commercial evaluation of existing and contemplated projects, and highlighting general areas of greatest potential growth. Advantages. Mr. Chung cites three major advantages of the setup: • It tailors services to customers' needs. • It is self-policing in that it eliminates idle curiosities. • It is self-policing with respect to controlling the size of the group. "The profit improvement program was not a cost-cutting program," says Mr. Boden, who is directly responsible for providing market research facilities for the marketing department. "If it were," he says, "the group wouldn't have increased in size from six analysts when the new system started last year to nine at present." He adds that management was looking for greater return for its money, and he feels that the new group is now providing it. He believes that, in two to three years, the commercial research department will have expanded responsibilities, and will need a larger group. T. W. Carmody, the chemicals division's vice president of marketing, says "The commercial research department has made such substantial contributions to business goals in its first year of operation as to make me confident that the new organization was a move in the right direction. As a result of the present business-oriented organization of the chemicals division, we are re-evaluating all of our staff activities." With such approval, the payas-you-go method of support could spread to market research departments in other Carbide divisions, as well as to corporate staff functions, such as accounting, public relations, and legal departments. 28
C&EN
OCT. 25, 1965
Chemical Industry Will Increase Spending On Plant and Equipment Next Year The chemical industry will increase its capital spending next year by 12%, according to Lionel D. Edie & Co. The 13th annual survey of capital spending prepared by Edie shows that the chemical industry will spend $2.77 billion in 1966, compared to $2.47 billion this year. Total capital spending by private industry will also increase 12% in 1966-$50.9 billion this year to $57.1 billion next. Thirteen of the 14 major manufacturing industries plan to increase spending next year, according to Dr. Pierre A. Rinfret, who conducted the survey, and who is chairman of the board of Edie (a New York City-based firm of economists). Of the five major nonmanufacturing categories surveyed, only the railroad industry will not increase its spending next year.
Dr. Rinfret foresees four main factors reflected in the capital spending survey: • Capital spending will increase from an annual rate of $54 billion in the first quarter of 1966 to a rate of $60 billion in the fourth quarter. • Demand will continue at a high level for durable goods, coupled with an enormous backlog demand. • The rate of economic growth in 1966 will match that of 1965. • Cash flow will continue to exceed capital spending. Dr. Rinfret says that these indicators mean that the economy will be "robust" for the next 12 months at least, even after 54 months of continuous economic growth. He points out, though, that there are some danger signs which could
Chemical industry spending on plant and equipment will be $2.77 billion in 1966 Per Cent 1965 1966 Change Preliminary Intentions 1965 to 1966 (billions of dollars)
Durable goods industries Iron and steel Primary nonferrous metals Electrical and nonelectrical machinery Motor vehicles and equipment Transportation equipment excluding autos Stone, clay and glass products Other durable goods
10.95 1.88 0.63 2.79 1.98 0.52 0.76 2.39
13.32 2.43 0.69 3.46 2.28 0.74 0.91 2.81
+22 +29 +10 +24 +15 +42 +20 +18
Nondurable goods industries Food and beverages Textile mill products Paper and allied products Chemical and allied products Petroleum and coal products Rubber products Other nondurable goods
10.93 1.17 1.01 1.13 2.47 3.83 0.35 0.97
12.15 1.55 1.25 1.32 2.77 3.83 0.38 1.05
+11 +32 +24 +17 +12 0 + 9 + 8
MANUFACTURING TOTAL
21.88
25.47
+16
Mining Railroad Transportation other than rail Public utilities Communications, commercial and other
1.31 1.62 2.79 6.69 16.63
1.51 1.36 3.82 7.27 17.68
+15 -16 +37 + 9 + 6
NONMANUFACTURING TOTAL
29.04
31.64
+ 9
TOTAL
50.92
57.11
+12
Sources: 1965 preliminary, U.S. Department of Commerce and Securities and Exchange Commission; 1966 intentions, Lionel D. Edie & Co., Inc.
slow the growth rate. With capacity levels being strained and delivery dates being extended, there is a tendency for price increases in capital equipment. These factors could spur inflation. Unemployment is down to 4.4%; skilled labor is at a premium. Also, monetary restrictions may be imposed which may lead to an eventual rise in short-term interest rates. The balance of payments deficit would continue into 1966. This nagging problem, he concludes, may lead to further curbs on foreign loans and investment.
specific structures for creative chemistry Hi
•EH
Government Case Against Penn-Olin Dismissed A final decision may now have been rendered in the Penn-Olin case—a case that, through its five years of litigation, has been watched closely by the chemical industry. The U.S. District Court in Wilmington, Del., dismissed the Government's civil suit against Penn-Olin and its co-owners, Pennsalt Chemicals and Olin Mathieson. The suit charged Penn-Olin with violating Section 7 of the Clayton Act. The Justice Department could now appeal the decision to the Supreme Court as it did an earlier decision on the case. The Wilmington District Court decided in May 1963 that Penn-Olin had not violated Section 7 of the Clayton Act and Section 1 of the Sherman Act. Justice appealed the decision to the Supreme Court. The Supreme Court ruled that the Penn-Olin joint venture was subject to Section 7 of the Clayton Act; it agreed with the lower court that "there is no violation of Section 1 of the Sherman Act" (C&EN, June 29, 1964, page 25). The Supreme Court returned the case to the lower court. Section 7 of the Clayton Act bars an acquisition "where in any line of commerce in any section of the country, the effect of such acquisition may be substantially to lessen competition or tend to create a monopoly." Section 1 of the Sherman Act makes illegal " . . . every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several states." Market. Penn-Olin was set up in February 1960 to make and market sodium chlorate in the Southeast. Before that time, Pennsalt was making sodium chlorate in Oregon; Olin was
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PHONE AREA 201 WH 5-5400 IN N.Y.C. DIAL 947-4934 OCT. 25, 1965 C & E N
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