C&EN A N N U A L REVIEW
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Developments in the Chemical and Process Industries Έ^ζχί^^ΩίΖ,ΙΓΠ^ΙΤΙΙ.
THE BUYER'S MARKET RETURNS GEORGE W . M E R C K , President, Manufacturing Chemists' Association, Inc., Washington, D. G
The successful transition from a seller's t o a buyer's market w a s 1949's most significant accomplishment b y the chemical industry . . . Chemical manufacture as w e know it has developed largely since the last de pression. Through 1948 the period was one of almost constant growth, with demand normally running ahead of our capacity to produce. Last year's storm clouds, therefore, provided the first real test of the industry's stability in t h e face of adverse economic pressure. It met that test satisfactorily. Although sharing in the general business recession, never theless it demonstrated a resilience and a vitality beyond that of almost any other of the basic industries. The chemical manufacturer's traditional emphasis upon research helped meet the challenge. As demands from old-line customers weakened, often there was a new product o. a newly discovered use for an old one that could open up en tirely new markets. And faced with necessity, the industry proved that its selling could match the efficiency of its production. Looking ahead, international complica tions offer the most serious immediate threat to the continued progress of the industry. Aided by Marshall Plan funds, foreign competitors are now in a position to benefit substantially from further tariff reductions or currency devaluations, per haps altering the whole pattern of chem ical imports and exports. Equally funda mental are our chronic domestic diffi culties—the shortage of venture capital, the depressing effect of burdensome taxes, and continuing proposals for punitive government regulation. Solutions must be found for these economic problems it we hope to avoid the slow attrition of our enterprise economy. Production Trends in 1949 Production, measured by the Federal Reserve Board index for industrial chem 12
icals (1935-39 = 1 0 0 ) , fell from an alltime high of 450 in December 1948 to 388 in August 1949, but recovered to 410 by October. The last quarter of 1949 promises to approach the corres ponding 1948 period, and continued high production is expected at least through the first half of 1950. During 1949, the production of inor ganic chemicals held up better than the output of organics, reversing the emphasis of recent years. Actual increases were recorded in some instances, notably in synthetic ammonia, ammonium nitrate, phosphoric acid, and hydrochloric acid. Sulfuric acid production during the first seven months slightly exceeded the out put for the corresponding 1948 period. Among organic chemicals, the major de clines recorded during the first seven months were for acetic anhydride, for maldehyde, phthalic anhydride, and ani line. Benzene production dropped slightly, and coal shortages resulting from strikes indicate it is quite unlikely that there was any recovery during the concluding months of the year. Sales of certain types of plastic ma terials were higher than in 1948, although
. . .
others like amino molding p o w d e r s dropped to a level approximating that of prewar years. Production of the newer pesticides, particularly the organics, sub stantially exceeded 1948 figures; D D T alone showed an increase of more than 200% for t h e first seven montlis. O n the other hand, decreases were rioted in some of the older types, such as cal cium arsenate and lead arsenate. Although the U. S. Department of Commerce reported a general decline of Hr/( in wholesale drug sales during t h e first seven months, new highs w e r e at tained in certain fields. Streptomycin production, for example, aggregated 5 1 , 832,788 grams during the first eight months—more than the combined output of the three preceding years. Sales and Prices The dollar volume of chemical manu facturers' sales, according to the Bureau of Foreign and Domestic Commerce in dex ( 1 9 3 9 = 1 0 0 ) , dropped from 300 in January to 2 5 5 in July, with til*? sevenmonths' total showing a decline of \3tyfrom 1948. Somewhat lower wholesale prices c o n -
ζ~^ EORGE W. MERCK, president of Merck & Co.,
^ I n c , Rahway, N. J., and of Merck Co., L t d . , Montreal, has a long record of distinguished pub lic service and has b e e n the recipient of m a n y honors in and out of t h e chemical industry, in cluding the Cold Medal of the Society o f Chemi cal Industry in 1947. H e is also chairman o f the executive committee of t h e Manufacturing Cîiemists' Association. Born in New York, he graduated from Harvard in 1915, and in 1925 took over the reins from his father, w h o had founded the company in 1891. Today the company has grown to be one of t h e largest producers of pharmaceutical and medicinal chemicals.
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49 tributed to this shrinkage in dollar volume. As measured by the Bureau of Labor Statistics index for industrial chemicals ( 1 9 2 6 = 1 0 0 ) , October prices stood at 115.5 a s compared with a 1948 average of 126.7. Price averages in 1949, h o w ever, reflected certain abnormalities in the solvents field, the outstanding example being a raw materials development which caused the price of ethyl alcohol to tumble from 70 cents per gallon to less than 2 0 cents within a few weeks. Employment and W a g e s The number of workers producing chemicals and allied products reached an all-time high of 532,000 in October 1948. T h e n c a m e a decline to 453,000 during July 1949, with gradual recovery thereafter. The latest figures are for September, with the total at 478,000. The employment curve roughly paralleled t h e production picture. T h e major drop w a s felt in industrial organic c h e m icals, a lesser decline in the inorganicfield, and employment in the drug industry remained substantially constant. Employee earnings readied a peak in 1949 despite the virtual elimination of overtime and a reduction in the average work week. The upward trend contrasted with cost of living figures, which d e c l i n e d fractionally during the year. T h e recent trend and the dollar-value of earnings in the industry, with comparable data for "all manufacturing," are shown by the following BLS figures o n total compensation, which include shift premiums, overtime premiums, and incentive bonuses as well as the basic w a g e rate: Average Hourly Earnings Sept. 1947 1949
Average Weekly Wages Sept. " 1947 1949
Industrial inorganic chemicals $1.38 $1,595 All manufacturing $1.24 $1,407
$55.65 $64.12 $49.97 $55.72
Labor Relations Union relations during 1949 were relatively stable, with the chemical industry suffering from fewer work stoppages than t h e majority of other industries. Preliminary BLS statistics for the first six months of the year show an industry total o f 191,000 man-days idle, with 10.800 workers involved. This repreV O L U M E
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sented 2.2% of the average number of production workers employed during the period. Nationally, work stoppages totaled 15,100,000 man-days and involved 1,680,000 workers, or 4 . 5 % of nonagricultural workers in privace employment. Contract negotiations in the industry followed a trend apparent throughout the country. Greatest emphasis was on socalled "fringe benefits," mostly payment for additional unworked holidays, premium pay for holidays worked, and liberalisation of vacation benefits. In 1950, as a backwash from the coal and steel strikes, union emphasis is likely to be placed upon pensions and other forms of so-called social insurance. With many retirement and insurance plans already in force in the chemical industry, it is impossible at this time to assess the probable outcome of this move. The definite progress the industry has made toward the regularization of employment also will aifect any demands for a guaranteed annual wage, popularly believed to be the next major objective in labor's program. The chemical industry takes a back seat to no one in its energetic drive to make its employees' jobs and futures as secure as possible. Nevertheless there is a growing conviction within the industry that attempts to bring security by fiat can b e pushed too rapidly to b e absorbed by the increasing r>roductivity of the industry. Insistence upon too much security too soon might easily impoverish the industry—reducing the research and expansion and progress that comprise the foundation of the high w a g e levels and the above-average security that the industry's employees now enioy. With respect to wages, there was an obvious trend toward stabilization during 1949. T h e majority of increases ranged from 5 to 10 cents per hour, substantially less than in the earlier "rounds" starting in 1946. Numerous contracts were negotiated without changing existing w a g e levels. Whether this trend will persist into 1950 may depend upon the impact of two minimum w a g e adjustments that are yet to b e experienced. T h e Jan. 25 statutory increase to 7 5 cents will affect few workers in the industry directly, but may inspire demands to maintain existing differentials. Of even greater significance is the forthcoming decision of the Secretary of Labor, acting under the authority of the Walsh-Healey Act, as to the "prevailing" minimum w a g e which must b e paid by chemical firms in order to qualify for government contracts. Various labor unions have asked that this minimum b e set at $1.20 or even higher, whereas the industry—through the Manufacturing Chemists* Association—has pointed out that any minimum higher than 95 cents per hour, w i t h a 10% geographic differential, would exclude a clear majority of firms in several major branches of the industry from bidding on government work. Chemical research expenditures during
J A N U A R Y
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1950
the past year did not follow t h e production dip but continued to climb. The bulk of 1949 construction in the industry consisted of new or expanded research facilities. A research budget of 37c o f annual sales is no longer considered u n usual. In consequence, the flow of n e w products continues. N e w fibers such as orlon, celcos, fiber V, Vinyon, and saran h a v e made progress in the face of a substantial drop in rayon consumption. Powerful new organic insecticides are n o w b e i n g evaluated and field-tested. Availability of so-called synthetic pyrethrum, w h i c h duplicates one of the four active ingredients of the natural product, has b e e n announced. The plastics industry perfected a n e w flame-resistant cellulose acetate and a n improved ethyl cellulose, which is marked by increased surface luster and improved moldability. Progress in the applicability of polytetrafluoroethane and p o l y a m i d e resins continues to b e reported. Less spectacular, but equally important, a r e the continuing modification and improvements of existing plastics raw materials, which increase their range of usefulness and widen their potential markets. The drug and medicinal chemical i n dustry, through intensive research and i n collaboration with academic and research institutions, continued to bring forth n e w discoveries and new x">roducts of significant value to the health and well-being o f mankind. Products developed during t h e past year show real promise for the treatment of arthritis, acute rheumatic fever, certain types of tuberculosis and p n e u monia, venereal disease, dysentery, a n d heart ailments. In the antibiotics field Chloromycetin, aureomycin, dihydrostreptomycin, and bacitracin have been developed sufficiently to show their potentialities in t h e alleviation of a wide? variety of diseases of b o t h man and animals. Neomycin and others are being investigated. T h e new vitamin Bis; cortisone, a n adrenal cortical hormone; A C T H , a pituitary hormone; and radioactive isotopes are other products w h o s e potentialities are of great significance. Chemical p r o ducers are striving to develop syntheses, improve manufacturing operations, a n d increase production and reduce costs s o that these new products will b e generally available to the public without needless delay. Transportation Costs Mount Mounting transportation costs, particularly in rail movements, not only h a v e speeded decentralization moves on t h e part of many chemical producers b u t have aided in creating a bulk m o v e m e n t of chemicals by water which is rapidly reaching substantial proportions. Formaldehyde and methanol are n o w moving by tanker in considerable v o l u m e from Texas plants to East Coast points at less than half the cost of shipment b y rail. Additional liquid organic chemicals will soon join the parade, s o m e of t h e 13
movement being i n freight vessels specially equipped with portable tanks that can b e lifted by crane and placed on railroad trucks or cradle cars. Terminal facilities on the East Coast are being enlarged to handle this traffic. Inland waterway shipments of liquid caustic, molasses, chlorine, sulfuric acid, and hydrochloric acid—the latter in specially designed, lined tank barges—are moving long distances. Regular barge movements of this type include shipments from the Gulf area to Ohio River ports. Tank trucks continue to supplant tank cars, particularly around metropolitan producing and distribution points, where one tank truck will take the place of approximately a half dozen tank cars because of increased mobility and the elimination of liilie-consuming switching operations. No serious shortages in transportation equipment were noted during the past year, although covered hopper cars at times were scarce. Containers have been in adequate supply with the possible exception of burlap bags. T h e industry has carried on an active program of container research and close contacts have been maintained with government officials in the various regulatory agencies. Legislative Proposals Federal, state, and local legislators have devoted more than usual attention to legislation affecting chemicals during 1949. At the federal level, Sen. Gillette's Subcommittee on Utilization of Farm Products held hearings on the substitution of synthetic materials for natural products, primary emphasis being placed on food emulsificrs, synthetic detergents, and industrial alcohol. House Resolution 207, calling for an investigation of the effect of synthetics, commercial fertilizers, and economic poisons upon the national health and well being, has been introduced by Rep. Kecfe. T h e Food and Drug Administration has scheduled hearings on permissible tolerances for insecticidal sprayresidue
Proposals also have been advanced in the Congress to broaden the scope of the Federal Caustic Poisons Act; to require the labeling of synthetic detergents; to require more comprehensive labeling of export drug shipments; and to require distinctive containers for poisonous drugs. In each of these instances, the chemical industry has offered to cooperate by furnishing technical information and other assistance. With 44 legislatures in session, 1949 also was a busy year for state legislation. Interest in water and air pollution abatement was keen, and model abatement acts drafted by the chemical industry formed the basis for legislative action in several instances. Certain states passed laws or issued regulations in general conformity with the Manufacturing Chemists* Association's recommendations regarding the labeling of hazardous chemicals and economic poisons. Still other state legislatures are considering laws regulating the transportation, storage, and use of hazardous substances. Los Angeles, among other municipalities, has issued extensive regulations along this line, soon to become effective. Voluntary action by the chemical industry itself is rapidly minimizing the need for extreme regulatory action. Millions of dollars are being spent by individual manufacturers for equipment which will deal effectively with waste liquids and gases, and the industry as a whole sponsors a comprehensive exchange of technical information with its customers and others, highlighting the precautions necessary for maximum safety in the transportation and use of all hazardous products. But the industry has no quarrel with intelligent legislative action to supplement these voluntary efforts. It stands ready at all times to cooperate in the enactment of sound and reasonably uniform legislation, recognizing that this is its best safeguard against adoption of laws and regulations hastily drafted.
It is encouraging that in 1949 thi.s constructive approach achieved a new high in recognition and acceptance by the nation's legislators and by the public as well. Foreign Competition Highlights International Developments With U. S. exports of chemicals during the first six months of 1949 topping all previous half-year records, it may seem incongruous to contend that foreign competition is rapidly becoming the one big threat to the continued progress of the ehemicar*hidustry. But many of the leading chemical-producing nations, notably Western Germany, are fast working out of their postwar production difficulties and are coming closer to self-sufficiency. Many Marshall Plan countries contemplate using American dollars for even further expansion in their output of chemicals, dyestuffs, fertilizers, and plastics. On top of this is the Administration's stated desire to grant further general tariff concessions despite the existence of rigid quotas and restrictions against American imports by nearly all the countries which are party to the existing General Agreement on Tariffs and Trade. An additional average reduction of 2(S% in the chemical tariff schedule is rjermissible under the existing terms of the trade agreements act. Of major concern to the chemical industry is the extent by which this margin may be reduced during the third round of tariff negotiations contemplated by the State Department for the latter part of 1950. American efficiency in chemical production is such that w e can afford to give certain odds to foreign competitors, despite their lower wage and production costs. But this elasticity has its limits. Too extreme a policy would seriously curb our domestic output, reduce employment and payrolls, and—in view of the military usefulness of certain of our products and processes—actually may jeopardize our national defense.
C&EN A N N U A L REVIEW
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Developments in the Chemical and Process industriés'^"fX-
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NEW DISCOVERIES MARK F O O D I P R O G R E S S C. G . K I N G , Scientific Director, Nutrition Foundation, Inc., New
York, Ν. Y.
The year's progress in foods a n d w a s characterized
by several
. . . ( 1 ) the adult human protein require ment in terms o f the quantities of indi vidual amino acids needed to maintain nitrogen balance, ( 2 ) evidence of new vitamins to be isolated, ( 3 ) clearer defini tion of vitamin, mineral, and amino acid functions in health and disease, ( 4 ) ad 14
important
nutrition
discoveries, including . . .
vances in tracing the course of combustion of sugars, fats, and amino acids in living cells, ( 5 ) an improved world food supply, and ( 6 ) a better understanding of the relations of food to human health. The increasing availability of radio- and heavy isotopic elements, especially of C", C H E M I C A L
with which to t?.*· individual components in complex reaction systems—characteris tic of all living cells—has made it possible to explore biological materials and proces ses with far greater efficiency and insight than was possible with older techniques. Precise, exciting, and valuable as these AND
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