to be unreliable because they are dictated by phenol demand. Allied and several other U.S. acetone producers that submitted testimony opposing Lederer's bill don't buy these arguments. Although other producers were involved, Allied assumed the lead role in opposition to the bill. With its acetone plant near Philadelphia, Allied also is a corporate constituent of Rep. Lederer. But Lederer wasn't aware of this when he introduced his bill. The producers, of course, believe that Customs acted properly when they classified cumene-derived acetone imports as benzenoid derivatives. More important, they believe that Rohm & Haas' argument about the unreliability of domestic supplies misses the mark. Last year, U.S. acetone production was 1.92 billion lb. Based on an estimated industry capacity of 2.58 billion lb, the industry operated at only 74% of capacity. Thus, argue the producers, plenty of acetone is available. The isopropyl alcohol-acetone situation is even worse. Because acetone derived from cumene is an "unwanted by-product," it usually sells at a slightly lower price than acetone from isopropyl alcohol. Historically, isopropyl alcohol-acetone producers make up the difference between total market demand and that supplied by cumene-based producers. Last year, an estimated 645 million lb of acetone was produced domestically from isopropyl alcohol. But capacity was 1.05 billion lb, which gave producers a lowly 66% of capacity operating rate. Shell Chemical estimates that this operating rate could fall to 54% by 1978 and plummet to 51% by 1980. With this much acetone capacity lying unused in the U.S., producers see no reason why acetone imports should receive what Allied Chemical calculates to be an 86% tariff reduction. That's what would happen if imports of cumene-based acetone were allowed to come in under TSUS 427.60. Allied figures that, if H.R. 5286 were enacted, the duty on most imported acetone would fall from 3.7 cents per lb to 0.5 cent. As it stands now, acetone imports will continue to enter the U.S. under two different tariff classifications, depending upon how it is produced. And acetone import statistics will remain confusing until later this year, when acetone imported under the basket TSUS 403.80 is pulled out and reported separately. Imports of acetone under its own specific classification (TSUS 427.60) fell from a recent high of 58 million lb in 1971 to 38 million lb in 1974, the year in which Customs changed its classification status. In 1975 acetone imports were 3 million lb. Last year, they were only 4000 lb. But those numbers refer only to material imported under 427.60. According to the International Trade Commission's report on imports of benzenoid chemicals, 15 million lb and 16.7 million lb of acetone were imported in 1974 and 1975, respectively. The report doesn't identify the TSUS number. But, since the report deals
specifically with benzenoid imports, presumably this reported acetone came in under TSUS 403.80 in addition to the acetone that entered under 427.60. Some producers suspect a case of double reporting, however, especially for 1974. This is because Customs didn't make its ruling until December of that year. •
Aluminum demand will exceed supply this year Billions of lb
3.9 3.8
•
3.7
Tight market for aluminum forecast The aluminum industry, a large user of industrial chemicals, is facing a period of tight supply, according to Cornell C. Maier, president and chief executive officer of Kaiser Aluminum & Chemical Corp. And the U.S. will have to rely increasingly upon imports, he says. Speaking to a group of security analysts in New York City, Maier said the principal reason for short supply is that U.S. capacity will grow only about 0.4% annually through 1981. Total capacity in noncommunist countries will increase at a rate of about 2.5% per year during this same period. Both of these figures are well below either historical or expected future demand growth rates, he notes. Maier also says, "Unless the twin problems of energy availability and environmental restriction are solved in the U.S. in future years, it seems likely that any new capacity will be built offshore— and this will further increase our reliance on imports." William Hobbs, vice president and treasurer of Kaiser, says that prices must increase greatly to justify expansion of U.S. capacity. Hobbs told the analysts' group, "Using today's estimated capital costs for primary aluminum and alumina, we believe that a market price about 6 cents a lb higher than the current price would be required to warrant U.S. incremental expansion of a moderate size." Current price of aluminum metal is about 51 cents a lb.
Maier: reliance on imports
Supply
1
3.6 3.5 3.4
ill ^^•iiii
H
1 r
3.3 3.2
—H-H
nB H Qtr 1
Qtr 2 Qtr 3 1977 Source: Kaiser Aluminum & Chemical Corp.
Qtr 4
Expanding further back in the production chain would involve even higher prices. Hobbs says: "As for green site expansion—and here I'm talking about a project back to bauxite production—the price that would be required to justify this type of program is significantly higher We believe a market price in the range of 60 cents a lb would permit the building of new green site capacity." He calls this a moving target which is totally dependent upon siting, environmental, and energy considerations. Kaiser is predicting that shipments of aluminum will greatly outstrip total supply—including production and imports—this year. Total shipments for 1977 will be about 14.175 billion lb, whereas supply will be about 13.740 billion lb. The shortfall will be made up out of inventories. The second quarter of 1977 will account for a disproportionate part of shipments in the U.S., when 3.818 billion lb of aluminum, or about 27% of the year's shipments, will be counted, according to Kaiser estimates. At the same time, the company estimates that production will fall from 2.259 billion lb in the first quarter to 2.246 billion lb in the second quarter. Besides inventories, imports will make up much of the difference. During the second quarter, imports will rise to 12.5% of total supply, up from 9.1% during the first quarter. Imports are expected to run about 10.7% of total supply during the year. In the aluminum industry, imports will outpace exports more than 2 to 1 this year, Kaiser forecasts. The U.S. will get about 1.465 billion lb of aluminum from foreign sources, while exporting only about 715 million lb to other countries. One cloud that remains over the aluminum industry is the drought in the western U.S. (C&EN, March 14, page 6). Although the area has received some relief recently, some production facilities in aluminum reduction plants are still shut down. Maier says that a major concern is another dry winter in the area. • May 30, 1977 C&EN 9
