2550
INDUSTRIAL A N D ENGINEERING CHEMISTRY
selves in newer, relatively undeveloped small inland towns which do not appeal to those who know New England. Perhap more important than these considerations are the changes that are taking place in transportation casts. As rail rates go up and specialized water transport spreads to sea trains and small tankem for the transport of petroleum chemicals, many investigations are bound to show that it costs less to transport raw materials with their lower classified freight r a h to New England, lmrk them here, and then deliver them by motor truck than it does to transport finished products at much higher ratea from faraway points. In normal times when buyem have more to eay about where and how they will buy than hes been the case during the last few years, the higher costs of inventories will he reEected in more reluctance on the part of the buyer to pay for material which is destined to sit in a freight car being shuffled around the oeuntry long after he has had to provide the money t o pay for it. The mads of New England are being improved. Its motor transport is growing. T w o things uppermad in many manufacturers’ minds todsy are taxes and marketa. Taxes are a controvemid subject. With pa& terns as variable as they are, it takes a brave man to generalbe, but it is probably fair to say that taxes in m a y New England aatea are reaeonable and that in three or four the probability of ecnnomy-minded governments is g o d . Even so, the higher standard of living will, for a while at any rate, keep their taxes somewhat above those of rural communities and communitiea b h d with more natural remurces. However, it must he admitted that there are two New England s t a h where the corporate tax picture and the state taxation of individuals are bad and growing worse. In one of tbese, taxation for unemployment bene6ta without merit credits in hurting the more etable industries, which naturally resent paying the mst of “Ey-by-nightem” that shnt down with every softening of the mark& for their pmducta. In an individual-minded community such as New England, theee aituations naturally cauea much talk. It in hoped that h e fore long the public in the two offending dates will take matters into ita own h d s , and in accordance with the g o d sound principles of democracy, throw the spenders out of the government and return to normal situations. Despite this, it is probably safetosaythatthetaxpiotureinNew Englandisnotadeterrentto husiness locating or operating in moat of the states and that in
Vol. 44, No. 11
some it ie sufficiently OUhtanding to attract wide-awake wmWiea. Many pwia of the country regularly advertise tbeir proximity to large marketing areaa We are all familiar with maps showing Cleveland and Chicago as the centera of concentric circles. Well, if w e were to draw a circle with a radius of 333 milea around New England, that circle would include the New England and Middle Atlantic states an well an the northeast parts of Ohio, Weat Virginia, and North Camlina. Within that area, 500 miles from the center of New England, is located about one third of the nation’s population and about half ita manufacturing eetablishmenk. The Middle Atlantic sector, with ita giant New York and Philadelphiametrupolitans,andNew England receivenearly athird of the nation’s inaome, have stable markets, and money to spend. Further, with water transportation at its door, enabling low ccet delivery to the West C&, New England need not taLe off its hat to anyone when it comes to available markets. New England has mueh to offer and already has a sizable, growing chemical industry, as witneesed by Monaanto’s recent expansion of ita plastics facilitka at Springfield, Maw., and Dow‘s new plant at Allyn’s Point near the mouth of the T h e e River in Connecticut. Today’s chemical industry in showing an abiiity to provide substitutes for natural pmduds aa well as to pmduce spe*slties that give rise to end pmducta otherwise impmible. One could talk for hours of the things that cao he made from ailicones, the developments in petroleum chemistry, plastioa, new amides end sminea, new esters, and many others. These developmenta are bringing into the field manufacturers who are chemical processors rathex than chemical pmducers and who take new pmducta and turn them into the painta, car polishw, plastic dishes, shoe soles, wrinkleproof fibers, and thousands of other items. Factoriw, medium and small an well an large, are needed, with alert well-educsted, forward-looking management, teams of highly trained technical and reeearch staffsand engineers, an well an an intelligent, skilled, adaptable labor force willing to do an honest day’s work for an honest day’s pay. New England has the know-how, the willingness, and the ingenuity to turn to new things and make them profitable. This is a remuroe of more importance than any other. It coats nothing to dig it out. It has bean tested and proved many times. Rzmvrr, for re?iisnMuch 81. 1852.
ACCEPT^ Saptambar 11, 1952.
Economic and Market Potentials of the Chemical Industry T
HE fabulous industrial power of the United S t a h in common knowledge the world around. The strategic key to that strength is the ability to MOW, to shift productive murcea to m a t changing needs. Unwnnted ‘%ug&y-whip“ products must be abandoned and new linen introduced. Changing rwourca patterm may dictate geogmphic shifts in production. It is not enough that newly tapped reser~oirsof natural monrwa q a w n new cantem of industry. The established centera of industrial concentration must exhibit continuom Eexibility and resourcefulnem an they continue to grow. That is the achievement of New Endand. Industrial activity Eourished in New England early in the nation’s history. A rare combination of CharaeteriStics favored the early growth of manufacturing and trade. Capital accwnu-
lated from whaling and clipper ship trade was available for invwtment. Materials were available locally or could be imported by water to be worked up by the growing pool of factory trained workers. Water power wan available from the many rivers and streams. Domestic and foreign marketa were readily reached hy water transport. Spurred hy these advantages, industrial production grew rapidly in New England. One hundred years ago the ratio of wage eemers per thousand population in New England was more than two timea the nation’s ratio. Aa the nation developed, some of these advantages remained, but others vanished and still others turned into disadvantagea. The availability of capital, trained labor, and ocean transport are production advantsges today. However, the westward move-
November 1982
INDUSTRIAL A N D ENGINEERING CHEMISTRY
2551
sumer markets. Development of rail, highway, and air transport hen only partially alleviated thin handicap. Development
kindred products industry, rhicti buys approximately 15% of the of electric power tranamiaaion freed industry from locations close net distributed output of the to waterfa& and even turned such locations into unfavorable chemical industry. Altogether, sites. As the years p w , we have placed greater reliance on approximately 48% of tho net disproducta made of metal. thus emphasieing the lack of basic mintributed output of the chemical eral o w and fuels in New England. To surmount such hasic industry is purchased by the che,ngea in. competitive wnditions has been a severe test of adaptindustrial sector of the national ability. market. The Bureau of Labor New Englanders have pioneered in the p r o w of industrial Statistin study of interindustry p r o m by adjusting their manufacturing activities t o accomm+ flow of goods and servim in 1947 date the changing competitive wnditions of a more industrialized (8) also indicates that sales to nation. The transition was literally from whaling ships to jet service olganizationa, such 114 aircraft, from buggy whips to electronies. hosuitals and estina ulam. account far a simificant share (approximately 14%7 of net distributed output the chemical industry. Direct sales to households account for approximately EMPLOYMENT C W G m ZO% and exports for another 8% of net distributed output. From Within that class of occupations g e n d l y daignated as “manuthis evidence, we must reason that the marketingcharaeteristics facturing,” the changea in production and employment were exof the chemical industry for a particular region are almost exactly tenaiVeend occasionally abrupt. During the 28 yeare that ended like the marketing eharacterifitics of the general industrial and in 1947, the cotton textile industry in New England o f f d consumer domestic markets of thst region. The export inm135,000 fewer jobs and the shoe and leather industry dropped off keting characteristics ran be analyeed in term of transportation by 46,000 j o b . Simultaneously, the electrical machinery indusfaeilitiea and advantages. try doubled and the machinery (other than electrical) industry Within its own borders, Sow England providea an extensive added e 0 0 0 w o r h . The net m u l t of the many espruate inindustrial market for the rhcmical industry. In addition, a New duntry c h g m was a drop of .?4l,ooO manufacturing johs. In England location frequently pmvideR advantages in reaching into efiect,industries making durable products, such 88 airplanes, exthe coneentrated industrial marketa of eastem United States. panded employment by 97.000 workers while industries making Also, exports to Canada and abroad are facilitated by Ncv nondurable products, such as cloth, deereased employment hy England locations. 127,000. Within the small geographic area of New England, there arc While these changa were under way in the manufacturing located about 8% of the nation’s mannfacturing establishments. occupticm, more and more New Englandere were entering other The basic industrial market provided by their purchases is amtypes of occupations. The Cemue of Population rev& the pli6ed for producers in the chemical industry hy the fact that the important changes New Englanders made between 1920 and region in well represented in industriG that UBB significant por1940. While employmat in manufacturing, mining, and contions of the chemical industry’s output. Table I reveals that stmction dropped by 120,000 workers, total employment exNew England producers employ shout 14% of the production panded in the region hy 458,000 pemns. More than 800,000 workers in the eight i n d w new j o b were offered in the tries which nra the biggest occupations c l d as earvice, such as clerical workera, For decadu New England hu wawn a n d ’ d a p t d its customers of the chekcal industry. p r o f w i o d men, salea per.conomic atructun to tho growing ~ t i o l u economy. l Published census informaAt pnunt, atendve industrial urd o o m n u r markets sona, and pemns engaged tion does not give enough in the transportation and provide vay r a d opportunitir to pmduin tho chunidetail to present fully the cxcommunication servioea. Gal industry. Then opportunitir ham bm p d y tent of chemiad and allied Throughout these changea u p l o i t d by the industry u it ham dwdopd a drablo products consumed in Ncw in manufacturing activity noionsl production dunctakd by specialty. highEngland However, sonic and other occupations, New value linea of production for tho ?egionsl urd adjacent information about the wnEngland has continued t o marh.tr. Th. high rate of . m w i o n in tha chuniul sumption of mme chemical grow and thus baast the exindill C h O h of 1WrtiON. The and allied products hy 19 pansion of the nation’s inM t u n of many new product. L N& that thdr producspecific industriea is pubdustrial capacity. In 1950, tion m a y rag loaidly be u n d d n in New &gland. lished. Table I1reveals that with 6.2% of the nation’s formaldehyde, phenol, stypopulation and with only rene,andsyntheticmbberm wnsumedin NewEnglandinmuch 2.1% of the land mea, New England produced 8.3% of the value water proportion than the region’s average participation in the of g d added hy manufacturing and received 8.2% of the nation‘s income payments to individuals. nation’s production (about 9%). New England producers m close to the most concentrated These adjustments in occupational structure have not been market for chemicals in the United States. Table I1 emphasizes painless. The involuntary lose of a particular job frequently the high proportions of organic chemical consumption that takes causes peraonsl W h i p to the worker wnoemed. Neverthep l w in northeeatern United States. In three of the six gmups, less, the overriding fact is thst New Englanders have displayed a the ratio somaches two thirda of total United States conpioneering ability to seek out new opportunities and to adjust their activities to new wnditinns. The new opportunities prosumption. The concentration of conmunution of basic chemicals in indicvided hy the chemical industry are challenging. ative of the general concentration of industrid markets in the NURKETINQ CHAMCTERISTICS northeastem m a of the United States. Within 500 miles from Boston, there is concentrated more than a third of all United The chemical industry in the United States in the most widely Staka manufacturing eatablishmenta and manufacturing emintegrated of all industria. Each of the major industry groups ployment, and Slso 37.2% of the employment in the United in the United States #pen& at k t W,000,000 forproducts of the States chemical industry. chemical industry. The largest single customer is the food and
(rCd
,
of
_.
2552
INDUSTRIAL AND ENGINEERING CHEMISTRY
Table I. New England’s Representation i n Eight Biggest Industrial Customers of Chemical Industry, 1947
Rank Industry 1 Food and kindred products 2 Textile mill products 3 Rubber products 4 Petroleum a n d coal products Electrical machinery Paper and allied products .4pparel Leather and products 8-industry total
Total Purchases as % of N e t Distributed Output of Chemical Industryn
% of U. S. Production Workers E m ployed in N.E.h
14.6 8.0 6.0
4.61 22.72 17.48
2.1 1.9
1.76 12 I10
1.8 1.4 1 .2 _. 37.0
15.43 6.88 28.34 13.74
a Calculated from (8). Net distributed output is calculated as total gross output minus purchases by chemical industry, undistributed, and inventory increase items.
* (1).
Table 11. Basic Chemicals and Synthetic Rubber Consumed by 19 Industries i n 1947 % of U. S. Consumption Northeast New England Inorganic chemicals Ammonia, 100% NH3 Chlorine Hydrochloric acid 100% HCI Nitrio acid, 1 0 0 % ’ H S 0 3 Sodium sulfate crude Sodium carbonate Sodium hydroxide, 100% Net0H Sulfuric acid, 100% HzSOc Organic chemicals Aniline, 1 0 0 ~ o Acetic anhydride, 100% Benzene 100% Formaldkhyde, 37% b y wt. Phenol, 100% Styrene 100% Synthetic ‘rubber
6.1 16.6 23.3 28.3 8.5 25.9 26.3 15.3
9.a. 1.4 2.1 0.9 2.5 1.1 6.5 1.9
64.5 21.1 27.0 64.4 67.2 48.1 24.2
6.2 0.1 0.8 11.3 16.6 37.9 11.3
Vol. 44, No. 11
time and may ultimately be reflected in relatively lower shipping costs compared to competitive ports. NEW ENGLAND’S CHEMICAL INDUSTRY Full measurement of the chemical industry in Nex England is beyond our present statistical competence because of the degree to u hich a chemical process or product enters almost every manufacturing, construction, or other industrial activity. It is impractical to seek measurement of the importance of the chemical aspects of paper making, leather tanning, textile finishing, and the other major New England occupations. However, we can appraise the industry in terms of its performance in those firms which the Bureau of the Census classifies as belonging to the chemical industry. About 28,000 persons were directly employed by the “chemical and allied products” industry in New England in 1950. On this basis, the industry ranks as fifteenth in the listing of 19 major industry groups. In terms of the net value of products added by these workers, however, the industry ranks as twelfth in the area, edging out even the lumber and lumber products (except furniture) industry. This achievement is a reflection of the high value of net manufactured product added by each production worker in the chemical industry, an average of $10.78 in 1947. The allindustry average in Kew England was only $5.46, and the record of the chemical industry was exceeded only by its close associate, the rubber industry. The same relationship also holds between the two industries a t the national level. This high standing in terms of value added by manufacture is part of the explanation of growth in the chemical industry in New England. Between 1939and 1947 the industry expanded its employment of production workers by 65%, thus becoming the fourth ranking industry in terms of groITth of that period (see Table V). Since 1947 the record of the chemical industry is better than the other three “growth industries.” The 1949 business recession caused a drop of 5.4% in the total of all production work-
Kearly 20% of the net distributed products of the chemical industry find their way directly into the consumer market. Approximately a third of the United States consumer market lies within or adjacent to New England. Table I11 illustrates the Table 111. Consumer Marketing Characteristics of New combination of population and income that results in a concenEngland and Adjacent 500-Mile Area i n United States trated consumer market within easy reach of New England proNew England 500 Mile U. 5. Marketa ducers. Of particular significance to the marketing managers is Sumber % of U. 8. Number % of C. S. the fact that the population is largely urban, is geographically Population concentrated and easy to reach, and has a high financial ability Total population, July 1, 1950 9,339,000 6.18 42,135,000 28.50 per person t o satisfy individual consumption needs. Income Million 8 Million S Foreign sales are an important segment of the market for Income payments, 1950 14,511 6.67 72,669 33.45 United States chemical producers. In 1947 they shipped about Income per capita, 8% of net distributed products of the industry to foreign coun1950 1.564 108.20 1.685 117.30 Savings tries. As a consequence, the chemical industry was the fourth Time deposits, 6/30/51 (a!l banks) 7,500 13.07 31,533 54.94 largest exporting industry in 1947. It ia obvious that a location Time deposits per with convenient shipping accommodations is a valuable asset in 803 211.90 731 capita, 1950 192.90 Sales the chemical industry. Retail sales, 1948 8,557 6,56 40,141 30.75 The industrial sections of Canada are most advantageously a Contains New England and states of New York, S e w Jersey, Pennsylvania, Maryland, Delaware, a n d District of Columbia. reached from locations in New England. Five separate rail lines connect the industrial areas of New England with the major Table IV. Water Distances to Important Foreign Ports (6) centers of eastern Canada. Many truck ( I n nautical miles) lines cross the border a t convenient cusNew PhilaNew Boston York delphia Baltimore Norfolk Charleston Orleans tom offices and provide direct service European ports between Canadian markets and New Amsterdam 3,265 3,581 3,598 3,438 3,719 3,858 4,915 Le Havre 3,363 3,562 3,220 3,640 4,697 3,047 3,380 England producers. Bordeaux 3,410 3,548 3,684 3,267 4,769 3,094 3,427 The markets of Europe, the MediterMediterranean ports Marseille 3,724 3,897 4,040 4,178 4,057 4,307 5,265 ranean, and Africa are nearer to exportGenoa 3,889 4,343 4,222 4,062 4,205 4,472 5,430 Asiat,io nnrts .~ 9,673 9,8;8 9,961 10,009 9,978 ers using the Port of Boston than any calcuiti-10,021 10,136 10,299 10,437 10,316 10,228 11,188 other United States port (Table IV). Singapore 10,566 11,524 South American east coast Also, Boston is nearer the east coast of nnrtc Riz”de-Janeiro 4,770 4,817 4,741 4,844 4,723 4,721 5,186 South America than any other major Santos 4,928 5,003 5,031 4,908 5,373 4,957 4,910 American port except Norfolk and 5,708 6,173 5,804 Montevideo 5,728 5,831 5,710 5,757 Charleston. This nearness saves shipping
November 1952
INDUSTRIAL A N D ENGINEERING CHEMISTRY
em in New England, a drop almost three times greater than that of the chemical induatry. The smallest drop among the other p w t h industries was still a third more than that of the chemical induatry.
Table V. New England's Growth Industries ( I ) % C b g s in Produotion Workem Induatry Elactrid machinery Msohinory Scept oleatrical TmnBprtsiion equipment Chsrmcal induatry UI induatrira
383847 117.8
1947-60
06.3
-1.8
88.3 81.0
-2.6 -21.0 -7.0
31.8
-5.4
1838-60 f112.3
+56.4 +m.3 +02.0
+24.8
Table VI. Chemical Product. Produced in New England Product 0oap and related products Misodheova ohemiosl producte Industrid orgmic ehemicab, Drum uld lpedicines (chiefly pharmaoeut1caIBa)
Value Added, Million S 62.8
c
'
24.4
47.3 46.0
21.8
24.7 110.8 18.4
114 78.8
~~~
Paint and d i e d pmducte Ve etabie and a n i d oila duatria1 i n o i w i o bemicab F4.S. Gum sod wood chemicals
N . 2 &' I
~
11.7 9.8 6.2
40.0 0.9
21.2
8.5 5.4
4.5 2.4 0.4 .-21.2
The chemical industry in New England is a chorus of soloists. Lacking the basic petroleum or coal m u r c e s , New England producers build their buSiness on ability to pmduce specialties that compete effectivelyin the national market. Otherwise they dired themaelves excluaively to sales within New England. Table VI ~ ~ v e athat l s more than three quarters of the industry's output ts concentrated in the first four general categories. Each of five special products-pharmaceuticala, cleaning and polishing preparations, plastica materials, maps, and glue and gelatin-accounts for more than 6% of the region's output, and in total they account for 51% of all New England production. Furthermore, another 14% of New England's production is scattered among mi~oellancouachemical products. In effect, at least two thirds of the output of the New England chemical industry may be classified as specialty pmducta, as distinct from basic chemic&. This emphaais on specialties, or products near the end of the line in the production sequence, means that New England frequently produces and ships a relatively large share of the total output of that line (Table VII). Among the nation's major industries, the chemical industry has been the psce aetter in tern of gmwth during the past few decades. A sample of announced buSinesa p l m for expansion 4 s that the chemical industry has scheduled 13% of the o u t lays for expansion during 195(4). In 1950 and 1951 the induetry spent 11 cents out of every dollar devoted t o purchase of
Table VII. Chemical Rodvctr in Which New England Shipped Mom Than 8% of National Total, 1947 (1) 61.8 m.0
18.4 16.7
18.2
14.0
12.1
2553
Resmrces
new plant and equipment by United States manufacturing lirm8. In what way is the New England sector of the industry sharing in this growth? It is evident that much of the national expanaion is directly connected to exploitation of new ENGLAND resources; particularly oil, in which New England doee not share. On the other hand, much of the development is for new products and new processes in the specialty lines wheie New England can sh: e. About 55% of New England chemical production workers identilied by product in 1947were in the sixteen United Statesproduct l i e n which more than tripled their value added by manufacture between 1939 and 1947. Almoat all of the other New England production workers in the chemical industry were in thoae national product lines which at least doubled their value added by manufacture between 1939 and 1947. The region haa almost no representation in thoas product lines which failed to double or even declined in value added or production workers between the given yeam.
r
NEWI .
,
INTERREGIONAL TRADE Chemical products constitute an important aegment of New England's interregional trade. It is estimated that imports of chemicals and chemical products by rail and water totaled about 1,500,ooOshort tons in 1950. In contrast, exports by rail and water totaled an estimated 203,oOO short tons during the same year. It is probable that rail and water shipments account for the great bulk, in tonnage meamren A, of New England imports of chemical products b e c a w of the nature of the products and their amenability t o bulk shipment. In contrast, the nature of New England's exports makes it probable that a large volume moves by truck. Therefore, it is reasonable to estimate that the ratio of imports to exports in tonnage terms might he about three t o one. Trucking is very important as a means of transporting chemical products in New England's intemgional trade. A suwey ( 8 ) of the relative importanoe of trucking as a means of transporting commodities in New England's inkregional trade in 1950 PICvides nome guide in judging the movement of chemical products. One hundred and fifty astimatea were collected from New England firms shipping or receiving chemical products that moved over regional boundaries. An average of the 1950 estimates indicate that about 46% of the tonnage of chemical products in New England's interregional trade was shipped by truck in 1950. More than two thirds of the respondents in each of the following commodity clssses reported that they move more t.han one half of those commodities by truck: Chemicals. n.0.a Aloohol. n.0.8. Flsatios &we. medicines.and toilet prapsrstiona Synthetio fiber and soybean oil
About 8.00/oof all railway shipmentaof manufacturingpmducts into New England in 1950 were chemical products. In contrast, only an estimated 2.7% of all outward railway shipments were chemical produds in the same year. Here again the ratio of three to one prevails betwean imports and exporta. This is a reflection of the cousumptiou of chemical producte by agriculture, induatry, and cousumers within the region. About half of all New England's rail freight trade in chemical products is with the Middle Atlantic region. About 58% of all chemical imports to New England originated there and about 47% of all New England exports were deetined for that region. A aihatantial portion of the region%trade by rail is with the east
INDUSTRIAL AND ENGINEERING CHEMISTRY
2554
Table VIII. Chemicals a n d Chemical Products i n New England’s Water Commerce, 1950 (SIe ( I n short tons) Foreign Commodity Synthetic rubbers Naval stores, etc. Drugs, herbs etc. Vegetable oil’s and fat materials Vegetable dyeing and tanning materials Sulfur Coal-tar Medicinalproducts and pharmacentiea1 preparations Industrical chemicals, excl. sulfuric acid Pigments, paints, etc. Other chemical specialties Nitrogenous fertilizers and fertilizer materials Phosphate fertilizer materials Potash fertilizer materials Fertilizers and fertiliaer materials, n.e.0. Miscellaneous chemical products Special category
Receipts
....
1,833 60
Shipments 64 152 21
Doinestic
Reccipts
Shipments
..... 503 .....
..... 437 .....
330
10,536
1,132
16,708
109
16,590
1Q7 56
io:oio
..... 141,948 izs,ois
....
29 8,607
...
- 27
1,663 173 3,554
6,944 395 -3,554
6 917 48
2,985 362 13,626
3 2,661
2,982 -2,229 13,626
7,337 102,871
1,628
1,839
-211
22,044
76
-47
568
....
29
....
....
transshipiiicrit point for materials in transit from source to market. This group includes rubber products, leather, tanning materials, and wool products. 3. Those product,s where “value added h y manufact’ure” represents a high proportion of total value of shipments, and lor ,rhich, therefore, producers greater irccdom from the source of raw materials in their selection of plant locations. Such products are synthetic plastics, drugs and pharmaceutical producti;, soap, arid glycerol.
_ I _ _ ~ _ _ _ _ _
Net b receipts -64 1,681 31
10,868
10,217
.._
Vol. 44, No. 11
71
- 71
.....
875 . I . .
Grand totals 67,520 10,969 56,551 474,689 Figures are for 13 largest harbors and 17 commodity groups only. b Receipts minus shipments.
a
north central region, but evcry part of the United Statcs sharcs in this trade with New England. New England producers rely heavily on import’ of che1nid products by water (Table VI11). This is particularl~~ true of the fertilizer industry and firms using basic industrial chemicals. It is evident that Sew England producers make considera.blc use of water shipments to move chemical products in domestic commerce. About 86% of the n’ater commerce in tonnage measure was with other sections of the United States in 1950. It is interesting t o obscrve that about a third of all shipments to foreign countries were chemical specialties. Here is direct evidence of the nature of Ne,, England’s production, LOCATION CHARACTERISTICS Proximity to markets has been the major orienting factor in development of the cheniical industry in New England. Availability of qualified labor, plentiful and high-grade water, and port locations have been auxiliary aids in this development. Within definite limitations it appears possible to group the area’s chemical industries according to the folloTring economic pattern (census data by products and by region are severely limited by nondisclosure of firm identity in many important lines): 1. Those products for which industry economics or technology dictates production close to markets, even if relatively high cost may be involved in transport,ation of raw materials. This group includes such products as sulfuric acid, fertilizer, manufactured gas, lime and cement, paint and varnish. For products in this group the New England producer competes effectively within the six-state * areas, plus in some cases part of northern New York state and southeast,ern Canada. To the south and west competition is rather effectively blocked off by the concentration of chemical industries in the New York-New Jersey-Pennsylvania area. 2. Those products based on indigenous raw materials or on by-products from local industries. An example of the former type is wood pulp and paper, and of the latter type is coal-tar product’s. Also included in this group should be those industries for which New England is strategically located as a
62
..... .....
Seth receipt3 . . . .6H .
..... 1,070 14i; i 4 a 91,043 -469
The bulk of Xew England’s produrtion falls into group 3. Each of 10,547 57,529 five industrial product groups’that ~;~~~ ,:,”,”the account for 51% of Sew England’s chemi(,a1 output fits into this cat,egory. Many 3,563 3,774 1,822 101,049 othcr products would also fall in this ..... ..... group. 8,110 15,894 It is apparent that the absence of basic 5,689 --4,814 chcrnical raw materials, the problem of .... ..... transport,at,ion,and high costs of fuel and 70,945 408,744 have caused a process of selection in the development of New England’s chemical industry. This conclusion is supported, not only by statistical analysis, but, by appraisals of location factors which New England chemical manufacturers have made as 8 result of their own experience. Judging from those members that reported, manufacturers of chemical products in xexl-England are among the most q t i rllist,icproducers in the region. Table IX summarizes their lu+s toward major locat,ion aspcrtP ( 7 ) . As expected, the mO erious draN.backs associated a-itli xew J!:ngland locations for chenlical producers are the trio of fuel, markets, and transportation. Saturally, if fuel or national markets were not s3 distant, transportation would not be listed a disadvantage. Of the reporting “adequacy and of transport,at,ion facilities” to be a disadvantage, seven aIso roportcd “markets” as a dkadvantage. The combination indi37,035 469
Table IX. How 26 New England Manufacturers of Chemical Products Appraise Their Locations, 1949 Per Cent Listing Factor as: Important Of little disadvantages importance 12 58
Adr,antago Ratioa 2.3
Importnnt advantages 26
Character force Of labor Relations with laboq Adequacy of electric power Location: foreign materials
Infinite Infinite
54 35
Infinite
27
lnfinite
11
.. ..
tions living .4ttitude of comniunity ,Tater supply Efficiency of niachin-
Infinite
46
..
50
4
10 0 8.0
38 31
4
58
4
61
..
Location Factor ~ i factors i conibined
erv
force
Of
Climate
dings
labor
..
..
42 65
No answer 4 .
I
..
73
..
54
35
4
7 5
50
8
42
..
7.0 6.0 3.7 3.0 3.0
27 23 42 35
4 4 11 11 4
65 73 42 54
4
85
..
65 19
..
69
..
11 ITage rates Financial and distribution facilities 2.5 19 8 1.6 50 31 Location: markets Location: domestic materials 0.6 11 19 Cost of transportstion 0.5 23 42 0.3 8 23 Cost Of 0.3 8 31 Cost ofand electric local taxes power 0.1 4 27 .. 15 Nontax laws a Number of advantages cited by firms in industry divided by number Detail may not add to 100% because of rounding.
.~
4
..
..
8
27 8 69 .. 58 4 65 4 77 8 of disadvantages.
INDUSTRIAL AND ENGINEERING CHEMISTRY
N m h r 1952
Value Added by Manufactum Table X. Relation of Ratio: Valu. of shipment. fa Growth in New England Chemical Industry. ISW-47 ( I ) New Eoghnd Rank growth of
-%io. d u e pmd. workers oddedlshiomsnta. % 1939-47
lndustrv
74.32
11
51.08
1
49.63 49.08
4 2 9 6 8 7 3 12 10 5
46.21 42.30
39.95
37.81 38.89 35.87 30.28 29.31
cates the likelihood that transportation cost is a relatively large share of delivered price and thus the market is restricted geographically. Emphasizing the role of markets in New England's develop ment, it is important to note that half of the producers designated "location with respect to market for your products" ~e a location advantage. The other important advantages emphasized were the adequacy of labor and water in the region. The i n h i t e adpantage ratio rating of "adequacy of power" is a further indication that New England producers have refrained from making chemical products requiring vast amounts of low-cost power. The favorable rating of the four anpects of the labor mpply LB a reflection of the level of labor costs in New England as well as other factors. New England producers appear to have a cost advantage resulting from relatively low wages in the chemical industry in the region. The median rate of average hourly e m inga in 1949in New England was $1.35, only 89.4% of the national median rate and only 83.3% of the level in the Southwest. Only two regions, Southeast and Mountain, had lower median rates.
POTENTIAL DEVELOPMENTS
In attempting to forecast the future of New England's chemical industry, there are certain fartors which afford grounds for optimiam.
AE cheap domestic mureen of certain basic raw msterials tend
to become depleted, there is likely to be increased reliance on water-borne imports of these materials. In mme c e s this may Mt the center of gravity of roduction from interior locations along the seaboard. b i l e New England one of ~ e v potential d beneficiaries of such an industrial shift, ita competitive pm ts would certainly be enhanced. our modem age is witnessing the emergence of new industries a t a constantly accelerating rate (cf. antibiotics). Many of the new products fall into general category 3 above and may,readily he produced in New England. Furthermore, the p w q shifting nature of the mdu?try facilitates selection of independent of earlier locations. new K& The trend toward incressed diversification and specialization would appear to offer favorable bilities for Now En land which h r i c a l l y has tended tp G e t @ with induatriea&nd rn l u h "value in whch tonnape IS the -.added" than mth th&-factor. Table X relatea tbe wth of individual %emical product industries to the ratio of v a g a d d e d by manufacturing as i pementage of total shi men- for those industries where auch~iof o m t i o n UI available. Pt ia interestin to note that the top four in ratio d u e contain three of the tonfour in terma of mwth in NeaEhgland. The trend t o w d w o f lighter materials, particularly plastics, to replace steel and other heavy metals operatea to reduce New En land'a lack of basic metallic oren. oms. Increased uae of ple+ttics, nlastics. Encland'a in &e h %e omduction of which New Enzland has a iine start.*will start. mll impmve the repion's competitive posiCion in basic materials.
waul%%$
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~
~
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It w perhaps unduly speculative to try to foreeast the linea of chemical demlopment which will make the mont apectecularprogmm over the next few d e d e s . However, the following am offered
2555
Resozimes
as examples of industries with important growth possibilities:
I
Petrochemicals
Silicones Fluoro chemicals Pharmaceuticals (espeoially antibiotios) Synthetic fibers Plsstic materials
N
1
#GLAND
All these fields would seem to offer New England a wide range of opportunities, not for the production of the basic materials, hut for the manufmture of diversified end products from intermediatea imported from other sections of the country. Growth in the chemical industries is largely dependent on invention, This is dramatically illustrated by two of the leading concerns in the &Id. E. I. du Pont de Nemours & Co. reports that 600/, of its current revenues come from products which were unknown a short generation ago. Yet D u Pont has one of the longeat business histories in the United States. Chas. P h e r and Co., a leader in the pharmaceutical industry, reports that 60% of its 1950 sales volume represented products which were not commercially available as recently as 10 years before. In the year 1950 alone Pfieer added 19 new products t o its line. It is interesting to raise the question as to whether New England may not find its logical future position in the chemical industry to be that of an incubator for new, specialized, and diversified chemical industries. For such a position, it can be rated as having these important essets:
Close proximity to major consuming markets, ,whirh facilitates the process of coordinating produrtion specifications with market re uirements. %loseproximity to unexcelled facilities and personnel for basic research, in the form of universities, medical centers, and i o d w trial research laboratories. Ready availability of relatively inexpensive intelligent labor, with meat diversification of kill^ and ahilitv careful - to wrform . contrA tasks. Local availabi!ity of large aggregations of capital funds and skilled financial management. General availability of adequate supplies of pure, soft water and clean air, both important for industries requiring precise control. The catalyat required for succesrrfnl exploitation of these reaourees is skilled, upto-date management. This resource is mobile, and not coniined to any area. New England should be able to compete for it effectivelyby reason of itn advantage. an a place to live.
LITERATURE CITED Bureau of the Census. U. S. Deot. of Cornmeroe. "Census of Meuufscturea," 1947. (2) I W . . S& YCIO-23, July 11, 1961. (3) Bureau of Labor Statistic*. U. 8. Dept. of Labor. "Interindustry Flow of Gwda snd Services." 1847. (1)
(4) BUaineas Week.
(5)
Feb. 2. 1952.
Chief of Engineers. U. S. Army. Annual Report (preliminary). 1961.
(6) C o w of Engineers,U. 8. Army, and U.S. Maritime Commiarion. "The Port of Boston, Mass.," Pmt Serica No. 3. p. 319 (revised
1946). (7) Fsdersl Reserve Bsnk of Boston. M d h l y Rm'w, July, August 8aptember 1948. (8) I W . , January 1952. R i o r r v r ~for review March 31.1952
Accrmeo July 25. 1952.
END OF SYMPOSIUM Reprint. of this -podurn maybe pvrchaud for 7s cents each fmm th. Reprint Daputmant, Amuiean Chmical Sxiety. 1155 Sixteenth St.,N.W.. Washington 8. D. C.
