October, 1927
INDUSTRIAL A N D ENGINEERING CHEMISTRY
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Economic Factors in Chemical Industry' By John E. Teeple 50 EAST41sT STREET, NEWY O R K , N. . ' 1
HERE is no commonly accepted definition of chemical industry. We all feel in a vague way that sulfuric acid and caustic soda are chemicals and that flour and automobiles are not chemicals; but how about iron, or aluminum, or cement, or sulfur? How about gunpowder and face powder, soda crackers and soda pulp? I n looking over the chemical industry monographs presented t o the Economic Conference of the League of Nations we are struck by the difficulty of finding a common ground for comparison of statistics. I n Germany artificial silk is a chemical; in England and America i t is a textile. I n the latter countries soap is a chemical, while in Germany it is not. I n Germany and France potash is a mineral; in America it belongs decidedly to the chemical industry. Even within our own Government, according to the Bureau of the Census, coke and cottonseed meal are chemicals while turpentine is not; according to the Department of Commerce turpentine is a chemical, whereas the other two are not, Such vagueness presents a beautiful opportunity for the speaker to manufacture his own definition. This definition probably cannot be used for classifying statistics, but it has repeatedly proved of value in forming a judgment as to the future of a given enterprise.
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Characteristics of the Chemical Industry
There are, it seems to me, about four characteristics that identify a business as belonging to the chemical industry: ( I ) It produces something that is essentially chemically different from its raw material. This condition would obviously exclude mining, fishing, lumbering, banking, and transportation, but would include agriculture, cattle-raising and much of what we call the manufacturing industry. The transformation of corn into hogs, or of grass into butter, or of chicken feed into eggs is certainly a chemical operation. (2) A preponderance of the operations involved must include chemical changes. The mere fact that iron is pickled in the making of rivets is not sufficient to classify a rivet factory as a chemical plant. (3) The chemical processes must be under the direction and control of trained chemists who are fully conscious of the chemical operations involved, and the practice must be a t least abreast of current chemical knowledge and progress. When the cook ignites the gas and prepares your three-minute egg for breakfast she is dealing with reactions in the vapor phase, heat transfer through metals, specific heat of various substances, and even converting sols into gels irreversibly, but on account of the mental status of the cook the operation is only cooking and is not a part of chemical industry. So a tannery, a steel mill, a glass works, a rubber factory, a smelter, or even a sulfuric acid plant may be a part of chemical industry or it may be only a cook shop. (4) The direction of the policies of the business as a whole, including the decision of what shall be manufactured and where and how and when, must be in the hands of men not necessarily professional chemists but a t least having chemica1 training and understanding and a chemical outlook on business. This is true because a chemical business more than any other must progress or die. Its research and development departments of today must be working on matters that will not appear in the operating sheet for possibly five 1 Presented before the Institute of Chemistry of the American Chemical Society, State College, Pa., July 6, 1927.
or ten years. This implies that the actual head of the company, not necessarily the nominal officers. must have a chemical understanding and a capacity for visualizing in a considerable degree the direction of future chemical progress. Whether a business belongs to chemical industry or not depends more on the state of mind of the management than i t does on the character or use of the products. Any well-established and successful chemical industry today could disband its research and development departments entirely and probably show no ill effects in its profit and loss statement for three or fire years. It might even show a temporary increase in profits because of decreased expense. The momentum carries the business along for a while but soon the curve begins to descend, a t first slowly, then with increasing speed, until some day an announcement comes that what is left has been taken over by a more progressive concern, or that because of changed conditions the business is no longer profitable. One of the greatest resources of a successful chemical business is its accumulated mass of fresh and usable information and experience ready to be reduced to practice as needed. Abandonment of research means eating up this resource or allowing it to mildew without replenishing it. Unless there is chemical vision in the management this resource will never be fully developed or directed. Ramifications and Progress of the Chemical Industry
Our definition, then, of chemical industry includes the manufacture and sale of materials whose production involves a preponderance of chemical processes, operated by trained chemists and engineers and managed with chemical understanding and vision. I n the light of this definition chemical industry is rapidly expanding. Twenty years ago the manufacture of steel was scarcely thought of as a chemical operation, but today the U. S.Steel Corporation is one of the largest manufacturers of by-product chemicals, and it has just announced the organization of a research department of proper magnitude, in charge of a chemist, to study the chemistry of steel and its alloys. The manufacture of aluminum is decidedly a chemical industry; the latest advances in copper production are largely chemical; vanadium, tungsten, molybdenum, titanium, most of the nonferrous metals, and an imposing number of new and valuable alloys show that the whole field of metallurgy is definitely becoming an integral part of the chemical industry as defined above. Tanning, glass, synthetic textiles, petroleum refining, rubber, may be added to the list. Look over your automobile, piece by piece, and see whether you can find anything, except possibly wood, from the tires to the top and from the lenses to the tail light, that has not undergone chemical transformation. Remember that a tire is not all rubber, nor the various alloy steels simply iron, nor the inside of your stop light only a vacuum, nor paint merely paint. Remembering this, go over your car some day, piece by piece, and &e whether you can identify the original raw materials, grown or mined, that have been necessary to the production of each piece, and the chemical operations involved to place it before you. T r y the same experiment with your radio, your airplame, telephone, office floors, and kitchen-floor coverings. One hundred years ago there waa no such puzzle; twenty-five years ago it would not have been so very difficult. Today even a highly trained chemist would find himself frequently
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guessing or speaking in vague terms. This experiment is no intelligence test, but it will demonstrate to you quicker than I could tell it, how wide are the ramifications of chemical industry and what progress it is making. Chemical industry is absorbing other manufacturing industry. It will eventually take charge of all manufacture excepting such operations as cutting and fitting, weaving and knitting, shaping and molding, and assembling and distributing to the millions of people. Today the body of your car is probably made of steel or aluminum, wood or fiber. What will be the favorite material a generation from now? We do not know. It may be some one of these or none of them but, whatever it is, chemical industry must furnish it. Business Fundamentals
With this picture in mind, what then are the economic factors in chemical industry? Obviously they are the same ones, with slight variations, that enter into any manufacturing business, or in fact into any business. First, it must produce something in the way of material or service for which a demand exists or can be created. Second, it must sell this product. And third, the margin between income and outgo must be large enough to attract and keep the necessary money, management, technologists, and labor. These things are fundamental in any business. Compared to other industries our proportion of technologists will always be very high, our charges for depreciation and obsolescence rather high, expense for research large in proportion to sales, and products, raw materials, and methods will change more rapidly than in other industries. We must also determine, as in any other industry, whether our producing plant shall be placed near the raw material, the markets, the labor or the fuel and power, and the answer may be any one of these four or none of them, depending on the particular circumstance. There is no such thing as the economics of chemical industry as distinguished from other industries except in minor details like those mentioned. I see only one major economic facto1 which seems to distinguish it from all other industry. Chemical industry must focus its vision much farther into the future to determine trends, the probable demands, and needs of that future. Let me illustrate what I mean by a short analysis of a piece of such a future. Mankind has many wants and needs, and these change from generation to generation. We cannot with any definiteness predict what many of them will be, but we do know, whatever his other requirements are, he must have food, clothing, and shelter, and we do know that the sources of raw materials for these three needs must be cultivated or mined, The forest, the wild animal life, the wild nuts, fruits, and berries which once sufficed for these purposes, are gone. Everything that he eats must be grown. If one wishes to be meticulous he should probably make an exception of salt, fish, and lobsters in whose cultivation and growth he takes little part, but in general his food must be grown, his clothing must be grown, and his shelter must either be grown or mined, The materials necessary for growth are widely distributed, with three exceptions. These three are nitrogen, phosphorus, and potash in forms available for plants to use. There are fairly abundant supplies of potash and phosphate rock in the earth, and of nitrogen in the air, but both the nitrogen of the air and the phosphate rock must undergo chemical treatment before the plant can properly assimilate them. Consequently, we could predict with certainty that in the future there will be a tremendous growth of the chemical process of the fixation of nitrogen, and of the further chemical process of making phosphate rock available for plant food. Today we are using only about 1,500,000tons of nitrogen per year. Most of us shall probably live to see the day
Vol. 19, No. 10
when 20,000,000 to 30,000,000 tons of nitrogen are taken from the air every year by some nitrogen fixation method. Chemical Vision
How will this react on other chemical industry? For instance, sulfuric acid is today manufactured to the extent of probably 9,000,000 tons of 100 per cent acid per year. Nearly half of this is used in converting phosphate rock into soluble phosphate, and another considerable part is required for combining with ammonia for making ammonium sulfate, Will the tremendous increase in the nitrogen and phosphate industries cause a corresponding increase in the sulfuric acid industry? Probably not. The present large production of sulfuric acid is not due to its actual need in the same sense in which nitrogen and phosphorus are needed, but is due merely to its cheapness and convenience of transportation. For many purposes hydrochloric acid would be preferable if it were as cheap and as conveniently transportable. Both the superphosphate industry and the nitrogen fixation industry could dispense with it entirely; in fact they can today, if necessary, although it would somewhat increase costs. We will look a t the large industry of soda ash and caust.ic soda in the same way. These are not needed, are not indispensable, but are simply the cheapest soluble alkalies that are today available. It is well within the possibilities of the future that ammonia might become a cheaper alkali than caustic soda and might replace it to advantage in many of its present uses. We are reasonably certain that nitrogen fixation and conversion of phosphate rock will become far more important factors than they are today, while it is easily probable that, the two great fields of sulfuric acid and soda, which have dominated the chemical industry of the last hundred years, may gradually become of minor importance. This is what I mean by the necessity for chemical vision. The dominance of the sulfuric acid and soda industries in the past has been due to the fact that acids and alkalies were the most powerful tools in our possession for producing chemical change, and sulfuric acid and soda happened to be the cheapest and most convenient acid and alkali a t the moment accessible. Chemical progress, however, is developing many other tools more effective and more convenient than acid and alkali. I refer to such agents as catalysts, reactions a t high pressures, reactions at high temperatures such as the electric furnace. These new tools, and many others to be added, will undoubtedly decrease the relative importance of the sulfuric acid and soda industries. By means of these new tools we are just opening the field of large-scale synthesis, and the chemical manufacturer who does not keep fully abreast of these kaleidoscopic changes and who does not continue to project their probable curves into the future, will wake up some morning to find himself with a good plant and large capacity for production but with no market. Take, for example, a product like ethyl acetate, which has had rather extensive development recently. Twenty years from now will this be made in Baltimore, with Cuban molasses and yeast as its essential starting points, or will it be made in Shawinigan Falls, from limestone and coke, or will it be replaced by some other solvent? Or, take a heavier solvent such as amyl alcohol and acetate which formerly depended on fusel oil, a by-product of the alcohol industry. This dependence on a single by-product raw material limited any very large use of such a solvent. Then came the production of butyl alcohol by an entirely different fermentation and a consequent great expansion in the use of that general type of solvent. What of the future here? Will fermentation of corn continue to produce these higher boiling solvents, as it is doing today, or will the field shift to petroleum hydrocarbons as the raw material, as it can do? These are the
October, 1927
INDUSTRIAL A N D ENGINEERING CHEMISTRY
questions that must be continually in the minds of those who direct policy in chemical industry. The answers in each case are specific rather than general and must be arrived a t by integrating raw material, fuel, power, labor, money, and technology, for each demand and for each source or method and, other things being equal, the integration that gives the minimum result is the most probable answer. I m p o r t a n t F a c t o r s in C h e m i c a l I n d u s t r y
What are the factors that make one country a home of chemical industry and leave another country barren of it? RAWM.urERIAL-The first factor is that of raw material. I consider this, however, one of the least important and one which has been greatly exaggerated in the past. The dye and pharmaceutical industries of Germany and the dye and synthetic essential oil industries of Switzerland could have been developed just as easily in any other country so far as the question of raw material is concerned. The superphosphate industry of Belgium, to cite a heavier and cheaper chemical, was developed in spite of the entire absence of any raw material that could enter into the production of superphosphate, and yet Belgium in proportion either to its size or population has been the greatest producer of superphosphate in the world. Raw materials are helpful but not controlling factors, and in any case no civilized country is so situated as to be devoid of raw materials for some form of chemical industry. Powm-This is an extremely helpful factor, and the growing chemical industries of Canada and Norway are mainly based on power, as to a considerable extent are also those of Switzerland and northern Italy. Power in this sense usually means hydroelectric development, but it may mean cheap fuel of any kind. The country that lacks either power or cheap fuel must either utilize the heat value of its higher priced fuel to a far greater extent than is usual today or devote itself to those chemical industries, of which there are many, where power and fuel are not proportionately large items of expense. MARKms-Chemical industry in general must seek its markets in manufacturing countries because i t furnishes the raw material for the other manufacturers to shape and assemble. In a large sense also chemical industry lives on itself, the finished products of one branch being the raw material of the next. Before the buyer in the street makes a purchase a t the drug-store or a t Woolworth’s the product may have passed through half a dozen chemical plants and two or three other manufacturing or assembling plants. A great manufacturing country produces a very broad market for chemical products, but both Canada and Norway show the possibility of large chemical industries without the benefit either of raw materials or of large home markets. TECHNICALLY TRAINEDPERSONNEL-A large proportion of technically trained men, particularly those with chemical training, is an absolute necessity. This is a resource open to any country a t all. No one territory has any monopoly of brains or education, and I consider it the most important resource for any country that desires a chemical industry. Such a crop of trained men cannot be developed overnight. Starting today, with a well-thought-out piogram of education for the future, nearly a generation will be required to produce the necessary leaders, properly trained, rich in experience, and mature in judgment, but any country that is willing t o make the effort may have them. MomY--h$oney that is educated; money that is accustomed to distinguish between a day dream and a real vision that can be logically supported; money that is content to build slowly and constructively looking for its return five or ten years ahead. This is a prime necessity. There is enough money in almost any country to establish chemical industry
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but there may very frequently be a shortage of this educated money. These five are the important factors in chemical industry. Other factors such as labor, transportation, can be adjusted, and any country can have a well-developed chemical industry if it has the will to do so and takes the necessary measures. Italy is a good example of a country that seems to have deliberately set about building a chemical industry, and she has made remarkable progress in that direction. Today, in the large industry of the manufacture of artificial silks or rayons, Italy is the second country in the world, being surpassed only by the United States. She has developed a process of nitrogen fixation which seems to be well adapted to Italian use and is meeting with some favor abroad. She is in the beginnings of the development of a real potash industry by chemical conversion and not by mining. She is recovering boric acid from her soffioni and utilizing the steam for power. Her electrochemical industry is well under way. And yet Italy is not particularly gifted by Nature with any of the five economic factors mentioned as being important to chemical industry. She is simply applying brains to the utilization of what she has, and any other country could do the same thing. If the United States had fewer natural resources it would probably be utilizing a higher type of brains in the constructive development of v h a t it has. I n t e r n a t i o n a l Commerce
One other factor which has occupied a very large place in the public prints should be mentioned here, although i t really is not an economic factor. This is the question of import and export duties and prohibitions I have little faith in such arbitrary barriers as real factors in the permanent development of chemical industry. They may, and frequently do, have a temporary beneficial effect. It is often highly desirable to encourage an infant industry, to foster it, with these artificial barriers during the time of its minority, but in general I see no purpose in encouraging and fostering these infants unless there is the firm hope that within a reasonable time, say ten years, the infant will have reached such a stage of maturity that it can stand on its own feet without crutches. I see no reason why every nation should manufacture all of its own chemicals. I see no reason why international commerce of any kind should cease. The amity of nations is fostered and is most secure when every country is selling what it can best produce and buying what it can produce to least advantage. At the same time I think it is wise for every country to be making at least a part of its own pharmaceutical products. Erery nation that hopes to take a strong position in manufacturing must consciously develop and foster a chemical industry background, and must “chemicalize” its existing industry. Erery agricultural nation must know how, in time of trouble, t o produce its own nitrogen from the air and its own potash from leucite, lava, feldspar, or whatever source it has. It is not necessary that these should be actually produced in time of peace, but the know-how must be there, either in the hands of industry or at the expense of government. I n the long run the course of international commerce will be determined by economic factors and by the will of the people to make use of them. Artificial barriers can do little except to furnish temporary annoyance. A special agreement dealing with the importation of German dyestuffs into Japan has been made effective. German importations are restricted to the ports of Yokohama and Kobe and t o 65 kinds of dyestuffs and their intermediates. The stipulation is also made for the restriction of importation if Japan becomes able t o manufacture the dye of a quality equal to the German product.
