The Chemical World This Week
CHEMICAL PRODUCTIVITY GAINS BEGIN TO SLIP An important measure of efficiency in the U.S. chemicals and allied products industry continued to gain this spring. However, the present pace is much reduced from the strong increases over the past year. The industry's productivity (physical output per hour worked by production employees) managed an annualized increase of about 1% in April and May over the first-quarter average, by C&EN calculations from preliminary data from the Depart ment of Labor and the Federal Re serve System. This rate is well down from the 10% annualized quarterto-quarter gain in the previous two quarters. The revised 10% figure for the first quarter of this year represents a con siderable upward shift from the pre liminary 4%. Such an upward revision also could happen in the secondquarter figure. However, forces were working in the second quarter making a repetition of the first-quarter gain doubtful. Most important, production in the chemicals and allied products indus try hit a plateau in the second quar ter. Second-quarter production av eraged an annualized 3% increase over first-quarter production through May, the latest month available in FRS's newly recast production index. The production figures for April and May actually fell a bit from the March level. Meanwhile, preliminary figures show that work-hours in the industry did not adjust downward significantly until June. As a result, productivity also declined slightly in April and May. The spring productivity level was still about 11% higher than in sec ond-quarter 1975. This follows yearto-year gains of 13% (revised) in the first quarter and 9% in the fourth quarter of 1975. These rates are well ahead of the 7% average annual gain in productivity in the industry during the last normal decade through 1972. Productivity gains from 1973 through 1975 were considerably below aver age, running 1 to 4%. As of May this year, the industry's productivity was 63% higher than in 1967. The small increase in productivity from the first to the second quarter ran behind a 9% annualized gain in production wages. This means that 4
C&EN Aug. 2, 1976
Productivity gains are down from last summer's high % change from previous quarter at annual ratea 25l
: < , . ^ ^ ^ ^ ; ^ ^ : ^ . ^ ? ά
10
0
1975
1976
a Productivity of nonsalaried workers in the chemicals and allied products industry. Note: Second-quarter 1976 results based on only April and May data. Source: C&EN calculations from Department of Labor and Federal Reserve System data
the industry's unit labor costs (pro duction worker labor costs per phys ical unit of output) moved up at an annualized rate of 6% from the first quarter. Again, these rates are pre liminary and could change later. The second quarter's rise in unit labor costs follows three quarters of successive declines. By the first quarter of this year, these drops had produced the first year-to-year de crease in unit labor costs since the first quarter of 1973. In between, unit labor costs had soared to a peak gain of 15% in first-quarter 1975.
The pickup in unit labor costs in the second quarter was not due to extraordinary increases in wages. The 9% annualized gain in second-quarter wages from the first quarter was about the same as in the previous two quarters and a bit below the 11% av erage wage gain in all of 1975 over 1974. The slowed performance in unit labor costs and productivity in the second quarter may be worth watch ing, pending any revisions. In the past, changes in these two efficiency measures have come several months to a year or more before changes in the business cycle. For example, the industry's productivity index hit a plateau in 1973 and then peaked in second-quarter 1974 about half a year before production in chemicals and allied products began to drop in the recession. At the bottom of the re cession, productivity turned around in March 1975, two months before the first production pickup in May. For the current recovery period in the chemical business cycle, the spring lag in growth of many mea sures such as production and pro ductivity is not causing official alarm at companies. A pause for breath is the general reaction. However, Wall Street saw a slight sell-off in chemical stocks beginning in June. Chemical stocks had been favored strongly earlier in the year and hence were vulnerable to any drop in expecta tions. Thus, the next few months may be critical in confirming either view —a pause or a turnaround. D
Modest expansion for f rtilizer forecast "It's not easy to project what will be happening in the fertilizer market in the next couple of months—let alone the remainder of the decade," TVA economist Edwin A. Harre says. Easy or not, he gave it a stab at the Na tional Fertilizer Conference spon sored by the Tennessee Valley Au thority and held last week in Cincin nati in conjunction with the Fertilizer Institute's annual trade fair. Since 1970, Dr. Harre notes, fer tilizer application rates have stabi lized or declined. Increases in fertil izer use have stemmed from increases in acres planted. That will continue to be the predominant factor. Looking
to 1980, Harre sees "modest, but not rapid, expansion." He cautions, however, that much will depend on what happens in world markets for U.S. farm commodities. U.S. nitrogen fertilizer consump tion will run from 10.7 million to 12.6 million tons (as N) in 1980, Harre predicts, compared to 8.6 million tons in 1975. Phosphate use will range from 5 million to 6 million tons (as P2O5), up from 4.5 million tons in 1975. Potash use will rise to between 4.6 million and 6.4 million tons (as K2O), compared to 4.4 million tons in 1975. As to supply, Harre says that the
recent excess of nitrogen is the result of a decline in demand, and there have been few plant additions in the past several years. In the case of phosphate, 2 million tons of new ca pacity came into production during a time of lowered demand. But during 1976, he adds, ammonia producers have been expanding, while the phosphate industry has been closing plants and lowering production rates. Planned expansions will raise total ammonia capacity from 15.5 million tons to almost 20 million tons by 1979, Harre says. As with previous rapid expansions, it appears that the market won't be able to absorb the scheduled increases. The 1977-78 period should be "the high-water mark," according to Harre, with more than 1 million tons of surplus avail able. Then, with little additional new capacity coming on, the market probably would begin to move back to balance as demand continued to in crease. But there's a catch. Harre points out that neighbor countries also are expanding their nitrogen capacity, with the idea of exporting to the U.S. For example, much of the production from three new Canadian plants surely will move into U.S. markets. Additional ammonia units also are scheduled for Trinidad—already a supplier to the U.S.—and for Mexico. Even if Mexico doesn't export nitro gen to the U.S., it will cease to be a major outlet for U.S. nitrogen. Harre warns producers not to be "overly optimistic" in assessing the 1976 season, despite the recent re covery in sales. An additional 1 mil lion to 1.5 million tons of U.S. am monia capacity have been "pro posed," he says, but not actually scheduled. Some of those projects could be reactivated. If so, they will worsen an already dim outlook for the U.S. nitrogen industry. In contrast to nitrogen, no signifi cant change in phosphate capacity is expected in the next few years, Harre says. He takes note of recent plant closings and says that industry ad justments are close to balancing supply and demand. "Assuming an operating rate of 85% of capacity for phosphoric acid, supply levels will be adequate," he predicts. When it comes to potash, Harre gives up. "It's impossible to paint any kind of meaningful picture of the market situation for potash in North America," he says, what with over capacity, quotas, and the threat of government takeover in Saskatche wan. World potash reserves are "im mense," and potash is a vital plant nutrient. He assumes the need will be met, one way or another. Reviewing industry actions and
TVA predicts only modest growth in fertilizer use U.S consumption Millions of tons
1960 1965 1970 1971 1972 1973 1974 1975 1980 low med high
Ν
P2O5
κ2ο
2.7 4.6 7.5 8.1 8.0 8.3 9.2 8.6 10.7 11.6 12.6
2.6 3.5 4.6 4.8 4.9 5.1 5.1 4.5 5.0 5.5 6.0
2.2 2.8 4.0 4.2 4.3 4.7 5.1 4.4 4.6 5.5 6.4
Note: All years are fertilizer years ending June 30. Source: Tennessee Valley Authority
reactions of the past few years, Harre concludes that reaction to changing conditions will be much quicker in the future than it has been. "We always hope that the drastic swings in supply levels that disrupt the market can be avoided," he says. Recent events suggest that this may be happening. "But the price may be having to op erate in a market place with short cyclical movements, rather than the almost 10-year span of the fertilizer supply-demand cycle that has been the history of this industry." D
the salary front, the median for chemical engineers ran $26,000 at the B.S. level, $27,000 for M.S., and $29,000 for Ph.D.'s. The average sal ary increase for engineers from 1975 to 1976 was found to be 9%. AIChE sent forms for its latest survey to a 25% sample of members in the U.S. Returns totaled 53.5% by the Feb. 20 cutoff date. Basic data for responding members show a median age of 37, a lopsided 99% male domi nance, and a similar 94.5% dominance of U.S. citizens. The minority status of women and non-U.S. citizens was a considerable handicap in salary. Salary medians were $16,000 for women and $21,500 for non-U.S. cit izens. One question in the survey con cerned sentiment for unionization. The survey found a drop in such sentiment to 15.2% of members from 20.5% in 1975. In common with an other recent survey by the Conference Board (C&EN, July 19, page 4), the survey concludes, "The union candle is flickering." D
Confirmation expected on Stever nomination
Senate confirmation hearings last week on President Ford's nomination of Dr. H. Guyford Stever to head the new White House Office of Science & Technology Policy (OSTP) might best be described as a sort of "loveEngineers' salaries in." All seven influential Senators attending the hearings had compli make record gain mentary things to say about Stever, "Salaries this year show not only the voiced support for his confirmation, highest median we've recorded, but asked rather pro forma questions. also the steepest rise in one year. The If all goes as Senate sources expect, $25,000 median is 13.5%, higher than members of the three committees last year's $22,000." So says the holding the joint hearings—Aero American Institute of Chemical En nautical & Space Sciences, Labor & gineers after its latest survey of Public Welfare, and Commerce— members' economic status. were to be polled on the nomination Chemical engineers have done ex before the end of last week. Stever's traordinarily well this past year by nomination probably will be any measure in AIChE's extensive promptly approved and will be taken survey, done in this year's first quar up on the Senate floor. And Senate ter. For example, unemployment sources indicate it's certain that among AIChE members dropped to Stever will be confirmed. 0.5% from 0.8% in the first quarter in At last week's hearings, Stever was 1975. Although not a record low, the quizzed on issues ranging from his new figure is way down from the re participation in military R&D issues cent high mark of 3.7% in the survey to a potential reorganization of the for third-quarter 1971. By contrast, Senate that would create a new the institute points out, the Bureau of Science & Technology Committee. Labor Statistics reported unem On the latter issue, Stever was ployment among professional and asked by Sen. Frank E. Moss (D. technical workers at 2.9% this June. Utah), chairman of the joint hearings By way of another comparison, and chairman of the Aeronautical & ACS's latest salary survey shows 1.9% Space Sciences Committee, whether of ACS members unemployed and the Senate should have a focal point looking for work as of March 1,1976 for science and technology issues as (C&EN, June 21, page 47). This fig the House now does. Stever diplo ure is up from 1.6% a year earlier. On matically replied, in effect, that some Aug. 2, 1976 C&EN
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