U.S. has bulk of world's synthetic ethanol capacity
Record year expected for rubber industry
Rubber manufacturers apparently are headed for a record-breaking year in 1977. Millions of gal For one thing, tire producers are working mightily to build up their own and disU.S. 310 tributors' inventories that were drastically Union Carbide 120 reduced during last summer's fourNational Distillers 65 month-long strike. For another, because Publicker 60 the strike delayed tire and rubber proShell Chemical 40 ducers' recovery from the recession, these Texas Eastman 25 producers are still cranking up production to reach prerecession peak levels. With Canada 17 these stimuli combined with higher conU.K. 84 sumer spending forecast for this year— France 40 meaning increasing sales of automobiles West Germany 42 and replacement tires—a banner year in Eastern Europe 60 1977 for rubber makers is almost a cerJapan 26 tainty. TOTAL 579 The Rubber Manufacturers AssociaSources: Union Carbide, C&EN estimates tion, for instance, predicts that total rubber consumption in the U.S. this year will reach 3.5 million metric tons, up 25% Slow growth ahead for from an estimated 2.8 million metric tons in 1976. The 1977 total includes 2.63 end uses of ethanol million metric tons of synthetic rubber Millions of gal 1973 1975 1981 (up 27.4% from 2.06 million metric tons in 1976) and 875,000 metric tons of natural 72 62 Intermediates 72 rubber (up 18.2% from 740,000 metric Cosmetics 47 32 53 tons last year). The previous record for Cleaning preparations 26 22 39 synthetic rubber was in 1973 when 2.44 Coatings 27 38 32 million metric tons were used. Vinegar 19 18 26 For this year's heady growth in rubber use to materialize, of course, a great many Pharmaceuticals 19 19 22 tires (which account for 65% of synthetic 21 23 Acetaldehyde 16 rubber's total consumption) and autos Solvents 3 5 4 must be built. Firestone chairman RichTOTAL 246 207 264 ard A. Riley predicts that 1977 sales of all 14 Exports 61 — types of tires will total 255.5 million, a TOTAL including 307 221 264 10.9% increase from 230.5 million in 1976. exports "This would set the industry on a new Source: Union Carbide path of unit growth, expected to continue into the 1980's," he says. And it would top ethanol are Canada, Japan, and several the previous record of 251.4 million in South American and Caribbean countries. 1973. The other loophole in EC's marketing By far the largest segment of the tire plan is crop uncertainty. Even if specific market is passenger car tires, which, inmarkets are assigned to agricultural al- cluding original-equipment tires supplied cohol in Europe, there probably wouldn't on new cars, replacement tires, and imbe enough to meet demand if the conti- ports, typically accounts for 80 to 85% of nent should hit another poor crop year. total sales. According to Firestone, about This, more than anything else, will de- 209 million tires for passenger cars will be termine the fate of future U.S. exports. sold this year. That's up more than 11% Meanwhile, U.S. producers will have to from the nearly 188 million passenger tire depend upon traditional domestic mar- market Riley estimates for 1976. (Despite kets for growth. And, according to Car- the long strike last year, Riley believes bide's Johnston, that growth will average that 1976 still ended up as the third largno more than 2 to 3% per year through est sales year for passenger tires in the 1981. He figures that cleaning prepara- industry's history.) tions and vinegar will be the fastest The future of the tire industry appears growing outlets for ethanol, with each to be riding on radial tires. The Firestone growing an average 6% annually. But in- chairman remarks: "In terms of dollar termediates will remain the largest single volume, statistically significant gains may market, growing about 3% annually to 72 be expected this year because of the conmillion gal by 1981. Ethanol consumption tinuing increase in market penetration by in acetaldehyde will level off after Carbide radial passenger tires. In 1977 we are shutters its plant, and coatings offer little forecasting total radial passenger tire sales as a growth market. of 97.9 million units [including imports] In all, Johnston estimates that, in 1981, compared with 81.3 million in 1976. This U.S. ethanol demand will rise to 264 mil- 20.4% year-to-year gain . . . should have a lion gal. That's not a lot to look forward positive effect on the industry's 1977 to, but with no new capacity in sight it at dollar volume, net income, and profit least offers producers the prospect of op- margins." Looking further ahead, Riley believes erating at about 85% of capacity. Earl V. Anderson, C&EN New York that nearly all growth in the passenger tire
market through 1980 will be in radial tires. "For the first time in 1975, radiais, in the combined original equipment and replacement market, represented the dominant type of tire construction. Radiais accounted for 64.9 million out of the 169.9 million total, significantly more than the 49.8 million belted bias units or the 55.2 million bias ply units. And in 1978, radiais will, for the first time, constitute 50% of the overall domestic passenger tire market," he says. RMA president Malcolm Lovell Jr. sums up the state of the tire industry: "Most segments of the industry have regained their economic health after the recession and labor difficulties, and are anticipating further good, solid growth on a moderate scale, barring unforeseen complications. The tire companies generally are expecting tire shipments to rise 3 to 5% next year, and the outlook for the rest of the decade is for continued growth." During 1977, Lovell says, strike-depleted inventories of tires must be replenished while the current needs of a growing market are being met. Part of that growing market, of course, is new cars and trucks, and output of both is expected to increase substantially this year. General Motors chairman Thomas A. Murphy estimates that total U.S. new car sales in 1977 will be 11.25 million, including imports. This total is about 1 million more than 1976 sales. The GM chairman predicts that 1977 sales of new trucks will be 3.5 million, 300,000 more than the record set in 1976. Murphy believes that 1977 may be a record year for combined sales of cars and trucks, exceeding the previous high of 14.6 million in 1973. There's another factor that will play a role in increased tire sales, according to RMA's Lovell. "Many cars sold in the record [auto] production year of 1973 need new tires," he says. "And customers who put off tire buying because of the
Synthetic rubber production bounced back last year Thousands of metric tons
Styrene-butadiene rubber Polybutadiene Neoprene Ethylene-propylene Butyl Polyisoprene Nitrile Other TOTAL
1973
1974
1975
1976 a
1536
1465
1179
1280
337 na 120
310 163 126
290 144 84
348 170 130
164 160 93 119 88 84 88 270b 2626 2497
80 61 55 47 1940
116 74 72 53 2243
a C&EN estimates, b Includes neoprene (polychloroprene). na = not available. Source: Rubber Manufacturers Association
Jan. 10, 1977 C&EN
13
1975 recession hardly can wait much longer." Record tire production this year, in addition to consuming a record amount of synthetic rubber, will consume a record amount of natural rubber. In fact, RMA's estimates of 875,000 metric tons in 1977 and 740,000 metric tons in 1976 are both consumption records. And as the Malaysian Rubber Bureau enthusiastically points out, last year was the 20th straight year in which the natural rubber industry sold "just about all or more of a consistently rising production." Prospects are good for even greater use of the natural polymer in the next several years, because radial tires have more natural rubber in them than does any other type of passenger tire. And the biggest growth item in the tire industry is the radial. But there doesn't appear to be any problem in natural rubber producers' meeting increasing demand. This is so mainly because of rubber growers' aggressive program begun in the 1950's to
Total rubber use may top 3.5 million metric tons in 1977 Millions of metric tons 3
Natural
0 1970 1971 1972 1973 1974 1975 1976a 1977· m Estimates. Sourc··: Bureau of the Census, Rubber Manufacturers Association
increase yields of rubber dramatically. A number of techniques, including breeding and chemical stimulation of the hevea tree, have doubled yields of Malaysian growers to the current average of some 900 lb per year per acre. According to Paul E. Hurley, president of the Malaysian Rubber Bureau/USA, "New planting materials in the pipeline at various stages of development are providing yields in excess of 3000 lb per year per acre." Even higher yields are hinted at by Dr. B. C. Sekhar, chairman of the Malaysian Rubber Research & Development Board, which oversees the Malaysian Rubber Bureau. Sekhar says that, although "for the sake of pragmatics, and looking well into the future," he would mention "a figure of 9000 lb per year per acre within the realm of achievement, the horizons of potential production [are] in the abstract just about limitless." Considering these high production rates, and to give some order to future 14
C&ENJan. 10, 1977
supply/demand balances, Sekhar's organization has completed an in-depth global study to estimate future size of the rubber market and how much of that market natural rubber realistically can achieve. Making allowances for available and committed supplies of synthetic polyisoprene rubber (which chemically resembles natural rubber) and for "marginal processing advantages of certain synthetics," Sekhar says that natural rubber's potential share of the total rubber market is limited to 42 to 43%. He notes that this is "an analytically derived figure that perhaps for the first time puts the natural rubber industry in position to make properly based long-term plans for the future." Estimates of total annual rubber use in the 1980's vary from 14 million metric tons to 17 million metric tons, he says. Using an average of 15.5 million for annual consumption in the 1980*8, natural rubber's share (42.5%) comes to 6.51 million metric tons. In terms of his own organization's interests, Sekhar says that for Malaysia to maintain its current 45% share of total world natural rubber output, it would have to bring in about 2.93 million metric tons more than it does now. This comes to an additional production of about 3 to 4% a year, he says, about the rate of increase most forecasters see for natural rubber going into the 1980's. Despite all the growth projections for synthetic and natural rubber, and the almost certain records of output a*nd use to be achieved this year, all is not well in the rubber industry. Troubles with raw materials loom on the horizon, for instance. Petroleum—the source for the synthetic polymers as well as the fiber for some tire belts, the carbon black for reinforcement, and many of the chemicals used in processing—may be in short supply in years ahead. And likely price increases in feedstocks also would have an adverse effect on the industry. Another problem—potentially a very big one—centers on radial tires, the one item much of the industry's growth is pinned on. Although the industry is very quiet about it, there apparently are problems in maintaining high quality in producing the more complicated radial tire. Some of the production problems may be eating into profits, for tire firms' earnings have been sliding during recent years, while radial sales have been increasing dramatically. Further, tire companies are dropping those parts of their warranties that deal with minimum mileage (generally 40,000 miles) and road hazards. And radiais' longer life could mean fewer tires sold and less rubber consumed. Nevertheless, tire and rubber companies are pretty well set for this year. Beyond 1977, however, says B. F. Goodrich chairman O. Pendleton Thomas, with yet one more potential problem, "much will depend on whether the federal government resists the temptation to overstimulate the economy, thereby provoking another inflation-recession cycle." Ernie Carpenter, C&EN Washington
CHECKOFF MERGERS • Akzona—Acquires Fibron Inc., Chattanooga, Tenn. Fibron is small, privately owned fiber manufacturer holding exclusive rights to proprietary process for fibrillated (split-film) synthetic yarns; terms are undisclosed. • Bemis—Enters specialty resins manufacture with acquisition of Custom Resins, Henderson, Ky., for undisclosed cash. Custom Resins produces nylon 6 resin for injection molding, films, coatings, and other markets with 1976 sales of about $7 million. • Borg-Warner—Makes preliminary agreement to sell 2 million shares of common stock at $31.45 per share to Robert Bosch GmbH, the large electrical and electronics firm in Stuttgart, West Germany. Bosch would buy stock as an investment limited to less than 10% of shares outstanding and to be held at least three years. • Certain-Teed — Completes withdrawal from real estate development with an agreement to sell three major projects of its 98%-owned subsidiary, Realtec Inc., in the southeastern U.S. Certain-Teed discloses no terms but says the transaction will have no effect on 1976 reported earnings. • Du Pont—Leaves a venture in holography, Holotron Corp., by approving its sale to Holosonics Inc., Richland, Wash. Holotron, which owns more than 150 patents or patent applications relating to holography, had been joint venture of Du Pont and of Scientific Advances Inc., venture development subsidiary of Battelle Memorial Institute, Columbus, Ohio. • W. R. Grace—Acquires Handy City Inc., a privately owned specialty retailer of home improvement products headquartered in San Antonio, Tex., for undisclosed terms. Handy City operates 13 "home centers" in Florida, Georgia, Louisiana, and Tennessee. • NL Industries—Sells sole consumer operation, Dutch Boy paints division, to ELT Inc., Northfield, III, for undisclosed terms. NL Industries says that transaction will have no material effect on company's net income or financial condition; the division's sales were less than 4% of NL's 1975 sales of $1.3 billion.
