Industry/Business
Squeeze on chemical R&D spending intensifies Dwindling support for R&D likely signals further loss of potential jobs for scientists in basic chemical industry Donald J. Soisson For the chemist looking for an encouraging word these days, the results of C&EN's latest survey of research and development spending in the basic chemical industry are grim news indeed. Last year for the first time ever, the survey shows, R&D expenditures were down from the yearearlier level. Planned R&D budgets for 1972 indicate spending will be up only slightly, if at all. Any increase will likely be less than 1% and expenditures still will be below the 1970 level. Adjusted for inflation, R&D spending has been declining since 1965. Last year's results, however, show that it is now beginning to fall off faster. As the level of support can be directly related to the number of jobs for R&D scientists and engineers, this will mean fewer potential jobs. Patterns. As in previous years, R&D spending patterns by the basic chemical industry contrast markedly with those of other industries. Overall expenditures by industry were up in 1971, according to Battelle Memorial Institute's annual R&D survey (C&EN, Dec. 13, 1971, page 6). All industry support rose some 6% from $11 billion to $11.7 billion. Looking at 1972, Battelle forecasts total industry support of R&D at $12.7 billion, about 8% above last year. Costs of R&D will continue to rise but probably at a lower rate. "It is possible that real R&D effort will turn upward for the first time since 1968," says Battelle. C&EN's survey, however, indicates that R&D expenditures in terms of real or constant dollars will continue to drop, and likely even more sharply than in the past. Plateau. For the survey, C&EN contacted all firms in its Top 50 listing
(C&EN, April 26, 1971, page 12) in the Securities and Exchange Commission category of basic chemical companies, Standard Industrial Classification (SIC) 281. Of these 22 companies, 20 provided R&D data (see table). Altogether these 20 firms represent about 90% of R&D expenditures and about 84% of sales in the basic chemical industry. Based on these companies' estimates, R&D spending dipped 2.4% last year. This is a considerable switch as C&EN's year-ago survey (C&EN, Jan. 18, 1971, page 12) had indicated that the industry planned to increase, albeit modestly, its R&D outlay in 1971. Instead, chemical companies spent about 4% less than they planned, in spite of improvements in the market place. (Total sales of the basic chemical industry are estimated
to have moved up about 8% last year to about $29.5 billion.) Overall industry R&D expenditures amounted to $890 million in 1971, compared to $915 million in 1970. Based on planned R&D budgets, spending this year will be up slightly to about $900 million. Correcting these R&D figures for inflation presents an even starker picture. Using inflation estimates suggested by Battelle, C&EN calculates that real (noninflated) spending in 1971 was down about 9% to $450 million (base year is 1958)—the worst fall in the past decade. At this level, it is about 20% below that of 1965 when it peaked. This year real spending will drop 5% to a level below the base year of 1958. R&D spending as a percentage of sales, something that basic chemical
1972 will be another stagnant year for chemical R&D Rank in C&EN's Top 50s1
1 2 3 4 6
Company
Du Pont Union Carbide Monsanto Dow Chemical Celanese
7 8 10 11 12
W. R. Grace 6
15 16 18 25 28
Stauffer
38 40 42 43 45
Air Products
Total
Allied Chemical Hercules American Cyanamid FMC
e
Chemical
Rohm and Haas Ethyl Corp. Diamond Shamrock Olin e
Akzona Air Reduction Chemetrpn Pennwalt
R&D spending (Milli ons of dollars) 1971 1971 (Actual)^ (Planned) b c
1970
1972
$258
$270
$250
$250
78 98 91 54
78 92d 95 50
77 85 94 52
72 85 101 54
19 29 22 46 11
20 32d 23 47 11 d
20 31 23 11
18 30d 23 40d 13d
14 29 18 11 7.5
13 28d 19d 12d 8.2
13 29 20 11 8.2
13 29d 20 12 8.6
5.2
6d
6.6 10s 9 3.5 18
7.2 12s 8.1 3.9 18
7.1
f
12 3.5 18 $832
10 d>g
12 3.5 18d $848
41d
$812
$818
a Ranked in terms of chemical sales in 1970 (C&EN, April 26, 1971, page 12). Companies listed are SIC 281 companies reporting R&D data, b Company estimates, c As of January 1971 (C&EN survey). d C&EN estimates, e Chemical activities only, f R&D at American Enka only, g R&D at American Enka, Armak, International Salt, and Organon. JAN.
17, 1972 C&EN
7
producers used to brag about, continued to slip. In 1971, it was about 3% of sales. This year it will likely decline to 2.8%, as sales are forecast by many producers to rise 10% and most R&D budgets to remain about the same as last year. Ten years ago, in more halcyon days for research, R&D was 4.4% of sales. Jobs. Unfortunately for the R&D scientist and engineer now in the industrial chemical sector, no matter which figures are selected to measure R&D activity, they all add up to fewer jobs in laboratories in the months ahead. R&D employment in the basic chemical industry in January 1971 was 22,700, according to the latest annual study of industrial R&D spending and staffing by the National Science Foundation (C&EN, Jan. 3, page 10). This was down 3000 from its peak in 1965—also the year R&D spending, adjusted for inflation, peaked. In contrast, total R&D employment for all industries in 1971 (360,000) had fallen back only to about the 1967 level. As R&D expenditures declined in 1971, employment in the basic chemical industry is certainly down to well below 22,000 this January. With this year's level of R&D spending projected to be close to the 1971 level, more staff cuts are probably in the offing. Half. Of the 20 companies surveyed by C&EN, only seven—Dow, Grace, Allied, Hercules, Ethyl, Olin, and Air Products—spent more on R&D in 1971 than in the previous year—about half as many as in last year's survey. Seven firms, including four of the five largest in terms of R&D expenditures (Du Pont, Carbide, Monsanto, and Celanese), spent less. Monsanto, for instance, cut back its spending last year by 13% to $85 million. Cyanamid reduced its outlay from $46 million to $41 million, down 11%. Other major companies which pared back their R&D in 1971 include Du Pont and Celanese, both by about 3%, and Carbide, by 1%. Du Pont had budgeted $270 million for R&D in 1971. The company estimates it actually laid out only $250 million, 7% below its projection, and down 3% from the 1970 level. Of the five aforementioned companies, only Celanese spent more than it had originally targeted. This year Du Pont plans to maintain its program at about the same level as in 1971. The company says it will continue to spend about a third of its budget on exploratory and new venture research. R&D expenditures at Carbide, the "discovery company," have been sliding since the late 1960's. From $85 mil8
C&EN JAN. 17, 1972
Chemical R&D spending slipped for first time in 1971 Millions of dollars 1000
Current chemical industry R&D dollars*
Constant chemical chemical industry industry R&D R&D dollars Constant dollars66
^
«**
400
I I 2001 ( I l
ol 1960
1965
1970
a Based on prevailing value of the dollar during any given year. rates; base year 1958.
1972
b Calculated using yearly inflation
Sources: National Science Foundation, Battelle Memorial Institute, C&EN estimate for 1971 and 1972
lion in 1967, they slipped to $76 million in 1969, recovered a bit to $78 million in 1970 before dipping to $77 million last year. Carbide is trimming its budget by $5 million in 1972 to $72 million. (To maintain its R&D effort at the 1967 level, C&EN estimates that Carbide would have to spend about $115 million this year—some 60% more than it has actually budgeted.) This year's and last year's cutbacks are the result of many factors, according to Carbide vice president John A. Swartout. One is the continued squeeze on profits. Another is the spinoff or closing down of several Carbide operations. For instance, the company phased out its R&D laboratory in Brussels, Belgium, last year (C&EN, March 1, 1971, page 15) and now confines all of its R&D to the U.S. Carbide has also substantially reduced the level of its exploratory research over the past few years. "I think we have reached the point, however," says Dr. Swartout, "where we have reduced our longer range research effort to a minimum level." He doesn't see any further cutbacks in the proportion of exploratory research to applied research. This is
all part of a general trend, he adds, reflecting a "disenchantment on the part of our business people with the return from R&D." C&EN estimates that Cyanamid will spend $40 million on R&D in 1972, down $1 million from last year and down $6 million from 1970. Queried by C&EN on the cutbacks, Cyanamid declined to make any comment. Other major companies spending less in 1972 are Grace and Allied; Monsanto will spend about the same as last year. A spokesman for Grace indicates that inflation has caused some reduction of its R&D force. The tailing off in its chemical R&D efforts is also reflected in per cent of sales figures. In 1971, R&D expenditures amounted to 2% of sales. This year they will slip to about 1.7% of sales, Grace says. Optimistic. But several companies are running counter to the pattern. Dow, for instance, plans to boost its spending in 1972 by 7% to $101 million. Last year Dow spent $94 million, up 3% from the previous year. "We are a little more optimistic about business prospects in 1972," says Dow's Dr. R. Allan Lindsay. Dow is
the only one of the major basic chemical producers to show no year-to-year decline.in its R&D spending since the mid-1960's. The company has been allocating 10 to 15% of its budget to basic research and will continue to do so, Dr. Lindsay adds. Celanese spending in 1972, budgeted at $54 million, is up from $52 million last year but is at about the same level as in 1970. Celanese had been increasing R&D outlays at an annual average rate of about 12% until last year. Spending in 1969 and 1970 was "unusually high, owing in part to an above normal component of development-scale projects," Celanese says. Outlays as per cent of sales have been 3.5%, but hit 5.1% in 1970. Reasons for the reduced outlays, says Celanese, are a restructuring of R&D goals and the application of more critical assessment standards for research projects. These resulted in some decrease in the total R&D work force in the latter part of 1970, which was reflected in the lower 1971 costs. "No further reductions are planned for 1972," the company says. Boosts. Most of the smaller basic chemical producers surveyed by C&EN plan to boost their outlays this year. These include FMC, Diamond Shamrock, Olin, Air Products, Akzona, and Chemetron. Only one— Air Reduction (Airco)—is reducing its effort. Air Products, for example, is projecting an expenditure of $7.2 million, up 9% from last year. In 1971, it spent $6.6 million, up a whopping 26% from the year earlier, primarily because of the acquisition of Airco's chemicals business, which included R&D facilities. Of the smaller companies, Akzona is planning the biggest boost. It will hike its R&D spending by 20% this year to $12 million. The company, which includes American Enka, Armak, International Salt, Organon, and Brand-Rex, recently completed a fairly substantial expansion of its R&D laboratories at Enka, N.C. Airco, meanwhile, plans to chop back R&D outlays by 10% this year to $8.1 million. "We are phasing out some of our programs involving more mature product lines," explains a spokesman for the company. Also, the firm is putting less emphasis on basic research, he says. In any event, planned R&D budgets for this year in the basic chemical industry indicate little, if any, growth. Unless the economy really begins to move out and budgets are adjusted accordingly in the coming months, chemists are certainly in for another rough year.
TVA report predicts faster fertilizer growth The latest edition of the Tennessee Valley Authority's biennial "Fertilizer Trends" contains much that should be encouraging for the U.S. fertilizer industry. The newly published 1971 edition of the authoritative publication predicts an average annual growth rate of 5% in the use of plant nutrients in this country through 1975. This rate is fast enough to sop up much of the industry's remaining overcapacity during the next year or so. But it is slow enough to discourage any repetition of the excessive capacity buildup of the sixties. Growth. In 1967 TVA predicted a 6.1% average annual growth rate in plant nutrient use through 1970. At that time most companies associated with the industry were looking for a continuation of—or even an increase in—the 10% annual growth they had then been enjoying for several years. They expanded capacity accordingly. TVA turned out to be right. The actual growth rate between 1966 and 1970 averaged 6.5% per year. The companies were badly wrong. Specifically, TVA now calls for U.S. plant nutrient consumption between 19.7 and 21.8 million tons in 1975. The mid-value of 20.7 million tons is a 5.3% average annual increase over estimated consumption of 16.9 million tons in 1971. Strongest growth would be in nitrogen products (as N), up 6.0% per year. Phosphates (as P 2 0 5 ) would be up 5.0% annually, and potash (as K 2 0 ) would average a 4.3% annual gain. Comparison of the 1967 and 1971 editions of "Fertilizer Trends" gives the most detailed picture yet of the attrition and cutbacks in the industry over the past few years. The disappearance of profits has shaken out a host of fringe companies and plants. Plants. For instance, at the beginning of 1967 there were 93 anhydrous ammonia plants in the U.S.; 23 others were being built and were expected on stream within two years. Four of these were to replace current capacity. So, a total of 109 plants owned by 75 companies and with a total capacity of 17.9 million tons per year were expected to be operating by the end of 1968. But by August 1971, according to the latest TVA data, U.S. fertilizer capacity had dwindled to 75 plants owned by 53 companies with a total annual capacity of 17.0 million tons.
EVANS MONO THin GLY CER OL NEUTRAL WATER-SOLUBLE THIOL CH 2 [0H)CH(0H)CH 2 SH Consider for: POLYMERS-, PHARMACEUTICALS INTERMEDIATE PROPERTIES | 108.2
Mol. Wt.: B.P.:
118°Cat5mm
Sp. Gr.:
1.295 at 14.4°C
Color:
SPECIF ICATIONS Water-white
Assay (Aqueous soln.)
90%
Stability:
Excellent
1-Thioglycerol is an excellent reducing agent and can serve as a useful additive to polymerization as well as stabilization of acrylonitrife polymers and co-polymers. It also has considerable potential as a stabilizer in various types of pharmaceuticals. Data sheet and samples available on request.
C H e m e n c s , ir\c. 90 Tokeneke Road Darien, Connecticut 06820 Phone: 203-655-8741 Cable: EVANSCHEM
TWX: 710-457-3356 JAN. 17, 1972 C&EN 9
