NEWS OF THE WEEK
STOCK PRICES: Chemicals reflect market turmoil Chemical company stocks were swept along with everything else in the massive stock market crash of last Monday—Black Monday 1987. C&EN's chemical stock index dropped 107 points to 423, or 20%, on the day. This was only slightly less than the almost 23% decline in the Dow Jones Industrial Average. As recently as Oct. 2, the C&EN index, which is made up of the weighted stock values of American Cyanamid, Dow Chemical, W. R. Grace, Hercules, Monsanto, Rohm & Haas, and Union Carbide, had stood at 630. Hence, in 17 days it lost about one third of its value. Of the seven companies in C&EN's stock index, the price of Carbide's stock was the least affected on Black Monday, falling 9%. Hardest hit was Rohm & Haas, down 33%. Other losses were Grace, 26%; American Cyanamid, 22%; Monsanto, 21%; Dow 19%; and Hercules, 17%. The downturn in chemical stock prices reflected the general panic that hit Wall Street, rather than any rational appraisal of chemical industry prospects. Security analysts have been virtually as one in predicting earnings gains for chemical makers through next year. By the close of business last Wednesday the Dow Jones Industrial Average had retrieved more than half of its Monday loss. Chemical stocks showed the same upward trend, with the C&EN index retrieving 55% of its Monday plunge. All seven companies joined in the recovery. However, on Thursday they all retreated, to drop the C&EN index by 5% from the Wednesday close. Robert Reitzes, an analyst with Mabon, Nugent & Co., told C&EN that the immediate impact of the market upheaval on chemical makers is that there likely will be less capital spending, more stock buy6
October 26, 1987 C&EN
Traders crowd floor of New York Stock Exchange as market goes wild backs, and possibly more acquisitions. Indeed, since Monday's freefall, GAF, National Distillers & Chemical, International Minerals & Chemical, W. R. Grace, Great Lakes Chemical, and 3M are among the many companies that say they will take advantage of what appear to be bargain prices to buy back their own stock. One stock analyst remarked that Hercules' recent sale of its 37.5% interest in polypropylene producer Himont for $5972 per share to Montedison (C&EN, Sept 21, page 7) "looks great now." Himont closed at $32 per share on Wednesday. Theodore Semegran, a stock analyst with Shearson Lehman Brothers who follows chemicals closely, fears that a loss of consumer confidence brought on by the market's gyrations may mean a cutback in consumer purchases. This, in turn, could affect sales of chemical products such as plastics and fibers. Reitzes agrees, even though in his opinion, current business is "unbelievably good." However, he adds
that the stock decline may mean the country is headed for a depression. He says that a lot depends on what Washington officials do to reduce the government deficit. "We've got to tighten our belts, or we're in for some tough times," he adds. Biotechnology stocks also have been hit by the panic. According to one barometer—a 64-stock average maintained by the New York City brokerage house of Casdin Associates—biotechnology stocks lost 25% of their value on Black Monday. The decline put this index at less than 50% of its March 20 peak. On overseas financial markets the damage occurred mostly on Tuesday, following the Wall Street plunge on Monday. In London, ICI's stock price fell 11% on Tuesday; in Italy, Montedison dropped 13%; in the Netherlands, Akzo fell 8%; and in Japan, Mitsubishi Chemical dropped 18%. However, there was some recovery on Wednesday, with ICI up 5%, Montedison up 1%, and Mitsubishi Chemical up 11%. In Europe the stock gyrations have
caused changes in some corporate financial plans. For example, Norsk Hydro, 51% owned by the Norwe gian government, says it might have to reconsider a Nov. 27 launch date for a $528 million stock issue. And the British government is consider ing whether to extend the closing date for its issue of British Petrole um shares. This follows a drop in market price of existing shares to a point about 9% lower than the offi cial offer price. D
CMA urges change in chemical arms treaty With no fanfare, the Chemical Man ufacturers Association's board of di rectors recently approved recom mendations aimed at undergirding U.S. efforts to negotiate a treaty ban ning chemical weapons and, at the same time, allowing CMA the op portunity to present its positions on issues of concern to it. CMA's first recommendation is that it "aggressively" supports such a treaty. The trade association, how ever, believes several areas need to be further debated, even though some have generally been accepted by the 40 nations hammering out the treaty. Other areas are still un der intense discussion. For example, the so-called rolling draft treaty states that proprietary information will be protected. CMA believes that details to assure con fidentiality are vague or absent. So the CMA board urges the U.S. "to effectively protect confidential com mercial and proprietary information under the treaty." As the draft treaty now reads, fa cilities producing or using chemi cals that could be precursors to chemical warfare agents are subject to routine, on-site inspections. This is to verify that these so-called Schedule II chemicals are not being diverted to outlawed purposes. CMA says it will continue to work with U.S. negotiators "to develop the least disruptive inspection protocols" con sistent with national security. How ever, CMA also advises the negotia tors that "a foolproof routine veri fication system [is] technically infeasible."
be controlled under the treaty "is ill-conceived and nonproductive." The CMA board acted now be cause it believes that when Presi dent Reagan and Soviet General Sec retary Mikhail S. Gorbachev meet, perhaps this fall, they may agree on the general outlines of a chemical arms treaty. Such agreement, broad though it may be, "could greatly reduce the flexibility negotiators would have, and it could limit the amount of impact the chemical in dustry would have on a treaty," Olson says. By adopting recommen dations now and conveying them to U.S. negotiators, CMA ensures that an avenue for advocacy remains open. D
One of CMA's gravest concerns is that some nations are trying to expand reporting and inspection re quirements to facilities "capable" of producing "supertoxic" chemicals. As CMA's associate director for health, safety, and chemical regula tions Kyle B. Olson explains, U.S. chemical plants are better able to handle very toxic chemicals because they have to comply with evertighter health, safety, and environ mental rules. This means that the number of plants "capable" of pro ducing "supertoxic" chemicals is growing. Verification costs and plant intrusions also would grow accord ingly. Therefore, CMA asserts that expanding the list of chemicals to
Spanish biochemist in line to head UNESCO After a bitter all-night session, the executive board of the United Nations Educational, Scientific & Cultural Organization last week voted 30 to 20 to nominate a Spanish biochemist as the organization's next director general. The choice may clear the way in the long run for return of the U.S. and U.K. to UNESCO, and more support for international scientific activities. Angry withdrawal of the incumbent director general, AmadouMahtar M'bow of Senegal, before the fifth ballot in 12 days enabled selection of Federico Mayor Zara-
goza, 53, who was Spanish Minister for Education & Science in 1981-82 and who is now a professor of biochemistry at the University of Madrid. Mayor won support from most Latin American and European nations, as well as Japan, China, and the U.S.S.R. Observers expect him to win a six-year term on Nov. 7 from the general conference, the 158-member organization's top policy-making body. However, bitterness among M'bow's supporters— mainly African and Arab nations— may engender opposition, Mayor received a Ph.D. in pharmacology from Madrid and has done I research at Harvard and Oxford. He ο
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was a professor of biochemistry and rector at Granada University, and served as deputy director general of UNESCO from 1978 to 1981. Mayor has pledged to restructure and reinvigorate the troubled or ganization—which has been dog ged by controversy during the 13-year tenure of M'bow, 66—and to seek the return of three nations. The U.S., U.K., and Singapore quit UNESCO in 1984 and 1985, charging mismanagement, wasteful spending, politicization, and anti-Western bias. Other nations have threatened to quit if M'bow were reelected. U.S. officials say it is likely to take at least several years for the U.S. and U.K. to rejoin UNESCO. The two nations will watch for eviMayor: restructure and reinvigorate dence of structural changes and October 26, 1987 C&EN
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