FIVE POLYMERS AND FIBERS
Strong demand brings bright earnings outlook GILBERT R. PARKER, Assistant Editor, New York City
P
olymer producers agree that 1969 will be a good business year across the board in resins, man-made fibers, and elastomers. High consumer spending is maintaining a strong, steady demand for synthetic polymers. Supply-demand balances for nearly all such materials are tight. Price structures are firm. The earnings outlook is the best in three years. For 1970, producers are generally optimistic about continuing earnings strength but have some reservations. On the one hand, they know that tight money caused by the surtax extension and the high discount rate will moderate inflationary pressures on their production and selling costs. On the other, the tight money will also reduce consumers' disposable income and spending for polymeric products. Such weakened demand could create some serious problems once again in view of spots of overcapacity that may develop particularly in man-made fibers. Resins U.S. production of all thermoplastic and thermosetting resins totaled 16 billion pounds in 1968, up from 11.4 billion pounds in 1965 and 6.3 billion pounds in 1960. Shipments last year were valued at $3.9 billion, which accounted for 14.8% of the basic chemical industry's sales of $26.4 billion. Last year's total production comprises 12.3 billion pounds of thermoplastic resins and 3.7 billion pounds of thermosetting resins. For the thermoplastic resins, the average annual growth rate has been 14.6% for the 1960-68 period and 12.5% for the more recent 1965-68 period. For the thermosetting resins, the average annual growth rate has been 6.3% for the 1960-68 period and 5.5% for the 1965-68 period. Comparison of the growth rates for both classes of resins shows that the thermoplastic resins have maintained more than twice the growth rate of thermosetting resins throughout both the 1960-68 and 1965-68 periods. This trend will continue during the next five years as thermoplastic resin 64A
C&EN SEPT. 1, 1969
growth declines toward an annual rate of l l % and thermosetting resin growth declines toward 5%. The strong growth potential for thermoplastic resins is, of course, attracting more and more oil companies to integrate ahead through petrochemicals into such big-volume commodity plastics as low- and high-density polyethylene, polypropylene, and, to a lesser extent so far, polystyrene and polyvinyl chloride. The weaker growth potential for the thermosetting resins, however, is already signaling some corporate planners to reassess the profitability of certain of these specialty resins—unsaturated polyesters, epoxies, and phenolics—particularly in view of the high costs of producing and selling such wide' product mix items. For both the thermoplastic and thermosetting resins, production costs are determined by three major factors: • Monomer costs, usually 45 to 65%. • Processing or conversion costs (including capitalized equipment and operating costs), usually 25 to 40%. • Utility costs, usually 5 to 10%. Selling prices of polymers are based not only on these production costs but also are determined by the inexorable laws of supply and demand in the market place, the price-performance characteristics of the polymers compared to alternative materials, and the degrees of competition. The multiple of selling prices to production costs for today's commercial polymers ranges from about 1.2 for low-density polyethylene (at 11 cents a pound), to about 1.6 for highdensity polyethylene (at 16.5 cents a pound), to about 2.1 for polypropylene (at 20.5 cents a pound), and to even higher figures for specialty polymers. As any polymer becomes more of a volume item, this multiple falls as larger markets, economies of scale, and improved productivity partly, but only partly, offset the lower selling prices. The Census Bureau price index for all plastics (1957-59 = 100) has fallen from 101 in 1958 to less than 89 last year. Indeed, plastics operations have
been contributing less to corporate profits than to corporate sales during the past 10 years. For example, Dow reports that for 1968 plastics and packaging accounted for 31.5% of corporate sales but only 25.5% of pretax earnings. Union Carbide reports that last year's price attrition in low-density polyethylene decreased earnings for 1968 by $21 million, or 35 cents a share. The point, then, is this: that during any polymer's early dynamic growth years, a producer makes his greatest earnings and exercises most control over the supply-demand balance, the price-performance characteristics, and the competitive situation. As the polymer becomes more of a commodity item and earnings per unit dwindle, the many producers find themselves in a profit squeeze and turn to trying to lower the relatively fixed production costs by decreasing monomer costs or improving the processing economics. Just how long chemical companies will continue to invest their R&D dollars to make what are only incremental gains that aid in prolonging their market positions by two or three years remains to be seen. One can readily question whether such R&D expenditures really pay off or whether the money should be invested in more essential and promising areas. After all, plastics operations compete with many other projects for corporate funding, and unless these operations are economically logical to the company's position in raw materials, technology, and marketing, the money will be spent elsewhere. In the next five to 10 years as more of the scientifically innovative companies come up with projects that offer better returns on investment, some will be phasing out the less profitable of their plastics operations just as some companies already have phased out basic industrial chemicals. In an economy where so many products of manufacture are designed with calculated lifetimes of utility, so too may be the plants themselves. Currently, though, the business outlook for the commodity resins is a good
Resin production will total 17.8 billion pounds this year, up 12°/o from last year Billions of pounds
20
15
one. Producers are maintaining the price increases they began late last year and shaving production and sales costs. In general, earnings should be good this year and next. Low-density
polyethylene
Production last year came to 3.29 billion pounds. The forecast for this year is 3.70 billion pounds and the 1969-74 average annual growth rate looks to be 12%, which compares with 15% in the 1960-68 period and 14% in 1965-68. Basic price runs 11.5 cents a pound for volume orders of general-purpose molding resins. Markets include film and sheet, 44%; injection molding, 13%; extrusion coating, 1 1 % ; wire and cable, 9 % ; blow molding, 2 % ; other domestic uses, 9%; and exports, 12%. There are 13 U.S. producers, led by Dow, D u Pont, Gulf Oil, U.S.I. Chemicals, and Union Carbide. Currently, producers are operating with a good supply-demand balance that will continue into 1972. Price attrition from the previous two years of overcapacity has been reversed and last November's price increases are holding for all grades of resins. Union Carbide's Vernon Larson, vice president, plastics products division, comments: "Now, I'm most concerned that the industry maintain reasonable pricing levels that give adequate returns for further growth. W e ourselves are trying for higher unit profits in two ways: expanding our specialty product mix and, at the same time, trimming the number of items in our commodity mix." Polyvinyl
10 5 0
1966
1967
1968
1969*
1970*
*C&EN computer forecasts. Source: U.S. Tariff Commission
Man-made fiber production will total 5.8 billion pounds this year, up 11.5°/o from last year Billions of pounds
1966
1967
1968
1969*
1970*
*C&EN computer forecasts. Source: Textile Economics Bureau
Synthetic elastomer production will total 2.2 million long tons this year, up 4.8°/o from last year Millions of long tons
2.6 2.2
chloride
Last year's production totaled 2.40 billion pounds and this year 2.66 billion pounds is forecast. The 1969-74 average annual growth rate is forecast at 11.5%, which compares to 12.4% from 1960-68 and 9.4% from 1965-68. Base price is 11 cents a pound for general-purpose resins. Markets are calendering, 18%; extruded products, 14%; wire and cable, 12%; calendered flooring, 10%;
1.8 1.4
1966
1967
1968
1969*
1970*
*G&EN computer forecasts. Source: U.S. Department of Commerce
SEPT. 1, 1969 C&EN 65A
film and sheet, 6%; paper and textile coating, 5%; phonograph records, 5 % ; plastisols, 5 % ; protective coatings and adhesives, 4%; injection and blow molding, 3 % ; coated flooring, 2%; other domestic uses, 1 1 % ; and exports, 5%. There are 22 U.S. producers, led by Borden Chemical, Diamond Shamrock, Firestone Tire & Rubber, B. F. Goodrich, and Union Carbide. Production will swing back to a slightly higher growth rate than during the recent three years when output was measurably less than capacity for two reasons: First, vinyl chloride monomer was short because of the down times of some producers as they converted from acetylene-based processing to oxychlorination of ethylene; and second, many producers pulled back to five-day work weeks in making general-purpose and calendergrade resins, which have traditionally glutted the market.
Thermosetting resins
Alkyd Coumarone-indene Epoxy Phenolic Polyester Urea and melamine
Production, millions of pounds 1968 1969* MeLow dium High Low
1966
1967
1970* Medium
666 335 140 1047 470 718
638 625 655 665 670 663 687 284 333 343 344 346 353 355 131 159 169 177 184 186 201 983 1038 1136 1174 1204 1201 1308 513 576 618 652 680 679 776 690 741 808 837 861 863 941
High
711 359 208 1324 782 945
Thermoplastic resins Cellulosics Polyethylene Low density High density Polypropylene Polystyrene, Straight and rubber-modified ABS and SAN resins Polyvinyl chloride
187
171
186
188
192
194
193
202
206
2648 2716 3285 3494 3649 3801 3877 4135 910 1082 1254 1402 1480 1559 1600 1723 554 662 876 963 1032 1100 1134 1250
4353 1842 1347
1572 1596 1791 2011 2099 2183 2220 2384 362 371 464 542 573 603 615 677 2164 2142 2395 2665 2789 2896 2918 3225
2487 710 3279
* C&EN computer forecasts. Source: U.S. Tariff Commission
Polystyrene 1968 production of straight and rubber-modified polystyrene reached 1.79 billion pounds. 1969 production is forecast at 2.0 billion pounds. 1969-74 average annual growth rate is forecast at 1 1 % , which compares to 13% from 1960-68 and 10% from 1965-68. Base price is 14.5 cents a pound for general-purpose resins. The main markets are molding, 50%; extrusion, 14%; textile and paper treating, 1 1 % ; emulsion paint, 2%; other domestic uses (including polystyrene foams), 20%; and exports, 3 % . There are 14 major U.S. producers, led by Amoco Chemicals, Dow, Foster Grant, Monsanto, and Sinclair-Koppers. For general-purpose, impact, and expandable bead resins, the supplydemand balance is tight with total sales for the first half of 1969 only 3 % behind production. This balance
could get tighter in the next three years if consumption in the potentially high-volume areas such as furniture and construction moves faster than many marketing men believe it can. High-density
polyethylene
Last year's production reached 1.25 billion pounds, and 1.39 billion pounds is forecast for this year. 1969-74 average annual growth rate is forecast at 15%, which compares to 24% from 1960-68 and 17% from 196568. Base price is 16.5 cents a pound for blow molding resins. Markets are blow molding, 42%; injection molding, 2 1 % ; film and sheet, 4%; wire and cable, 3 % ; extrusion coating, 2%; pipe and conduit, 2%; other domestic uses, 17%; and exports, 9%. There
Cellulosic fibers 1966
Cellulose acetates, excluding cigarette tow Rayon
454 1065
1967
Production, millions of pounds 1968 1969* 1970* MeMeLow dium High Low dium High
481 500 525 540 546 549 570 573 912 1104 1088 1138 1224 1138 1210 1329
Noncellulosic fibers Acrylic Nylon Olefinic Polyester, staple Textile glass * C&EN computer forecasts. Source: Textile Economics Bureau 66A C&EN SEPT. 1, 1969
353 398 521 516 548 557 571 612 624 1066 1052 1317 1461 1472 1477 1650 1662 1674, 101 117 199 234 231 237 293 291 303 409 568 827 834 860 879 983 1019 1051 332 309 400 461 466 469 537 545 552
are 12 U.S. producers, led by Celanese, Du Pont, Monsanto, Phillips Petroleum, and Union Carbide. The supply-demand balance, which has been tight since early 1968, may loosen slightly next year, but not seriously, as additional capacity from Amoco, Du Pont, and Monsanto comes into the market. 90% of capacity will be used this year, and this will probably decline to no less than 85% next year. "Generally, though, the outlook is for a good business climate," says Monsanto's Robert Bates, market manager, hydrocarbons and polymers division. "In one major area, we're hoping to sell more and more volume into the milk bottle market." On this point, Union Carbide's John Luchsinger, vice president, plastics products division, adds: "High-density polyethylene will inevitably be priced around 13 cents a pound in several years . . . and when it is, the blow-molded milk bottles will really become competitive with coated paper containers." Polypropylene Production last year totaled 876 million pounds. This year, production is forecast at 1.1 billion pounds. The 1969-74 average annual growth rate is forecast at 16%, which compares to 46% from 1960-68 (the 1960 base year is low at 41 million pounds) and 3 3 % from 1965-68. Base price is 20.5 cents a pound for general-purpose resins. The main markets are injection molding, 4 1 % ; fibers and filaments, 35%; film and sheet, 7%; other
domestic uses, 7 % ; and exports, 10%. There are eight U.S. producers; the major ones are Avisun, Enjay, Hercules, and Shell. Currently, producers cannot make enough polypropylene to satisfy the market demand, limited as they are by a tightness in propylene feedstock and existing installed capacity. Producers are scheduling new capacities that, when on stream in 1971, will oversupply the market and probably prompt price cutting. In 1971, production will total an estimated 1.5 billion pounds, but average capacity for the year will total 1.9 billion pounds. Man-made fibers U.S. production of all man-made fibers totaled 5.2 billion pounds last year, up from 3.5 billion pounds in 1965 and 1.9 billion pounds in 1960. Shipments last year were valued at $3.5 billion, which accounted for 13.3% of the basic chemical industry's sales. Last year's total production comprises 1.6 billion pounds of cellulosic fibers—rayon and acetate—and 3.6 billion pounds of noncellulosic fibersacrylic, nylon, olefin, polyester, and textile glass. For the cellulosic fibers, the average annual growth rate has been 6% from 1960-68 and 3 % from 1965-68. For the noncellulosic fibers, the average annual growth rate has been 2 1 % from 1960-68 and also 2 1 % from 1965-68. In the man-made fibers industry, producers keep a sentinel watch over their supply-demand balances which, of course, are the determinants of pricing and earnings. When balances slacken, prices weaken; when balances tighten, prices firm up. Over the years, fiber producers have allowed price structures to fall gradually and, by doing so, have gained larger markets and increased total revenues. But now, with greater-than-ever market saturation, some producers are beginning to see 1973 as a time when many fiber prices will near the bottom of 20- and 30-year downward trends. Besides price stability, another good measure of how well the fiber industry is operating within a certain supplydemand situation is its use of plant capacity. Given a healthy economy and a tight supply-demand balance, total plant use can approach an optimum 93%, which, in fact, happened at times throughout 1965 and the first half of 1966. Given a weak economy and a loose supply-demand balance, total plant use can fall toward 70%, which subsequently happened in the second half of 1966 and throughout the first three quarters of 1967. This loss in plant use, together with price erosion in many fibers, slashed into
both years' earnings of every U.S. fiber producer. To achieve optimum plant use, then, the fiber industry must plan additional capacity more astutely than ever, gearing down to the lower growth rates ahead for all man-made fibers. This would require a sort of planning that isn't likely to occur, however, because the industry, an abstraction, doesn't plan anything. Each producer and newcomer does the planning. And it's often the case that each one, in competition with others and in pursuit of its own business objectives, builds too much too soon. The near-term outlook for the total industry's operating efficiencies, based on expansion plans producers have reported to the Textile Economics Bureau, is in some cases alarming. For the cellulosic fiber producers, plant use through 1970 will remain high— 90% plus. For the noncellulosic fiber producers, however, plant use appears headed downward toward 70% from what should be generally satisfactory levels this year. Rayon Production last year totaled 1.10 billion pounds (filament, 376 million pounds and staple, 724 million pounds). Production for this year is forecast at 1.12 billion pounds. The 1969-74 average annual growth rate is forecast at 2%, which compares to 5% from 1960-68 and 1% from 196568. There are six U.S. producers, led by American Enka, Beaunit, and FMC's American Viscose. Average operating capacity for 1970 is scheduled at about 1.25 billion pounds. With production estimated at about 1.15 billion pounds, plant operating rate will be 92%. Producers are losing filament markets in tire cord, gaining staple markets in disposable products, making incremental price increases, spending heavily for advertising, and generally pushing hard for further growth. Acetate Last year's production came to 500 million pounds (filament, 455 million pounds and staple, 45 million pounds). The forecast for this year is 520 million pounds. The 1969-74 average annual growth rate is forecast at 4 % , which compares to 7% from 1960-68 and 4% from 1965-68. There are four U.S. producers, led by Celanese and Eastman. Average operating capacity for 1970 is scheduled at about 531 million pounds. With production estimated at about the same figure, plant use will be more than 90% once yet unannounced capacity is added.
Producers foresee continuing consumer acceptance of diacetate and triacetate apparel fabrics. In spite of the fiber's poor abrasion resistance and tenacity, acetate fabrics fill a market demand for fashion and style at low cost. Nylon Last year's production: 1.32 billion pounds (filament, 1.18 billion pounds and staple, 140 million pounds). For this year production is forecast at 1.38 billion pounds. The 1969-74 average annual growth rate is forecast at 6%, which compares to 17% from 1960-68 and 12% from 1965-68. There are 11 U.S. producers, led by Allied, Celanese, Du Pont, and Monsanto. Operating rate this year will be about 86%. In 1970, average operating capacity is scheduled at about 1.78 billion pounds. With production estimated at 1.45 billion pounds, plant use will fall to 8 1 % . Nylon fiber, established in its markets, continues to show slight upward and downward price movements as market conditions change. With its projected growth of 6% for the next five years, it will probably lose its No. 1 position to polyester fiber in 1972 as the largest volume man-made fiber. Polyester Last year production topped a billion at 1.04 billion pounds (filament, 213 million pounds and staple 827 million pounds). This year production will likely reach 1.18 billion pounds. The 1969-74 average annual growth rate is forecast at 15%, which compares to 3 1 % from 1960-68 and 29% from 1965-68. There are 17 U.S. producers, led by Celanese, Du Pont, and Eastman. Plant operating rate this year will be about 84%. In 1970, average operating capacity is scheduled at about 2.03 billion pounds. With production estimated at about 1.40 billion pounds, plant use will be only 70%. The current overcapacity has already weakened filament and staple prices. During the past year, for example, 150 denier filament dropped 20 cents to its current $1.38 a pound and staple dropped 9 cents to its current 52 cents a pound. If next year's overcapacity develops as it appears bound to, even the fastest growing markets—carpets, tire cord, and bed sheeting, won't help enough to push demand into balance with supply. Acrylic Last year's production totaled 521 million pounds (staple only). 1969 production is forecast at 565 million SEPT. 1, 1969 C&EN 67A
Elastomers and rubbers 1966
Production, thousands of long tons
1967
1968
Low
Butyl rubber Natural rubber, new supply Neoprene Nitrile rubber, N-type Polybutadiene Stereoelastomers Styrene-butadiene rubber, S-type
1969* Medium High
Low
1970* Medium
High
119 651 167 81 332 451
120 664 170 84 348 471
1336 1244 1389 1385 1403 1416 1417 1445
1464
103 587 145 70 186 272
114 550 149 62 202 307
113 619 160 71 265 357
115 614 159 74 285 384
116 628 161 76 300 398
117 636 163 77 310 413
118 627 163 78 310 433
C&EN computer computer Torecasts. forecasts ** C&EN Source:- U.S. Department of Commerce
pounds. The 1969-74 average annual growth rate is forecast at 8%, which compares to 17% from 1960-68 and 12% from 1965-68. There are six U.S. producers, led by Du Pont and Monsanto. Plant use this year will b e about 90%. In 1970, average operating capacity is scheduled at about 725 million pounds. With production estimated at about 610 million pounds, plant operating rate will be down to 84%. Acrylic fiber is the nearest substitute to wool among all the man-made fibers, and producers expect solid growth patterns and further penetration into the established wool markets, particularly in apparel knitwear and carpets. In some needle-punched carpet markets and in pile linings for apparel, acrylic fiber growth is being slowed by polypropylene fiber. Olefin Last year production of olefin reached 254 million pounds. This year it will likely reach 270 million pounds. The 1969-74 average annual growth rate is forecast at 20%, which compares to 4 1 % from 1960-68 and 45% from 1965-68. There are five U.S. producers, led by Enjay Chemical and Hercules. Plant use this year will be about 65%. In 1970, average operating capacity is scheduled at 510 million pounds. With production estimated at about 325 million pounds, plant use will remain at about 65%. Several factors account for these low operating rates. First, the polypropylene monofilament capacity that has been built up to make sandbags for Vietnam is not being fully used now that that market is declining, but producers hope to develop a market for industrial shipping bags. Second, Uniroyal is not producing fiber anywhere near capacity at its Winnsboro, S.C., plant. 68A
C&EN SEPT. 1, 1969
Textile glass Last year production increased to 403 million pounds. 1969 production will probably reach 450 million pounds. The 1969-74 average annual growth rate is forecast at 13%, which compares to 1 1 % from 1960-68 and 12% from 1965-68. There are eight U.S. producers, led by OwensCorning Fiberglas and PPG Industries. Plant operating rate this year will be 82%. In 1970, average operating capacity is scheduled at 720 million pounds. With production estimated at 510 million pounds, plant use will be 7 1 % . Next year's apparent overcapacity, or underproduction, may be no problem at all as long as producers move as much glass fiber into tire belts as their expansion plans indicate they hope to. Since Goodyear introduced its Polyglas belted-bias tires, it's become conclusive that glass fiber will really move in view of industry projections that such tires will account for 80% of the 220 million domestic passenger tire business in 1974. Elastomers U.S. production of synthetic elastomers totaled 2.13 million long tons last year, up from 1.81 million long tons in 1965 and 1.4 million long tons in 1960. This year, production will advance nearly 5%, compared to an average annual growth rate of 5.1% in 1960-68 and 5.4% in 1965-68. Styrene-butadiene rubber (SBR) production last year reached 1968 production: 1.39 million long tons. This year it will climb to production forecast: 1.4 million long tons. The 1969-74 average annual growth rate is forecast at 2.5%. Markets: tires and tire products, 64%; mechanical goods, 5 % ; footwear, 3 % ; foamed products, 3 % ; wire and cable, 1%; other domestic uses, 17%; and exports, 7%. U.S. producers: 19, led by Firestone Tire
& Rubber and Goodyear Tire & Rubber. Polybutadiene production last year totaled 265,000 long tons. 1969 production is forecast at 285,000 long tons. The 1969-74 average annual growth rate is forecast at 9%. Markets: tires and tire products, 87%; high-impact polystyrene, 4%; other domestic uses, 2%; and exports, 7%. U.S. producers: five, led by Firestone Tire & Rubber and Goodyear Tire & Rubber. Neoprene production reached 160,000 long tons last year. 165,000 long tons will likely be produced this year. The 1969-74 average annual growth rate forecast: 5%. Markets: mechanical goods, 3 3 % ; automotive, excluding tires, 15%; adhesives and binders, 13%; wire and cable, 12%; tires and tire products, 3%; other domestic uses, 4%; and exports, 20%. U.S. producers: two, led by Du Pont (newcomer is Petro-Tex). Butyl production last year: 113,000 long tons. 1969 production forecast: 116,000 long tons. The 196974 average annual growth rate is forecast at 3%. Markets: tires and tire products, 5 1 % ; mechanical goods, 9%; electrical, 2%; other domestic uses, 7%; and exports, 3 1 % . U.S. producers: two, Columbian Carbon and Enjay Chemical. Nitrile production last year totaled 71,000 long tons. 1969 production is forecast at 76,000 long tons. The 1969-74 average annual growth rate is forecast at 4%. Markets: hose, 26%; sealants, gaskets, and O-rings, 14%; molded goods, 10%; coated fabrics, 6%; plastics blends, 6%; footwear, 4%; rubber-covered rolls, 4%; other domestic uses, 7%; and exports, 15%. U.S. producers: seven, led by B. F. Goodrich, Standard Brands Chemical Industries, and Uniroyal. Polyisoprene production totaled 60,000 long tons last year; 1969 production is forecast at 95,000 long tons. The 1969-74 average annual growdi rate is forecast at 14%. Markets: tires and tire products, 52%; mechanical goods, 14%; footwear, 7%; other domestic uses, 4%; and exports, 23%. U.S. producers: three, Ameripol, Goodyear Tire & Rubber, and Shell Chemical. EPDM (ethylene-propylene-diene monomer) production came up to 60,000 long tons last year; this year about 70,000 long tons will be produced. The 1969-74 average annual growth rate is forecast at 10 to 30%. Markets: automotive, excluding tires, 28%; tires and tire products, 17%; appliances, 7%; hose, 6%; wire and cable, 6%; coated fabrics, 3%; other domestic uses, 18%; and exports, 15%. U.S. producers: four led by Du Pont and Uniroyal.
