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Vol. 22, S o . 6
The Migration of Chemical Industry’ Charles W. CunoP INDUSTRIAL
I
BUREAUOF THE
INDUSTRIAL C L U B OF S T .
S A STUDY of industry in the United States, the first
observation one makes is the tendency to centralization; thus, the automobile industry spells Detroit, the rubber industry, Akron, the collar industry, Albany, etc. Less obvious, but nevertheless as positive, are the tendencies of migratioii of industry. Profound changes are especially notable in those essentially technical industries, such as the iron and steel, fertilizer, glass, coke, alkali, paper, heavy chemicals, etc. A noted writer on this subject has said, “Industries do not migrate, they grow.” However, we will not quibble over words or the definition of migration. A period of less than twenty-five years has witnessed a shift of over 26 per cent of the sulfuric acid manufacture of the United States to the Southern States; ten years, a shift of nearly 50 per cent of the rayon manufacture to the Carolinas and Virginia. Of the open-hearth steel produced in 1900, Pennsylvania produced 80 per cent, in 1925 Pennsylvania produced only 36.5 per cent, while Ohio, Indiana, and Illinois produced 45.9 per cent. Cast-iron pipe in 1880 was manufactured almost entirely in Ohio, Pennsylvania, and New York. I n 1925 Alabama alone produced over 46 per cent of the nation’s tonnage. These are some of the examples of the migration of industry. Our chief interest is, however, not in establishing the fact of the migration of industry but, conceding that fact, the
SULFURIC AGIO PLANTS
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two questions-what are the causes of this migration, and what mill be the effect on the body econonTic? Successful plant management resolyes itself into two partsfirst, that of economic production; and, second, that of efficient distribution. Too often those concerned in the eco1 Received April 30, 1930. Presented before the Industrial Bureau Managers Conference, United States Chamber of Commerce Building, Washington, D. C., April 15, 1930. 2 Consulting Chemical and Metallurgical Engineer for the Industrial Bureau of the Industrial Club of St. Louis.
LOUIS,hf0.
nomic plant location look only upon the five factors of production-raw-material sources, labor, fuel, power, and water resources. Too frequently they neglect the sometimes more important factors which affect overhead and distribution, and which may be grouped under the headings of transportation facilities, freight rates, magnitude of markets, climate, taxes, corporation fees, municipal restrictions, and competitive, feeder, and consumer industries. Production Factors in Plant Location
The lodestone of basic industries, whose major raw materials are unprocessed, has usually been cheap fuel or cheap power. For example, electrochemical industries-those that manufacture alkalies, chlorine, artificial graphite, abrasives, electrolytic metals, etc.--centralize about cheap sources of hydroelectric power. It is to be remembered, however, that coal, gas, electric power, and raw materials are the most cheaply transported commodities. We find, therefore, that there i s often a compromise between sources of raw materials and sources of fuel, as is evidenced in the iron and steel industries. The most prosperous of these are located in the Chicago, Cleveland, and Detroit districts, between the source of iron ores in Minnesota and Michigan and coal from Pennsylvania aud Virginia. This compromise has been made at points of high local consumption and exceptional distributing facilities. In the examination of intermediate industries, whose major raw materials are the semi-finished products obtained from basic industries, we find the trend of migration toward locations where these products are obtainable. Examples of such industries are steel mills and steelfabrication plants, which depend upon blast furnaces for their pig iron; the manufacturers of intermediates, who depend upon by-product coke ovens f o r their tar; dye manufacturers who look to the producers of intermediates for their raw materials, etc. I t is evident that such semi-finished products must take a higher freight rate; therefore, such industries look, not so much to cheap sources of fuel or power, as t o advantageous connections with producers of certain finished products and to adequate outlets for their finished materials. In this case it is clearly seen that feeder, competitive, and consumer industries are prominent factors in determining the location of these intermediate industries. We hare observed the migration of cotton mills aiid rayon factories to the Southern States. Cotton is the semi-finished product for the cotton mills, and cotton linters and wood pulp for the rayon factories. But the factor which has influenced this migration is not these sources of semi-finished products, but the supply of cheap labor in the South. The wisdom or fallacy of location on such a basis is not a matter for discussion in this paper. Again considering the five factors of production in the light. of specialized chemical industry, we find that labor in such.
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industries rarely becomes a governing factor of plant location. Coninion laborers in such plants are usually few in ~iumber:in many cases the payroll of the research and technical staff greatly exceeds that of the common laborers. Raw materials have. however, certain restricting factors. Thus, sulfuric acid is never manufactured a t the source of sulfur. but a t the point of local consumption. The reasons are these: 32 ton> of sulfur make more than 100 tons of sulfuric acid; in coii?equeiice, sulfur, which takes a low freight rate, can he shipped long distances, while its product, sulfuric acid, taking a niuch higher freight rate. cannot be shipped a t a profit niore than 100 miles. This is reversed in the alkali industry, which usually locates a t the source of salt, first, hecause it takes about 11/2tons of salt to make 1 ton of caustic, and second, because the freight rates on salt arid on caustic are usually about the same. An abundant source of good water obtainable a t a cheap price io an often neglected factor in plant location. To many chemical and semi-chemical industries pure water is necessary for their efficient operation; thus, sugar-beet factories have never located in South Dakota because of the highly chalybeate water< of that region, although in many localities sugar beets of exceptional quality can be raised. T o paper mills, rayon factorie-, leather, and a host of others water is an important factor of plant location. Thus we see that, from the standpoint of production alone, power. eqpecially electric power, is a governing factor in the locatiw of plants for the manufacture of chlorine, artificial graphite, abrasives, and electrolytic metals. For certain others raw-material resources, their cost of transportation when balanced with the cost of transportation of finished products, is a deciding factor in plant location. Minor factors are water, fuel, and labor. Distribution Factors in Plant Location
We come now to the problem of distribution and its factors, all of ivhich have influence in the migration of industry, but
the most important of which are transportation facilities, freight rates, and markets. Transportation facilities, such ab railroads, steamship lines, barge lines, terminals, and wharves. are the mays through which production flows to the consuming public. Where a city has more than one railroad or, better still, railroads and barge or steamship lines, the freight competition occasioned by these several transportation facilities makes for lower freight rates, efficiency and service. The territory in which favorable freight rates apply, as compared with other competitive points, is an important consideration in plant location. The larger the population reached in the territory, the more important such a district becomes as an industrial center. Markets are defined as local. favorable, compet~tive,and national. The local area is the population served by reason of plant location. The favorable area is that which an industry can serve by reason of lower cost production or freight rates. The competitive area is where the industry must compete on equal, or nearly equal, terms with like industries in other localities. I n the national area the industry must be able to overcome freight-rate differentials cornpletely as a limiting sales factor. Factors Affecting Both Production and Distribution
Three factors-climate, taxes and corporation fees, and niunicipal restrictions-affect both production and distribution. The seasonal range, precipitation, humidity. wi
