Environmental Protection
           Agency
Toxic Substances
Washington DC 20460
           Toxic Substances
SEPA     Support Document
           Economic Impact Analysis
           of Proposed Section 5
           Notice Requirements

           Appendix: Volume II

           Proposed Rule   Section 5
           Toxic Substances Control Act

-------
                                        EPA-560/12-80-005-B
                                        September  1980
   ECONOMIC IMPACT ANALYSIS OF PROPOSED
      SECTION 5 NOTICE REQUIREMENTS
           APPENDIX:   VOLUME II
         Contract No. 68-01-5878


             Project  Officer:

               Sammy K. Ng
    ECONOMICS AND TECHNOLOGY DIVISION
        OFFICE OF  TOXIC  SUBSTANCES
         WASHINGTON, D.C.  20460

   U.S.  ENVIRONMENTAL  PROTECTION AGENCY
OFFICE OF PESTICIDES AND TOXIC SUBSTANCES
         WASHINGTON, D.C.  20460

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       APPENDIX E
CHEMICAL SEGMENT PROFILES

-------
                                  INTRODUCTION
    ICF Incorporated (ICF) has developed the following profiles of chemical
industry segments as part of its continuing work in analyzing the impact on
the chemical industry of the premanufacturing notice provisions of the Toxic
Substances Control Act (TSCA).  These profiles were undertaken for three
reasons.  First, they provided ICF with the opportunity to survey all segments
of the chemical industry that would be affected by the provisions so that the
structure, conduct, and performance of these industry segments could be
tentatively and crudely assessed.  Second, they provided ICF with a mechanism
for narrowing the in-depth portion of the work to segments in which
significant amounts of innovation will probably occur.  Finally, they insured
that ICF would seek only that data from the industry which was not available
in the public file and was necessary to complete the economic analysis of this
set of regulations.  (Industry would be least burdened in supplying data for
this analysis.)

    These profiles are organized into seven segments: inorganic chemicals;
synthetic high polymers; amphipathic compounds; elementary organics; organics,
not elsewhere classified; catalysts; and other chemical products.  Within each
segment, component product profiles are provided.  For those segments which
contain more than one component product profile the first page of the chapter
lists the component product summary and then provides a brief description of
the segment's general characteristics.

    These profiles are based on publicly available data only.  Major sources
of information are: Census of Manufactures, Kline Guide to the Chemical
Industry, 10-Ks and annual reports, trade journals, and business periodicals.
Within each profile sources are clearly noted.

    Readers of these profiles will note that the length of the profiles varies
substantially.  This reflects ICF's efforts to focus resources.  For example,
if a component product had extremely small sales volume, was characterized by
no innovation, and was not likely to be affected by innovation in other
component products, ICF dismissed it.  For sectors in which substantial
innovation is occurring (according to public sources), considerable effort was
devoted to insure that public data on this segment have been exhaustively
explored.

    In addition to the principal authors of this report, the following
individuals contributed substantially to this appendix:  Aaron Goldberg, Lori
Hashizume, Glenn Kautt, Kenneth Kolsky, Frank Lerman, Steven Payson, Steven
Stern, and Marguerity Voorhees.

    On the next page we list the component products and segments in the order
in which they occur in this document.

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                    TABLE OF CONTENTS:   APPENDIX:   VOLUME  II
                    APPENDIX  E:  CHEMICAL SEGMENT PROFILES
                                                                         PAGE
    Segment                          component Products

Inorganic Chemicals	1
                                     industrial gases	4
                                     fertilizers	18
                                     inorganic pigments	34
                                     all other inorganic chemicals	50

Synthetic High polymers	80
                                     plastics and resins	83
                                     organic fibers,  non-cellulosic	98
                                     synthetic rubber	115

Amphipathic compounds	129
                                     surfactants	133
                                     fatty acids and  glycerine	146
                                     soaps and detergents	158

Elementary Organic chemicals	170
                                     petroleum refinery products	172
                                     cyclic crudes	190
                                     gum and wood chemicals	196

Organic Chemicals, NEC.	203
                                     cyclic intermediates	207
                                     miscellaneous organics	218
                                     synthetic organic dyes and pigments.226
                                     plasticizers	239
                                     rubber-processing chemicals	251

Catalysts	261

Other Chemical Products	272
                                     cellulosic man-made fibers	275
                                     polishes and sanitary goods	285
                                     paints and allied products	290
                                     adhesives and sealants	300
                                     explosives	308
                                     printing ink	314
                                     toilet preparations	316
                                     carbon black	318
                                     salts, essential oils, chemical
                                     preparations, nee	320

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INORGANIC CHEMICALS

-------
                                        E-2
                        Inorganic Chemicals Segment Summary
                                  Industrial Gases
                                    Fertilizers
                                Inorganic Pigments

                           All Other Inorganic Chemicals
     Inorganic Chemicals are chemicals that are not carbon-based.  As a result,
 they have relatively limited bonding ability and usually cannot be used as
 building blocks to form large molecules.  This factor acts to lower their
 structural and functional diversity.

     In general, there appears to be relatively little product innovation in
 the inorganic chemicals segment. _ The difficulty in forming large molecules,
 referred to above, is one reason for this lack of innovation.  Another reason
 is that the study of inorganic chemicals is one of the oldest fields in
 chemistry.  Because of the relative lack of product innovation in inorganic
 chemicals, inorganic chemicals markets typically exhibit the following
 features:
              Many important products  have  the status of commodity chemicals
              standardized  products  produced  on a very large scale.

              Commodity  chemicals  tend  to be  produced by large companies,  and
              the  markets are often  highly  concentrated.   Because  of  the
              importance of  commodity chemicals in the inorganic chemicals
              segment, market concentration is  higher in inorganics than in
              other segments of the  chemical  industry.

              There is a great premium  on process innovation in commodity
              chemicals, and in inorganic chemicals in general.  Even though
              producers  find it difficult to  capture new markets through the
              introduction of new products, by  improving  the efficiency  of
              their production processes manufacturers may be able to lower
              costs, lower prices, and  capture  new markets.

              Research and development  expenditures tend  to  be concentrated  in
              engineering process innovations rather  than  in  basic scientific
              research.
    The above
iption should not lead one to believe that there is no
•h A .. ,_• _. 	 • 	 	 !____»_  ^       *    *	 	 ^ _ ^ *•. i» * * A 
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                                      E-3
produced in amounts too small for commercial development.   In addition,
process innovation often leads to the development of new chemical
intermediates.

    It may be a mistake to predict that future innovation in inorganic
chemicals will look like past innovation.  In recent years an enhanced
theoretical understanding of inorganic chemistry has emerged from university
laboratories.  These theoretical innovations have not yet been translated into
commercial innovations, but it is quite possible that they may be
commercialized in the future.  If so, innovation in the inorganic chemical
segment could increase substantially.

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       E-4
Industrial Gases

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                                      E-5
                                INDUSTRIAL GASES

DESCRIPTION

    The industrial gases are comprised of nine gases,  many of which have been
used by the chemical industry for over 100 years.V  The largest dollar
volume industrial gas is oxygen, which in 1977 accounted for 37 percent of
total dollar shipments.  Following oxygen, ranked  by dollar volume of
shipments, are nitrogen, acetylene, carbon dioxide, and hydrogen.  Helium and
argon rank sixth and seventh, respectively, in dollar volume sales for
1978. y

    Generally, industrial gases are produced in one- or two-step processes,
and are themselves later used as feedstocks for the production of other
chemicals.  They may be in solid, liquid, or gaseous form; transportation and
handling considerations often determine the physical state of the industrial
gases.  Transportation through pipelines is becoming an increasingly popular
method, in which case the gaseous state is desirable.   For transportation in
cylinders, tank cars, or barges, the liquid or—less often—the solid state  is
used.
ENGINEERING PROCESS

    Industrial gases are obtained from three main sources:   the air,
hydrocarbons, and the processing of other chemicals and elements—such as
calcium carbide—which yield these gases as byproducts or coproducts.   The
first source, the air, requires the least complex processing.   Air is
liquefied at extremely low temperatures and its components  are separated,
producing hydrogen, oxygen, nitrogen, and smaller amounts of argon and other
elements which are present in traces.

    Hydrocarbon processing, the second method of obtaining  industrial  gases,
involves treating natural gas.  Argon and helium are frequently obtained in
this fashion.

    Additionally, much of the industrial gas produced is obtained as a
byproduct or a coproduct of other chemical operations.  The gas is drawn off
and purified, to be used later.  If the industrial gas production, treatment,
and use are done in one plant or in adjacent facilities, the production is
known as "captive"'.  Data on captive production and consumption are usually
not included in commerce reports, and it is estimated that  overall production
data for industrial gases is, therefore, about 15 percent too low.2/
    i/All industrial gases are contained in the SIC category 2813.

    Z/Mary K. Meegan, ed., Kline Guide to the Chemical Industry (3rd ed.,
Fairfield, N.J.:  Charles Kline & Co., 1977).

    j/Chemical Purchasing, October 1977.

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                                      E-6
USES

     industrial gases are used primarily in the chemical, metals, and food
industries  (see Table 1 and Figure 1) .   They are also used diversely in
manufacturing and are increasingly important in petroleum recovery.

     The chemical industry utilizes industrial gases extensively in the
formulation of intermediate and final products   Acetylene, for example, is an
important building block in the production of vinyl chloride and a ^e< °f
various plastic products.  Hydrogen is used in numerous steps of petroleum
refining.   The production of fertilizer also requires large quantities of
industrial  gas.

     The metals industry uses some industrial gases to control the degree to
which metals will or will not react.  Oxygen, for example, finds its primary
use  in the  steel industry, where its highly reactive nature increases the
temperature and efficiency of furnace operations.  Argon and helium, on the
other hand, are extremely inert; they are used when a protective, non-reactive
atmosphere  is needed.  Argon is used extensively in welding operations.

     The food industry utilizes industrial gases for refrigeration and
freezing.   Nitrogen, hydrogen, and carbon dioxide are liquefied  at very low
temperatures and then circulated, cooling or freezing the areas  around them.
The  freeze-drying of foods, as well as the freezing of prepared  foods, is a
huge and fast-growing use.  Carbon dioxide is also used  extensively  in the
production  of soft drinks.

     Other  applications  for industrial gases include the atmosphere  within
electric light bulbs and tubes  (argon and neon), and anaesthetics  (nitrous
oxide).  Additionally, energy research has indicated huge potential  for the
use  of  industrial gases  in energy storage and transmission, as well  as in
fusion  and  conventional  fission reactions.

     The petroleum industry is using increasing  amounts  of  industrial gas,
particularly carbon dioxide, for oil well stimulation.   The gas  is either
applied alone or combined with water to pressurize wells and aid secondary and
tertiary oil recovery.   Higher prices for oil should stimulate  increased
utilization of carbon dioxide for oil stimulation and should encourage  the
shipment of merchant carbon dioxide  into oil fields.V


INDUSTRY STRUCTURE

     The industrial gas  industry  is  extremely  concentrated.  While there are
numerous production locations, only  a  limited  number of  large companies
     I/Ibid.

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                                 E-7



                              TABLE  1

                    MAIN USES OF  INDUSTRIAL GASES
Metals

Oxygen
Argon
Helium
Nitrogen
Food

Carbon Dioxide
Nitrogen
Chemicals

Acetylene
Nitrogen
Hydrogen
Argon
Other

Argon
Helium
Hydrogen
Neon
Nitrous Oxide

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                                      E-8
ACETYLENE
                                    FIGURE 1

                              CONSUMPTION PATTERNS
                          vinyl chloride
                          welding & metal cutting
                          acrylates & acrylic acid
                          vinyl acetate
                          acetylenic acid
                          tetrahydrofuran
                          other
(24.6%)
(20.7%)
(20.7%)
(14.4%)
 (6.9%)
      I
 (6.7%)
 (6.0%)
CARBON DIOXIDE
                        gapitive Use
                          chemical raw material for urea production
  (44%)
  (40%)
                          chemical raw material for production of
                            methanol and sodium carbonate; inerting;
                            pressurizing in coal mining; and oil recovery  ( 4%)
                        Merchant Use
                          oil well stimulation
                          refrigeration
                          carbonation
                          chemical raw material
                          inerting
                          pressurizing
                          miscellaneous applications
  (56%)
  (30%)
  (11%)
  (  5%)
  (  3%)
  (  3%)
  (  1%)
  (  3%)

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                                       E-9
CARBON DIOXIDE  (conf d.)
OXYGEN
  FIGURE 1  (Continued)

  CONSUMPTION PATTERNS



Steelmaking

      basic oxygen process

      open hearth

      electric furnace


Other Steel Industry Applications


Non-Ferrous Metal Industry

Chemicals

      ethylene oxide

      acetylene

      titanium dioxide

      propylene oxide

      vinyl acetate

      miscellaneous chemicals


Miscellaneous Applications
(50.6%)

(39.6%)

(  9.3%)

(  1.7%)


(14.8%)


(12.0%)

(12.0%)

(  4.9%)

(  2.3%)

(  1.7%)

(  1.4%)

(  1.4%)

(  0.3%)


(10.6%)
Source:  Gloria M. Lawler, ed., Chemical Origins and Markets  (5th  ed.,  Menlo
Park, CA:  Chemical Information Services, Stanford Research  Institute,  1977).

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                                      E-10


consistently supply the market, and only a small number have large national
sales.   In 1976, combined sales of the three largest producers accounted for
65 percent of total shipments.  Sales of the six largest accounted for 91
percent  of the totaX5./ (see Table 2) .  It should be noted that because the
concentration ratio is based on the value of shipments, rather than on
production figures, industrial gases produced captively are not reflected.
Thus, there are actually many more sizeable producers than the concentration
ratio would indicate.

     Part of the reason for both the large number of captive producers and the
extremely high concentration ratio is the economics of transportation involved
for  industrial gases.  With the exception of pipeline transport, general
shipment of industrial gases further than approximately 200 miles is not
feasible.]>/  This constraint results in a substantial number of smaller
regional producers, an incentive for captive production and consumption, and a
small number of very large volume producers who have access to a pipeline and
can  thereby transport large volumes of gas over long distances.
 PRICES

     Pricing trends for industrial gases have not been consistent.  Measured
 in constant dollars, the prices of most industrial gases fell quite steadily
 from 1967 to 1973 (see Table 3).  In 1974, however, a significant price
 increase occurred.  A general trend of increasing prices has since continued
 up through 1978.

     Just as the pricing past was somewhat unstable, the pricing future is
 uncertain as well.  The biggest threat to prices is the potential for
 overcapacity and overproduction.I/  it is not clear if demand for industrial
gases will increase substantially in the next few years, as some predictions
claim,  if it will grow only moderately or if overcapacity will be realized and
prices  will drop.

     In addition to overall supply,  the major factor affecting industrial gas
prices  is the sharply rising cost of energy.  The production of industrial
gases is extremely energy-intensive, regardless of which engineering process
is used.  Thus, any industrial gas price must reflect the cost of this
important production factor.
    1/Meegan,  Kline Guide.

    VChemical Purchasing,  October 1977.

    2/Ibid.

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                      E-ll
                    TABLE 2
MAJOR U.S. PRODUCERS OF INDUSTRIAL GASES:  1976
Rank
1
2
3
4
4
4

Company
Union Carbide
Airco
Air Products & Chemicals
Chemetron
Houston Natural Gas
Big Three Industries
Other
$ Million
$ 325
220
190
95
95
95
105
         Total                         $l,125a/

  S./U.S.  Department  of  Commerce  figure  of  984  is
  approximately  15 percent  too low,  as  it  does not
  include the  complete  value of  the  conversion of liquid gas.

  Source: Mary  K. Meegan,  ed.,  Kline Guide  to the  Chemical
  Industry,  (3rd ed., Fairfield, NJ:  Charles  Kline and
  Company, 1977).

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                                      E-12
                                     TABLE  3

     INDEX OF AVERAGE MANUFACTURERS' PRICES OF INDUSTRIAL GASES:  1967-1976
      02, High
Year   Purity
 Nitrogen,
High Purity  Acetylene   CO2
          Argon, High
Hydrogen    Purity     Totals*/
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
100.0
99.7
91.5
91.9
89.0
75.9
73.3
83.8
108.5
101.3
    Excludes CO,
                     100.0
                     100.5
                      92.5
                      84.1
                      76.8
                      68.0
                      68.4
                      73.9
                      94.5
                      88.6
100.0
102.4
98.6
104.0
124.7
122.2
146.2
195.1
292.5
284.7
100.0
90.8
77.0
74.0
64.8
66.1
62.5
73.4
77.9
84.4
100.0
94.7
105.9
119.5
128.4
119.4
142.6
180.6
181.5
172.6
                                            100.0
                                            117.5
                                            111.5
                                            107.0
                                             71.8
                                             64.1
                                             60.6
                                             75.7
                                            109.4
                                            101.6
                        100
                         99
                         94
                         92
                         87.4
                         75.8
                         72.1
                         87.0
                        108.3
                        103.8
Source:  Mary K. Meegan,  ed.,  Kline Guide to the Chemical Industry (3rd ed.,
Fairfield,  NJ:  Charles Kline  & Co.,  1977),  p.  84.

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                                      E-13
                                     TABLE 4

                      INDUSTRIAL GAS PRODUCTION:  1973-1977
Industrial Gas
Acetylenea/
Production
Unit
Mil. cu. ft.
1977
5,972
1976 1975
7,111 6,704
1974
7,808
1973
8,2
Carbon Dioxide   Short tons   2,255,814 2,063,665 1,850,318 1,804,251 1,565,506

Argon,
 High Purity

Heliumb/

Hydrogen£/

Nitrogend/, e_/

Oxygend/, e/

Nitrous Oxide
Mil. cu. ft.
Mil. cu. ft.
Mil cu. ft.
Mil. cu. ft.
Mil. cu. ft.
1,000 gals
(STP)
5,925
N/A
84,506
331,545
392,984
N/A
5,107
1,339
82,100
288,868
388,446
1,940,969
4,457
1,078
73,552
252,368
352,554
1,652,298
4,688
883
81,536
243,316
389,628
1,628,271
4,325
3,205
65,169
227,160
389,436
1,281,590
a/Excludes information from railroad ships, shipyards, welding shops, and
small establishments using portable generators.

.b/U.S. Department of the Interior, Bureau of Mines.

£/Excludes amounts vented, used as fuel, etc., and amounts produced and
consumed in the manufacture of synthetic ammonia and methanol, but includes an
unspecified amount produced for sale or interplant transfer to plants
consuming this gas in the production of ammonia.  Also excludes amounts
produced by the ammonia dissociation process.  Also excludes amounts produced
in petroleum refineries for captive use.

^./Excludes amounts produced and consumed in the manufacture of synthetic
ammonia or ammonia derivatives.

£/Data for 1973 and 1972 include figures for high and lower purity gas.

SOURCE:  U.S. Department of Commerce, Bureau of Census, Current Industrial
Reports (Washington, D.C.:  Government Printing Office, 1977).

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                                      E-14
 INNOVATION

     Most industrial gases have been used for over a century, and the industry
 is generally considered to be quite mature.  There have been no major product
 or process innovations for a number of years, and none are expected.  There
 have been, however, a number of important use innovations in the past few
 years, and there is a definite potential for further innovations of this type.

     The most important recent use innovation involves the use of argon in the
 production of stainless steel.  Discovered in 1968 by Union Carbide and Joslyn
 Stainless Steel, this process substantially increases the quality of stainless
 steel and is becoming increasingly popular with manufacturers.  It is esti-
 mated that currently more than 90 percent of U.S. stainless steel is manufac-
 tured by the argon-oxygen decarburization process.jy

     A number of use innovations appear to have already been discovered or
 hypothesized by researchers, but have not yet been put into practice.  We feel
 that this has occurred for one of two reasons:  either the use innovation has
 not yet been refined to a degree sufficient to allow widespread acceptance and
 use, or it is not yet cost effective.  The extent to which these potential
 uses are put into practice may determine pricing trends and patterns for
 industrial gases in the coming years.

     An example of use innovation with a huge potential that has not yet been
 exploited is helium.  Among its potential uses are magnetic containment
 systems for fusion reactors; high temperature gas turbines; laser-based
 missile defense systems; magnetic propulsion units for new transport systems;
 and low-temperature energy transmission, distribution, and storage.J/
 Additionally, hydrogen may be used to store energy for motor vehicles and
 stationary power plants,!£/ oxygen may be used in the treatment of
 wastewater by revitalizing aerobic bacteria,  and nitrogen has begun to replace
 natural gas as an inert blanketing agent for  metals, electronics,  and chemical
processing. H/
     J/Chemical & Engineering News,  August 21,  1978.

     I/Science, December 7,  1979,  p.  1145.

    l°/Chemical & Engineering News,  May 15,  1978.

    JLJi/Chemical & Engineering News,  July 16,  1979.

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                                      E-15
FOREIGN TRADE

    There are virtually no imports of industrial gases.  Exports,  however,
have generally been increasing over the past years.  Nitrogen is an exception
to this trend; its exports fell by nearly $244 million between 1976 and 1977.
Overall, during the period 1973-1977, the value of industrial gas exports
increased from $6,441,000 to $20,838,000, or by 224 percent (see Tables 5,  6).
SHIPMENTS

    Total shipments of industrial gases were $1,080 million in 1977 compared
to only $572 million in 1967.i2./  constant dollar shipment forecasts are
approximately $1,300 million in 1980 and $1,850 million in 1985.

    The substantial increase in the dollar volume of foreign trade and
shipments is related to both volume and price.  Price increases (Table 3)  have
been large for a number of industrial gases—particularly acetylene and
hydrogen.  Although acetylene production fell from 8,269 million cubic feet in
1967 to 7,111 million cubic feet in 1976, the value of production was 67
percent higher in 1976.

    Hydrogen experienced both price and production increases,  such that the
adjusted value of production was 52 percent higher in 1977 than in 1973.

    For some industrial gases, particularly nitrogen and carbon dioxide,
volume increases have been the important factor in the increased value of
shipments.  From 1973 to 1977, production of nitrogen increased by 46 percent,
and production of carbon dioxide increased by 44 percent.
    12/Meegan, Kline Guide, p. 81

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                                                   TABLE  5
                                   U.S.  EXPORTS—DOLLAR VALUE OF SHIPMENTS


                                  Unit of
   SIC       	Commodity	  Shipment        1973        1974        1975         1976         1977

281320 00   acetylene               MCF           62,637     261,926      273,941      264,577      569,644

281330 00   carbon dioxide,
            nitrous oxide, &         ~        1,040,447   1,131,152    1,526,283    1,866,551    2,156,015
            carbon monoxide

281340 20   oxygenS/                MCF          670,266     720,028    1,682,422    2,098,415',    2,467,005

281340 40   nitrogen^/              MCF        1,074,719   1,220,582    1,448,891    2,310,414    2,066,481

281340 97   hydrogen, rare
            gases, & liquid air     MCF        3,592,820   5,232,779    7,761,984   10,733,842   13,398,819


£/Changed to 281360 00 in 1977 figures.
                                                                                                            w
^/Changed to 281350 00 in 1977 figures.                                                                     M
                                                                                                            CTi



Source:  U.S. Department of Commerce, U.S. Exports, FT 610, various years.

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                                      E-17
                                    TABLE  6

                      BALANCE OF TRADE;  INDUSTRIAL GASES
                             (thousands of  dollars)
                        1977      1976      1975      1974      1973      1965
Value of Exports       20,838    17,274    12,694     8,566     6,441     3,164

Value of Imports           —        —        —        —        —        —

Balance of Trade       20,838    17,274    12,694     8,566     6,441     3,164


Source:  Totals from Table 5.

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FERTILIZERS

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                                      E-19
                                   FERTILIZERS
DESCRIPTION

     Until recently, natural organics such as manure/ wood ash and bone meal
were used to supply nutrients necessary for plant growth.  Most of these
materials have since been replaced by chemical fertilizers.  The first
chemical fertilizer, superphosphate, was developed in the early 19th century,
and physical mixing of several fertilizer materials occurred in 1849.  By the
early 1930s, scientists discovered ways to chemically combine multinutrient
fertilizers—ammoniating superphosphate was the first attempt at this.

     Fertilizers are mainly composed of the primary nutrients needed for plant
growth:  nitrogen, phosphorus, and potassium.  SIC codes 2873 and 2874
encompass the nitrogenous and phosphatic fertilizer industries, respectively.
Potassium compounds fall under SIC code 2819, and mixing fertilizers are
covered by SIC code 2875.  For purposes of our analysis we exclude industry
2875 because items in this category are not chemicals per se, but products
like compost, mixed fertilizers, and potting soil.
ENGINEERING PROCESS

     Ammonia is the starting point for almost all nitrogen fertilizers.
Ammonium nitrate, for example, is derived by the action of ammonia vapor on
nitric acid.  Ammonium sulfate, also a nitrogenous fertilizer, is derived by
one of several processes:  1) reaction with sulfuric acid, followed by
crystallization and drying, 2) neutralizing synthetic ammonia with sulfuric
acid, 3) as a byproduct of caprolactum (a chemical used to manufacture
synthetic fibers and plastics), and 4)  from gypsum, by reaction with ammonia
and carbon dioxide.

     Ammonia is also the starting point for a few phosphatic fertilizers.  For
example, ammonium phosphate is derived by interaction between phosphoric acid
and ammonia.  Diammonium phosphate and ammoniated superphosphate also contain
ammonia.

     Superphosphate, the most important phosphatic fertilizer, is made by the
action of sulfuric acid on insoluble phosphate rock to form a mixture of
gypsum and calcium phosphate-monobasic.
USES

     Figure 1 presents a breakdown of the uses of four inorganic fertilizer
materials:  ammonia, ammonium sulfate, phosphoric acid, and urea.  It is
important to note that all of these materials have non-fertilizer uses ranging
from the production of fibers, plastics, resins and elastomers, to the
treatment of water and waste.  With the exception of ammonium sulfate, the
bulk of each of these materials is used as fertilizer.

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                                      E-20
                                    FIGURE 1

                    INORGANIC  FERTILIZER  CONSUMPTION  PATTERNS



                            Fertilizers
 Ammonia
  Fibers, Plastics, Resins, Elastomers

  Explosives and Blasting

  Feeds
                            Miscellaneous Applications

                            Exports
69%

 7%

 3%

 2%

10%

 9%
 Ammonium Sulfate
  Pulp and Paper

  Treatment of Water and Waste

  Miscellaneous Applications

  Exports
48%

44%

 5%

 3%
 Phosphoric Acid
 Fertilizers

 Builders and Water Treatment

 Livestock and Poultry Feeds

 Foods, Beverages, Pet Foods, Dentifrices

 Direct Acid Treatment of Metal Surfaces

 Miscellaneous Applications

 Exports
 80%

  8%

  6%

  2%

  1%

  2%

  1%
 Urea
Fertilizers, solid

Fertilizers, liquid

Livestock feeds

Industrial Applications

Exports
  36%

  29%

  10%

  10%

  15%
Source:  Gloria M. Lawler, ed., Chemical Origins and Markets  (5th ed., Menlo
Park, CA:  Chemical Information Services, Stanford Research Institute, 1977).

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                                      E-21
INDUSTRY STRUCTURE

     The fertilizer industry experienced major changes in the last 15 years as
the number of fertilizer products increased dramatically and new forms of the
final product were developed.!/  Companies intensified efforts to integrate
both vertically and horizontally.  Many nitrogen producers, for example,
integrated forward to the retail level by acquiring old fertilizer outlets or
building new ones.  To a large extent this vertical integration eliminated the
wholesaler..?_/  Moves of this type were made by other chemical and
petrochemical companies that were new to the fertilizer business yet concerned
about securing reliable markets for their large-scale plants.I/

     Many companies also moved horizontally to acquire phosphate producers
and, in some instances, potash sources.  Some phosphate producers in turn
entered into nitrogen production..!/

     Severe declines in the price of fertilizer eventually led to divestitures
by many of the petrochemical companies.  Of the sixteen that were once in
business only ten were still operating at the end of 1973.I/

     Relatively speaking, concentration in the industry is low, with the top
four companies out of 34 accounting for only 23 percent of the business.  The
top eight account for 41 percent (see Table 1).
PRICES
     A summary of the Wholesale Price Index for fertilizers appears in Table 2.
From 1967 to 1973, fertilizer prices exhibited an overall decline.  Moderate
increases in 1973 preceded dramatic price increases in 1974 and 1975,
particularly for ammonia, ammonium nitrate, ammonium sulfate, phosphates and
potash.j>/  prices declined somewhat in 1976 and 1977.  The United States
Department of Agriculture reported farm level fertilizer prices at 181 in May
1978 (1967= 100) and at 194 in May 1979.I/  Prices for selected fertilizers
are presented in Table 3.
     i/Mary K. Meegan, ed., Kline Guide to the Chemical Industry (3rd  ed.,
Fairfield, NJ:  Charles Kline & Co., 1977).

     .2/It is not clear that another study would substantiate this statement.

     1/Meegan, Kline Guide.

     i/Ibid.

     I/Ibid.

     I/Ibid.

     I/Chemical Week, June 20, 1979.

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                                 E-22
                               TABLE 1

               MAJOR U.S.  PRODUCERS OF FERTILIZERS, 1976


 RANK              COMPANYSALES!/
                                                 (millions of dollars)
                                                           48°
                                                           375
                                                           35°
                                                           300
                                                           30°
                                                           300
                                                           300
                                                           25°
                                                           205
                                                           200
                                                           200
                                                           190
                                                           180
                                                           180
                                                           175
                                                           165
                                                           150
                                                           150
                                                           140
                                                           130
                                                           120
                                                           120
                                                           115
                                                           110
                                                           100
                                                           100
                                                           100
                                                           100
                                                            95
                                                            90
                                                            90
                                                            70
                                                            50
                                                            50
                                                           420
1
2
3
4
4
4
4
8
9
10
10
12
13
13
15
16
17
17
19
20
21
21
23
24
25
25
25
25
29
30
30
32
33
33
—

The Williams Companies
Farmland Industries
CF Industries
American Cyanamid
W.R. Grace
Hooker Chemical
U.S. Steel
Estech
IMC
Borden
Gardinier
Kaiser Aluminum
Allied Chemical
Kerr-McGee
Chevron Chemical
Mississippi Chemical
Cominco American
Texasgulf
Royster
Beker Industries
Valley Nitrogen
Vistron
JR Simplot
First Mississippi
Amoco
Monsanto
Olin
Union Oil of California
Indian Farm Bureau
Agway
Phillips Petroleum
Terra Chemical
Nipak
Potash Co. of America
Other
Total
                                                        $6,450
Estimated sales valued at manufacturer's price.

Source:  Charles Kline & Co.

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                                      E-23
     Higher prices were a result of increased farm demand for fertilizers and
rising production costs.  Because of increases in energy prices, U.S.
fertilizer production costs have been moving up at a rate of 15 to 20 percent
annually..§/
                                     TABLE  2

                             FERTILIZER PRICE INDEX

                                   (1967 =100)
      Year

      1978
      1977
      1976
      1975
      1974
      1973
      1972
      1970
      1968
Fertilizer
Materials
  157.4
  154.7
  181.3
  205.1
   89.2
   75.2
   71.9
   75.9
   79.4
Nitrogenates

   151.0
   148.2
   159.4
   187.6
    89.6
    72.6
    67.2
    71.5
    66.8
Phosphates
     ,1
     ,3
176.
172.
217.6
240.9
 85.2
 75.0
 75.0
 79.3
103.1
Potash

154.1
159.6
172.4
156.8
110.9
100.5
 98.6
 97.6
100.3
      Source:  U.S. Department of Commerce, Wholesale Price Index, 1979.
SHIPMENTS

      The U.S. fertilizer industry is highly volatile in terms of production
and shipments.  Values of shipments between 1967 and 1969 declined severely as
a result of falling prices and three successive years of poor fertilizing
weather, but recovered slowly thereafter until 1972.2/  Sales were up a
considerable 8.7 percent in 1973 due to stronger unit demand and rising prices.
Inadequate supplies, predictions of shortages and rapidly escalating prices
continued to stimulate investment in fertilizer plant facilities until 1976.
Unfortunately for the fertilizer industry, farmers were just experiencing
falling prices for their farm products, and as a result of this and rising
fertilizer prices, they sharply reduced their use of fertilizers.  Inventories
     ^/Chemical and Engineering News, February 12, 1979.

     .2/Meegan, Kline Guide.

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                                                      E-24
                                                 TABLE 3
                                            FERTILIZER PRICES
                                    SHIPMENTS AND  INTERPLANT  TRANSFERS
                                             (Price per Ton)
Calendar
Year
1947
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
Anhydrous
Ammonia
62.68
80.60
84.40
85.05
89.41
89.37
84.13
75.26
70.92
72.97
69.57
69.52
71.83
70.11
68.88
68.06
67.45
63.51
54.83
41.70
34.02
33.84
34.07
35.37
42.68
92.62
148.29
106.96
106.53
Sulfuric
Acid
13.13
14.43
16.94
17.38
18.70
19.45
19.32
18.81
18.40
18.29
19.01
18.69
17.95
17.65
17.16
16.54
16.68
17.32
18.66
21.18
20.98
19.05
19.14
18.23
•18.34
23.36
32.38
31.82
33.05
Ammonium-
Nitrate
_—
—
—
__
—
54.98
55.79
51.22
44.21
55.60
43.27
48.86
49.14
51.79
48.79
54.87
50.99
50.28
45.70
36.35
32.60
48.60
48.42
51.50
61.77
83.07
116.45
120.96
133.48
Ammonium-
Nitrate
	
—
—
—
—
68.52
66.07
62.89
58.88
61.44
60.89
62.02
63.54
62.43
60.91
59.72
59.03
53.87
52.20
46.27
42.13
44.42
44.81
42.35
55.82
93.78
117.49
96.30
108.68
Nitrogen
Solutions
—
—
114.56
117.02
124.10
124.96
123.47
109.64
112.35
111.55
115.67
123.23
132.38
131.40
119.15
120.54
129.25
116.91
111.80
107.71
84.99
76.14
83.40
90.54
106.03
168.53
230.20
227.74
237.24
Ammonium—
Sulfate
48.52
38.01
44.48
47.38
47.47
44.92
44.92
36.71
33.16
33.12
33.12
31.97
34.34
30.54
27.63
28.41
28.01
28.34
29.96
25.93
24.53
18.09
16.55-
19.53
28.00
61.35
71.56
40.51
45.29
d/
Urea -
—
—
—
—
—
—
101.81
92.41
93.78
93.39
93.10
89.00
87.25
87.18
84.42
80.88
79.96
86.02
73.69
62.65
56.11
59.69
52.61
51.58
66.51
138.97
152.08
124.32
124.83
.
Urea ^
—
—
—
—
—
—
—
—
111.09
90.62
100.17
105.08
91.93
84.14
87.00
88.43
89.35
80.40
82.61
72.87
62.19
40.23
55.55
56.59
71.08
96.69
126.09
91.90
145.19
Phosphoric
Acid
162.21
163.91
180.38
175.72
165.50
168.75
163.15
155.10
153.82
137.80
148.70
143.65
139.99
129.95
124.74
120.01
110.77
109.41
111.69
109.53
98.30
98.69
91.87
92.62
106.60
165.36
180.77
191.34
189.16
2/Solution, fertilizer grade.
b/solid, fertilizer grade.
£/Other than coke oven.
I/Solid fertilizer.
I/Liquid fertilizer.

Source:  U.S.  Department of Agriculture,  Agricultural Stabilization and Conservation. Service, The
         Fertilizer Supply, 1978-1979.

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                                      E-25
grew and oversupplies forced fertilizer prices to decline.IJ)/  The value of
shipments of fertilizers in 1968, 1969, and 1976 showed decreases in shipment
value of 11 percent, five percent, and four percent, respectively.  The other
years showed gains in value (see Table 4).  In 1977, shipments were estimated
to be $6,835 million, or approximately 8.3 percent of total chemical industry
sales.  Table 5 breaks down the value by its components.

                                     TABLE  4
                     U.S.  SHIPMENTS  OF FERTILIZERS  1967-1977

                              (millions of  dollars)

Year
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976-a
1976-e
Nitrogen
compounds
$1,031
915
831
898
901
927
1,188
2,155
2,937
2,546
2,750

Phosphates
$ 542
523
421
472
452
421
443
913
1,209
1,160
1,225

Potash-a
$ 162
153
139
187
214
224
269
395
455
515
535
Mixed
Fertilizers
$1,029
1,043
943
922
970
1,094
1,287
1,916
2,116
2,200
2,325

Total
$2,770
2,634
2,334
2,479
2,537
2,678
3,194
5,390
6,754
6,452
6,835
  a- includes imports for consumption.
  e- estimates.

  Sources:  U.S. Department of Commerce, Bureau of Census, Current Industrial
            Reports (Washington, D.C.:   Government Printing Office, various
            years); U.S. Department of  Commerce, Bureau of Census,  1972
            Census of Manufactures (Washington, D.C.:   Government Printing
            Office, 1975); U.S. Department of Interior, Bureau of Mines,
            Minerals Yearbook (Washington, D.C.:  Government Printing Office,
            various years); U.S. International Trade Commission, Synthetic
            Organic Chemicals (Washington, D.C.:  Government Printing Office,
            various years); and estimates by Charles Kline & Co.
     Ifi/Ibid.

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                                       E-26
                                     TABLE 5

                             VALUE OF SHIPMENTS,  1977

                              (thousands  of dollars)


               Nitrogen compounds3-/:                         $2,750
               Phosphates  (except  phosphate rock):            1,225

               Potash^/:                                        535

               Mixed Fertilizers:                             2,325
 a/   Includes  sizeable  amounts used  in nonfertilizer applications.
 b_/   Includes  imported, potash as well as domestic shipments.
      Source:    Mary  K.  Meegan, ed.,  Kline Guide to the Chemical  Industry  (3rd
                ed.,  Fairfield, N.J.:  Charles Kline & Co., 1977).



     The  1978 value of shipments was  expected to increase approximately three
 percent  for nitrogen and four percent for potash.il/

     The  composite nature of the statistics of values of shipments can mask
 some important  changes  in its components.  For example, although it is not
 totally  clear from the value figures, fertilizer prices rose tremendously from
 the  period 1973 to 1976, and in 1976 they decreased sharply.  These changes
 came about because of consecutive under- and over-supply.  As noted earlier,
 manufacturers responded to the high prices and inadequate supplies by building
 new  plants; the result was a sharp increase in inventories and supplies.  As a
 final result, prices dropped to significantly lower levels in 1976.

     The pictures that one draws on fertilizer supply are somewhat
controversial.   While some sources point to real or anticipated overcapacity,
 there are also predictions of shortages of some fertilizer products in 1980.
Edwin M.  Wheeler,  President of the Fertilizer Institute, predicted an increase
of 53 million tons in fertilizer use for the 1979-80 fertilizer year (July 1 -
June 30).  Phosphorous and potash supplies are specifically predicted to be in
limited supply by spring 1980I2/  On the other hand, the Kline Guide states
that the  phosphate industry is most  affected by overcapacity, and that some
nitrogen  overcapacity is anticipated as well.
    il/U.S. Department of Commerce, 1978 U.S. Industrial Outlook
(Washington, D.C.:   Government Printing Office, 1978).

                Week, September 5,  1979.

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                                      E-27
     Future shipments of fertilizers are forecast by the Kline Guide to
increase in constant dollars by approximately 6 percent a year, reaching $7.8
billion in 1980 and $9.7 billion in 1985.  The U.S.  Industrial Outlook
predicts an approximate 3 percent annual real growth in value of shipments
with no significant increase in prices.

PRODUCTION AND GROWTH

     Although chemical fertilizers have been in use since the early 19th
Century, real growth in fertilizer demand occurred in the post-World War II
period.  During this period, there was an enormous expansion in both tonnage
of primary nutrients applied to soils and in the number and complexity of
materials containing nutrients.  Domestic consumption rose from 4.1 million
tons in crop year 1950 to 20.8 million tons in crop year 1976, an increase of
more than fourfold.

     The industry has undergone several major changes in recent years.  In
addition to a sharp increase in the number of fertilizer products,  there have
been significant changes made in the final form of fertilizer materials
(granulated solids, liquids, etc.).  These new products have resulted in new
application techniques and changes to the distribution system.

     Although production of selected inorganic fertilizers fluctuates from
year to year, some generalizations can be made about output during  the
six-year period from 1974 to 1979.il/  Production of synthetic anhydrous
ammonia appears to have increased slightly over the six-year period from
approximately 1.2 million tons in Jauary 1974 to 1.4 million tons in October
1979.  Phosphoric acid production increased substantially more than synthetic
anhydrous ammonia.  January 1974 output was just above 525 thousand tons.  By
October 1979, output increased to 796 thousand tons, an increase of 51
percent.  Production of phosphatic fertilizer materials exhibited an overall
increase of 41 percent during the same period from 425 thousand tons in
January 1974 to more than 600 thousand tons in October 1979.

     Monthly production figures of principal inorganic fertilizers  from August
1977 to October 1979, are summarized in Table 6.
FOREIGN TRADE

     A substantial amount of U.S.-produced fertilizer is exported to other
countries, and exports are a very important part of the U.S. fertilizer
industry,  it is estimated that exports comprise 10 percent of all
              conclusions are drawn from a graph appearing in the U.S.
Department of Commerce, Bureau of Census, Current Industrial Report on
Inorganic Fertilizer Material and Related Products, October 1979.  Precise
values of earlier annual production were not available.

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                                      E-28


 shipments.14/  since 1973, the balance of trade in fertilizers has been
 consistently positive, and although a severe drop occurred in 1976, the 1977
 total was  $351 million  (see Table 7).

     Phosphatic fertilizers, or phosphatics, are by far the largest dollar
 volume  fertilizer export.  In 1977, they accounted for $595 million, or 72
 percent of all fertilizer exports.

     Imports are mainly comprised of nitrogenous fertilizers.  The negative
 balance of trade for this category—$237 million in 1977—has pulled down the
 overall positive balance of trade since 1974.

     Despite some decreases in the dollar volume of exports and imports,
 particularly in 1975 and 1976, quantities of fertilizer exports have
 consistently grown.  It is projected that, as foreign markets stabilize, the
 growth  of  exports will slow down but probably still continue to increase.

     Apparent consumption!^/ of nitrogen, phosphorous and potassium
 fertilizers for crop year 1977 (ended June 30)  is presented in Table 8.  The
 apparent consumption of both nitrogenous and potassium fertilizers exceeds
 domestic production.  However, in aggregate, the U.S appears to produce about
 2 million  tons more than it consumes.
MISCELLANEOUS FACTS ABOUT THE INDUSTRY

     Table 9 summarizes information on the number of establishments and
employees; value added by manufacture; value of shipments; capital
expenditures; inventories; and specialization and coverage ratios for the
phosphatic and nitrogenous fertilizers.
INNOVATION
     Generally speaking, fertilizers are the result of chemical reactions or
mixtures as opposed to being basic, unchanging chemicals in the inorganic
segments of the chemical industry.  From publicly available data, it is
impossible to determine how many new fertilizers, if any, are now
manufactured, however, it is possible that new chemical fertilizers may result
from an isolated chemical reaction process.

     In view of the fairly recent dynamic nature of the fertilizer business—
new products and new forms—it is possible that this trend may continue,
especially as farm demand for fertilizers increases.  Worldwide concern over
food shortages will also have an impact on fertilizer performance in the
coming years by creating additional demand.
     ii/Meegan, Kline Guide.

     il/Apparent consumption  is defined as the sum of domestic production
and net imports.

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                                                  E-29
                                                   TABLE 6


                                        SEASONALLY ADJUSTED PRODUCTION

                          SUMMARY OF PRINCIPAL INORGANIC FERTILIZERS:  1977 TO 1979
Month and Year
1979
October
September
August
July
June
May
April
March
February
January
1978
December
November
October
September
August
July
June
May
April
March
February
January
1977
December
November
October
September
August
Ammonia,
Synthetic
Anhydrous
(100%)

1,443
1,566
1,479
1,442
1,505
1,456
1,511
1,470
1,379
1,396

1,564
1,506
1,394
1,377
1,298
1,408
1,398
1,427
1,499
1,361
1,334
1,439

1,487
1,492
1,446
1,594
1,511
Ammonium
Nitrate
Original
Solution

616
594
640
627
676
633
668
678
604
647

625
590
615
563
579
560
576
594
646
677
559
621

543
601
603
653
629
Ammonium .
Sulfate =

(D)
164
144
161
167
188
170
188
(D)
(D)

134
(D)
147
159
176
186
171
175
173
159
158
159

(D)
(D)
143
130
188
Nitrogen
Solutions
(100%)

(D)
(D)
(D)
210
(D)
197
184
189
(D)
193

(D)
179
212
202
186
207
182
177
198
203
197
224

234
238
220
259
251
Nitric
Acid
(100%)

689
647
690
703
746
706
737
751
685
693

698
661
707
622
663
639
648
687
694
748
628
653

606
642
656
681
706
Phosphoric
Acid
(100%)

796
865
845
883
883
833
827
847
815
804

828
805
808
813
819
791
824
802
794
785
750
735

648
624
717
735
716
Sulf uric
Acid,
Gross
(100%)

3,383
3,467
3,489
3,592
3,466
3,483
3,488
3,437
3,411
3,133

3,256
3,361
3,452
3,419
3,429
3,236
3,318
3,367
3,204
3,203
3,143
3,240

2,659
2,703
2,979
2,963
2,904
Phosphatic
Fertilizer
Materials
(100% P2 05)

609
671
690
644
601
643
619
630
585
633

607
571
631
650
639
586
564
616
563
610
553
588

498
498
602
635
602
Note:  The seasonally adjusted series shown in this table have been revised to reflect revisions to 1977.
       The new seasonal factors were published in the June 1977 report.  Beginning in January 1972, the data
       are adjusted for report period variation.  Comparable data are not available for previous years;
       however, the effect of this adjustment is considered to be negligible at the total level.  See
       "Reporting Period Adjustment" in the text.


(D) Withheld to avoid disclosing figures for individual companies.
3/Excludes byproduct ammonium sulfate, coke oven.

Source:  U.S. Department of Commerce, Bureau of Census, Current Industrial Reports:  Inorganic Fertilizer
         Materials and Related Products, October 1979.

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                                      E-30
                                     TABLE  7

                                   FERTILIZERS

                                 BALANCE OF TRADE

                              (thousands of dollars)
                            1977     1976
                     1975
          1974     1973
                                                                           1965
Value of Exports
 Nitrogenous Fertilizers
 Phosphatic Fertilizers
 Mixing Fertilizers
 Total

Value of Imports
 Nitrogenous Fertilizers
 Phosphatic Fertilizers
 Mixing Fertilizers
 Total

Balance of Trade a/
 Nitrogenous Fertilizers
 Phosphatic Fertilizers
 Mixing Fertilizers
 Total
138,000
595,008
96,908
830,716
377,975
55,739
45,012
478,726
120,168
519,746
30,284
670,198
240,380
61,562
33,949
335,891
251,371
833,580
40,695
1,125,646
279,656
77,822
69,906
427,384
167,949
626,246
53,476
847,671
205,256
73,639
104,595
383,490
100,881
269,067
34,084
404,032
95,248
39,128
22,361
156,737
64,653
55,241
12,985
132,879
29,124
15,560
11,985
56,669
-239,175  -120,212
 539,269   458,184
  51,896    -3,665
 351,990   334,307
-28,285  -37,307    5,663   35,529
755,758  552,607  229,939   39,681
-29,211  -51,119   11,723    1,000
698,262  464,181  247,295   76,210
.a/Exports minus imports.

Source:  U.S. Department of Commerce, U.S. Exports, FT 610, and U.S. Imports,
FT 210, various years.

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                                      E-31
                                     TABLE 8

              SUPPLY AND CONSUMPTION OF FERTILIZERS,  CROP YEAR 1977

                       (thousands of tons, nutrient basis)
                                                                     Apparent
                                Production    Imports    Exports    Consumption

Nitrogen  (N)
 Ammonia                            4,643          592        345        4,890
 Ammonium nitrate^/                 1,115          118          2        1,231
 Ammonium sulfate                    487          119        104          502
 Urea                                883          346        206        1,023
 Other                              3,534          252        562        3,224
Total                             10,662       1,427      1,219       10,870

Phosphorous(P2Q5)
 Ammonium phosphates a/             3,587          152      1,292
 Concentrated superphosphate        1,677          18        585
 Normal superphosphate               371          —          1
 Other                              1,748          54        467
Total                               7,383          224      2,345
Potassium
1*221
 Potassium cfiloride                2,075       4,226        927        5,374
 Potassium sulfate a/                412          45        161          296
 Other                                35          24         26           33
Total                              2,522       4,295      1,114        5,703
  GRAND TOTAL                     20,567       5,946      4,678       21,835


£./—Includes ammoniu™ nitrate and ammonium nitrate-limestone mixtures.

    Source:  U.S. Department of Agriculture, Agricultural Stabilization and
Conservation Service, The Fertilizer Supply, 1978-79.

-------
                                                                         TABLE 9


                                                              FERTILIZER  INDUSTRY STATISTICS
All
Establishments
Yeari/ With 20
Employees
Total or more
(number) (number)
1977 Census
1976 ASM
1975 ASM
1974 ASM
1973 ASM
1972 Cerisus

1977 Census
1976 ASM
1975 ASM
1974 ASM
1973 ASM
1972 Census

119
(NA)
(NA)
(NA)
(NA)
76

92
(NA)
'(NA)
(NA)
(NA)
145

88
(NA)
(NA)
(NA)
(NA)
69

68
(NA)
(NA)
(NA)
(NA)
115
All
Employees
Payroll
Number (million
(1,000) dollars)

12.0
11.3
10.6
10.1
9.2
9.4

14.6
14.9
16.0
14.8
13.1
14.9

205.1
189.8
160.8
132.6
113.1
104.3

212.8
201.5
199.6
162.4
128.0
135.1
Production Workers
Number
(1,000)

7.7
7.4
7.1
7.1
6.3
6 .1

10.1
10.7
11.7
11.1
9.6
10.8
Hours
(mil-
lions)

16.8
16.7
15.2
14.8
13.8
13.2

21.7
22.5
24.7
24.0
20.8
23.1
Value added by Cost of
Wages Manufacture materials
(million (million (million
dollars) dollars) dollars)
INDUSTRY
126.6
115.8
98.8
84.8
74.3
64.3
INDUSTRY
139.0
130.5
135.2
111.2
88.4
91.9
Value of
shipments
(million
dollars)
Assets and
Expenditures
New
Capital
Expendi-
tures
(million
dollars)
Ratios
Gross End-of-
value of Year
fixed inven- Special-
assets tories ization
(million (million ratio
dollars) dollars) (percent)

Coverage
ratio
(percent)
2873, NITROGENOUS FERTILIZERS
1,193.0 1
1,238.6 1
1,582.4
1,141.3
500.2
447.6
2874, PHOSPHATIC
818.5 1
726.9 1
1,178.8 1
1,028.1 1
543.6
426.4
,433.8
,171.7
968.9
671.1
448.0
362.7
2,578.4
2,384.5
2,500.3
1,789.4
970.4
799.4
846.0
604.7
400.0
155.6
104.4
33.2
3,047.5
2,526.9
2,006.3
1,582.6
1,440.6
1,403.3
377.0
290.9
238.4
152.1
106.9
116.2
94
(NA)
(NA)
(NA)
(NA)
r94
72
(NA)
(NA)
(NA)
(NA)
r69
FERTILIZERS
,919.0
,696.0
,685.6
,247.9
795.6
740.9
2,663.9
2,439.1
2,746.9
2,222.4
1,357.5
1,178.9
111.8
225.6
302.2
297.7
88.3
65.8
1,810.9
1,616.0
1,492.7
1,090.9
811.8
771.5
420.2
370.6
378.8
233.3
129.8
157.8
93
(NA)
(NA)
(NA)
(NA)
89
91
(NA)
(NA)
(NA)
(NA)
92
                                                                                                                                                               M
                                                                                                                                                                I
                                                                                                                                                               w
                                                                                                                                                               to
     rRevised.   (NA)  Not available.


     ^In years of Annual Survey of Manufactures (ASM),  data are estimates based on a representative sample of establishments canvassed annually  and may

differ from results of a complete canvass of all establishments.  ASM publication shows percentage standard errors.  This industry was newly defined  for

1972 Census of Manufactures so no comparable data prior to 1972 exist.
     Sources:   U.S. Department of Commerce, Bureau of the Census, 1977 Census of Manufactures, Washington, D.C.:  Government Printing Office, 1979).

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                                      E-33
Of course, the argument could be made that fertilizer manufacturers,  concerned
with rising production costs, will focus on process improvements instead of  on
new products.  At this point of our analysis,  it is unclear if either trend
will materialize, and which, if any, will dominate.  Industry interviews may
provide more information on fertilizer innovation.

-------
       E-34
Inoganic Pigments

-------
                                      E-35
                               INORGANIC PIGMENTS


OVERVIEW OF THE INORGANIC PIGMENT INDUSTRY

    This section describes the chemistry of inorganic pigments and a history
of the industry's development.  Later sections discuss in greater detail
processing, industry structure, and the raw materials used in production.

    There are three major product categories of inorganic pigments:

    •    prime white pigments,

    •    color pigments, and

    •    extender pigments.

The following subsections briefly describe the production chemistry and
typical uses of pigments in each category.

Prime White Pigments

    White pigments are the largest volume and dollar category, accounting for
59 percent and 63 percent of total dollar shipments of inorganic pigments in
1976 and 1977, respectively.!/  They are used for their whiteness and
opacity which are expressed either individually or in combination with other
pigments and colorants.  The two most important white pigments are titanium
dioxide (TiC>2) and zinc oxide (ZnC>2)  which accounted for 78.2 percent
($626.7 million)  and 18.6 percent ($149.1 million), respectively, of the total
$801.5 million in sales for white pigments in 1977.Z/  Other products in
this group include white l^ad (lead sulfate or carbonate), leaded zinc oxide,
antimony oxide, lithopone (a mixture of zinc sulfate and barium sulfite) and
zinc sulfide.jl/

    The metallic oxide white pigments, TiO2 and ZnC>2 (as well as other
colored metallic oxide pigments)  are made in a continuous slurry process by a
reaction of the appropriate metal in the presence of acid.  The metal is not
    i/Mary K. Meegan, ed., Kline Guide to the Chemical Industry (3rd ed.,
Fairfield, NJ:  Charles Kline & Co., 1977); and U.S. Department of Commerce,
Bureau of Census, 1977 Census of Manufactures (Washington, D.C.:  Government
Printing Office, 1979).

    J/U.S. Department of Coiwirce, Bureau of Census, 1977 Census of
Manufactures  (Washington, D.C.:  Government Printing

    .I/The leaded pigments have been banned from household paints since the
early 1970s and their sales for uses in this area declined.  For example, the
white lead sales volume in 1976 was less than .1 percent of all white pigment
sales and was largely for export.  Source:  Meegan, Kline Guide.

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                                      E-36
 in  its elemental state, but is in an ore body or alloy form.  For example,
 titanium dioxide is made by reacting either rutile or ilmenite—both titanium
 ores—with sulfuric acid or chlorine.I/  Only nine plants constitute the
 entire industry, with plant capacities ranging from 164,000 to over 2,000,000
 pounds per day.J5/

     Several of the white pigments have properties that make them especially
 attractive in particular applications.  Zinc oxide in paint is an effective
 fungicide.  Additionally, it has photoconductive properties and is used to
 coat reprographic papers for photocopying.  Antimony oxide, because of its
 relatively high cost compared to TiO2, is rarely employed as an opacifying
 agent.  Instead, it is used as a flame retardant in plastics.

 Color Pigments

     Color pigments are the second largest group by dollar sales, accounting
 for 30.7 percent and 33.3 percent of the total dollar shipments of inorganic
 pigments in 1976 and 1977, respectively.j>/  Among the color pigments shown
 in Table 1, the chrome pigments, as a group, are the largest in dollar volume.

     Chrome pigments are made by roasting chromite ore with soda ash and
 lime.  This yields an intermediate powder, sodium dichromate, which is then
 reacted with various metals in the presence of strong acids to yield the
 pigments.  The larger volume colorants are produced through a continuous
 process in relatively large plants.  For example, the average litharge
 facility produced slightly more than 50,000 pounds of pigment per day in
 1977.1/

     Because of the wide range of colors and physical and chemical properties,
color pigments have wide application.  Chrome yellow and molybate orange
pigments are used to color plastics as well as serve as colorants in paint.
 Zinc yellows and red lead are used in primers to resist corrosion.  Litharge's
major use is in storage battery plates and as a glass additive.   Cuprous
oxides are employed in antifouling marine paints, and cadmium sulfides and
selenides have high temperature applications.   Iron oxide pigments are used in
magnetic tape coatings.
    -i/In this example,  as well as with other processes using acids, waste
acid disposal presents  a problem.  Recent environmental problems have mandated
pollution control equipment which add to processing costs.

    I/Chemical Marketing Reporter;, October 16,  1978.

    .§/U.S. Department of Commerce, 1977 Census  of Manufactures; and Meegan,
Kline Guide.

    2/U.S. Department of Commerce, 1977 Census  of Manufactures.

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                                      E-37


                                     TABLE 1

                  SALES OF COLOR METALLIC PIGMENTS:  1976, 1977
                                                      Sales
              Color  Pigment                       (millions of dollars)
                                                          1977V
              Chromes
               Yellow and Orange                   45       49. 7
               Green                                3
               Oxide green                         14       12.2
               Molybate Orange                     26       28.2
               Zinc Yellow                          6        4. 6

              Litharge  (lead monoxide)              67       67.3
              Red lead  (lead oxide)                 11        7.8
              Ceramic Colors                        80       48.8
              Iron oxides                           46
              Iron blues                             9        5.6
              Other colors                         123      _

              Total                                430      447.6


— ' Meegan, Kline Guide.

-/ U.S. Department of Commerce, 1977 Census of Manufactures.


Extender Pigments

      Extender pigments have little or no opacity, but are generally less
expensive to  use than metallic ovides.  Paper is coated with extenders to
improve gloss and "inkability".  In paints, they can affect sheen, coat
thickness, and uniformity of pigment dispersion, and settling.

      Most extender pigments are mined products such as kaolin, calcium
carbamate, talc and asbestos.  They are sold as minerals with no chemical
processing and, therefore, are not discussed here.  Other extenders, such as
precipitated  silicates (sodium metasilicate, sodium orthosilicate, and sodium
sesquisilicate) ,  fine particle silicas and aluminum hydrates are chemically
produced.  There are substantial differences in publicly reported data for
sales of extender pigments.   The Kline Guide reports that an estimated one
million tons of chemically produced extender pigments were sold,  valued at
$140 million  in 1976. I/  m conflict, the 1977 Census of Manufactures
    Ji/Meegan, Kline Guide, p. 154.

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                                      E-38


reports 83,000 tons sold, valued at 37.5 million in 1977.JV  There are no
other publicly available sources that confirm either number.   However, the
Census data reported purchases of raw material non-metallic minerals  (clay,
talc, limestone, barite, potash, etc.)  of only $12.2 million.  The Bureau of
Mines Minerals Yearbook (1976)  reports sales of talc and kaolin alone of $8.3
million for paints, which tends to make the Census data estimates lower than
actual.

     The extenders are produced by a variety of methods.  One of the  largest
volume extenders, aluminum hydroxide, is made by the Bayer process, reacting
bauxite ore in the presence of sodium hydroxide to form a solution from which
aluminum hydroxide is extracted.  This extender is used extensively in carpet
backing where it contributes flatus retardant properties.

     Another high volume extender pigment, precipitated calcium carbonate, is
made from limestone by roasting the limestone in a continuously run oven,
treating the resulting calcium oxide with a strong base to form calcium
hydroxide, and precipitating the pigment with further acid treatment.  This
extender is used in paper coatings to improve brightness and "printability".

     Chemically, most pigments from all categories are insoluble in inorganic
and  water base  solvents.  In their final state, they are highly inert,
generally non-toxic except for lead pigments  (and then only  if ingested) and
will not react  with other chemicals except strong acids or bases.  As their
name implies, they are called pigments because they impart color  (including
white  and black) through mechanical mixing rather than through a chemical
reaction.

     While pigments have many uses today, the earliest use was as a colorant.
As early as 3000 B.C., a paint industry flourished in Mesopotamia  (an ancient
country northwest of the Persian Gulf), and has continued in various
configurations  since that time.iO/  Initially, minerals that possessed
natural colors  (typically iron oxides) were ground and mixed with a liquid or
applied as a powder.  The advent of synthetic inorganic pigments occurred when
minerals were treated with acids in 1857.

     The age of this industry has resulted in a steady, slow growth industry,
and, except for extender pigments, manufacturing has become  very
concentrated.   In 1976, the four largest producers  (each with sales of over
$100 million in 1976) accounted for 54 percent of industry shipments  and the
10 largest, listed in Table 2, accounted for  80 percent of the total.
    1/U.S. Department of Commerce, 1977 Census of Manufactures.

    iP-/Will Durant, The Story of Civilization  (New York:  Simon and
Schuster, 1935- ), Vol. III.

    ii/Meegan, Kline Guide.

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                                      E-39
                                     TABLE 2

                             MAJOR U.S.  PRODUCERS  OF
                       SYNTHETIC INORGANIC PIGMENTS:  1976

                                                     Sales
                  Rank       Company           (millions of dollars)

                    1        DuPont                   315
                    2        NL Industries            160
                    3        Glidden                  120
                    4        New Jersey Zinc          100
                    5        Hercules                  85
                    6        American Cyanamid         80
                    7        St. Joe                   60
                    8        Harshaw                   35
                    9        Asarco                    30
                   10        Kerr-McGee                30
                   11        Eagle Picher              25
                   12        Ferro                     20
                             Other                    215
                               Total                1,275
Source:  Mary K. Meegan, ed., Kline Guide to the Chemical Industry (3rd ed.,
         Fairfield, NJ:  Charles Kline & Co., 1977).

    Other uses include the plastics, paper, paper board and printing ink
industries.  Table 3 shows the relative value of sales to major users of
inorganic pigments in 1977.
RAW MATERIALS

    In 1977, all inorganic pigment production consumed $560.7 million in raw
materials, up from $333.1 million in 1972.  Table 4 presents the major raw
material groups consumed in production in 1977, and where available, the
respective quantity, value, and per an^um price increase from 1970 to 1976 of
each group.  Comparable data for earlier years is not available.

-------
                                      E-40
    Inorganic pigments serve  as  raw materials for  many  other  industries,  with
the largest user being paint  manufacturers (more than one-third  of sales  in
1977) .12/
                                    FIGURE 1

                 U.S.  SHIPMENTS OF PAINTS AND PIGMENTS 1960-1976
Million
Gallons
   Million
   Dollars
                                                                           Year
          Paint  Sales
Pigment Sales
 Sources:     U.S. Department  of  Commerce, Bureau  of  Census,  Current Industrial
             Reports  (Washington, D.C.:  Government  Printing Office,  various
             years);  and  U.S  Department  of  Commerce,  Bureau  of Census,  Annual
             Survey of  Manufacturers  (Washington, D.C.:   Government Printing
             Office,  various  years).
     12/ibid.

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                                      E-41
                                     TABLE 3


                    MAJOR USERS OF INORGANIC PIGMENTS:  1977


                                     Percent of Total          Value
       Industry                       Pigment Sales         ($ Millions)

       Paint & Allied Products              38.8                472.0

       Plastics                             2.5                 30.03-/
       Paper and Paperboard                 22.4                351. 0^.'


       Printing Ink                         15.2                184.8


       —' Actual figure probably is much  larger, but data is incomplete.

       Source:  U.S. Department of Commerce, Bureau of Census, 1977 Census of
       Manufactures (Washington, D.C.:  Government Printing Office, 1979).


    The largest single raw material cost  is for titanium ore.   The two major
resources for Ti©2 are rutile, imported from Australia, and ilmenite, more
than 90 percent of which is produced domestically.il/  There are indications
that the Australian supply of rutile may  become exhausted within 10 to 15
years, and ilmenite could substitute.il/'  The ilmenite ore is converted by
the sulfate process which, as previousl"  mentioned, is highly polluting, while
rutile is transformed by the less polluting chlorine process.   Thus, a shift
from rutile to ilmenite would increase overall production costs by increasing
pollution control costs.

    Table 5A presents the cost trends for imports of TiO2 ore.  As with many
other raw materials,jL§/ there has been a  rapid expansion in cost since the
mid-1970s due to increased extraction and transportation costs.
    il/U.S. Department of Commerce, 1978 U.S. Industrial Outlook
(Washington, D.C.:  Government Printing Office, 1978).

    11/Ibid., p 123.
          . Department of Commerce, 1978 U.S. Industrial Outlook; and
Chemical and Engineering News, October 16, 1978.

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                                      E-42
                                    TABLE 4

                   MAJOR RAW MATERIAL GROUPS CONSUMED:  1977
        Material Group

      Acids

        Other Inorganic
          Chemicals

      Industrial Gases
      Plastic Powers,
        pellets & Ganules

      Crude Ores;
        Non-ferrous
        (except titanium ore)


        Ferrous

        Titanium

      Non-metallic minerals

      All  other parts,
        supplies
 Quantity
(tons  100QI

  396.6
   76.0
   8.25
  238.2
   Value
_($ millions )

       12.9
                                                                Per annum
                                                              price increse
                                                               1970 - 1976
8.8
3.9
6.5
14.0
2.0
14.2
34.1
5.2
100.2
12.2
24. 2§/
28.4b/
14.9
14.1
__
                    311.6
      5   Phosphate rock.

      b/  Chromite.

      Sources: U.S. Department of Commerce, Bureau of Census, 1977 Census of
Manufactures (Washington, D.C.; Government Printing Office, 1979); and U.S.
Department of Interior, Bureau of Mines, Minerals Yearbook  (Washington, D.C.:
Government Printing Office, 1970 and 1976).

-------
                                  E-43
  Year
                                TABLE 5A

        TITANIUM DIOXIDE  IMPORTS AND SELECTED PRICES:
Import Value

($ millions)
1970
1971
1972
1973
1974
1975
1976
1977
1978-e
22.2
15.7
33.4
27.5
24.8
18.3
45.3
80.1
95.0
Price Per Ton
                                      82.33
                                     167.48
                                      214.42
1976-1978

    Amount Imported

   (thousand tons)


         269.6
                                                     148.1
                                                     212.3
  e- estimates


  Source:  U.S. Department of Commerce, Bureau of the Census, U.S.

           Imports, FT 210; U.S. Department of Interior, Bureau of Mines,

           Minerals Yearbook  (Washington, D.C.:  Government Printing

           Office, various years); and Mary K. Meegan, ed., Kline Guide to

           the Chemical Industry  (3rd ed., Fairfield, NJ: Charles Kline &

           Co., 1977) .
                                TABLE 5B

         IMPORTS,  EXPORTS AND PRICES OF  CHROMITE ORE:
                       (tons, thousands of dollars)
                                           1971-1976
     Year
      Exports
1971
1972
1973
1974
1975
1976
35
20
21
18
139
124
Imports

 1299
 1056
  931
 1102
 1252
 1275
    Average
   Price/ton

     25.00
     22.72
     30.00
     33.00
     82.00
    107.66
Source:   U.S. Department of Interior, Bureau of Mines, Minerals Yearbook
          (Washington, D.C.:  Government Printing Office, various years).

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                                      E-44


    Other metallic ores, notably chromite, are largely imported.  Table 5B
indicates the import, export, and price trends in chromite ore from 1972
through 1976.  These figures show a rapid price increase after 1972.

    Chromite is imported mainly from the USSR, Turkey and South Africa.  While
the reserves of ore from these countries are large enough to supply domestic
needs for several centuries at present consumption rates, political and
economic instability such as the recent changes in Soviet-American diplomacy,
have led to increased stockpiling.  The possible impact of changes in
relationships with any of these supplier countries is hard to predict, but a
substantial lessening of supply from any one of these countries could cause a
substantial increase in raw material prices.

PRICES, PRODUCTION, AND EMPLOYMENT

    With few exceptions, inorganic pigments are commodity chemicals sold in
relatively large volumes to composition specifications that are standard
throughout the industry.  Because there is little differentiation in the
quality of a product, it appears that competition is based largely on price
and, as a result, prices in this mature segment tend to approach costs, with
producers relying on reductions of processing costs to increase margins.
While data on the identity of the producers and aggregate amounts of products
sold are publicly available, the relative profit margins and overall
contribution to profits is not available for any single producer.

    Increases in raw material prices, largely due to higher extraction,
processing and transportation costs that are directly or indirectly linked to
energy costs have, in recent years, put; upward price pressure on all inorganic
pigment products.  Table 6 examines the price indices trends of several major
inorganic pigments between 1967 and 1976.  While there is year to year
variation from 1967 to 1973, all prices rose sharply in the three years
following 1973,  reflecting sharp increases in energy costs.  The average per
annum price increase between 1970 and 1976 was 11.5 percent.

    As indicated in Table 4, the majority of raw materials used underwent
price increases  greater than 11.5 percent between 1970 and 1976, indicating
there could be an overall reduction in profit margins.  This margin squeeze
can be examined  in greater detail by looking at the trends in the amount of
value added each year.   Also, trends in the real value of shipments indicate
industry growth  and the effects on capacity utilization.  Finally, trends in
the relative costs of materials, labor, and value added will indicate the
total cost situation that the industry faces.

-------
                                      E-45
Titanium dioxide

Zinc oxide

Chrome yellow
  and orange

Litharge

Iron oxidesa/

Red lead

Iron blues
Calcium
  carbonate^'
  AVERAGE
                  TABLE 6
INDICES OF AVERAGE MANUFACTURERS'  PRICES OF
  SELECTED INORGANIC PIGMENTS:   1967-1976
                 (1967=100)

 1967   1968  1969   1970  1971  1972  1973  1974  1975  1976

 100.0  100.0 100.0  97.3  88.8  93.5  99.8 132.3 143.8 163.6

 100.0   99.6 107.6  98.9 115.5 123.8 126.4 223.8 260.3 248.0


 100.0  102.2 103.0  109.3 113.2 111.0 109.7 160.5 183.1 197.8

 100.0  102.2 103.0  109.3 113.2 111.0 109.7 160.5 183.1 197.8

 100.0  101.6 103.8  96.5 105.3 111.9 125.3 193.9 227.6 254.2

 100.0  103.8 106.4  114.0 105.6 107.3 114.9 155.0 147.7 169.0

 100.0  101.0  98.9  103.0 111.9 135.3 139.7 168.0 187.1 209.0

 100.0  104.1 102.8  104.6 110.0 114.8 116.7 142.6 155.6 172.2

 100.0  101.1 103.2  101.1  98.4 102.6 108.8 153.5 165.2 194.4
^/Excludes natural iron oxides.

^/Precipitated grades only.
Source:  Calculated from data of U.S.  Department of  Commerce, Bureau of
         Census,  Current Industrial Reports (Washington, D.C. Government
         Printing Office, various years);  and  U.S. Department of  interior,
         Bureau of Mines, Minerals Yearbook,  (Washington, D.C.:   Government
         Printing Office, various years).

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                                      E-46
    Table 7 illustrates the trends in payroll costs and value added both as a
percent of shipments, and in material costs.   The table indicates that new
value added, which includes profits,  has steadily declined.   Table 8 examines
the dollar volume of shipments,  showing the relative stagnation of industry
sales.  The maturity and stability of the industry has resulted in little net
change in the amount of labor employed.  Also,  there has been little real
increase in overall average value added per production worker.   Table 9 shows
trends in employment and value added  per production manhour  from 1972 through
1978.
                                    TABLE 7

                 TRENDS IN EMPLOYMENT AND MATERIALS EXPENDITURE

                  IN THE INORGANIC PIGMENTS SEGMENT:  1967-1977
            Year

            1977
            1976
            1975
            1974
            1973
            1972
            1971
            1970
            1969
            1968
            1967

            Source:
Material
 (Percent of Shipment)
Payroll   Value Added
55.8
55.2
55.5
54.0
49.6
50.1
49.3
45.5
43.4
42.8
42.6
, ed. ,
8. 7
8.3
10.3
10.2
11.4
11.0
12.8
12.8
11.8
11.1
11.5
Kline Guide
44.9
45.3
47.4
49.7
48.0
50.0
52.1
55.9
57.1
57.6
58.4
to the Chemical Industry
                     (3rd  ed.,  Fairfield, NJ:   Charles Kline  &  Co.,  1977).

-------
      Year

      1977
      1976
      1975
      1974
      1973
      1972
      1971
      1970
      1969
      1968
      1967
                                      E-47


                                    TABLE 8

              SALES OF INORGANIC PIGMENTS IN CURRENT AND CONSTANT

                             DOLLARS FOR 1967-1977
 Shipments
($  Millions)

 1256.0
 1292.5
   988.9
 1188.6
   890.2
   796.9
   666.0
   646.0
   657.7
   624.0
   549.3
    Shipments
(1972  $ millions)!/

      894.6
      973.2
      782.4
      1016.8
      843.8
      796.9
      689.4
      698.4
      758.4
      755.7
      695.1
      5/  Adjusted using GNP deflator,  1972 index.

      Source:   Mary K.  Meegan,  ed.,  Kline Guide  to  the  Chemical  Industry  (3rd
ed., Fairfield, NJ:  Charles Kline & Co., 1977).
                                    TABLE 9

        PRODUCTION WORKER EMPLOYMENT AND AVERAGE  VALUE-ADDED:   1972-1978
                                               Value  Added  Per
                            Production        Production Manhour
                 Year       Employees      (constant 1972 dollars)**/

                 1972          9,000                21.00
                 1973          9,600                19.66
                 1974         11,000                22.07
                 1975         10,300                18.56
                 1976         10,600                19.67
                 1977         10,500                23.89
                 1978         11,000                18.55

                 a/  Adjusted  using GNP deflator,  1972 index.

         Source:    U.S.  Department of Commerce,  1978  U.S. Industrial Outlook,
                   (Washington D.C.:  Government Printing Office,  1978)

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                                      E-48
     Forecasts by several sources do not predict significant changes in these
trends.
COMPETITION

     Sales of the inorganic pigments industry are relatively concentrated,
with a small number of producers accounting for a large percentage of total
sales.  As previously discussed, the top 10 producers of inorganic pigments
accounted for 80 percent of shipments.   This fact,  coupled with the large
overall amount of pigments shipped,  means that the  10 producers mentioned in
Table 2 shipped an average of 4,110  tons per day in 1978.il/  The large
capital investment necessary to achieve these volumes has created an effective
barrier to entry for new domestic competitors.   For example, in 1975,
Kerr-McGee started construction of a synthetic rutile plant which was
completed in 1976.  The plant's design  capacity is  110,000 tons/year, and it
was built with an estimated $90 - 100 million dollars. !§/  with a total
industry volume of 750,000 tons of titanium dioxide in 1979, Kerr-McGee's
large investment captured less than  15  percent of the market.

     However, foreign competitors have  placed increasing competitive pressure
on domestic producers by lowering their prices.  Subsidization by their
respective governments in the form of reduced taxes, tariffs, and secured
loans; access to plentiful raw materials; and less restrictive environmental
constraints have combined to give many  new entrants the ability to gain market
share. 19/

     As a result, imports of inorganic  pigments have been growing more rapidly
than exports, resulting in wider trade  deficits.  Table 10 illustrates this
trend, which is expected to continue.

     While the chemical industry as  a whole is a leader in R&D spending
compared to all manufacturing, there are very few new annual product additions
in the inorganic pigment segment.  No publicly available data indicates the
amounts of money spent annually for  R&D in this segment.  Since approximately
90 percent of total annual expenditures in the overall chemical industry is
    ii/U.S. Department of Commerce, 1978 U.S. Industrial Outlook; and
Chemical and Engineering News, October 16, 1978.

    12/U..S. Department of Commerce, 1978 U.S. Industrial Outlook.

    M/ICF estimates from data in SEC 10-K reports for 1974, 1975, 1976.
The resulting capital cost per pound of rutile, assuming a 20 year plant life,
is 23tf per pound, while the market price is 59& per pound.  Source:  Chemical
Engineering News, July 16, 1979.

    i2/U.S. Department of Commerce, 1978 U.S. Industrial Outlook.

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                                      E-49


                                    TABLE 10

                           U.S.  IMPORTS  AND  EXPORTS  OF

                    SYNTHETIC INORGANIC PIGMENTS:  1969-1976

                              (millions  of dollars)


                 Year    Imports     Exports     Trade Balance

                 1969       46          37            - 9
                 1970       46          43            - 3
                 1971       59          46            -13
                 1972       46          39            - 7
                 1973       77          62            -15
                 1974      100          93            - 7
                 1975       68          60            - 8
                 1976      124          87            -37
     Source:   Mary K. Meegan, ed., Kline Guide to the Chemical Industry (3rd
               ed., Farifield, NJ:  Charles Kline & Co., 1977).
for applied or development research, it is reasonable to expect that the
majority of R&D expenditures for the pigment industry is on process
applications..±£/

     Rising raw material, energy, and pollution control costs imply that most
of future R&D efforts will be toward reducing these costs through more
efficient and less polluting processes.  Because of the capital intensity of
these high volume processes, radical changes in processes probably do not
occur as often as minor changes.

     Organic pigments face similar rising raw material and energy costs..21/
Thus, changes in market share are unlikely to occur by substitution with
organic products or by improved production techniques, but may result from
price competition with competitors.
    ^/National Science Foundation, Graduate Science Education;  Student
Support and Post Doctoral, Publication number 74-318, Fall 1973.

    .2i/Discussed in detail in the profile on Organic Dyes and Pigments.

-------
             E-50
All Other Inorganic Chemicals

-------
                                      E-51
                          ALL OTHER INORGANIC CHEMICALS
DESCRIPTION

    The all other  inorganic chemicals segment of the chemical industry
includes alkalies  and chlorine; aluminum, potassium and sodium compounds; and
inorganic acids.   By Standard  Industrial Classification (SIC) code, this
segment is comprised of  the "281" industries except for industrial gases
 (2813), inorganic  pigments  (2816), and chemical catalytic preparations  (28198)

    In general,  inorganic chemicals  are produced from minerals.  They are
usually solid, non-combustible, and  soluble in water.
 ENGINEERING  PROCESS
     The engineering processes used to manufacture inorganic chemicals vary.
 For  example, some chlor-alkalies may be produced by the electrolysis of brine
 or by chemical or thermal reaction.  Others, such as caustic soda, are
 byproducts or coproducts of some other chemical's production.i/  Rapidly
 escalating costs of synthetic soda ash production have all but eliminated
 facilities using the Solvay method of saturating brine with ammonia and carbon
 dioxide gas to make soda ash..2./  New soda ash plants now produce the
 chemical more cheaply from a natural source—trona ore.  The trona process
 involves calcination of a sodium carbonate/sodium bicarbonate mixture to
 convert the bicarbonate portion of the trona into carbonate.

     The production of inorganic acids utilizes entirely different processes
 from those used to manufacture the chlor-alkalies and sodium compounds.
 Nitric acid results from the oxidation of ammonia with a platinum catalyst.
 Sulfuric acid, derived from sulfur, pyrites, sulfide smelter gases, and
 hydrogen sulfide, are produced in several ways.  The  "Cat-ox" procedure, a
 proprietary catalytic oxidation process, removes sulfur dioxide and fly ash
 from stack gases and converts the sulfur dioxide to sulfuric acid.  The widely
 used contact process involves the oxidation of sulfur dioxide with air by
 contact with a vanadium pentoxide catalyst.  This process yields sulfur
 trioxide which is then absorbed in high strength sulfuric acid to yield a
 product of 98 to 100 percent acid.
    i/The oroduction of chlorine and caustic soda is highly interrelated.
Electrolytic processes yield both chemicals in a fixed ratio of 1.1 tons of
caustic per ton of chlorine gas.

    2/In 1974 there were six giant Solvay process facilities with an annual
aggregate output of four million tons of soda ash.  By mid-1979, only one, a
900,000 ton unit owned by Allied Chemical, remained in operation  (Business
Week, April 16, 1979).

-------
                                      E-52
USES

     Most of the inorganic chemicals produced today date back to the late
eighteenth century and have well established end uses.   They are employed
primarily as processing aids in the manufacture of chemical and non-chemical
products.  In most cases,  they do not appear as final products.

     Many inorganic chemicals are used to produce organic chemicals as well as
other inorganics.  Numerous other industries rely on inorganics:  pulp and
paper, aluminum, rayon/cellophane, petroleum, detergents, water treatment,
Pharmaceuticals, etc.  Except for chlorine and a few others, inorganics are
not used extensively in synthetic products such as plastics and fibers.

     Figure 1 presents a breakdown of end uses for five chlor-alkalies
(chlorine, potassium hydroxide, sodium bicarbonate, sodium carbonate, and
sodium hydroxide) and three other inorganics (calcium chloride, hydrofluoric
acid and sulfuric acid).

     Almost two-thirds of chlorine is consumed in the production of organic
chemicals.  The  remainder is utilized in pulp and paper production, inorganic
chemical production, and sanitizing processes.  Chlorine is one of the most
important chemicals used as a raw material in producing polyvinyl chloride
(PVC) and other  plastics as well as solvents, intermediates and bleaches.  The
demand for end-products like PVC determines to a large extent chlorine's
volume of sales.  Demand for PVC is sensitive to the housing and automotive
markets; thus, chlorine as an intermediate in PVC is sensitive to these
markets  as well  as to overall changes in the economy.

     Soda ash is used in virtually every industry from dishwa; .dng detergents
to  fiberglass insulation.  Fifty percent of all soda ash is consumed by the
glass industry;  therefore, soda ash, like chlorine, is quite sensitive to the
construction and automotive markets.  Other major alkalies are also affected
by changing economic conditions, but to a lesser degree than chlorine and
soda.3/
 INDUSTRY STRUCTURE

      In general, the inorganic chemicals industry does not attract a large
 number of producers due to the maturity of its products and moderate rates of
 growth.  Prior to 1974 inorganic chemicals kept pace with GNP, but industry
 experts believe that in the future inorganics will grow at a rate slightly
 less  than the gross national product  (GNP).!/
    I/Chemical Purchasing, October 1979.

    I/George M. Tapps and William T, Hewitt, "Industry Outlook for Inorganic
 Chemicals," Chemical Engineering, June  6, 1977.

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                                 E-53
CHLORINE
POTASSIUM HYDROXIDE
                               FIGURE 1
                      USES OF  INORGANIC  CHEMICALS
                       Organic chemicals
                         vinyl chloride
                         chlorethane solvents
                         propylene oxide
                         pesticides
                         fluorocarbons
                       Pulp and paper
                       Inorganic chemicals
60.0%
13.0%
11.0%
                       Sanitization of potable and waste water in
                       municipal waterworks and sewage plants      5.0%
                       Potassium carbonate
                       Soaps
                       Tetrapotassium pyrophosphate
                       Other potassium chemicals
                       Liquid fertilizers
                       Dyestuffs
                       Herbicides
                       Miscellaneous applications
                       Exports
28.0%
18.0%
18.0%
10.0%
 8.0%
 5.0%
 4.0%
 5.5%
 3.5%

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                                 E-54
SODIUM BICARBONATE
                               FIGURE 1
                     USES OF  INORGANIC  CHEMICALS
                              (continued)
                       Food (baking powder) industry               33.0%
                       Rubber and industrial chemicals             20.0%
                       Pharmaceutical                              15.0%
                       Fire extinguishers                          10.0%
                       Soaps,  detergents, animal, feeds,
                       textile, paper, leather, and exports        12.0%
SODIUM CARBONATE (caustic soda)
                      Glass                                      51.0%
                      Chemicals                                  22.0%
                      Pulp and paper                              6.0%
                      Soap and detergents                         5.0%
                      Water treatment                             3.0%
                      Miscellaneous applications                  6.0%
                      Exports                                     7. o%

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                                 E-55
SODIUM HYDROXIDE
                               FIGURE 1
                      USES OF INORGANIC  CHEMICALS
                              (continued)
                      Chemical and metal processing               46.0%
                               (other than aluminum)
                      Paper and pulp manufacture                  16.0%
                      Petroleum, textile, soap, food industries   12.0%
                      Aluminum processing                          5.0%
                      Rayon and cellophane production              4.0%
                      Miscellaneous applications                   7.0%
                      Exports                                     10.0%
HYDROFLUORIC ACID
                      Fluorocarbons
                      Aluminum smelting:
                        aluminum fluoride
                        synthetic cryolite
                      Gasoline alkylation catalyst
                      Stainless steel pickling
                      Fluoride salts
                      Uranium isotope separation
                      Miscellaneous applications
41.0%
37.0%
25.0%
12.0%
 4.0%
 3.0%
 3.0%
 2.0%
10.0%

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                                 E-56
                               FIGURE 1
                      USER OF  INORGANIC  CHEMICALS
                              (continued)
CALCIUM CHLORIDE
SULFURIC ACID
                        Dust control
                        Deicing highways
                        Industrial processing
                        Concrete treatment
                        Oil well drilling
                        Tire ballasting
                        Miscellaneous applications
                        Exports
27.0%
26.0%
21.0%
10.0%
 5.0%
 3.0%
 4.0%
 4.0%
                        Phosphate fertilizers
                        Other fertilizers
                        Ammonium sulfate
                        Petroleum refining
                        Titanium dioxide
                        Alcohols
                        Hydrofluoric1 acid
                        Copper leaching
                        Miscellaneous applications
52.0%
 3.0%
 6.0%
 5.0%
 4.0%
 4.0%
 3.0%
 3.0%
20.0%
Source:  Gloria M. Lawler, ed., Chemical Origins and Markets  (5th ed.,
         Menlo Park, CA:  Chemical Information Services, Stanford
         Research Institute, 1977).

-------
                                      E-57
     Compared to organics, the inorganics industry has a smaller number of
producers and a higher concentration of sales among larger companies.  The top
four chlor-alkali firms accounted for 72 percent of shipments in 1972, and for
other industrial inorganics, the top four accounted for almost 35 percent of
shipments.^/

     Specifically, eight companies produce about 75 percent of U.S. chlorine;
the remainder is produced by 23 companies.  The soda ash industry is also
highly concentrated.  In 1977 seven companies produced soda ash, but with
recent closings of synthetic ash plants, only five producers may remain.  In
1977 there were almost 70 producers of sulfuric acid, with the five largest
sharing 30 percent of the market.  One phosphoric acid company held a 12
percent share of industry capacity.  The top five producers of phosphoric acid
are estimated to have 40 percent of the total market, which has 30 producers
all together.  In contrast to these industries, there are no dominant
producers of nitric acid.  Five producers have 38 percent of industry capacity
while 41 smaller firms share the remaining 62 percent.j>/

     Of the 100 leading U.S. chemical producers, 64 manufacture basic and
intermediate inorganics.!/  Fourteen of the 64 produce only sulfur (11 are
petroleum companies, three are agricultural chemical producers).  The
remaining are either considered true chemical companies with more than 50
percent of sales in chemicals, or long-time producers of chemicals.JV

     Several large chemical companies appear to concentrate in inorganics
instead of organics:  Diamond Shamrock, FMC Corporation, Freeport Minerals,
Kerr-McGee, NL Industries, Occidental Petroleum through its Hooker subsidiary,
Olin, PPG, and Stauffer Chemical.  Other major producers of inorganics are
Allied Chemical,  American Cyanamid, BASF Wyandotte, Dow Chemical, DuPont,
Monsanto, Pennwalt and Union Carbide.jV
    .§/Mary K. Meegan, ed.,  Kline Guide to the Chemical Industry (3rd ed.,
Fairfield, NJ:  Charles Kline & Co., 1977).

    .§/Tapps and Williams,  "Industry Outlook  for Inorganic Chemicals."

    2/Eighty-one out of the 100 engage in the production of basic and
intermediate organic chemicals.

    1/Meegan, Kline Guide.

    I/Ibid.

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                                      E-58
SHIPMENTS

     Inorganic chemicals represented 9 percent,  or about $9 billion,  of the
total shipments of all chemicals in 1976.IP./  In 1977,  shipments of alkalies
and chlorine by primary manufacturers totaled almost $1.7 billion,  three
percent below the 1976 total.   Shipments of inorganic chemicals other than
chlor-alkalies, pigments and fertiliser chemicals, totaled $6.5 billion.
Inorganic acids, other than nitric and sulfuric  acid, contributed $369 million
or 6 percent of this total, and aluminum oxide,  exclusive of natural alumina,
contributed $827 million or 13 percent. Other aluminum compounds constituted
$314 million or five percent,  and potassium and  sodium  compounds (except
bleaches, alkalies and alums)  constituted  $1.4 billion  or 22 percent (refer to
Table 1).  Other products contributing to  the $6.5 billion figure are chemical
catalytic preparations; chemical reaaents; and compounds of antimony, arsenic,
barium, bismuth, cadmium, and calcium, chromium, cobalt, copper, manganese,
mercury, and nickel, phosphorus and other  less common elements.ii/


PRICES

     In general, before 1973 the average price of many  inorganic chemicals
rose more slowly than the costs of labor and energy. The price of
chlor-alkalies began climbing in 1974 after price decontrol and continued to
rise through 1977.i?/  Price increases were attributed  largely to higher
costs of labor, fuel and electric power, and raw materials.

     The magnitude of price increases in this period varied.  Between 1973 and
1976, the price of native sulfur jumped 221 percent while the price of
aluminum sulfate increased by 58 percent.il/  These increases were due
largely to shortages in the supply of these products.

     The price of liquid chlorine rose dramatically in  1974 from $74 per ton
on January 4, 1974 to $140 by year-end, an increase of  87 percent.   Caustic
soda also experienced a sharp increase from $76 per ton to $120, a rise of
    M/Tapps and Williams, "Industry Outlook for Inorganic Chemicals."

    i±/U.S. Department of Commerce, Bureau of Census, Current Industrial
Reports;  Inorganic Chemicals (Washington, D.C.:  Government Printing Office,
1977) .

    i^/Meegan, Kline Guide.

    il/U.S. Department of Commerce, 1978 U.S. Industrial Outlook
(Washington, D.C.:  Government Printing Office, 1978).

-------
                                                   TABLE 1

                                             INORGANIC CHEMICALS

                              VALUE OF SHIPMENTS INCLUDING INTERPLANT TRANSFERS

                                            (thousands of dollars)
SIC Code
Product
1977
1976
1975
1974
1973
2812
28121
28122
28123
2819
28193
28194
28194-11
28194 	
28195-11
28196
28197
Alkalies and Chlorine
Chlorine
Sodium carbonate
(soda ash)
Sodium hydroxide
(caustic soda)
Inorganic chemicals,
NEC , total
Sulfuric acid
Inorganic acids, except
nitric and sulfuric
Boric acid
Hydrochloric acid
Aluminum oxide, except
natural alumina
Other aluminum compounds
Potassium and sodium com-
1,681,442
501,275
144,700
973,229
6,543,384
404,587
369,271
45,043
111,732
827,520
314,556

1,728,676
524,741
155,315
982,836
5,941,573
380,323
295,935
31,355
68,123
749,636
287,117

1,562,478
442,193
165,941
890,883
5,017,522
368,723
231,682
23,451
50,142
590,051
233,827

1,191,878
333,238
157,534
663,505
4,791,198
320,452
214,294
14,159
45,372
618,926
220,108

855,718
238,774
131,028
452,636
3,644,127
241,535
174,343
13,344
41,622
453,160
183,256

              pounds  (except bleaches,
              alkalies, and alums)
                              1,419,754    1,323,357    1,161,658      962,209      730,696
                                                                                                                Ui
                                                                                                                VD
Source:  U.S. Department of Commerce, Bureau of Census, Current Industrial Reports;  Inorganic Chemicals,
         1977.

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                                      E-60
58 percent.il/  These increases were due to shortages in the supply of these
products.

     According to one source, the price of soda ash was stable between 1955
and 1969 at $31 per ton, freight on board (F.O.B.)  producing point.  In 1970
the price moved to $33 and, after price decontrol in 1974, prices spiraled to
$75 per ton in the East and $51 in the West.  In August 1977 a firm price of
$55 per ton for dense bulk ash was established.^/  Price increases were
attributed to high production costs and water pollution regulations.  The
leveling-off of prices after 1977 represents somewhat the shift to natural
soda ash and more efficient production technologies.

     Table 2 summarizes the Wholesale Price Index for various inorganic
chemicals.  Most of the chlor-alkalies have doubled in price since 1967.
Other inorganic chemicals have increased in price by as little as 13 percent
(calcium phosphate) or as much as 162 percent (sodium tripolyphosphate).


PRODUCTION AND GROWTH

     With the exception of synthetic soda ash, caustic soda and smaller-volume
inorganics, production of chlor-alkalies and other inorganics has been
increasing steadily since 1973  (refer to Table 3).  However, in aggregate,
most of  the markets are operating under capacity.  Table  4 presents annual
production and capacity figures for high-volume inorganics.  None were being
produced at full-capacity in 1977 and 1978.

     Chlorine production, for example, was at 76.5 percent of capacity in
December 1977.  The reason behind this is that chlorine producers overbuilt
plants before demand growth fell way below forecasts, and producers have
continued to push up capacity each year faster than production has
grown.i§/  improvement in capacity use occurred in 1978;  the Chlorine
Institute listed capacity use at 82.5 percent by year end.  However, new
capacity that came on stream in 1979, olus a slowdown in  the U.S. economy, was
expected to lower the operating rate to less than 80 percent in 1979.  Low
profitability in the chlorine industry will likely dampen future plant
investments and provide industry with a chance to return  to higher operating
rates after 1980.  In addition, some existing capacity may be shut down as
    ll/lbid.

    Ui/Chemical  Purchasing, June  1978; and U.S. Department of Commerce,  1978
 U.S.  Industrial  Outlook.

    jJ?/Chemical  and  Engineering News,  February  26,  1979.

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                                                    E-61

                                                   TABLE 2
                                             INORGANIC CHEMICALS
                                            WHOLESALE PRICE INDEX
                                                  (1967=100)
                                   1978
Basic Inorganic Chemicals
 Alkalies and Chlorine
  Chlorine Liquid
  Potassium Hydroxide
  Sodium Carbonate
  Sodium Hydroxide

Other Inorganic Chemicals
  Aluminum Fluoride
  Aluminum Hydroxide
  Aluminum Oxide
  Aluminum Sulfate
  Calcium Carbide
  Calcium Oxide
  Calcium Phosphate
  Hydrochloric Acid
  Hydrofluoric Acid
  Hydrogen Peroxide
  Nitric Acid 42 degrees BE
  Sodium Hydrosulfite
  Sodium Metasilicate
  Sodium Silicates
  Sodium Sulfate, Anhydrous
  Sodium Tripolyphosphate
  Sulfuric Acid  (contact) 66 BE

3/This is the figure for all chlorine.
b/This figure is for all sodium sulfate.

N/A - Not available.
                                           1977
                                                   1976
                                                           1975
                                                                   1974
                                                                           1974
                                                                                   1973
                                                                                           1971
                                                                                                   1970
193.0
202.1
207.6
200.4
183.9
212.4
190.5
141.3
123.0
146.7
190.3
129.2
201.2
113.1
177.0
151.5
115.5
175.5
116.6
169.8
196.5
207.9
261.9
166.1
ine.
I £_ 1.A
187.2
204.4
211.7
193.5
179.9
216.9
181.3
138.0
118.2
135.9
173.7
120.3
187.3
112.8
152.8
139.9
116.9
185.0
105.8
152.5'
170.8
243.1
153.6
164.0
j.ca te •
ce, Wholesale
177.3
202.8
200.9
188.3
153.1
229.5
168.1
125.4
105.1
109.0
157.1
117.0
170.2
104.2
128.9
140.1
102.7
180.3
111.9
N/A
162.2
227.4
N/A
164.7
154
.0
165.5
167
164
132
179
149
100
101
107
124
104
147
.8
.7
.8
.6
.8
.0
.7
.5
.5
.0
.7
N/A
130
117
99
166
104
102
124
180
216
147
Price Index,
.0
.7
.2
.6
.2
.1
.5
.0
.9
.9
1979
101.0
100.1
N/A
101.1
103.3
98.2
101.3
N/A
N/A
N/A
98.2
N/A
N/A
N/A
101.1
99.9
100.0
97.5
N/A
N/A
100.8
101.9
100.0
102.9

110
114
111
123
114
117
110
100
100
113
134
100
113
104
86
143
84
106
115
.3
.6
.!§/
.1
.5
.7
.2
.0
.0
.2
.1
.0
.4
.9
.7
.6
.1
.4
.6
N/A
146
100
121
118

.2
.0^
.3
.8

107
114
' 111
123
114
117
106
100
100
113
123
100
114
100
86
143
94
106
109
.9
.4
.1
.1
.5
.7
.9
.0
.0
.2
.4
.0
.3
.0
.7
.6
.1
.4
.9
N/A
134
' 100
114
111

.7
.0
.4
.9

107.0
112.5
111.1
118.0
106.4
117.7
105.8
N/A
N/A
110.4
123.4
100.0
110.2
111.1
106.7
130.8
94.1
106.4
109.9
N/A
123.2
100.0
111.6
111.9

115.3
114.6
119.1
128.0
106.4
114.7
118.5
N/A
N/A
N/A
136.0
117.6
111.3
111.6
116.7
103.3
84.4
100.0
117.6
N/A
125.0
100.0
94.7
144.5


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                             E-62

                              TABLE  3
                      QUANTITY OF PRODUCTION
                     (thousands of short tons)
Product Class Chemical
28121
28121
28122
28122
28123
28124
28193
28194
28194
28194
28194
28195
28196
28196
28196
28196
28196
28197
28197
28197
28197
28197
28197
28197
28197
28197
28197
28199
28199
28199
28199
28199
28199
Source:
11
15
51


21

11
40
51
61
11
17
25
27
51
55
13
16
18
21
24
27
29
30
38
61
04
10
12
13
74
75

Chlorine gas
Chlorine liquid
Synthetic soda ash
Natural soda ash
Caustic soda
Caustic potash
Sulfuric acid
Boric acid (boracic)
Hydrochloric acid
Hydrocyanic acid
Hydrofluoric, anhydrous
Aluminum oxide, except
natural alumina
Aluminum Chloride,
anhydrous
Aluminum hydroxide,
tethydrate
Aluminum fluoride,
technical
Commercial aluminum
sulfate
Iron free aluminum
sulfate
Potassium iodide
Potassium sulfate
Pyrophosphate
Sodium (metal)
Sodium borate
Sodium chlorate
Sodium hydrosulfide
Sodium hydrosulfite
Tripolyphosphate
High purity sulfate
Barium carbonate,
precipitated
Isolated bromine
Calcium carbide
Calcium carbonate,
precipitated
Sulfur, recovered
elemental (long ton)
Sulfur dioxide
U.S. Department of Commerce,
1977
10,573
6,341
1,812
6,278
10,933
301
35,821
177
2,721
198
179
5,948
45
N/A
148
1,255
123
.8
494
41
159
N/A
218
20
64
717
741
35
164
252
175
3,567
153
Bureau of
1976
10,378
6,091
2,344
5,216
10,516
252
33,300
135
2,542
182
182
5,720
34
488
142
1,202
174
'.
465
40
146
N/A
199
21
60
724
766
36
156
244
142
3,138
162
Census,
1975
9,167
5,317
2,802
4,353
9,634
236
32,360
133
2,009
151
213
5,057
27
421
130
1,141
252
7 .5
456
41
.144
N/A
173
24
50
770
796
26
143
253
202
2,969
146
1974
10,753
5,852
3,507
4,048
11,188
208
33,936
140
2,470
176
261
6,950
37
532
169
1,252
232
1,
430
40
173
587
203
30
56
903
783
40
155
324
267
2,632
130
Current Industrial
1973
10,402
5,426
3,813
3,707
10,734
220
31,949
144
2,534
161
249
6,751
37
607
140
1,227
230
.2 1.1
463
45
177
603
204
28
49
967
907
48
N/A
290
242
2,416
110
Reports:
Inorganic Chemicals, 1977.

-------
                                 E-63
                                TABLE 4
                          INORGANIC CHEMICALS
                    ANNUAL PRODUCTION AND CAPACITY
                       (thousands of short tons)-
Product
Ammonia, anhydrous
Caustic soda
Chlorine
Nitric acid
Phosphoric acid, wet
Potash^
Soda ash
Sodium chlorate
Sodium sulfate
Sodium phosphates
Sulfur, frasch
Sulfuric acid
Annual
1/1/77
18,750
13,895
13,400
10,497
8,650
11,500
10,315
264
1,443
1,499
7,900
47,177
Capacity
1/1/78
22,462
14,704
14,042
10,370
8,740
11,999
10,590
285
1,640
1,400
8,350
49,210

1976
16,450
10,160
9,040
7,790
7,350
7,975
7,124
196
923
890
6,365
32,350
Production
1977
17,295
11,975
10,692
7,866
7,330
9,000
7,938
211
1,261
881
5,911
34,304

1978
19,093
12,514
11,173
8,141
7,110
9,405
8,176
226
1,299
855
6,136
36,019
^/Sulfur figures in thousands of long tons.
^/Figures for U.S. and Canada.
Source:  Chemical Marketing Reporter, January 2, 1978.

-------
                                      E-64
some companies attempt to balance the tradeoff between economies of plant size
and increasing overhead costs,  such as those due to environmental
regulations. !V
    Caustic soda also has a dismal capacity record (see Table 5) .

    As noted earlier, the production of chlorine and  caustic soda  is highly
interrelated:  electrolytic processes yield both at * fixed ratio  of 1.1 tons
of caustic soda per ton of chlorine gas.   In effect,  caustic soda  growth has
been forced by vigorous attempts at chlorine caustic  plants to meet chlorine
demand.  The result is a parallel increase in caustic output whether the
market wants it or not.  At present, demand for caustic is slack:   aluminum
production has been sluggish and labor disputes in the U.S. pulp and paper
industry have helped reduce caustic demand because of uncertainties about
production.  To compound matters, demand for caustic  soda appears  to be
elastic, as soda ash is a substitute for caustic. !§./   This means that
caustic producers are limited in the amount by which  they can raise prices to
cover costs.

    In contrast to the chlorine and caustic soda markets, supplies of soda ash
are very tight at consuming points.  Operating rates  are also much higher for
soda ash  (see Table 6) .

    The tightness in supply is due partly to transportation difficulties
(e.g., freight car unavailability and adverse weather conditions).  Delivery
became a critical factor in the supply of soda ash when plant sites were
shifted from old synthetic plants in the East to natural ore deposits in the
West.  With approximately 70 percent of domestic soda ash production consumed
east of the Mississippi, i§/ transportation was destined to become  a
constraining factor.  In addition to these transportation difficulties, over
one million tons of synthetic soda ash capacity w^s shut down, which tightened
supplies even further.  Although forecasts for 1980 were not available at this
writing, production of soda ash was expected to rise  a modest three to four
percent in 1979. 10/

    For other inorganic chemicals, future production  trends and growth rates
rest largely on end-product market conditions.  Sulfuric acid's largest use,
for example, is in the production of phosphoric acid  for subsequent use in
phosphatic fertilizers.  About two-thirds of all phosphoric acid is used to
this end; therefore, the market for phosphatic fertilizers determines to a
    JLZ/Chemical Purchasing, October 1979.

    Wibid.

    Ij/Chemical Purchasing, June 1978.

    ZQ/Chemical and Engineering News, February 26, 1979.

-------
                          E-65
                         TABLE 5
                      CAUSTIC SODA
                 PRODUCTION AND CAPACITY
                   (thousands of tons)
 Year     Production
                 Average
             Annual Capacity
1979 E
1978 E
1977
1976
1975
1974
1973
11,685
11,290
10,933
10,516
9,635
11,189
10,734
16,400
15,860
14,685
13,665
13,035
12,140
11,210
                  Operating Rate

                      71.3%
                      71.2%
                      74.5%
                      77.0%
                      73.9%
                      92.2%
                      95.8%
E- estimated.

Source:  Chemical Purchasing, April 1979.
         (From information provided by the Chemical Research
         Group of the First Boston Corporation.)

                         TABLE 6
                        SODA ASH
                 PRODUCTION AND  CAPACITY
                   (thousands  of tons)
 Year
Production
    Average
Annual Capacity
1979 E
1978 E
1977
1976
1975
1974
1973
8,595
8,380
8,040
7,560
7,130
7,566
7,535
9,595
9,535
9,880
9,705
8,760
8,390
8,260
E- estimated.
Operating Rate

    89.6%
    87.9%
    81.4%
    77.9%
    81.4%
    90.2%
    91.2%
Source:  Chemical Purchasing, April 1979.
         (From information provided by the Chemical Research
         Group of the First Boston Corporation.)

-------
                                      E-66
large extent the fate of the sulfuric acid industry .

     Sodium sulfate serves as another example of how production is tied to end
markets; the bulk of sodium sulfate production goes to the pulp and paper
industry-  Recently, increased environmental pressure forced the industry to
recover and recycle some of the material lost in the production process.  As a
result, use of sodium sulfate by the pulp and paper industry is expected to
decline.
FOREIGN TRADE

     The inorganic chemicals business to a large extent depends upon foreign
trade.  In 1975, 15.4 percent of the total shipments of inorganic chemicals
was exported. 22/  At a disaggregated level, however, exports in many cases
appear to be relatively small.  For example, trade in many of the basic
inorganic chemicals like sulfuric acid, hydrochloric acid, phosphates, and
potassium and sodium compounds is often small. .2V  Trading partners often
prefer to import or produce basic mineral products like potash and phosphate
rock and then produce inorganic chemicals themselves .

     A comparison between the value of exports  (Table 7) and the value of
domestic shipments  (Table 8) shows that in 1977 the U.S. exported less than 9
percent of its  inorganic acids , 11 percent of its chlor-alkalies, and 17
percent of its  potassium and sodium compounds. 24/
      Caustic  soda and sodium carbonate are the major items in chlor-alkali
 exports.   The bulk of caustic soda exports goes to countries in which
 subsidiaries  of  U.S. aluminum companies operate (caustic soda is an
 intermediate  in  aluminum production) and also to Canada, Mexico, Brazil  and
 Argentina.

      Table 11 suggests  that the United States has been able to maintain  a
 positive  balance of  trade  in chlor-alkalies and potassium and sodium
    jl/ Chemical  and Engineering News, March  27,  1978.

    .22/Meegan, Kline Guide.

    Zl/U.S. Department of Commerce,  1978 U.S.  Industrial Outlook.   (Note:
 It  is  unclear whether "small"  refers to volume or value.)
            a detailed  breakdown of  export  and  import  values  by  product
 class,  see  Tables  9  and  10.

-------
                                      E-67
                                      TABLE 7


                       INORGANIC CHEMICALS:   VALUE OF EXPORTS


                               (thousands of  dollars)





Chemical Product & SIC Code        1977    1976    1975    1974    1973    1965
o,     Chl°rine             185,120 159,703 210,286 152,374  81,401  35,118
SIC 281.2




                                    31'815  2
Potassium and Sodium Compounds

         /
cTooo                  963,831 920,412 676,660 543,781 535,933 147,991
SIC zo-Ly 5, 6, y
Source:  U.S. Department of Commerce, U.S. Exports, FT 610.
                                      TABLE 8

                       INORGANIC CHEMICALS:  VALUE OF  IMPORTS

                               (thousands  of dollars)




Chemical Product & SIC Code       1977     1976     3975     1974    1973    1965



             Chl°rine              35,377  25,375    29,255  26,280  13,984  3,243




                                   71'369  59'368    32'090  25'535  20f366  2'583


Potassium and Sodium Compounds     48 182  42 855    35l055  34i381  23,55613,769
SIC 2819 7
CT                              1» 058, 791 993,967 1,091,623 506,400 393,433 64,833
SIC 28J.9 5, 6, "





Source:  U.S. Department of Commerce, U.S. Imports, FT 210.

-------
                                                         E-68
Description of Chemical
Alkalies and Chlorine
Chlorine
Sodium Carbonate
(Soda ash) — except natural
Sodium Bicarbonate
Sodium Hydroxide — Solid
Sodium Hydroxide — Liquid
Potassium Hydroxide
Alkalies, NEC
Inorganic Acids
Sulfuric Acid (Oleum)
Boric Acid
Hydrochloric and Chloro-
sulfonic Acids
Chromium Oxides, Anhydrides
etc., except pigment grades
Inorganic Acids, NEC
Potassium and Sodium Compounds
SIC Code
2812
2812

2812
2812
2812
2812
2812
2812
2819
2819
2819

2819

2819
2819
2819

10

20
20
30
30
40
40

30
40

40

40
40


00

20
40
20
40
10
97

00
10

25

40
97

TABLE 9
VALUE OF EXPORTS
(dollars)
1977 1976
185,120,453
11,048,429

52,943,416
3,152,771
5,918,615
107,261,839
3,558,971
1,236,412
31,815,221
2,295,744
12,957,553

1,963,956

7,411,400
7,186,568
247,054,724
159
5

47
3
13
87
2

26
1
12

1

5
4-
218
,702,909
,183,292

,003,527
,077,876
,064,022
,654,443
,811,020
908,729
,194,273
,910,434
,362,932

,706,296

,518,399
>696,212
,398,762
1975
210,285,923
4,020,559

45,822,262
2,469,777
39,384,733
116,208,665
2,094,751
285,176
24,726,975
4,762,872
11,460,994

1,510,860

3,997,752
2,974,497
230,538,582
1974
152,374,345
3,196,982

34,156,479
2,084,113
33,981,255
76,020,902
1,602,888
1,331,726
20,557,732
3,022,909
8,773,999

1,519,436

3,630,209
3,611,179
184,111,842
1973
81,400
1,390

16,064
2,156
17,614
42,445
1,220
508
15,478
754
9,343

880

2,687
1,813
123,268

,986
,767

,159
,719
,515
,594
,714
,518
,834
,046
,732

,752

,131
,173
,467
1965
35,117,844
2,353,556

9,029,526
N/A
10,953,692
12,056,168
665,613
52,289
8,612,110
439,937
2,947,099

N/A

N/A
5,225,074
79,059,594
Potassium Compounds
Sodium Sulfate—Crude
 and Refined
Sodium Borates—Refined
Sodium Cyanide
2819 70 22    2,801,225    3,635,573     6,144,006     3,250,046     2,048,535       415,140
2819 70 23   64,633,664   49,156,150    42,486,333    33,836,394    19,353,562    13,975,248
2819 70 25    5,749,446    4,052,833     2,939,410     3,931,924     2,155,671     1,289,489

-------
E-69
Description of Chemical SIC Code
Potassium and Sodium Compounds (continued)
Sodium Hydrosulfite
Sodium Phosphate — Mono-.
Di-, Meta-, Pyro-
Sodium Compounds, NEC
Other Inorganic Chemicals, NEC
Aluminum Oxide
Aluminum Hydroxide
Aluminum Sulfate
Aluminum Compounds, NEC
Calcium Carbonate, Precipi-
tated, except pigment grades
Calcium Chloride
Dicalcium Phosphate
Activated Carbon
Sodium Bichromate and Chromate
Bleaching Compounds, NEC
Inorganic
Elemental Phosphorus
Tin Oxides
Chemicals & Chemical Elements,
NEC (Including Special
Nuclear Material) — Inorganic
2819
2819
2819
2819
2819
2819
2819
2819
2819
2819
2819
2819
2819
2819
2819^
2819
2819
Source: U.S. Department of Commerce,
70
70
70
50
60
60
60
9c
9c
9c
9c
9c
9c
9c
9c
9c
U.S
35
40
79
00
15
20
97
11
13
17
20
24
55
58
81
97
1977
4,460
13,891
38,236
963,830
94,208
9,104
889
17,575
4,052
3,383
9,549
12,941
7,975
22,369
20,722
453
760,604
TABLE 9
VALUE OF EXPORTS
(dollars)
(continued)
1976
,926
,524
,067
,733
,776
,504
,789
,126
,482
,075
,970
,413
,766
,563
,041
,601
,627
2,472,075
12,700,839
26,344,222
920,412,051
122,299,994
7,935,036
1,568,521
21,028,815
735,017
2,578,448
7,611,636
13,050,858
6,397,863
19,046,344
30,387,005
466,867
687,305,647
2
14
25
676
96
5
2
16

2
6
13
4
15
36

476
. Exports of Domestic Merchandise
1975
,975,421
,527,904
,021,569
,660,312
,087,101
,694,056
,897,072
,307,074
704,917
,313,555
,269,534
,307,134
,569,124
,148,132
,659,382
511,907
,191,324
, 1978.
1974
3,633,984
13,103,394
27,215,939
543,781,466
72,378,253
4,947,419
1,807,486
16,838,625
1,541,445
1,699,039
6,864,360
14,034,970
3,283,553
13,676,569
20,075,306
443,398
386,191,043

1973
1,513,111
6,496,936
17,738,114
535,932,682
63,179,884
3,897,565
642,181
14,095,970
1,088,076
2,224,715
4,752,759
8,650,971
3,373,582
12,997,778
12,255,716
401,935
408,371,550

1965
603,109
4,620,956
9,313,476
147,990,612
25,106,093
2,208,745
500,705
4,115,258
N/A
N/A
N/A
3,520,050
862,285
2,617,715
N/A
281,834
108,777,927


-------
TABLE 10
VALUE OF IMPORTS
(dollars)
Description of Chemical
Alkalies and Chlorine
Chlorine
Sodium Carbonate, Calcined
Sodium Bicarbonate
Sodium Hydroxide
potassium Hydroxide
Potassium Bicarbonate and
Carbonate and Sodium
Carbonate, Hydrated
Inorganic Acids
Sulfuric Acid
Boric Acid
Hydrochloric Acid
Hydrofluoric Acid
SIC Code
2812
2812
2812
2812
2812
2812
2812

28193
2819
2819
2819
2819
10
20
20
30
40
40

30
40
40
40
00
20
40
00
10
98

28194
00
10
20
30
1977
35,377,265
11,806,888
148,097
454,521
21,291,616
372,506
1,303,637

71,368,688
8,075,372
5,588,041
4,305,560
44,890,463
1976
25,374
10,737
2
153
13,338
288
854

59,367
'7,974
14
3,131
40,975

,779
,459
,246
,388
,948
,021
,717

,672
,642
,201
,187
,644
1975
29,255,181
8,903,595
341,078
78,580
16,141,054
2,721,108
1,069,766

32,089,870
5,339,227
59,339
2,327,345
20,336,992
1974
26,279,814
7,293,932
3,258,345
330,930
13,742,628
752,379
901,600

25,535,390
7,826,004
176,074
2,409,772
12,080,281
1973
13,983,732
3,327,434
756,101
260,120
8,870,759
295,177
474,141

20,365,767
5,260,180
3,015
2,940,878
9,823,468
1965
3,243,
2,394,
N/A
276,
336,
193,
41,

2,582,
667,

222
782

911 I/
101
585
843

705
124
1,616
W
820,943' ~J
O
14,166
  Arsenic Aold, Tungstic Acid
   and Inorganic Acids, NES
2819 40 98
                  8,509,252
7,271,998
4,026,967
3,043,259
2,338,226
1,078,856
^/Includes Sodium Carbonate and Bicarbonate.

-------
                                                                         TABLE 10
                                                                     VALUE OF IMPORTS
                                                                         (dollars)
                                                                        (continued)
Description of Chemical
Potassium and Sodium Compounds
Potassium Iodide
Potassium Nitrate
Potassium Compounds, NES
Sodium Borate, Other
than Crude
Sodium Cyanide
Sodium Chlorate
Sodium Hydrosulfite
Sodium Phosphate and
Pyrophosphates
Sodium Silicate
Sodium Silicofluoride
Sodium Sulfate, Crude or
Salt Cake
Sodium Sulfate, Anhydrous
Sodium Sulfide
Sodium Compounds, NES
Sodium Sulfate, Crystal-
1 i r» «s«4 .-.•- r>1-1iil"mm P-» 1 *-
SIC Code
28197
2819 70 05
2819 70 10
2819 70 19
2819 70 23
2819 70 25
2819 70 30
2819 70 35
2819 70 40
2819 70 45
2819 70 50
2819 70 55
2819 70 60
2819 70 70
2819 70 89
2819 70 65
1977
48,481
183
154
7,772
23
4,761
11,036
3
243
142
394
5,936
6,697
5
11,126


,981
,378
,985
,332
,375
,485
,262
,094
,650
,917
,467
,324
,753
,025
,934
	
1976
42,854
120
38
6,951
3
3,482
4,305
39
165
26
609
11,592
6,959
141
8,417


,936
,927
,282
,601
,744
,715
,321
,787
,439
,750
,926
,364
,707
,346
,027
, 	
1975
35,055,183
108,720
196,671
6,547,943
2,625
2,971,464
3,259,894
66,305
3,111,227
11,666
1,023,343
8,304,796
4,318,562
113,542
5,018,425
	
1974
34,380
137
31
8,047
109
2,704
3,258
61
906
11
796
7,132
3,220
119
7,816
29

,997
,031
,358
,093
,564
,132
,285
,970 *
,721
,253
,356
,557
,254
,196
,061
,166
1973
23,555
91
97
4,852

1,729
3,226
8
2,094
4
445
4,054
1,601

5,348
2

,573
,820
,020
,002
—
,476
,395
,892
,394
,156
,593
,032
,526 ~~
—
,067
,200
1965
13,769,331
300
154,675
2,343,667
—
2,625,203
334,831
22,261
125,510
223,319
426,295
4,521,280
242,646
—
2,749,082
262
                                                                                                                                                             H
Aluminum Hydroxide and
  Oxide or Alumina
2819 50 00
                511,350,880
404,058,338
370,038,900
                                                                   270,616,984
209,329,453
15,941,087

-------
                                     TABLE 10
                                 VALUE OF IMPORTS
                                     (dollars)
                                    (continued)
SIC Code
                   1977
                                   1976
                                                     1975
                                                                     1974
                                                                                       1973
                                                                                                        1965
Other Inorganic Chemicals,
NEC
Aluminum Sulfate
Sodium Aluminate
Cryolite or kryolith
Aluminum compounds , NES ,
Including Ammonium
Antimony Compounds
Arsenic Compounds
Barium Compounds,
Precipitated
Barium Compounds, NES
Bismuth Compounds
Bromine
Calcium Carbide
Calcium Carbonate,
Precipitated
Calcium Chloride
Calcium Cyanide
Calcium Hypochlorite
Dicalcium Phosphate
Calcium Compounds, NES
2819 5,6,9
2819 60 20
2819 60 30
2819 60 40
2819 60 98
2819 9c 01
2819 9c 02
2819 9c 03
2819 9C 05
2819 9C 06
2819 9c 07
2819 9c 09
2819 9c 11
2819 9c 13
2819 9c 15
2819 9c 16
2819 9C 17
2819 9c 19
1,058,790,812
1,586,010
11,196
4,311,771
5,388,897
12,769
2,658,596
1,393,921
2,896,267
44,200
102,059
1,258,809
1,205,686
1,073,342
340,409
306,983
8,771
10,505,889
993,966,8-30
1,220,491
1,368
4,332,140
4,539,962
9,640
1,733,113
422,857
1,932,862
35,382
23,520
926,319
551,095
681,462
441,903
682,856
181,140
7,254,689
1,091,623,273
911,107
6,050
9,057,929
2,220,708
5,965
4,516,400
110,861
2,272,683
47,897
1,248
1,037,010
242,426
597,758
375,228
897,912
45,592
11,328,203
506,400,065
751,694
~
6,968,721
2,631,624
24,739
2,504,503
1,723,063
8,912,055
182,570
796,956
518,697
450,520
155,727
373,879
148,334
1,342,544
10,675,590
393,432,810
704,931
29,002
5,103,646
4,019,253
147,977
2,149,384
1,603,186
3,543,139
40,957
—
740,495
332,063
316,507
585,411
209,079
174,659
7,215,927
64,833,104
335,217
88,450
2,008,551
783,316
214,591
1,280,608
53,452 H
329,833 *°
25,338
—
728,381
164,188
99,751
1,462,639
N/A
N/A
2,549,156

-------
                                                                           TABLE 10
                                                                       VALUE OF IMPORTS
                                                                           (dollars)
                                                                          (continued)
Description of Chemical
                                      SIC Code
                                                         1977
                                                                         1976
                                                                                           1975
                                                                                                           1974
                                                                                                                            1973
                                                                                                                                             1965
Other Inorganic Chemicals,
NEC (continued)
Potassium Chromate and
Bichromate
Sodium Chromate and Dichromate
Cobalt Oxide, Sulfate and
Compounds, NES
Copper or Cupric Oxide
Cuprous Oxide
Copper Sulfate
Copper Cyanide, Iodide, and
Compounds, NES
Gold Compounds
Hydrogen Peroxide
Iodine
Iron Sulfate
Iron Compunds, NES
Lead Nitrate
Lead Compounds, NES
Magnesium Sulfate

2819
2819
2819
2819
2819
2819
2819
2819
2819
2819
2819
2819
2819
2819
2819

9c
9c
9c
9c
9c
9c
9c
9c
9c
9c
9c
9c
9c
9c
9c

22
24
26
27
28
29
31
33
35
36
37
38
40
42
43

4,699
62,903
2,720,375
869,568
759,340
1,213,319
450,457
19,553
2,731,063
13,949,953
334,586
1,490,549
112,568
168,630
1,387,720

4
240
931
748
364
537
241
85
3,305
13,870
144
2,138
140
86
1,095

,597
,929
,864
,631
,261
,248
,271
,770
,349
,615
,196
,635
,256
,430
,762

24,622
373,699
852,658
526,520
805,274
192,541
699,883
20,078
415,529
11,792,956
58,213
823,461
110,115
61,140
1,070,557

344,955
1,253,593
4,526,531
—
1,455,535
295,695
468,452
7,411
800,196
14,929,787
119,127
1,139,745
164,675
61,062
701,557

2,495
244,665
2,751,663
24,612
751,427
304,379
302,484
—
1,013,280
10,622,960
76,605
258,959
37,700
99,722
962,338

11
3,204
1,173

,553
,887
,276
N/A
489
131
245
29
414
2,478
,742
,449
,621 M
u>
,400
,089
,477
N/A
191
45
11
597
,301
,072
,201
,914

-------
                                                                           TABLE  10
                                                                       VALUE OF IMPORTS
                                                                           (dollars)
                                                                          (continued)
Description oE Chemical
                                      SIC Code
                                                         1977
                                                                         1976
                                                                                           1975
                                                                                                           1974
                                                                                                                            1973
                                                                                                                                             1965
Other Inorganic Chemicals,
NEC (continued)
Magnesium Oxide, Carbonate,
Chloride, and Compounds, NES
Manganese SulEate
Manganese Borate and
Compounds, NES
Mercury Compounds
Molybdenum Compounds and
Sodium Molybdate
Nickel Sulfate
Nickel Chloride, Oxide, and
Compounds, NES
Phosphorus
Phosphorous Oxychloride
Phosphorous Trichloride
Phosphorous Compounds, NES
Platinum Compounds
Selenium Compounds
Silver Compounds
2819 9c 45
2819 9c 46
2819 9c 48
2819 9c 51
2819 9c 53
2819 9c 54
2819 9c 56
2819 9c 58
2819 9c 59
2819 9c 60
2819 9c 62
2819 9c 64
2819 9c 67
2819 9c 70
1,684,433 1,154,599
18,890 15,671
3,652,404 2,372,754
87,549 57,659
95,808 256,345
559,332 815,026
17,265,643 22,291,'903
1,461,751 1,633,674 1,615,145
467,960 367,639 781,048,
37,017 50,485 70,474
984,354 707,786 1,350,632
352,000 1,668,385 2,068
687,178 377,888 464,401
4,402,109 419,248 2,569,602
725,679
1,300
841,561
35,476
230,627
254,391
15,212,029
1,214,227
128,293
243,422
609,152
59,645
510,012
656,168
1,410,354
3,768
1,724,543
51,247
322,003
58,814
15,230,055
744,692
N/A
N/A
303,854
67,344
961,752
78,567
920,613 418,600
8,585 7,136
1,286,545 241,636
30,530 85,118
614,066 553,259
177,208 65,949
13,442,975 14,990,241
293,368 H
1
N/A ^
N/A
74,038
3,857
131,733
153,251
  Strontium Carbonate, Nitrate,
   Oxide, and Compounds, NES
2819 9c 72
                    556,828    2,039,260
1,124,687    2,433,630    1,301,727
                                                                                         2,490

-------
                                                             TABLE 10
                                                         VALUE OF IMPORTS
                                                             (dollars)
                                                            (continued)
Description of Chemical
                                      SIC Code
                       1977
                                                                         1976
                                                                                           1975
                                                                                                           1974
                                                                                                                            1973
   sulfite, and Compounds, NES

  Lime chlorinated with not more
   than 40% of Available Chlorine

  Other Elements and Inorganic
   Compounds, NES
                                  2819 9c 89
2819 9c 95
2819 9c 98
919,
                     67,329
                                                                   653,226
              59,051
                                                781,001     2,305,596
                                                 29,058
49,873
                                                                                                            843,424
                                                       24,826
                                                                  517,099
                                                                                       82,904
                442,221,370  496,427,804    207,105,995   135,191,499   113,272,708   10,928,642
                                                                                                                                             1965
Other Inorganic Chemicals,
NEC (continued)
Sulfur Dioxide
Thallium Compounds
Tin Tetrachloride
Tin Dichloride
Tin Compounds, NES
Titanium Compounds.
Tungsten Compounds
Zinc Chloride
Zinc Sulfate
Zinc Arsenate, Cyanide, Hydro-
2819
2819
2819
2819
2819
2819
2819
2819
2819
OQl Q
9c
9c
9c
9c
9c
9c
9c
9c
9c
Or-
74
78
79
80
82
84
85
86
87
aa
4,086
483
1
249
1,187
813
2,921
1,032
1,762
ai a
,295
,463
,170
,577
,180
,771
,039
,355
,703
z.f.f.
2,840
16

132
1,040
1,067
2,219
700
1,614
ZC.1
,400
,833
--
,435
,930
,438
,764
,861
,815
ooe
2,389,830
8,636
—
91,362
732,383
1,206,432
1,725,696
517,778
1,065,180
"7Di nm
2,225,276
4,308
—
291,181
866,555
497,660
1,563,215
1,263,859
2,439,138
i ir»c CQC
2,024,195
4,030
—
81,424
546,145
372,680
1,392,146
535,803
698,621
O A -3 A tA
104,345
9,210
N/A
N/A
355,983
211,933
22,932
185,886
304,954 W
Ul
m i nort
Source:  U.S. Department of Commerce, U.S. Imports for Consumption and General Imports, 1978.

-------
                                      E-76
                                    TABLE 11

                               INORGANIC CHEMICALS

                       BALANCE OF TRADE:   EXPORTS-IMPORTS

                             (thousands of dollars)
Chemical Product & SIC Code       1977    1976    1975    1974    1973    1965
Alkalies and Chlorine
SIC 2812                         149,743 134,328 181,031 126,094  67,417 31,875

Inorganic Acids
SIC 2819 3, 4                    -39,554 -33,174  -7,363  -4,977  -4,887  6,029

Potassium ana Sodium compounds
SIC 2819 7                       198,873 175,544 195,484 149,731  99,712 65,291

Other inorganic chemicals, NEC
SIC 2819 5, 6, 9                 -94,960 -73,555 -414,963 37,381 142,500 83,158
Source:  Calculated from Tables 9 and 10.

-------
                                                                         TABLE 12

                                                                   ECONOMIC  INDICATORS
All
Establishments
All
Employees
Production Workers
YearS./ With 20
Employees Payroll
Total or more Number (million Number
(number) (number) (1,000) dollars) (1,000)

1977 Census
1976 ASM
1975 ASM
1974 ASM
1973 ASM
1972 Census
1971 ASM
1970 ASM
1969 ASM
1968 ASM
1967 Census
1966 ASM
1965 ASM
1964 ASM
1963 Census
(N/A) Not

48
(N/A)
(N/A)
(N/A)
(N/A)
48
(N/A)
(N/A)
(N/A)
(N/A)
44
(N/A)
(N/A)
(N/A)
38

32
(N/A)
(N/A)
(N/A)
(N/A)
39
(N/A)
(N/A)
(N/A)
(N/A)
40
(N/A)
(N/A)
(N/A)
37

11.8
13.3
14.1
13.7
13.3
13.3
13.7
14.7
15.9
16.9
19.2
19.9
20.0
19.9
19.7

215.4
209.2
203.5
182.5
164.6
152.0
142.4
141.3
143.0
140.7
155.7
154.0
148.2
145.3
138.2

7.9
8.8
9.8
9.9
9.7
9.6
9.9
10.5
11.2
11.8
12.8
13.4
13.5
13.8
13.5
Value Added
Value added by Cost of
Hours Wages Manufacture materials
(mil- (million (million (million
lions) dollars) dollars) dollars)

16.0
17.9
19.9
19.9
19.5
18.9
19.6
21.4
23.0
23.8
25.5
27.5
26.8
28.1
27.6
INDUSTRY
135.8
133.6
133.1
123.4
111.8
102.6
96.1
93.5
92.6
90.1
94.4
97.8
92.1
92,3
88.1
Assets and
Expenditures
New
Capital
Value of Expend i-
shipments tures
(million (million
dollars) dollars)
Ratios
Gross End-of-
value of Year
fixed inven- Special-
assets tories ization Coverage
(million (million ratio ratio
dollars) dollars) (percent) (percent)
2812, ALKALIES AND CHLORINE
805.4
960.4
897.9
697.8
463.0
455.6
360.3
362.0
377.9
372.4
419.2
467.0
442.8
436.0
389.2
823.4
852.7
749.5
601.0
416.0
365.5
313.7
299.6
310.2
286.2
302.0
319.6
291.4
276.2
263.6
1,663.2
1,797.7
1,633.2
1,282.4
884.0
823.2
675.9
660.3
687.9
664.9
719.8
782.7
735.4
711.6
652.1
186.6
222.8
183.4
163.7
67.9
61.5
45.2
51.0
121.6
90.2
98.0
81.2
57.7
49.4
57.5
1,692.1
1,792.5
1,724.4
1,481.8
1,364.0
1,302.0
1,165.4
1,158.9
1,233.1
1,193.8
1,185.6
(N/A)
(N/A)
1,083.8
1,046.7
141.
156.4
133.6
110.7
63.1
60.4
67.3
67.6
64.5
61.9
71.4
69.2
65.3
66.0
64.3

(N/A) (N/A)
(N/A) (N/A)
(N/A) (N/A)
{N/A) (N/A)
65 65
(N/A) (N/A)
(N/A) (N/A)
(N/A) (N/A)
(N/A) (N/A)
67 75
(N/A) (N/A)
(N/A) (N/A)
(N/A) (N/A)
66 79
available.
a/In years of
Annual Survey
of Manufactures
(ASM),
data are
estimates
based on a
representative sample
of establishments
canvassed
annually and may
                                                                                                                                                               ^J
differ from results of a complete canvass of all establishments.  The ASM publication shows percentage standard errors.  For data prior to 1963, see 1963
Census of Manufactures, Vol. II, table 1 of industry chapter.

-------
                                                                          TABLE 12

                                                                     ECONOMIC  INDICATORS
                                                                         (continued)
All
Establishments

a/
Year-' With 20
Employees
Total or more
(number) (number)
All
Employees


Payroll
Number (million
(1,000) dollars)


Production Workers


Hours
Number (mil-
(1,000) lions)


Wages
(million
dollars)



Value Added


Value added—
by Manufacture
(million
dollars)


Cost of£/
materials
(million
dollars)


Value of-'
shipments
(million
dollars)
Assets
and

Expenditures
New-
f Capital
Expendi-
tures
(million
dollars)
Gross-
value of
fixed
assets
(million
dollars)

Ratios


' e/
End-of —
Year
inven-
tories
(million
dollars)
f
Special- —
ization
ratio
(percent)
/
Coverage-
ratio
(percent)
                                                       INDUSTRY 2819, INDUSTRIAL INORGANIC CHEMICALS, NEC (TOTAL)
                                                                                                                 a/
1977 Census
1976 ASM
1975 ASM
1974 ASM
1973 ASM
1972 Census
557
(N/A)
(N/A)
(N/A)
(N/A)
383
281
(N/A)
(N/A)
(N/A)
(N/A)
264
79.0 1,311.9
74.6 1,186.8
73.7 1,061.2
68.5 897.0
64.6 761.7
63.8 704.7
46.5
43.7
43.5
42.4
40.1
39.9
95.3
87.8
85.8
84.8
80.1
80.0
706.2
615.8
555.4
491.9
418.9
392.4
4,283.9
3,974.7
3,260.5
2,904.4
2,334.9
2,038.2
4,295.7
3,475.6
2,844.0
2,723.6
1,926.2
1,804.1
8,519.0
7,388.5
6,053.4
5,534.9
4,233.8
3,833.3
458.7
391.1
341.8
254.7
176.6
149.0
3,648.6
3,462.9
3,200.8
2,964.6
2,627.6
2,563.3
860.4
753.4
685.9
621.3
417.4
384.1
88
(N/A)
(N/A)
(N/A)
(N/A)
89
78
(N/A)
(N/A)
(N/A)
(N/A)
79
                                    INDUSTRY 2819, INDUSTRIAL INORGANIC CHEMICALS, NEC  (PRIVATELY OWNED AND OPERATED ESTABLISHMENTS ONLY)
                                                                                                                                                                 co
1977 Census
1972 Census
547
371
271
252
49.9
39.7
813.0
426.5
31.3
27.0
64.1
54.6
476.6
262.2
2,729.2
1,260.3
3,648.5
1,549.4
6,321.0
2,800.7
458.7
149.0
3,648.6
2,563.3
860.4
384.1
88
89
78
79
       (N/A) Not available.

      iL/in years of Annual Survey of Manufactures  (ASM), data are estimates based on a representative sample of establishments canvassed annually and
may differ from results of a complete canvas of all establishments.  The ASM publication shows percentage standard errors.  This industry was newly
defined for 1972 Census of Manufactures so no comparable data prior to 1972 exist.
      b/Value added for government-owned, contractor-operated plants, included in total, was estimated based upon averages reported for commercial
 establishments in prior years.
      £/Total data exclude government-owned materials furnished to government-owned, contractor-operated plants, and include fuels and electric energy
 purchased by or for these1 plants.
      I/Total data include a calculated value of shipments for government-owned, contractor-operated plants, comprised of adjusted value added  (estimated
 as described in footnote 3) plus the cost of fuels and electric energy.
      ^/Includes expenditures for plants under construction.  Total excludes expenditures, inventories, and fixed assets of government-owned, contractor-
 operated plants.
      I/Ratio excludes government-owned, contractor-operated establishments because their dollar receipts were included in miscellaneous receipts.   See
 Appendix B for discussion of calculation of specialization and coverage ratios.
      £/lncludes both privately owned and operated plants and government-owned, contractor-operated plants.
Source:  U.S. Department of Commerce, Bureau of Census, 1977 Census of Manufactures  (Washington, D.C.:  Government Printing Office,
         1979.); and U.S. Department of Commerce,  Bureau of Census, Annual Survey of Manufactures  (Washington, D.C.:  Government
         Printing Office, various years) .

-------
                                      E-79
compounds.  However, the trade deficit in inorganic acids has been mounting in
recent years.  The trade balance for inorganic chemicals not elsewhere
classified (NEC)  has fluctuated from year to year, starting with a surplus of
$142 million in 1973 and continuing to a $94 million deficit in 1977.  One
explanation for the deficit is that imports of alumina, uranium compounds,
hydrofluoric acid, sulfur, inorganic metal salts and precious metal compounds
have registered large gains in recent years.  Combined with rapid inflation in
world markets, it is believed that this import trend acts to worsen the
balance of trade in miscellaneous inorganic chemicals.


INNOVATION

     It appears that the inorganic chemicals industry has experienced very
little innovation in the way of new chemical substances.  Most of the
chemicals and compounds that are part of the industry have well established
end uses.  However, we believe that it is not necessarily true that past
trends will be continued in the future.  Although the segment has experienced
limited innovation overall, within the segment there are several specialized
areas in which R&D effort has been high.  For example, new phosphate, boron
and silicon compounds have been developed.  in recent years many new theories
on inorganic chemistry have emerged from university laboratories.  These
theories have not yet been translated into commercial innovations, but it is
quite possible that they may do so in the near future.  One of the areas in
which commercial applications may soon appear is in rare earth salts.

-------
          E-80
SYNTHETIC HIGH POLYMERS

-------
                                      E-81
                     SYNTHETIC  HIGH  POLYMERS  SEGMENT SUMMARY
                          Plastic Materials and Resins
                         Organic Fibers, Non-cellulosic
                                Synthetic Rubber
     Synthetic High Polymers are chain-like macromolecules formed by the
chemical linkage of smaller molecular units known as monomers.  Depending upon
the nature of the monomers, these compounds can assume the form of plastics,
resins, fibers, or rubbers for use in the fabrication of a wide variety of
industrial and consumer goods.

     The basic polymers currently in use date largely from the period
1930-1960.  Some important new polymers have been developed since
then—polysulfore plastic by Union Carbide (1965), olefin fibers by Hercules
(1962), and Anidex fibers by Rohm and Haas (1969)—but the synthetic high
polymers industry is built upon polymers that were first developed a
generation ago.  A relatively small number of these basic polymers have large
market shares.  For example, in 1978 polyester accounted for almost half of
domestic non-cellulosic organic fiber production, and nylon accounted for
almost one-third.  Forty to fifty basic plastics are available commercially,
but in 1976 polyethylene accounted for 29 percent of domestic production,
polyvinyl chloride accounted for 15 percent, and polypropylene accounted for
almost 9 percent.  in 1976 styrene-butadiene rubber constituted more than half
of all U.S. synthetic rubber output.

     These characteristics of synthetic high polymers—a small number of basic
products that are made in very large volumes and have dominated the industry
for years—lead to a market which is dominated by large plants owned by large
companies.  Concentration in synthetic high polymer markets is relatively
high, and this is particularly true in the synthetic fibers market.  in 1976
Dupont alone owned 35 percent of domestic synthetic fiber production, and the
top four firms (including DuPont) owned two-thirds of domestic production.
The top four synthetic rubber producers accounted for half of domestic
production in 1976, and the top eight account for 72 percent.  The plastics
market displays the lowest degree of concentration:  in 1976 the top four
producers accounted for 27 percent of domestic production, and the top eight
firms accounted for 38 percent.

     Because of the characteristics of high polymer markets outlined above,
chances seem low that a radically different generic fiber could be developed
that could compete successfully with today's major fibers.  Not only would
finding such a fiber be difficult in this well-researched field, but the cost
of building a plant with a large capacity and then establishing that new fiber
in the man-made fiber market would require a large commitment of resources.

-------
                                      E-82
    Anidex, the last generic fiber to be developed,  was introduced in 1969.
Rohm and Haas reputedly spent $20 million and 10 years of research to develop
this product.  A 1977 estimate by an industry executive was that a minimum of
$50 million and 5 to 10 years of development would be required to
commercialize a new generic product for broad-based  market application.

    Even though the roster of basic polymers is quite stable,  a constant
stream of new products emerges from the synthetic high polymer industry.  in
recent years there seems to have been much innovation in the area of
copolymers.  Copolymers differ from other polymers in that the polymers  are
built from two or more different types of monomers rather than from one  type
of monomer.  The same building blocks are used in copolymers as in
polymers—they are simply put together in different  ways.

    The production of copolymers is not the only way in which  the synthetic
high polymer industry introduces new products.   By the use of  additives  which
affect color, flexibility, stability, tensile strength, electrical
conductivity, and dozens of other properties, and by the use of different
methods of processina the basic materials, manufacturers are able to produce
literally thousands of different formulations,  custom-tailored to specific
end-uses.  For example, in 1977, Hercules, Inc.   the largest producer of
polypropylene at that time, had more than 150 polypropylene products
available.  Most of the additives which are used to  produce these products are
covered in another segment—Organic Chemicals.  NEC.

-------
        E-83
Plastics and Resins

-------
                                      E-84
                         PLASTICS MATERIALS AND RESINS
DESCRIPTION

    Plastics and resin materials are high molecular weight polymers or macro-
molecules which at some stage in their manufacture, exist in such physical
condition that they can be shaped or otherwise processed by the application of
heat and pressure.  The terms "plastic," ''resin," and "polymer," are often
usea interchangeably.  Strictly speaking, a "plastic" is a relatively tough
resin, with a molecular weight between 10,000 and 1,000,000, that can be
formea into solid shapes with good mechanical properties under the influence
of heat and pressure.  The term "resin" is used for the nonstructural polymers
in protective coatings, adhesives. and binders,  commonly, a processed polymer
is called a plastic and an unconverted polymer, a resin.  "Latexes" are
dispersions of resins in water.

    There are about 40 to 50 basic plastics and resins available commer-
cially. I/  These basic materials have thousands of individual compounds,
each with its distinct properties depending on the molecular weight of the
resin and the types and amounts of the additives present,  conation
characteristics of plastics which are considered in production are strength,
dimensional stability, toughness, and other desirable mechanical properties.
Other characteristics are weight; ease of fabrication; resistance to wear,
water, and chemical attack; and color.

    Plastics and resin materials are categorized generally into thermosetting
and thermoplastic types.  Thermosetting materials harden with a change in
composition in the final treatment so that their final state is substantially
infusible and insoluble.  That is, they cannot again be softened by heat or
solvents.  Thermosetting materials comprised 20.6 percent.?/ of total U.S.
plastics and resins production in 1977.  The most important products in this
category are phenolic, amino , polyester, and alkyd resins.

    Thermoplastic materials have final states that can be repeatedly softened
by heating and hardened by cooling,  in 1977 thermoplastic materials accounted
for 79.4 percent3/ Of total U.S. plastics and resins production.  The most
important products in this category are polyethylene, vinyl resins, and
styrene-type materials.
     I/Edward J.Taylor, "plastics and Resin Materials," Synthetic_qnjanic
Chemicals, 1977 (Washington, D.C.:  U.S.  international Trade Commission,
1977),  p. 220.

     j/Ibid., p.  220,  calculated from data presented in article.

     j/Ibid., calculated from data presented in article.

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                                      E-85
HISTORY

     The first commercial plastic was cellulose nitrate (celluloid) ,  patented
in 1870.  Four decades passed before a predecessor company of union carbide
introduced the phenolics  (Bakelite) in 1909.  By the 1930s more than a dozen
plastics were either on the market or well along in development.  World War II
created a heavy demand for materials of all kinds,  polymer research and
production accelerated markealy, and established the technological base for
the industry.

     Polyethylene is the largest-volume plastic in both the U.S. and the
world,  it was Discovered durina the period 1932 to 1935 by imperial Chemical
Industries, Ltd., in the course of a research program on the effects of very
high pressure on chemical reactions.  Although the initial discovery was
accidental, it became evident that polyethylene was the ideal material for
shielding microwave cable in military radar equipment.  The British work on
radar was a top priority project as World War II drew near and sharply spurred
the development of polyethylene.

     Although the major classes of commercial plastics and resins date largely
from World War II and earlier, important new polymers have been recently
discovered.  Some examples are:

     •    General Electric's Lexan polycarbonate in I960;

     •    DuPont's Delrin polyacetal (polyformaldehyde) in 1960; and

     •    Union Carbide's polysulfone in 1965.


ENGINEERING PROCESS

     Plastic materials and synthetic resins are either  (1) formed by the
polymerization or polycondensation of organic intermediates or  (2) chemically
modified from such natural polymers as cellulose.    Common monomers are
ethylene, propylene, styrene, and vinyl and acrylic compounds.

     In polycondensation, two or more different molecules  (or monomers) are
reacted to form large molecules of high molecular weight, usually with the
elimination of a small molecule such as water or methanol.  Examples are the
condensation of urea or phenol with formaldehyde.  When more than one type of
monomer is being polymerized, the material formed is called a copolymer.

     Polymerization of vinyl chloride, as an example, may be carried out by
any of several methods:  suspension, emulsion, solution, or mass.  Suspending
agents are needed for suspension polymerization, emulsifying agents are needed
for the emulsion method.  The latter also requires coagulating aids to bring
the polymer out of emulsion,  usually two or more catalysts are used.

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                                      E-86
     The basic polymer is seldom used alone in plastics,  polyvinyl chloride
requires a thermal stabilizer to prevent loss of hydrogen chloride in any
processing step at temperatures above 100°C.  Flexible polyvinyl chloride
films and foams require 20 to 40 percent of a plasticizer (organic chemical
that improves workability during fabrication).  Flow agents may be included to
facilitate heat fabrication.  Other additives may include colorants, solid
fillers to improve properties and reduce costs, and rubbers to improve low
temperature properties,  plastics in general may contain such additional
additives as antioxidants, carbon black to stabilize against degradation by
light, delusterants, self-extinguishing agents, agents that control surface
properties, and so on.
RAW MATERIALS

     Petroleum and natural gas are the basic raw materials of the plastics
materials and resins industry.  For example, naphtha, derived from crude oil,
is the source of benzene.  It is modified by chemical processes and converted
into resins such as alkyds, acrylonitrile-butadiene-styrene,
styrene-acrylonitile, polystyrene, phenolics, polycarbonates, and silicones.

     Natural gas is the main source of ethylene and propylene, which are basic
to the production of polyethylene, polyvinyl chloride,  polyvinyl acetate,
polypropylene, acrylics, and other resins.   Liquefied refinery gases,  obtained
from crude oil,  serve as another source of  ethylene,  propylene and butylene.
Any restrictions on the supply of benzene,  ethylene or  propylene are bound to
limit the availability of synthetic resins.

     As mentioned earlier, the base polymer  is seldom used alone in plastics.
The most coitimon additives are plasticizers,  fillers,  antioxidants, ultraviolet
radiation absorbers, stabilizers, flame retardants, and colorants.
USES

     The plastics materials and resins industry (SIC 2821)  produces material
for sale to the plastic products industry (Sic 3079)  and other industries for
molding, extruding, casting, fabricating and finishing into components or
parts for such products as furniture, automobiles and appliances.

     The versatility of plastics materials is responsible for much of their
growth in competition with metal, wood, paper, and glass.  Many of these
materials have been gradually replaced by plastics which offer improved
properties, often at lower cost,  plastics can be produced  with the physical
and chemical properties required to fulfill special product needs and are used
by most industries because of their ready adaptability to high output
processing methods.

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                                      E-87


     It appears that markets for plastics and resins are so diverse that
overall demand is not appreciably influenced by single factors such as defense
spending, shifts in fashion, or changes in the composition of the population.
Three of the principal markets for plastic materials are packaging,
building/construction, and automotive applications.  Table 1 provides
information on the consumption of the ma^or types of plastics in 1976 and
their major uses.

     Packaging represents a highly diversified market for plastics,  packaging
is the single most important use for thermoplastic resins, representing in
1976 about 30 percent!/ of all the thermoplastic resins consumed,  packaging
materials include both rigid and flexible plastic items such as shrink wrap,
blister containers, bottles, disposable cups, boxes, and trays,  plastics
material constituted about 10 percent!/ of all material used in packaging in
1976.  The growth of plastics in packaging has been at the expense of both
traditional materials (glass, paper products, and nonferrous metals)  and older
plastics (e.g., cellulosic plastics).

     The preference for newer plastics materials over other materials is due
primarily to cost ana performance factors.  For example, plastics may be
formed into a greater variety of shapes, and at lower temperatures and lower
energy requirements than glass or metal.  Also, plastics are typically lighter
than glass or metal, which results in lower shipping costs.

     Major synthetic plastics used in construction include pipe, siding, and
insulation.  Approximately 40 percent^/ of the thermosetting resins are
consumed in this market,  insulation applications have made substantial gains
as a result of the energy crisis,  polyurethane foam and polystyrene foam are
two of the principal materials used in insulation.  Other important plastics
applications in the building and construction sector are glazing, panels,
ducts, and tanks.  In 1976, plastic products accounted for about five
percent!/ of all the materials used in building and construction.  Growth is
projected because plastics are increasingly being accepted by building
contractors, and because building codes are being rewritten to accommodate
them.
     i/Edward J. Taylor, "Synthetic Resins and plastics Materials,"
Synthetic Organic Chemicals, 1977 (Washington, D.C.:  U.S. international Trade
Commission, 1977) , p. 212.

     5/Ibid. , p. 212.

     6/Ibid. , p. 211.

     yIbid., p. 212.

-------
                                                 E-88
                                                TABLE 1

             CONSUMPTION  OP  MAJOR PLASTICS MATERIALS AND SYNTHETIC  RESINS BY END USE:  1976
                                          (millions of  pounds)

                                             Electric

Polyethylene
Low-d ens i ty— /
High-density

Vinyl
Chloride
Other

Styrene
Polystyrene
Solid
Foam

ABS and SAN
Other

Polypropylene
Polyurethane foam
Phenolic
Polyester
Ami no
Alkyd
Acrylic
Cellophane
Courmarone-indeneH/
Epoxies
Cellulosics
Polyamides
Other-7
TOTAL
5/Includes data for
garden hose, and
— Includes data for
-Includes data for
Pack-
aging

2,515
1,320
3,835

375
225
600


875
280
1,155
35
—
1,190
430
45
10
—
15
—
—
200
40
—
45
—
165
6,575
Con-
struction

200
280
480

2,200
—
2,200


110
—
110
250
—
360
15
265
610
185
705
—
135
—
30
15
5
—
40
5,045
House- and
waresS/ Electronic

1,170
350
1,520

100
—
100


385
120
505
20
—
525
130
—
50
—
35
—
—
—
—
—
—
—
10
2,370
film consumed in household and
dinnerware
.


340
—
340

350
—
350


220
—
220
70
—
290
85
—
200
55
35
—
—
—
—
15
5
25
70
1,470
institutional

Trans-
portation

—
20
20

285
—
285


—
—
—
170
—
170
365
485
50
160
—
—
75
—
—
15
15
45
70
1,755
Paints

—
—
—

80
40
120


—
—
—
—
25
25
—
—
25
10
75
650
100
—
35
90
—
	
—
1,130
Toys

110
150
260

75
—
75


340
—
340
90
—
430
70
—
—
—
—
—
—
—
—
—
5
—
5
845
bags and wraps, wallcoverings



Furni-
ture

25
—
25

210
15
225


100
—
100
10
—
110
30
510
60
20
15
—
—
—
—
—
—
	
—
995
Appli- Other
ances domestic

10
10
10

45
—
45


155
—
155
130
—
285
90
80
85
35
—
—
5
—
—
5
—
10
50
700

775
650
1,425

455
580
1,035


75
145
220
355
535
1,110
945
240
190
425
320
40
525
10
195
70
80
45
50
6,705
other than paints,



ethylene copolymers.
petroleum
hydrocarbon
resins .
—Includes engineering thermoplastics, silicones.
Source: Mary K. Meegan, ed.,
Kline Guide

fluoroplastics

, and others
to the Chemical Industry (3rd ed..

•
Fairfield,


, N,J.=


Charles


Kline & Co


. , 1977)
p. 91.

-------
                                      E-89


     Although plastics are used in all forms of transportation, the automobile
is the largest end use for plastics in the transportation industry.  Weight
reduction for improved fuel economy has been an important stimulant for the
growing use for plastics in automobiles.  The average 1977 automobile was
estimated to contain 166 pounds of plastics as compared with 20 pounds in the
typical 1960 automobile.8/  It has been forecast that the typical 1985
automobile will contain 350 to 500 pounds of plastics.!/

     Between 1966 and 1976, the production of synthetic resins and plastics
materials increased at an average rate of 8 percent per year.iP./ representing
one of the highest growth rates within the chemical industry.  Continued high
rates of growth are likely, both through continued gains of market shares in
existing products and through the development of new products.

PRODUCTION

     Table 2 provides information on the plastics and resins industry
including numbers of employees, value added by manufacture, and value of
shipments.  U.S. production volumes of plastics and resins are shown in Table
3.

     Shipments grew at an average rate of 12.4 percent a year between 1967 and
1977 and in 1977 represented 14 percent of the shipments of the entire
chemical industry.li/  Between 1948 and 1976 physical production of plastics
and resins other than cellophane increased more than 15 times, for an average
annual growth of 10 percent.A/?/
INDUSTRY STRUCTURE

     The plastics and resins industry is somewhat concentrated since the
production of polymers requires a high capital investment.   in 1976, the top
four companies accounted for an estimated 27 percent of shipments;  the top
     8/ibid., p. 213.

     9/Ibid.

     i£/Mary K. Meegan, ed.,  Kline Guide to the Chemical industry,  (3rd ed.,
Fairfield, NJ:  Charles Kline & Co., 1977), p. 91.

     jj/Ibid., p. 85.

     12/Ibid.

-------
                                 E-90
                               TABLE  2

                PLASTICS AND RESINS  INDUSTRY STATISTICS
Year
            Number of
Number of   Production
Employees    Workers
 (1,000)      (1,000)
 Value  Added by
   Manufacture
(million dollars)
    Value of
    Shipments
(million dollars)
1977
1976
1975
1974
1973
1972
Source:
57.4
56.2
54.3
57.7
54.4
54.8
U.S.
1977
36.9
36.4
34.0
37.6
35.0
35.0
Department of Commerce
Census of Manufactures
4,015.3
3,524.4
2,770.5
3,640.1
2,490.0
2.160.5
, Bureau of the
- (Washington, D
10,622.1
9,201.9
7,043.1
7,773.0
5,159.4
4,478.2
Census.
.C. : Government
         Printing Office, 1979).

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                                       E-91
                                      TABLE 3

                     PLASTICS MATERIALS AND  RESINS PRODUCTION

                                (millions of pounds
                                             1966
                                                       1974
                                                                 1975
                                                                           1976
  Polyethylene
    Low-density2/
    High-density

    Total

  Vinyl resins
    Polyvinyl chloride and cc-polymers
    Polyvinyl acetate
    Polyvinyl alcohol
    Other

    Total

  Styrene resins
    ABS and  SANJE/
    Other

    Total

  Urethane chemicals^/
    Polyurethane and diisocyanate resins
    Polyether and polyester polyols

    Total

  Polypropylene.?/
  Phenolics

  Ami no
  Polyesters-saturated and  unsaturated-
  AcrylicsS/
  Alkyds
  Engineering plastics2/
  Cellophane^/
  Petroleum hydrocarbons and
    courmarone-indene  resinsj3/
  Epoxies—unmodif ied
  Polyamides£/
  Celluosics
  Rosin modifications
  Other
     Total
2,648
910
3,558
2,164
336
38
132
2,670
362
2,032
2,385
72
—
72
554
1,047
718
470
d
666
d
395
334
140
93
116
131
561
1.3,910
6,027
2,799
8,826
4,744
543
141
241
5,669
1,009
4,051
5,060
193
1,112
1,305
2,249
1,578
1,236
944
890
726
398
335
407
270
221
224
123
1,228
31,689
4,889
2,594
7,483
3,695
526
118
197
4,536
791
3,086
3,877
119
932
1,051
1,903
1,275
1,057
879
778
674
266
300
360
183
144
157
64
128
25,115
5,611
3,113
8,774
4,545
617
126
265
5,553
1,003
3,740
4,743
126
1,346
1,472
2,551
1,305
1,229
973
888
705
f
325
306
203
155
f
64
678
29,924
^includes ethylene copolymers.

-•^1976 figures are only for ABS.
c/
-'Excludes resins for man-made fibers.

— Excludes isocyanic acids which are found in cylic  intermediates.

— Estimates.

-'Included in other.

2/Includes such grades as acetals, polycarbonates, polyimide, polyphenylene
   sulfide, polysulfone and polyphenylene oxide.

-'1916 data excludes coumarone-indene resins.
Source:  Mary K. Meegan, ed., Kline Guide to the Chemical Industry,  (3rd ed.,
         Fairfield,  NJ:  Charles Kline & Co., 1977), p. 91.

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                                      E-92
eight, 38 percent.  Table 4 shows the 30 largest producers,  along with their
1976 estimated sales in domestically produced synthetic resins.   The 30 leading
producers accounted for about 72 percent of total shipments.A3/  In 1977
there were 337 establishments with 20 or more employees in the industry.il/

     Despite the concentration, a competitive environment exists.  There are a
large number of producers serving the same markets and competition from
different products for the same applications.


PRICES

     Table 5 gives indices of average manufacturers'  prices for  selected
plastics.  Between 1967 and 1972 prices generally fell.  This was partially a
result of the low-volume specialties developing into high-volume commodities,
with consequent lower costs of production due to economies of scale.  The
declines also reflect expanding production capacities from both old and new-
producers because of the high growth attraction to the industry.  This
overcapacity situation has led to frequent price cutting.

     From 1972 through 1975 overall prices increased by 80 percent, consistent
with large price increases for most chemicals,  plastics prices in 1976 were
only four percent higher than 1975 levels.  Price increases for plastics over
the 1967 to 1977 period have generally been significantly lower than price
increases for iron and steel, lumber, and plywood.  Price increases for
nonferrous metals and pulp and paper were comparable to or slightly less than
plastics' price increases.
FOREIGN TRADE

     Table 6 shows imports, exports, and the trade balance in plastics and
resins.  As can be seen, the trade balance has generally increased over the
1968 to 1977 period.

     In 1977 exports accounted for 16.6 percent of total U.S. shipments of
plastics materials.  Thermoplastic commodity resins accounted for 45
     I3-/Ibid., p. 93.

     li/U.S. Department of Commerce, Bureau of the Census,  1977 Census of
Manufactures. (Washington, D.C.:  Government Printing Office, 1979).

     il/U.S. Department of Commerce, 1978 U.S. industrial Outlook
(Washington, D.C.:  Government Printing Office, 1978).

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                                                                TABLE 4

                                          MAJOR U.S. PRODUCERS OF PLASTICS AND RESINS:  1976
 Rank
                 Company
   Domestically
     Produced
Plastics Materials
    and Resins
   ($ million)
1
2
3
4
5
6
7
8
8
10
10
12
12
14
14
14 '
17

18
18
20
20
22
22
24
24
26
26
26
29
29
—
Dow Chemical
DuPont
Monsanto
Union Carbide
Reich ho Id
Rohm and Haas
General Electric
ARCO Polymer0./
Borg-Warner
Exxon
Hercules
Allied Chemical
Amoco
B.F. Goodrich
W.R. Grace!/
Phillips Petroleum
Hooker (Occidental
Petroleum)
Celanese
Diamond Shamrock
Gulf Oil
Shell Chemical
Borden
USI (National Distillers)
Chemplex
Eastman Kodak
Foster Grant
Northern Petrochemical
Soltex (Solvay)
American Cyanamid
Dart Industries
Others
900
800
600
550
345
300
275
250
250
225
225
200
200
175
175
175
1 fill
J.DU
150
150
150
150
135
135
125
125
110
110
110
100
100
3,105
   Total
  Chemical
   Sales
($ million)

    4,320
    7,300
    3,577
    4,000
      490
      825
      375
      826
      350
    3,238
    1,375
    1,738
    l,432b/
      450
    1,385
    1,230
    1,536

    1,855
      813
    1,062
    1,574
      500
      340

    1,247
                                                               1,096
                                                                 170
Plastics Materials
    and Resins
 Percent of Total
Chemical Sales (%)

       20.8
       11.0
       16.8
       13.8
       70.4
       36.4
       73.3
       30.3
       71.4
        6.9
       16.4
       11.5
       14.0
       38.9
       12.6
       14.2
       10.4
                                                                                    8,
                                                                                   18.
                                                                                   14.1
                                                                                    9.5
                                                                                   27.0
                                                                                   39.7

                                                                                   10.0
                                                9.1
                                               58.8
  Total
 Sales!/
($ million)

    5,652
    8,361
    4,270
    6,346
      585
    1,053
   15,697
    8,462
    1,862
   48,631
    1,596
    2,630
   11,532
    1,996
    3,615
    5,698
    5,534
    2,123
    1,357
   16,451
    9,230
    3,381
    1,504

    5,438
                                            2,094
                                            1,476
Plastics Materials
    and Resins
    Percent of
 Total Sales  (%)
                                                                                                                          15.9
                                                                                                                           9.6
                                                                                                                          14.1
                                                                                                                           8.7
                                                                                                                          60.0
                                                                                                                          28.5
                                                                                       1.8
                                                                                       3.0
                                                                                      13.4
                                                                                       0.5
                                                                                      14.1
                                                                                       7.6
                                                                                       1.7
                                                                                       8.8
                                                                                       4.8
                                                                                      14.2
                                                                                       2.9
                                                                                       7.1
                                                                                      11.1
                                                                                       0.9
                                                                                       1.6
                                                                                       4.0
                                                                                       9.0

                                                                                       2.3
                                               4.8
                                               6.8
                                                                                                                                                         fd
          Total
                                         $10,560
—Sales exclude value  of  collected  exise taxes,  equity interest,  dividends,  royalties,  fees and other  non-operating  income.
— Includes fabricated  plastics.
— Sales figures are  for Atlantic Richfield.
^/Includes $252 million in sales by its majority-owned subsidiary,  Chemed Corporation.

Source:  Mary K. Meegan,  ed.,  Kline Guide to the Chemical Industry,  (3rd  ed.,  Fairfield,  NJ:   Charles  Kline &  Co.,  1977),  pp.  7 and
         94.

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                                           E-94


                                          TABLE 5
                          INDICES  OF AVERAGE MANUFACTURERS'  PRICES
                             OF PLASTICS AND RESINS:   1967-1976
                                         (1967=100)
                               1967  1968  1969   1970   1971  1972   1973   1974   1975   1976
                       b/
Thermoplastics

  Polyethylene
               a/
    Low-density—
    High-density
  Vinyl resins
    Polyvinyl chloride—
    Polyvinyl acetate
  Styrene resins
    ABS and SAN
    Other
  Polypropylene
                       c/
   Total thermoplastics—
100.0 101.4  82.3  85.0  85.7  83.0  93.3 153.3 173.3 199.7
100.0  91.7  89.9  83.4  71.0  69.2  82.4 123.5 152.9 167.1


100.0  89.2  87.3  86.0  85.4  82.8  93.8 143.8 150.0 164.7
100.0  87.0  90.8  79.5  81.8  79.8  82.8 110.3 120.7 135.4


100.0  86.3  84.5  89.9  86.0  86.3  87.8 118.2 124.2  —
100.0  94.6  93.5  92.9  88.6  85.9 111.1 177.8 177.8  —
100.0  97.7 101.4  92.5  81.8  73.8  81.0 114.3 119.0 131.9
100.0  88.3  87.8  85.9  84.5  83.1  90.5 137.6 152.4 157.0
 Thermosetting
   Phenolics
   Ami no
   Polyesters
   Alkyds
   Epoxies
                            100.0   94.9  93.2  84.3   88.1  89.8   79.4  149.9  166.7  162.3
                            100.0   83.2  80.6  74.1   76.7  87.1   52.1   82.6   95.7  100.2
                            100.0   98.9  97.5  83.9   81.0  67.4   82.1  142.9  107.1  154.0
                            100.0   94.5 100.4  100.4  101.1  101.5  111.1  170.4  163.0  155.8
                            100.0 100.0  99.4  88.3   92.0  88.0  102.0  121.6  133.3  150.7
     Total thermosetting-    100.0 100.8  99.6  92.2  94.2  90.3  80.8 138.5 150.0 153.8
       Total-''               100.0  90.6  89.2  86.4  85.2  83.4  90.9 136.4 150,0 159.1
— Includes ethylene copolymers.
— Includes vinyl chloride copolymers.
£'Includes products now shown separately.
 Source:  Mary K. Meegan, ed., Kline Guide to the Chemical Industry, (3rd ed.,
          Fairfield, NJ: Charles Kline and Co., 1977), p. 95.

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                                      E-95


                                     TABLE 6

                       FOREIGN  TRADE  OF  PLASTIC  AND  RESINS

                              (millions  of dollars)
Year
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
imports
93
99
123
133
177
207
357
247
340
415
Exports
590
590
653
657
696
1,028
1,618
1,173
1,672
1,768
Trade
Balance
497
491
530
524
519
821
1,261
926
1,332
1,353
              Sources:  For 1968-1976, Mary K. Meegan, ed., Kline
                        Guide to the Chemical industry (3rd ed..
                        Fairfield NJ:  Charles Kline and Co.,
                        1977), p. 95; for 1977, U.S. Department
                        of Commerce, U.S. industrial Outlook
                        1978, (Washington, D.C.:  Government
                        Printing Office, 1978).


percent in the same year.16/  Large U.S. exports of plastics, particularly
the commodity resins, are indicative of the inability of the manufacturers of
developing countries to keep pace with U.S. production.  Living standards in
these countries are creating a considerable need for raw materials which can
be satisfied only by other than traditional natural sources.

     Canada was the leading market for U.S. exports of plastics in 1977, as it
had been during the previous decade.  Other important U.S. markets in the
Western Hemisphere during 1977 included:  Brazil, Colombia. Ecuador, Guatemala,
     16/Edward j. Taylor, "Synthetic Resins and plastics Materials," p. 212.

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                                      E-96
Mexico, and Venezuela—nations whose fabrication demands have outpaced their
local plastics production capabilities.   The ma^or Asian markets in 1977
included Hong Kong, Japan, Korea. New Zealand  the Philippines,  Singapore, and
Taiwan.  The leading markets in Europe were all developed nations—Belgium,
the Netherlands, France, and West Germany.   A significant share  of these
exports are believed to represent shipments by U.S. producers to their own
European subsidiaries.

     U.S. plastics producers face competition with many efficient producers
throughout the world.  Capacity is also rising sharply in countries outside
the common Market, and the developing countries are expected to  show the
fastest growth in the production and consumption of synthetic resins.  As
markets expand, substantial investments are expected in these regions.  For
example, the buildup of capacity in the Middle East with access  to inexpensive
raw materials makes the Middle East a very  promising future exporter.

     Except for 1974, imports of plastic materials and resins have not
exceeded one percent of consumption in any  year during the 1950  to 1977
period.AZ/  Traditionally, the capital-intensive, technology-oriented
manufacture of plastics has given the United States a competitive edge over
its foreign competition, but that advantage appears to be diminishing.

     The leading sources of imports in 1977 included Canada, France, Japan,
the United Kingdom- and West Germany, together accounting for three-fourths of
the volume of plastics imports in that year, ana two-thirds in 1976.  Since
most foreign plastics do not compete with domestic plastics in the U.S.
market, imports are usually sought for one  of three reasons:  (1) a shortage
of a particular resin exists in the United  States; (2)  the imported plastic is
a new product not yet made domestically; or (3)  foreign firms are supplying
their U.S. affiliates or subsidiaries to make up for a short-fall for a given
plastic or resin.

     The pattern of U.S. imports of plastics materials is not expected to
change signifcantly until at least the mid-1980s.117  At that time, the
nations of the Middle East are expected to  attain a capacity for plastics
which will allow them substantial export capabilities.
     127Ibid., p. 214.

     M/Ibia.

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                                      E-97
INNOVATION

     The plastics and resins segment seems to have been one of the fastest
growing segments within the chemical industry.  The impetus behind this growth
has been the versatility of plastics, displacing other materials in many uses
while offering superior performance at lower costs,  plastics can be
formulated with specific physical, electrical, ana chemical properties that
can meet an endless series of requirements.

     About 40 to 50 basic plastics and resins are manufactured.  For most of
these, the ability of producers to vary molecular weights, copolymers,
 lasticizers, colorants and other additives—together with their ability to
vary processing parameters such as temperature, time and pressure—has led to
production of thousands of different formulations, custom-tailored to specific
end uses,  polypropylene products illustrate this point.  in 1977 Hercules,
Inc., the largest producer of polypropylene at that time, had more than 150
polypropylene products available.it/

     Review of a plastics buyers' guide.20/ further illustrates this point.
For extension grade acrylonitrile-butadiene-styrene (ABS), one of a number of
grades available, five suppliers were listed (Abtec, Borg-Warner, Mobil,
Monsanto, and USS Chemicals)  in a recent buyers' guide.  Readily available
product information (advertisements)  for Abtec Chemical company and USS
Chemicals were reviewed.  Abtec listed seven extension grade products with
different impact strengths and flame-retardancy characteristics.  USS Chemicals
listed five extension grade ABS products with various impact strengths, tensile
strengths, and heat deflection data and also provided qualitative information
for each product.  This review suggests the large numbers of plastics
materials available and the ability of the chemists to design chemicals for
specific requirements.

     Innovation will continue to bring new products to the plastics materials
and resins industry.  it seems unlikely that any new polymers discovered will
combine the broad utility and low cost to rival plastics such as polyethylene,
polypropylene, or polystyrene.^1/  More likely is the advent of new,
specialized materials such as polycarbonates, polyacetals. and others which
have been commercialized in the past several decades.  Additionally, we
believe new products within existing types of plastics materials and resins
will likely continue to be produced at a high rate.
     i9/"polypropylene:  R&D is the Key," Chemical Marketing Reporter, March
14, 1977.

     .iH/Modem Plastics Encyclopedia, McGraw Hill, October 1976, Vol. 56.
          erican Chemical Society, Chemistry in the Economy .  a study
supported in part by the National Science Foundation, 1973, p. 82.

-------
             E-98
Organic Fibers, Non-Cellulosic

-------
                                      E-99
                         ORGANIC FIBERS, NON-CELLULOSIC
DESCRIPTION

    Just like plastics, non-cellulosic organic fibers are polymers.  These
fibers are also known as "synthetic fibers".

    Table 1 lists the major synthetic fibers, the monomers or polymers
involved, and the first commercial U.S. producer.  As can be seen, there are
nine generic types of synthetic fibers in commercial production in the U.S.
However, within each generic type of synthetic fiber, there are a great many
different variations (up to several thousand in some cases). each individually
tailored to meet the requirements of a specific end use.

    Synthetic fibers have great versatility and can be tailored for improved
washability, durability, tensile strength, ana resistance to soiling and
shrinking.  These advantages have allowed them to gradually replace natural
fibers in many applications.
HISTORY

    After seven years of effort, in 1935 scientists at Dupont successfully
combined hexamethylene diamine and adipic acid to form a fiber which was
subsequently named Nylon.  This began the non-cellulosic organic fiber
industry.

    Other synthetic fibers followed nylon in short order.  I.G. Farbenin-
dustrie in Germany sold a slightly different nylon commercially in 1939
(Perlon).  In England, Calico Printers Association produced the first
polyester fiber (Terylene) on a pilot-plant scale in 1948.  Union Carbide
began selling an acrylonitrile-vinyl chloride fiber (Dynel) in 1949, and
Dupont followed with an acrylonitrile fiber (Orion) in 1950.  Dupont bought
American rights to calico's polyester in 1946, produced experimental
quantities in 1950- and began full-scale commercial production  (of Dacron) in
the U.S. in 1953.  Dupont added a urethane fiber (Spandex) in 1959, and
Hercules produced textile-grade polypropylene fibers (Herculon) in 1961.

    The Textile Products identification Act was passed to bring order to the
naming of man-made fibers.I/  The Act named "manufactured" fibers
generically and required manufacturers to use these generic names on textiles.
    i/"Man-made fibers" in this paper means both cellulosic and non-cellu-
losic organic fibers unless otherwise noted.

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                                     E-100
                                    TABLE 1

                         NON-CELLULOSIC ORGANIC FIBERS


Generic Name   Monomer or polymer^  First commercial U.S.  Producer    Year
Nylon
Vinyon
Saran



Modacrylic

Acrylic

Polyester



Spanaex

Olefinb/



Anidex
polyamide
  85% vinyl
  choride
Vinylidene chloride



35-85% Acrylonitrile

  85% Acrylonitrile

Ester of dihydric
alcohol and tere-
phthalic acid

Urethane

Ethylene. pro-
pylene, or other
olefin

Monohydric alcohol/
acrylic acid
ester
E.I. dupont de Nemours & Co.,     1939
American viscose Corp.            1939
(now FMC Corp.), and Union
Carbide Corp.

Firestone Plastics Co. (now       1942
Firestone Synthetic Fibers
and Textiles Co.)

Union carbide Corp.               1949

E.I. dupont de Nemours & Co.      1950

E.I. dupont de Nemours & Co.      1953
E.I. du pont de Nemours & Co.     1959

Hercules powder company (now      1962
Hercules, Incorporated)
Rohm and Haas Company             1969
j*/indicative only, as some definitions are more complex than shown.

b/Hercules produced olefin monofilaments for specialized use in 1949, but
 the first production of textile grade monofilament occurred in 1961.  In
 addition to the above fibers, there are three others, azlon, nytrile, and
 vinyl, that are no longer produced commercially in the U.S., and lastrile,
 that has not ever been produced commercially.
Source:  American Chemical Society, Chemistry in the Economy, a study
         supported in part by the National Science Foundation, 1973.

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                                     E-101
ENGINEERING PROCESS

    The process of producing a polymer is called polymerization.  The
polymerization processes—batch and continuous—used for producing the
various non-cellulosic organic fibers are basically similar,  in the batch
process, the polymer is produced in batches, then sent into a spinning
process,  in the continuous process, the polymer is made continuously and spun
continuously.  To make the polyester polymer, dimethyl terephthalate is
reacted with ethylene glycol at a temperature between 150-210°C in the
presence of a catalyst.  A monomer  (dihydroxydiethyl terephthalate) is created
and transferred to a polymerization autoclave, where the temperature is raised
to about 280°C.2/

    When the desired viscosity is reached, the polymer is extruded, cooled and
formed into chips.  All moisture is removed to prevent irregularities.
Polymer chips are melted under high temperatures (260-270°C) into a syrup-
like solution which is then forced through the tiny holes of a spinneret or
jet.  This forms the fiber  (filament).

    Filaments can be produced in various diameters.  Monofilaments usually
have relatively large diameters and are most frequently used for non-textile
applications.  Textile multifilament yarns consist of several small-diameter
filaments twisted together and are the most widely used type of yarn.  The
size and number of strands used, as well as the amount of twist, can be varied
to form yarns of various sizes.  The surface texture and softness which this
yarn gives to fabrics makes it appropriate for many ready-to-wear and home
furnishings uses.  Multifilament yarn can also be textured to provide yarn
with more "natural" properties.

    Filaments are also cut into short  wavy strands varying in length from one
to five inches.  These cut strands, called staple, are spun into soft, springy
yarns which are used especially in rugs, carpets, sweaters, and socks.

    As the filament leaves the spinneret, it is cooled and stretched to three
or four times its original length.  This provides the filament strands with
greater strength and elasticity, since random molecules are all drawn into a
parallel formation.  When monofilaments are wound, the process is complete.

    Staple fiber undergoes several additional steps after being stretched.
Compression boxes force the fiber to buckle back on itself like an accordion,
9 to 15 crimps per inch.  Crimping holds the fiber together, giving  it
    J/American Fabrics Magazine, Encyclopedia of Textiles  (2nd ed.,
Englewood Cliffs, New Jersey:  Prentice-Hall, Inc. 1973),  p.  31.

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                                     E-102
coherence during the yarn spinning stage.   The crimped fiber is dried at
100-150°F to set the crimp.   The crimped and heat-set fiber is cut into
lengths determined by its eventual end use.  The material, called staple at
this point, is baled and the process is complete.
RAW MATERIALS

    The production of organic fibers depends heavily on petroleum as a source
for the basic chemicals required.  The production of saran fibers provides a
good example of this dependence.   Ethylene is obtained from petroleum by
cracking, and chlorine is extracted from salt water by electrolysis.  Chlorine
and ethylene combine to form trichloroethane which is polymerized into
polyvinylidene chloride.
USES

    In 1975 consumer goods led industrial goods as a market for man-made
fibers by about three to one (see Table 2).  consumer goods include apparel;
home furnishings (mainly bedroom and bathroom supplies, floor coverings,
upholstery, and draperies); and toys, luggage, hospital supplies, and shoes.
Tires dominate the industrial market   Reinforced plastics and a diverse array
of other products (hose, rope,  belting, sewing thread, etc.)  comprise the rest
of the industrial market.

    Wool and cotton have been the most widely used fibers up to recent times.
Man-made fibers have been increasina their  share of the market and in 1968»
surpassed natural fibers in U.S. consumption.I/  Table 2 shows how man-made
fibers have increased their market shares in nearly every consumer and
industrial market between 1970 and 1975.  Table 3 provides some recent general
market share information.  Man-made fibers  occupy approximately 75 percent of
the market at present.

    Man-made fibers succeeded so dramatically and changed clothing, home
furnishings, and industrial textiles to such a large extent because they are
long lasting and easy to care for.  Non-cellulosic fibers generally soften at
high temperatures,  and fabrics may therefore be heat-treated to set pleats,
develop shape retention, or receive embossed designs.  Non-cellulosic fibers
are generally abrasion resistant, which allows them to withstand surface wear
and rubbing.  Most of the fibers are resilient  springing back when crushed.
They are relatively non-absorbent and quick drying.  The smooth, non-porous
surfaces of most of these fibers do not allow dirt and grime to become
imbedded.  Most non-cellulosic fibers are non-allergenic and are not affected
by moths or mildew.
    I/American Chemical Society, Chemistry in the Economy, a study supported
in part by the National Science Foundation, 1973, p. 89.

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                                      E-103
                                     TABLE  2
       U.S.  MILL CONSUMPTION  OF MAN-MADE  FIBERS BY END USE:  1970 AND 1975
                                        Million Ibs.
 % Man-Made
to all fibers
HOME FURNISHINGS
    Carpets and rugs
    Draperies and upholstery
    Sheets
    Blankets
    Curtains
    Bedspreads and guilts
    Towels
    Other
                Subtotal
APPAREL
    Men's suits, slacks and coats
    Women's dresses
    Women's suits, slacks and coats
    Shirts
    Women's blouses
    Women's under- and nightwear
    Apparel linings
    Uniforms and work clothes
    Anklets and socks
    Sweaters
    Men's under- and nightwear
1970
1,098
320
109
91
25
27
1
1.110
2-781
>ats 299
406
coats 230
193
90
iar 179
182
82
65
76
33
47
66
30
177
2-155
GOODS
558
245
200
83
77
19
25
384
1,591
6,527
rs.
Kline Guide to the
1975
1,591
317
196
103
44
34
14
1,617
3,916
509
405
385
248
221
153
115
109
86
78
61
60
52
31
177
2,690

510
371
410
129
128
77
45
577
2.247
8,853
Chemical
1970
87.7
54.4
21.7
75.8
56.8
18.4
1.0
85.4
64.9
48.2
71.2
49.2
54.4
52.9
58.9
64.3
35.5
53.3
70.4
12.4
60.2
100.0
33.7
59.4
53.5

100.0
91.4
58.1
48.3
57.4
19.8
26.0
50.6
65.9
60.5
industry,
1975
98.1
57.8
41.7
88.0
75.9
31.4
5.1
96.6
80.2
59.5
80.5
64.7
57.8
75.9
73.2
60.2
46.0
71.7
77.2
22.0
73.4
100.0
36.9
54.0
64.5

100.0
93.7
73.9
60.8
78.5
55.4
39.1
67.6
77.0
73.3
(3rd ed.,
    Robes and loungewear
    Hosiery
    Swimwear and other recrea-
      tional wear
    Other
                Subtotal
 INDUSTRIAL AND OTHER CONSUMER GOODS
    Tires
    Reinforced plastics
    Retail piece goods
    Medical, surgical and sani-
      tary products
    Rope, cordage, and tape
    Coated fabrics
    Sewing thread
    Other
                Subtotal

Total

£/Includes data for glass fibers.

Source:  Mary K. Meegan, ed
         Fairfield, NJ:  Charles H. Kline & Co., 1977), p. 100.

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^/Estimate.
                                     E-104
                                    TABLE 3

                             MILL FIBER CONSUMPTION
                              (millions of  pounds)
   Fiber

    Wool

    Cotton

    Man-made


    Total
YEAR
1975
110.0
3,206.7
7,416.6
1976
121.7
3,413.9
8,052.5
1977
108.1
3,182.6
8,900.2
1978
117.1
3,043.0
9,338.3
19793/
108.8
3,100.0
9,808.0
1980£/
104.0
3,095.0
9,350.0
10,553.6  11,588.1  12-190.9  12,498.4  13,016.0  12,549.0
Source:  Textile World, January 1980,  p. 62.

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                                     E-105
    No fiber is considered an all-purpose fiber able to meet all the varied
requirements of apparel, home furnishings, and other textile uses.   The
success of man-made fibers has been based largely on scientists' ability to
adapt man-made fibers to an ever-increasing variety of end uses.

    polyester is the largest-volume man-made fiber produced (see Table 4).
Much of polyester's growth has been in blends with cotton for permanent-press
fabrics,  polyester is also used in sheets, curtains, carpets, and  towels.
Fiberfill, a short-length polyester fiber, is rapidly replacing cotton and
down as a filling material for pillows, comforters, and furniture.
polyester1s major industrial application is in tires where it is used as the
boay cord of belted-bias tires.

    Nylon was used in ladies' hosiery at the end of World Vvar II and soon
replaced silk and rayon in this application.  Currently, carpets and rugs are
the largest outlet for nylon fibers, accounting for 56 percent of nylon's 1975
domestic shipments.I/  Flat knit fabrics and yarn for hosiery are two of
nylon's major apparel uses.  Tire cord is the major industrial application  for
nylon.

    Acrylics are exceptionally soft to the touch and have natural warmth and
resilience.  Their largest uses are as replacements for wool in a variety of
household and apparel products such as pile fabrics, carpets, blankets and
sweaters.  industrial uses are negligible.

    polypropylene is the major polyolefin fiber in the U.S.  It is  widely used
in synthetic turf, where it competes with nylon.  It is also used in bagging
materials and carpet backing.

    Other synthetic fibers include spandex, used largely in foundation and
other garments where stretch is desired; saran, used for upholstery in public
conveyances, garden furniture, awnings, etc.; and vinyon, used as a bonding
agent for non-woven fabrics and products.
PRODUCTION

    Table 5 provides historical information on the non-cellulosic fiber
industry including number of employees, value added by manufacture and value
of shipments.  Overall dollar growth has averaged 9.2 percent per year since
1967.  U.S. Quantities of production of the major non-cellulosic fibers are
shown in Table 4.  As can be seen, polyester has grown at a very high rate
over the 1968 to 1978 period and surpassed nylon in 1972 as the non-cellulosic
fiber with the greatest production by weight.
    i/Mary K. Meegan, ed., Kline Guide to the Chemical industry. (3d. ed.,
Fairfield, NJ:  Charles Kline & Co., 1977), p. 198.

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                                                               TABLE 4



                                               NON-CELLUIOSIC ORGANIC FIBERS PRODUCTION

                                                         (millions of pounds)

Acrylic^/
Nylonk/
OlefinsS./
Polyester
Other
TOTAL
1978
726
2550
692
3800
16S/
7784
1977
709
2326
635
3642
16S/
7328
1976
621
2075
577
3340
14S./
6627
1975
525
1857
497
2995
121/
5886
1974
631
2124
531
2926
12S/
6224
1973
742
2175
492
2888
131/
6310
1972
626
1974
416
23281/
IIS/
5355
1971
545
1595
322
114 2£l/
68817
4292
1970
492
1355
262
1022d/
455l/
3586
1969
533
1411
269
939d/
376^/
3528
JJ68
521
1350
264
8261/
267i/
3229
                                                                                                                                                      fd
                                                                                                                                                       i
                                                                                                                                                      o
5/Includes modacrylic.



k/Includes aramid.



£/lncludes olefin yarn and monofilaments, and olefin and vinyon staple and tow




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                                     E-107


                                    TABLE 5

              NON-CELLULOSIC ORGANIC FIBERS:  INDUSTRY STATISTICS
Year
1977
1976
1975
1974
1973
1972
1971
1970
1969
1968
1967
1966
1965
1964
1963
Number of
Employees
(1,000)
73.0
69.3
70.2
80.9
81.8
78.2
75.2
75.7
70.2
62.1
57.2
59.1
51.5
44.3
41.4
Number of
Production
Workers
(1,000)
54.0
50.2
51.0
60.5
61.5
58.4
55.2
54.6
50.9
45.6
40.7
40.6
36.5
30.7
28.4
Value Added
by Manufacture
(million dollars)
2,789.4
2,263.7
1,983.0
2,410.9
2,819.0
2,039.8
1,905.4
1,692.6
1,703.6
1,736.9
1,251.8
1,301.5
1,215.4
1,043.1
922.0
Value of
Shipments
(million dollars)
6,345.6
5,307.3
4,933.8
4,716.1
4,751.2
3,638.9
3,241.4
2,868.8
2,713.3
2,584.7
2,033.2
1,991.8
1,842.9
1,580.6
1,403.2
Source:  U.S. Department of Commerce, Bureau of the Census,  1977 Census of
         Manufactures (Washington, D.C.:  Government Printing Office,  1979).

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                                     E-108
INDUSTRY STRUCTURE

    Table 6 lists the numbers of establishments within the non-cellulosic
fiber industry.  The number of establishments has been relatively small;
however, the rate of firms entering the industry in recent years is
substantial.  Dupont held patents on nylon,  polyester, and acrylics throughout
most of the 1950's.  With the expiration of  these patents, however, and the
development of polyolefin fibers, many new producers entered the industry.

    In spite of the increased number of manufacturers, the industry is still
highly concentrated.  Table 7 shows the ranking of firms in the man-made fiber
industry (including cellulosics)  in 1976. Dupont alone accounts for roughly
36 percent of all shipments.  The top three  firms (Dupont, Celanese, and
Monsanto) have a 60 percent share of the market, and the top ten firms have a
91 percent share.
PRICES

    Table 8 gives indices of average manufacturers'  prices for non-cellulosic
fibers from 1966 through 1975.   It can be seen that prices had fallen sharply
until 1972.  In fact, prices fell faster than those of any other product group
in the chemical industry for the previous 10 years.^/  part of the decline
was due to a shifting product mix.  For example,  staple production grew faster
than filament yarn, which is less expensive.

    Prices of individual products, particularly nylon and polyester,  declined
significantly during this period.  Most of the price decrease was brought
about by increased competition.  For example, Dupont was the only producer of
polyester fiber in i960, while in 1976, there were eleven relatively  large
producers.

    Beginning in 1973, prices of man-made fibers  began to increase because of
raw material shortages caused by the oil embargo.

FOREIGN TRADE

    Table 9 shows imports, exports and the trade  balance in non-cellulosic
fibers.  The trade balance decreased until 1971 and then made a strong
reversal.  The turnaround was primarily accomplished by government agreements
with Hong Kong, Japan, South Korea, and Taiwan.  These countries agreed to
    1/Meegan, Kline Guide, p.  101.

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                                     E-109
                                    TABLE 6

             NON-CELLULOSIC ORGANIC FIBERS INDUSTRY ESTABLISHMENTS


                          Total Number               Number of Establishments
   Year                of Establishments             With 20 Employees or  More


   1977                        65                                 57

   1972                        40                                 35

   1967                        25                                 24

   1963                        14                                 14
Source:   U.S.  Department of Commerce,  Bureau of the Census,  1977 Census of
         Manufactures.  (Washington,  D.C.:   Government  Printing Office, 1979)

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                            E-110







                           TABLE 7





        MAJOR U.S. PRODUCERS OF MAN-MADE FIBERS:  1976
Rank
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15


Man-Made
Man-Made Fibers Total Chemical Fibers %
Company Sales (Million $) Sales (Million $) of Total
Dupont
Celanese
Monsanto
Eastman Kodak
Akzona
Allied Chemical
Avtex Fibers
American Hoechst
Dow Baaische
Hercules
Standard Oil of Indiana
American Cyanamid
Beaunit
Courtaulds of North America
Standard Oil of California
OTHER
TOTAL
2,025
850
625
425
300
300
300
155
150
145
125
95
85
80
75
65
5,800
7,300
1,855
3,577
1,247
490
1.738
300
600
300
1,375
1.432S/
1,096


685


27.7
45.8
17.5
34.1
61.2
17.3
100.0
25.8
50.0
10.5
8.7
8.7


10.9


£/ Includes fabricated plastics.
Source:
Mary K. Meegan, ed., Kline
Guide to the chemical
industry
(3rd ed.,
Fairfiela, NJ:  Charles Kline & Company, 1977),  pp. 7 and 101.

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                                      E-lll
                                     TABLE  8

        INDICES OF AVERAGE MANUFACTURERS'PRICES OF NON-CELLULOS1C FIBERS
                                   1967 = 100
                Year                                      Price


                1966                                      115.4

                1967                                      100.0

                1968                                       92.5

                1969                                       86.2

                1970                                       82.1

                1971                                       78.3

                1972                                       65.6

                1973                                       74.6

                1974                                       74.0

                1975                                       81.9
Source:  Mary K. Meegan, ed., Kline Guide to the Chemical industry (3rd ed.,
         Fairfield, NJ:  Charles Kline & Co., 1977), p. 102.

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                                     E-112
                                    TABLE 9

               U.S. FOREIGN TRADE IN MAN-MADE FIBERS:  1967-1976
                              (millions of dollars)


                           imports^       Exports-^      Trade Balance—^
         1967

         1968

         1969

         1970

         1971

         1972

         1973

         1974

         1975

         1976
81
137
109
221
363
319
280
242
138
189
153
172
189
226
231
234
419
629
432
492
72
35
80
5
-132
- 85
139
387
294
303
•^/Includes data from glass fibers.
Source:  Mary K. Meegan, ed., Kline Guide to the Chemical industry (3rd ed.,
         Fairfield, NJ:  Charles Kline & Co., 1977), p. 102.

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                                     E-113
limit the annual increase of their exports to the U.S. to only five to seven
percent.  Their average annual rates of growth had been 33 percent between
1963 ana 1971.V
INNOVATION

    During the first generation of non-cellulosic organic fibers, chemists
developed basic fiber technology.  At that time, each of the fibers was made
in one form.  During the next phase of development  each of the generic fibers
underwent modification to improve both performance and aesthetics.  This was a
time of problem-solving and the exploration of designs for end use.  Now most
generic fibers are made in many different versions, each engineered to suit a
particular product.

    Every man-made fiber has both positive and negative characteristics for
particular uses.  At one time nylon was considered the universal fiber, the
best for all applications.  But experience proved that nylon has limitations,
such as relatively poor recovery from deformation.  Hence, it is prone to
wrinkling in wear and is not well adapted to many outerwear applications.
Nylon has also had the problem of static build-up, which triggers shocks to
people walking on nylon carpeting.

    This static problem was addressed successfully by both Monsanto and
DuPont.  in 1969, Monsanto introduced the first permanently altered antistatic
nylon fiber, 22N.  Later in the year, Dupont introduced its textile fiber,
Antron.  Production of 22N involves dispensing an ethoxylated hydrocarbon as a
second phase in the polymer matrix before the fiber is formed.  in the
finished yarn, this dispersed phase reduces the fiber's electrical
resistivity, which allows static charges to dissipate rapidly.  This virtually
eliminates shocks normally experienced after walking on nylon carpets.

    There are a great many such stories within the non-cellulosic organic
fibers industry.  There are literally hundreds of variants for each non-cellu-
losic organic fiber.  Each variant has somewhat different characteristics.  A
number of new products have been introduced over the years—some involving
changes to the chemistry and some involving physical changes to the fibers.
The development of bi-component fibers is an example of a physical change.
Bi-component fibers are composed of two generically similar but chemically or
physically different polymers, physically joined in a single filament,  in
processing, or in later fabric finishing, one component shrinks more than the
other  thus pullina the whole yarn into a crimped conformation, a desirable
aesthetic quality.
    6/ibid.

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                                     E-114
    It appears that non-cellulosic organic fiber manufacturers are now
accelerating the trend toward engineering fibers to specific,  narrow end
uses.  They are also still concentrating on producing products that look and
feel like cotton, wool, silk, or linen.

    The chances do not seem to be too high of developing and producing a new
generic fiber that differs radically from those now made and that would
compete successfully with today's major  fibers.2/  Not only would finding
such a fiber be difficult in this well-researched field, but the cost of
building a plant with a large capacity and then establishing that new fiber in
the man-made fiber market woula seem to  require a large amount of resources.

    The last aeneric fiber introduced was anidex in 1969.   Rohm & Haas
reputedly spent $20 million and 10 years of research to develop it .§/  A
1977 estimate by an industry executive was that a minimum of $50 million and 5
to 10 years of development would be required to commercialize  a new generic
product for broad-based market application.!/

    We belive that, for the forseeable future, new product development in the
non-cellulosic fiber industry will continue at a rapid rate, but will involve
modifications of existing products for enhanced performance and aesthetic
characteristics.
    2/American Chemical Society,  Chemistry in the Economy,  p.  112;  Robert L.
Stultz, Jr., and "Fibers through  the Crystal Ball:  No New  Generics,  Just
Variants," Textile World. December  1977,  pp. 73-74.

    ^/American Fabric Magazine, Encyclopedia of Textiles, p.  47.

    i/Stultz, "Fibers Through the Crystal Ball," p.  74.

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      E-115
Synthetic Rubber

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                                     E-116
                                SYNTHETIC RUBBER
DESCRIPTION

    Synthetic rubbers (also known as synthetic elastomers)  are part of a group
of materials called polymers which also include plastics and organic fibers.
An elastomer is any polymeric material capable of recovering quickly and
forcibly from large deformations such as stretching, bending, or twisting.
Generally, a cured elastomer (1)  can be stretched to at least three times its
original length at room temperature and (2)  after being held at twice its
original length for one minute, will return to no more than 1.5 times its
original length within five minutes.

    The basic chemical elements of synthetic elastomers are carbon, hydrogen,
nitrogen, and oxygen.  These elements are combined in specific ways to build
long chains of molecules with carbon "backbones".  Synthetic elastomers can be
divided into three categories:   (1) the general-purpose type, which includes
butyl, ethylene-propylene, polybutadiene, polyisoprene, and styrene-butadiene;
 (2) the specialty, solvent-resistant type, which includes epichlorohydrin,
epichlorohydrin-ethylene oxide, nitrile, polychloroprene (neoprene),
polysulfides (Thiokol), and the polyurethanes  (polyester and polyether); and
 (3) the specialty, heat-resistant type, which includes chlorosulfonated
polyethylene (Hypalon), fluoroelastomers, polyacrylates, and silicone.  For
each of these types there are a number of variants.

HISTORY

    Synthetic rubber was first produced commercially in Germany during World
War I.  in 1931, Dupont introduced the first synthetic rubber of great
importance, polychloroprene (neoprene), and Thiokol Corporation at about the
same time announced a polysulfide rubber it called Thiokol.  Despite all their
good properties, neither Thiokol nor neoprene proved to be a truly general-
purpose synthetic rubber that could compete with natural rubber in its many
uses.

    Standard Oil Company  (New jersey). interested in coal liquefaction because
of rising demand for gasoline, signed an agreement in 1927 with I.G.
Farbenindustrie of Germany to exchange information on making oil from coal.
The next year,  the East Texas oil field was discovered and the U.S. oil
industry shifted from scarcity to surplus.  The coal liquefaction work was
suspended, but the agreement with I.G. Farbenindustrie was extended to include
making chemical raw materials  (including synthetic rubber)  from oil.  The
Germans developed two synthetic rubbers and shared information with Standard
Oil under terms of the agreement.  One was called Buna S, a butadiene-styrene
elastomer that wae viewed as a general-purpose rubber.  The other was called
Buna N, a butadiene-aerylonitrile elastomer that was viewed as an
oil-resistant rubber.

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                                     E-117
     Although the original Buna S and Buna N rubber products were of poor
quality, they formed the technological basis for synthetic rubber production
in the United States.  The U.S. Government, the four major rubber companies,
and Standard Oil Company (New Jersey) agreed in December 1941 to pool their
information on styrene-butadiene rubbers.  Other companies later joined the
agreement.  Within a short time, chemists developed a new all-purpose rubber
that could be processed on conventional equipment, and could improve the
quality of tires.

     The U.S. synthetic rubber industry was established on a high-volume basis
during World War II when the government, anticipating the loss of natural
rubber sources, built enough synthetic rubber production capacity to meet
wartime requirements.  Styrene-butadiene rubber (SBR) was selected as the
synthetic to substitute for natural rubber.  in addition, plants for such
specialty synthetics as butyl, nitrite, and neoprene were also built.
Production of all types of synthetic rubber rose from 2-940 long tons in 1940
to 820,373 in 1945, when synthetic rubber constituted 86.9 percent of all
consumed rubber products.i/

     Under the Rubber Producing Facilities Disposal Act of 1953 the government
sold its plants to private industry in 1955.  The oil, chemical, and rubber
companies that had managed the properties for the government were the
successful bidders.
ENGINEERING PROCESS

     There are four basic steps in processing synthetic elastomers.   First,
the polymer is prepared from the monomer or monomers; this process is called
 olymerization.  If only one type of monomer is being polymerized, it is
called homopolymerization.  if more than one type of monomer is involved, it
is called copolymerization.  The polymerization step includes the receipt,
storage, and mixing of additives, solvents or suspending media, and monomers.

     Second, the material is compounded or mixed and blended with other
polymers, vulcanizing agents, and other rubber-processing chemicals to obtain
the required properties.

     The third step involves shaping or forming the compound either by
extrusion, calendering or molding,  considerable quantities of elastomers are
also applied in the form of water dispersions, called latexes.  Most latex is
made into foam rubber, but there are other important applications in paints,
paper coatings, textile coatings and backings, and such dipped rubber goods as
gloves and drug sundries.
    i/Mary K. Meegan, ed., Kline Guide to the chemical industry (3rd ed.,
Fairfield, NJ:  Charles Kline & Company, 1977), p. 103.

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                                     E-118


     in the fourth step of processing synthetic elastomers,  the elastomer is
vulcanized to obtain the characteristic elastic or rubbery qualities.
vulcanization also improves strength, hardness and other physical properties.
Sulfur is the most common vulcanizing agent, but many specialty rubbers use
peroxides, resins, and other chemicals.  Even when vulcanized, some rubbers
are weak, particularly at higher temperatures, and they need reinforcing for
strength.  Fine colloidal fillers, particularly carbon blacks and silicas, are
used.  Sometimes softeners and plasticizers are added to make rubber easier to
process or to make it more flexible at low temperature.
RAW MATERIALS

     The synthetic rubber industry draws almost entirely on chemicals derived
from petroleum and natural gas.  The industry is the major consumer of
butadiene2/ which is produced from butane, a byproduct of petroleum refining
or natural gas manufacture.  Other important petroleum derivatives include
benezene  (for producing styrene); isobutylene and isoprene  (for producing
butyl); propylene (for producing acrylonitrile and nitrile) ; and chloroprene
 (for producing polychloroprene).  The synthetic rubber industry is quite
sensitive to petroleum refining development.

     The synthetic rubber industry consumes a large amount of carbon black.
 In 1977 this consumption amounted to about 12 percent of the total carbon
black  shipped in that year.I/   Soaps and detergents, plasticizers, and
 rubber processing chemicals are also used in significant amounts.
 USES

     The predominant use of synthetic as well as natural rubber is in the
 automotive  industry with tires, tubes, and related tire products, accounting
 for 57.7 percent of all synthetic rubber consumed in 1976.I/  Other major
 uses are shown  in Table 1.
     2/u.S.  Department of Commerce,  1978 U.S.  industrial Outlook, Washington,
 D.C.:   Government  Printing Office,  1978) p. 145.

     I/Calculated from data in U.S.  Department of commerce,  Bureau  of  the
 Census,  197?  Census of Manufactures,  (Washington,  D.C.:  Government Printing
 Office,  1979).

     i/Meegan,  Kline Guide, p. 106.

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                                      E-119
                                     TABLE 1

          U.S. CONSUMPTION OF SYNTHETIC RUBBER BY MAJOR END USE:  1976
     Tires, tubes ana tire products
     Molded goods
       Industrial rubber
       Automotive
     Footwear
     plastic impact modifiers
     Belting, hoses and gaskets, etc,
     Wire and cable
     Adhesives
     Coatings
     Other

         Total
Percentage of Tonnage

        57.7

        11.0
         4.7
         3.0
         1.8
         1.8
         1.4
         1.2
         1.1
        16.3
       100.0
     Source:  Mary K. Meegan, ed., Kline Guide to the chemical industry (3rd
              ed., Charles Kline & Co., 1977) , p. 106.
     In 1940, natural rubber (new or reclaimed) held 99.6 percent of the U.S.
market.^/  By 1951 synthetic rubber had a 53 percent market share and a 69
percent share by 1960.JL/  By 1976, this share had risen to about 75
percent.7/  This success was achieved despite the fact that until the
development of the "stereo rubbers" (polybutadiene, polyisoprene, etc.) in the
1960s there were no synthetic rubbers that duplicated the excellent
elastomeric properties of natural rubber.  The success of synthetic rubber may
be explained in part by the fact that world production of natural rubber is
inadequate for world demand.  Also, styrene-butadiene rubber  the largest
volume synthetic, is less expensive than natural rubber.8/
    ^/American Chemical Society, Chemistry in the Economy, a study supported
in part by the National Science Foundation, 1973, p. 116.

    I/Ibid..

    .2/Meegan, Kline Guide, p. 103.

    8/ibid., p. 104.

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                                     E-120
     Table 2 lists the primary uses ana important characteristics of the major
types of synthetic rubber.   in addition to the types of synthetic rubber
listed in the table are such specialty elastomers as chlorosulfonated
polyethylenes, polysulfides, fluorocarbons, polyacrylates, polyurethanes, and
silicones.  Synthetic rubbers can be seen to compete with each other in
addition to competition with natural rubber.

     Synthetic rubber has probably nearly reached the saturation point
regarding further penetration into the markets for natural rubber.!/  The
increasing wearlife of tires, and the consequent reduction in consumption of
replacement tires- is another factor which has contributed to slow growth
within the synthetic rubber industry.  One other factor was the 1976 strike in
the industry and the resultant increases in market share achieved by foreign
competitors.

     The automotive market will likely continue to dominate rubber usage.
Growth in auto production is not expected to be strong over the next few
years..10/  This is a negative factor in the synthetic rubber industry's
growth pro3ections.  However  the trend in the future will probably continue
to be toward more fuel efficient, lighter cars.  Rubber products can play a
part in this trend by replacing some heavier metal automobile parts.
PRODUCTION

     Table 3 provides historical information on the synthetic rubber industry
including number of employees, value added by manufacture and value of
shipments.  The annual dollar growth in shipments averaged 7.5 percent between
1967 and 1977.  U.S. production volumes of synthetic rubber are shown in Table
4.  The growth rate during the 1966 to 1976 period in production volumes
averaged 3.4 percent.  The difference between the two growth rates can be
attributed to the fact that average prices have increased.

     The most rapidly growing segment of the synthetic rubber industry has
been projected to be the specialty elastomers, usually of much higher value
than general purpose materials.li/  This will cause the value of shipments
to increase more rapidly than the quantity of shipments.
    9/Ibid..

    i2/U.S. Department of Commerce,  1978 U.S.  industrial Outlook, p. 145.

    JJ/Ibid.,  p.  146.

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                                                               TABLE 2

                                    MAJOR USES AND CHARACTERISTICS OF IMPORTANT SYNTHETIC RUBBERS
Synthetic-Rubber


Styrene-butadiene


Polybutadiene





Polyisoprene




Ethylene-propylene




Neoprene (polychloroprene)




Butyl





Nitrile
Major Uses
Passenger car tire treads, tire carcasses,
mechanical goods, and carpet backing.

Tire treads.
Passenger and truck tire carcasses, and
truck treads, mechanical goods, rubber
footwear, and latexes.
Bicycle tires, white walls, other side-'
walls, molded automotive parts and other
mechanical goods.
Belts, hoses, molded products, general
industrial and mechanical goods, wire
and cable jackets, construction,
adhesives, sealants, and coatings.

Inner tubes, inner liners, inflatable
sporting goods, liners for reservoirs
and grain silos, automotive and mechan-
ical goods, architectural and industrial
sealants, wire and cable.

Self-sealing fuel tanks, gasoline hose,
gaskets, printing rolls, seals, adhesive
and footwear.
                                                                              Characteristics
Good wear characteristics due to high resistance
to abrasion, heat, and tread cracking.

Excellent abrasion resistance, high resiliency,
and excellent high- and low-temperature properties.
Contributes to better resistance to groove cracking.
Limitations include poor wet-skid resistance and
cutting and chipping in heavy-duty truck tire treads.

Chemically identical with natural rubber.  More
expensive than natural rubber, but cleaner, lighter
in color, and more uniform from batch to batch and
therefore cheaper to process.

Poor adhesion and slow cures which make them difficult
to blend with other rubbers.  Potentially low cost,
outstanding resistance to oxidation and cracking, and
low-temperature flexibility.

One,of most versatile elastomers with high
resistance to oils and solvents, superior
tensile strength and resistance, and high
resistance to abrasion and oxidation.

Low permeability to gases and excellent tear and
aging resistance.
Good oil resistance.
H
M
K>
Sources:  Mary K. Meegan, ed., Kline Guide to  the Chemical Industry  (3rd ed., Fairfield, NJ:  Charles Kline & Co., 1977), pp. 103-108; and
          American Chemical Society, Chemistry in the Economy, a study supported in part by the National Science Foundation  (1973), pp. 116.

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                                E-122
                               TABLE 3


                 SYNTHETIC RUBBER INDUSTRY STATISTICS



Year
1977
1976
1975
1974
1973
1972
1971
1970
1969
1968
1967

Number of
Employees
(1,000)
10.1
10.6
9.9
10.7
11.2
11.8
12.2
12.8
12.5
12.2
12.6
Number of
Production
Workers
(1,000)
7.2
7.6
7.0
7.5
7.8
8.2
8.2
8.7
8.5
8.3
8.5

V.alue Added by
Manufacture
(million dollars)
570.1
510.7
468.8
531.5
475.2
491.7
476.7
460.9
500.7
453.0
404.9

Value of
Shipment
(million dollars)
1,866.8
1,702.3
1,455.7
1,481.1
1,167.6
1,089.4
1,042.6
1,006.6
1,046.2
974.2
926.9
Source:  U.S. Department of commerce,  Bureau of the Census,
         1977 Census of Manufactures (Washington, D.C.:  Government
         Printing Office, 1979).

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                          E-123
                         TABLE 4

           U.S.  PRODUCTION OF SYNTHETIC RUBBER
                   (millions of pounds)
SBR

Stereo-specific
  Polybutadiene

  EPDM
 1966

2,448


  417

  196
 1974

3,135


  793

  279
 1975

2-608


  656

  187
 1976

2,980


  752

  303
  polyisoprene
Stereo-specific
  Subtotal
  613+
             188
1,260
            135
                                          978
          1,055s/
Butyl
Nitrile
Ure thane
Silicone
Oth erb/

231
157
12
13
455
3,929
354
206
88
44
655
5,742
182
119
51
31
610
4,579
277
166
81
39
869
5,467
a/ Additional amounts included in "other" elastomers.

b/ includes polychloroprene, chlorosulfonated polyethylene,
  polysulfide, silicone, fluorocarbon, thermoplastic rubber
  and miscellaneous elastomers.
Source:  Mary K. Meegan, ed., Kline Guide to the Chemical industry
         (3rd ed., Fairfield, NJ:  Charles Kline & Co., 1977), p.
         105.

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                                     E-124
INDUSTRY STRUCTURE

     Table 5 lists the number of establishments within the synthetic rubber
industry.  in 1976, there were 39 companies producing synthetic rubber through
60 establishments.JL2/  Fourteen of these companies accounted for almost 90
percent of the dollar shipments in 1976.  Table 6 lists the major firms in the
industry with their estimated sales of synthetic rubber and total chemical
sales in 1976.  The estimates include the value of production consumed within
the firm.

     It can be seen that the industry is dominated by tire and oil companies.
Dupont, Copolymer Rubber and chemical. Ashland, and petro-Tex are the only
major producers that are primarily chemical companies.  This tire and oil
company dominance can be traced to the origins of the industry as described
earlier.  Styrene-butadiene and the "stereo rubbers" (polybutadiene, and
polyisoprene, etc.) are produced by many of the firms in Table 6 while at the
other end of the spectrum, butyl and neoprene are produced by few firms.
                                    TABLE 5

                    SYNTHETIC RUBBER INDUSTRY ESTABLISHMENTS


                        Total Number of     Number of Establishments
                        Establishments      with 20 Employees or more

                              62                        31

                              59                        34

                              48                        28

                              24                        24
              Source:  U.S. Department of commerce,  Bureau of the
                       Census, 1977 Census of Manufactures
                       (Washington, D.C.:  Government Printing
                       Office, 1979).
    i^/Meegan,  Kline Guide, p.  106.

    M/Ibid.

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                                     E-125
                                    TABLE  6

                MAJOR U.S.  PRODUCERS OF  SYNTHETIC RUBBER:  1976
                                                 Synthetic
                                               Rubber Salesa/
      Rank     	company	      ($ million)       capacity

        1      Goodyear Tire & Rubber                 320          610
        2      Firestone                              250          495
        3      DuPont                                 230          240
        4      B.F. Goodrich                          150          275
        5      Exxon Chemical                         140          190
        6      Copolymer Rubber & Chemical             95          160
        6      General Tire & Rubber                   95          190
        8      Texas—U.S. Chemicals                   90          180
        9      American Synthetic Rubber               75          160
       10      Phillips petroleum                      65          125
       10      Uniroyal                                65           75
       12      Ashland Chemical                        30           55
       13      Cities Service                          25           37
       13      petro-Tex Chemical                      25           30
               Other                                  245           NA

                 Total                              1,900
     a/ includes captive consumption as well as merchant sales.

     NA:  Not available.

     Source:  Mary K. Meegan. ed., Kline Guide to the chemical industry-
              (3rd ed.. Fairfield. NJ:  Charles Kline & Co., 1977),  p.
              107.
     Many domestic rubber plants in use were constructed during NorId War II.
Improvements in design and processing at new plants make many of these old
plants comparatively inefficient,  in recent years there has been relatively
little new capital investment in the industry because of ample capacity.
PRICES

     Table 7 gives indices of average manufacturers' prices for selected
synthetic rubber.  Until 1970, prices were fairly stable,  in 1971 prices fell
4.8 percent from the 1970 average.  Between 1971 and 1976 average prices
increased 60.4 percent.

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                                     E-126
                                    TABLE 7

                    INDICES OF AVERAGE MANUFACTURERS'  PRICES

                   OF SELECTED SYNTHETIC RUBBERS:  1967-1976

                                    1967=100
    Year
 Styrene-
butatiiene
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
100.0
104.1
103.2
104.5
90.9
90.9
72.7
109.1
122.7
121.3
Nitrile
                         100.0
                          99
                         101
                         101
                          98
                          95.3
                          95.7
                         108.7
                         123.9
                         132.5
 Stereo-
specifics   Urethanes
                        100.0
                         97.6
                         96.6
                         95.1
                         91.2
                         97.1
                        104.8
                        142.9
                        142.9
                        172.2
                           .3
                           ,3
              100.0
               99.4
              106.
               98.
              106.6
              116.4
              109.0
              119.0
              130.0
              128.9
                                                          Silicones   Total
100.0
92.4
95.0
94.3
81.1
71.0
66.1
73.8
93.5
89.0
100.0
101.9
100.7
100.7
95.9
98.9
92.6
122.2
137.0
153.8
    Source:  Mary K. Meegan, ed. .  Kline Guide to the Chemical Industry,
             (3rd ed., Fairfield,  NJ:   Charles Kline & Co.,  1977).  p.  108.
FOREIGN TRADE
     Table 8 shows imports, exports,  and the trade balance in synthetic
rubber.  As can be seen,  exports have fluctuated over the period.   Overseas
synthetic rubber production capacity  has grown significantly over  the last
several decades.  The U.S.  currently  has less than half the world's synthetic
rubber capacity. M/  In 1957 the U.S. accounted for 88 percent of  the
non-communist world's production of synthetic rubber. 15/  jn that  year, U.S.
exports were 18 percent of  total U.S. production.   in 1976, exports accounted
for only 11.8 percent of this production. M/  Exports are expected to
continue to fall as additional foreign production capacity is added.
    J^/Ibid.

    IV Ibid.
    M/Ibid.

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                                      E-127
                                     TABLE 8

                         SYNTHETIC RUBBER FOREIGN TRADE

                               (million of pounds)
Year
1972
1973
1974
1975
1976
1977
imports
249.8
304.0
249.5
203.9
273.5
367.0
Exports
602.8
657.2
631.2
510.2
623.3
559.1
Trade
Balance
353.0
353.2
381.7
306.3
349.8
192.1
              Source:   David B. Beck, "Synthetic Elastomers:
                        Role of U.S. imports," Synthetic Organic
                        Chemicals, U.S. international Trade
                        Commission 1977, p. 243.
     Exports of styrene-butadiene rubber have been particularly affected as
much of the foreign production capacity is for this type of rubber.17/  jn
1963 exports of styrene-butadiene rubber accounted for 15.2 percent of U.S.
production, while in 1976 exports only accounted for 6.0 percent.18/

     imports of synthetic rubber also fluctuated over the 1972 to 1977
period.  On the average 5.4 percent of total U.S. consumption was supplied by
imports.19/  m 1977 Canada and Japan supplied most of these imports, 52 and
23 percent respectively, with the remainder coming from Western European
countries.20/
    IT/Ibid., p. 107.

    jjl/lbid., p. 104.

    ii/David B. Beck, "Synthetic Elastomers:  Role of U.S. imports,"
Synthetic Organic Chemicals, U.S. International Trade commission, 1977, p. 245.

    20/ibid.

-------
                                     E-128


     For the 1972 to 1977 period, styrene-butadiene rubber accounted for about
one-third of total imports; polybutadiene, about one-fourth; and butyl rubber,
about 15 percent.  In 1977 for the first time, polybutadiene (34 percent of
total imports)  surpassed styrene-butadiene (24 percent)  as the leading
import.21/

     In 1977 imports rose to a record level of 6.4 percent of U.S.
consumption,22/ mostly due to an increase in polybutadiene imports.  U.S.
production capacity was insufficient to meet the increased demand for
polybutadiene because of increased truck and bus tire production.  This
capacity situation was seen as temporary because U.S. tiremakers were
replenishing the inventories that had been depleted as a result of the 1976
strike.

     imported synthetic rubber is generally comparable in quality to U.S.
products.  The average unit value of imports  (including  insurance and shipping
costs)  was one to four cents lower than the average value of U.S. sales during
1972 to 1977.23/  u.S. producers are able to compete for two reasons:  (1)
the overall U.S. product mix is different from the imports, and  (2) the
 roximity of U.S. producers to their customers provides  more rapid response to
customer needs and a steady availability of supply.  Also, many imports from
Western Europe and elsewhere are intracompany transfers, some of which are
valued below the domestic market price.
INNOVATION

     The history of the synthetic rubber industry has been characterized by
the development of new types of synthetic rubber and improved versions of
existing types.  An example of the latter is styrene-butadiene which, over the
years, has become a vastly different and improved product due to better
polymerization techniques, new types of modifiers, and improved compounding
materials.

     It appears that a novel synthetic rubber that would challenge the
established ones in more than small specialty markets would face stiff
competition,  increment improvements will,  however, continue to be made in
existing synthetic rubbers.  These improvements will largely be the result of
process innovations and the development of  new additives.  The latter are
discussed in the section on rubber processing chemicals.

     ICF believes that specialty elastomers production will to grow faster
than any other synthetic rubber.  This part of the industry is characterized
by significant innovation since products are engineered to specific uses.
    21/Ibid., p.  245.

    A2/Ibid., p.  245.

    jj/Ibid., p.  247.

-------
        E-129
AMPHIPATHIC COMPOUNDS

-------
                                     E-130
                             AMPHIPATHIC COMPOUNDS
    All amphipathic compounds have two parts to them.  The hydrophilic part,
or hydrophile, is soluble in water.  The hydrophobia (lipophilic) part is
soluble in oil.  Usually these molecules are large enough for each part to
display its own solubility behavior.  The parts that are not soluble in the
particular chemical environment surrounding them are chemically attracted to
each other.  As a result, the molecules huddle together with the insoluble
parts forming their own environment inside the huddle.   These huddles, called
micelles, are of microscopic size and are spherically shaped,  particles not
soluble in the solution may be dissolved in these micelles.  This is what
accounts for the relatively high dissolving capabilities of many amphipathic
compounds such as detergents.i/
                                    FIGURE 1

                          FLOW CHART OF THE INDUSTRIES
                                Fats and Oils
     Other
  industries
Glycerin
Fatty Acids
  Other
Industries
     Other
  industries
       Synthetic
      Surfactants
                                 Soaps and
                            Synthetic Detergents
                        Household
               industrial
                  and
              institutional
    i/Robert T.  Morrison and Robert N.  Boyd, Organic Chemistry (3rd ed.,
Boston:  Allyn and Bacon, inc.,  1973),  p.  1060.

-------
                                      E-131
    This section discusses the chemicals and industries in SIC 2841, Sic 2843,
and SIC 28992.  These industries have many connections and common characteris-
tics, but also differ in many ways.  The profile will be divided into three
major sections:

         1)   Surfactants;

         2)   Fatty Acids and Glycerin; and

         3)   Soaps and Synthetic Detergents.

    Both the fatty acid and the synthetic surfactant industries are ma]or
suppliers of the soap and synthetic detergent industry.  The fatty acid
industry also supplies the synthetic surfactant industry and glycerin is a
byproduct of fatty acid production.

    Finishing agents and assistants, which form a segment of SIC 2843,  are not
covered in this report because:

         (I)   they are not connected chemically to the rest of the
              industry, and

         (2)   they are not a significant industry with regard to
              sales ($172 million in 1977)  or innovation.

    Because natural glycerin is a byproduct of fatty acid production and has
no chemical relation to soaps or synthetic detergents, it is discussed  with
fatty acids although it is part of Sic 2841  (Soaps and Detergents). The
synthetic glycerin market (SIC 2869) is included here, because it is difficult
to discuss the natural glycerin market alone.

    Products that fall under Sic 2842  (polishes and Sanitary Goods) and
SIC 2844 (Toilet Preparations, perfumes)  are mentioned in Soap and Synthetic
Detergents because they share common chemical characteristics and are produced
by the same companies.

    Within the report, several terms are used whose definitions should  be
clear at the outset.

         (1)   Synthetic detergent:  a product synthetically
              manufactured,  usually including a surfactant,
              builders, and other components.  Synthetic detergents
              are used for textile cleaning, dishwashing, hard
              surface cleaning, etc.

         (2)   Detergent:  a compound that reduces surface tension;
              specifically,  a surface-active agent which
              concentrates at oil-water interfaces, exerts
              emulsifying action, and thus aids in cleaning surfaces.

         (3)   Detergent industry:  the industry producing synthetic
              detergents.

-------
                            E-132
(4)   Surfactant:   a detergent.  Surfactant  is a commonly
     used  term, short  for surface  active  agent,   in  this
     report,  "surfactant" and  "synthetic  surfactant"  are
     synonmous.

(5)   Soap:  a  detergent derived directly  from natural fatty
     acids.

(6)   Cleansing bar:  a bar of  soap usea for personal
     hygiene.

-------
    E-133
Surfactants

-------
                                     E-134
                                  SURFACTANTS

DESCRIPTION

    Surface active agents (surfactants)  are organic compounds that reduce
surface tension.  They wet surfaces  easily, remove and suspend dirt, disperse
particles, emulsify oil and grease,  and produce foam.   They are sometimes
called wetting agents, detergents, penetrants,  dispersants, emulsifiers, or
foaming and frothing agents.

    Different surfactants have different optimal concentrations called micelle
concentrations.  These concentrations vary with temperature, the presence of
inorganic salts, and the pH level.

SHIPMENTS AND GROWTH

    in 1977 total production of surfactants was 4,718  billion pounds, a 3.0
percent increase over 1976.^7  Sales increased 6.6% to $875 million.  The
average unit value was $35 per pound.I/  The industry  is expected to grow at
two percent or three percent annually^/ because the major use of
surfactants—detergents—is also growing at that pace.  (See Table 1:
Economic indicators for Surfactants.)  Some industrial applications are
expected to grow faster, but most analysts believe the slow growth rate of
household detergents will limit surfactant growth.  Present capacity should be
sufficient through most of the 1980s.

PRODUCTS AND USES

    The four types of surfactants are differentiated by their electrolytic
behavior.  Anionics, the major group, have a hydrophile with a negative
charge, cationics have a hydrophile  with a positive charge, nonionics have a
hydrophile with no charge, and amphoterics exhibit anionic and cationic
behavior depending on the pH of the  solution they are  in.
    .i/U.S. international Trade Commission, Synthetic Organic Chemicals, 1977
 (Washington, D.C.:  Government Printing Office, 1977).

    3/lbid.

    i/Ibid.• and Chemical and Engineering News. May 22, 1979.

-------
                                            TABLE 1

                              ECONOMIC INDICATORS FOR SURFACTANTS


                  XXX            1975    1974     1973    1972    1971     1970     1969     1968

Employees  (thousands)             6.7     7.8     6.3     6.9     6.6     6.4      5.8      5.9

Payroll  (millions)               91.4    95.2     73.2    71.5    68.5     60.4     57.7     54.9

Production workers  (thousands)    3.7     4.4     3.4     3.8     3.5     3.4      3.0      3.2

    Manhours  (millions)           7.8     9.2     6.8     7.7     7.3     7.0      6.2      6.5
    Wages  (millions
      of dollars)                42.4    46.6     32.5    32.3    30.0     26.6     22.7     22.7

Value added
    (millions of dollars)       269.7   334.3    211.3   209.5   173.3   163.3   151.4   141.5

Cost of materials
    (millions of dollars)       431.0   483.0    277.7   257.0   215.6   212.3   174.6   187.6

Value, industry shipments
    (millions of dollars)       705.6   797.5    488.5   462.6   388.3   375.1   324.0   328.9

New investments
    (millions of dollars)        34.7    31.6     25.1    19.7    19.8     21.9      8.3      9.1

End of year inventory
    (millions of dollars)       100.6   117.4     66.6    61.4    52.3     48.9    42.5    40.7
                                                                                                          OJ
                                                                                                          en
Source:  U.S. Department of Commerce, Bureau of Census, 1977 Census of Manufactures
         (Washington, D.C.:  Government Printing Office, 1979).

-------
                                     E-136
    The anionics,  which include natural soaps,  accounted for 79 percent of
total surfactant production in 1977.   Lignosulfonates.5/ (also called lignin
sulfonates),  the major anionic group, accounted for 24 percent with 1.160
billion pounds.   They are obtained as byproducts of sulfite pulping, and are
one of the least expensive surfactants.  They are used in drilling muds for
oil wells, dye dispersants, ceramic binders, concrete admixtures, gypsum
board, animal feeds, carbon black, and industrial cleaners.

    Alkylbenzene sulfonates, the largest group of lignosulfonates, accounted
for 13 percent  (632 million pounds) of total surfactant production in 1977.
They have good detergent and "sudsing powers" and are used in most heavy-duty
laundry powders,  in the past they were inexpensive because they were made
from cheap, abundant, petrochemical starting materials and were produced on a
low margin.  Because of rising oil prices, they are losing some of their
market to non-petroleum derived surfactants.

    Until 1963 alkylbenzene sulfonates (ABS) were derived from tetrapropylene
benzene and contained a branched benzene ring.   This made them
non-biodegradable and led to environmental problems (see History).  Linear
alkylbenzene sulfonate  (LAS) replaced them but is still not totally
acceptable.  it breaks down slowly and incompletely, and has been banned in
many areas.  The use of fat-based detergents, the most important of which are
the linear alkyl alcohols, has been growing because of their complete
biodegradability.

    The move toward lower phosphate levels has hurt the market for LAS  (see
History).  Lower phosphate levels require higher concentrations of surfactant.
but they are anionics, which foam too much in high concentrations.  Because
they also are not as effective as nonionics and cationics in hard water, they
have been replaced by nonionics.  In the nonphosphate detergents, nonionics
account for 70 percent of the surfactants used and anionics account for the
rest.  Other less important anionic sulfonates include the benzene, cumene,
toluene, xylene, and naphthalene sulfonates; the sulfosuccinamates; the
sulfonsuccinates; and the taurates.

    Another group of anionics, sulfates,j>/ accounted for 11.3 percent (524
million pounds)  of total surfactant production.  Ether sulfates are primarily
used as auxiliary surfactants with LAS in light-duty dishwashing liquids and
delicate fabric detergents.  They are also used in shampoos and bubble baths.
Alcohol sulfates are primarily used in cosmetics and toiletry products, and
remaining sulfates are used in the plastics industry.

    The other major anionic group is phosphate and polyphosphate surfactants,
which had a production of 38 million pounds.  These have excellent wetting,
    1/Sulfonation is the formation of a sulfuric acid, i.e., a compound
containing the S02OH group.  A common sulfonating agent is concentrated
sulfuric acid.

    6/Sulfates contain H2SO4 esters.  They are not as stable as, and are
more hydrophilic than, sulfonates.

-------
                                     E-137
emulsifyin"  detergent, and anticorrosive characteristics, but are very
expensive.  They are used mostly for emulsion polymerization, latex
stabilization, antistatic effects, dispersants, textile scouring, and general
purpose cleaners.  Other anionics include sarcosinates, polypeptides,
xanthates, and sulfonates.  Natural soap is also anionic. but is not covered
in this section.

    Nonionics accounted for 25 percent of the total production of surfactants
in 1977 (1.2 billion pounds).  Nonionics are compatible with anionic
surfactants, cationic surfactants, and most builders because they do not
ionize.

    The most important group of nonionics is the ethylene oxide condensates.
Alcohol ethoxylatesj/ are primarily used as auxiliary surfactants in
heavy-duty laundry detergents.  Some are also used as intermediates for
anionic ether sulfates.  Alkylphenol ethoxylates are used in textile
processing, petroleum oils, pesticides, paper manufacture, emulsion
polymerization, and as intermediates for sulfate surfactants.

    Anhydrosorbitol esters and ethoxylated anhydrosorbitol esters^/ are used
in foods,  cosmetics, and toiletries.  Glycerol esters are used in foods, and
polyethylene glycol is used in foods and textiles.  Fatty acid alkanolamides
are used as dispersants and foaming agents.

    Cationics accounted for 6.3 percent of the total production of surfactants
(297 million pounds) in 1977.  The most important group, the salts of higher
alkyl amines, are used as ore flotation agents, corrosion inhibitors,
dispersants, foam builders, softeners, and petroleum demulsifiers.  The
quaternary ammonium salts have good wetting and germicidal properties and are
used in fabric softeners, germicides, and dye stuff fixatives.  Cationics in
general are expensive and cannot be used with anionics; this severely limits
their use.

    Amphoterics accounted for .3 percent (18,000 pounds) of total surfactant
production in 1977.  They are used in cleansing bars and shampoos and are
unique in their ability to control detergency.  However, they are very
expensive.

    About one half the total surfactant production is used in household
detergents.  Other major markets are industrial cleaning products, oil well
drilling,  breaking of crude oil emulsions,  secondary oil recovery, pesticides,
textile processing, metal processing, foods, ore flotation, paints, metal
cleaning,  elastomer and polymer production, and lubricants.
    Z/Ethoxylates are chemicals containing ethylene oxide, which provides
solubility in water.

    JL/Esters are organic compounds that correspond in structure to salts in
inorganic chemistry.

-------
                                     E-138
HISTORY

    The first synthetic surfactants were developed in Germany during World War
I because of a shortage of natural fats.2/  They included sulfated fatty
alcohols, fatty aryl taurides, and isethiomates. and were used in textile
manufacturing,  in the 1920s, the first commercially feasible sulfonated
surfactants were developed by the chemical and dye manufacturers who supplied
the textile industry.  Although Germany continued to be the leader in this
field, the United States, Great Britain, France, and Switzerland quickly
caught up.

    Alcohols were first ethoxylated in 1929 by I.G. Farben (Germany), and
Union Carbide and Rohm Haas were responsible for developing nonionic
surfactants in the United States.

    In the middle 1930s the first light-duty surfactants were introduced.  At
the end of World War II their performance was greatly improved from the
addition of builders that soften water.

    Alkylbenzene sulfonate (ABS) was introduced in the early 1950s, and with
it came the explosive growth of the synthetic detergent industry.  Over the
next two decades production increased 20 times its original amount and in the
middle 1960s the nonbiodegradability of ABS, due to its branched nature, was
discovered.  The industry spent several hundred million dollars to develop
linear alkylbenzene sulfonates  (LAS) .M/

INDUSTRY STRUCTURE

    There are three parts to the surfactant industry:  raw material suppliers,
producers that sell surfactants, and producers that use most of their
productive capacity.Al/

    Major suppliers of linear alkylbenzene (LAB). the intermediate used to
produce LAS, are Conoco, Monsanto, and Union Carbide (see Table 5).  Conoco,
Ethyl, and Shell chemical produce synthetic fatty alcoholsJL?./, and Proctor
and Gamble is the only producer of natural fatty alcohols.  Nonylphenol, the
major alkylphenol.i^/ is produced by Borg-Warner, GAF Corporation, Jefferson
Chemical, Monsanto, Rohm Haas, and Schenectady Chemicals.  Ethylene oxide is
produced by BASF Wyandotte, Jefferson Chemical and union carbide.  Major
synthetic surfactant producers are:  BASF Wyandotte, Conoco, GAF Corporation,
Jefferson Chemical, Monsanto, Rohm Haas, Shell chemical, and Union Carbide.
    I/Natural fats are used to make soap.

    i2/American Chemical Society, Chemistry in the Economy, a study
supported in part by the National Science Foundation, 1973, p. 200.

    ii/Mary K. Meegan, ed., Kline Guide to the Chemical Industry (3rd ed.,
Fairfield, NJ:  Charles Kline & Co., 1977), p. 166.

    ii/Fatty alcohols are used in anionic surfactants.

    il/Alkylphenol is used in nonionic surfactants.

-------
                                                                            TABLE 2







                                                                 U.S  PRODUCTION  OF SURFACTANTS




                                                                       (million pounds)







                    1977   1976   1975   1974   1973   1972   1971   1970   1969   1968   1967   1966   1965   1964   1963   1962   1961   1960   1959   1958
An ionics
Sulfonates
Carboxylic
acids
Sulfates
Phosphates
i, poly-
phasphates
Other
Total
Nonionics
Carboxylic
acid amides
i
Carboxylic
acid esters
Esthers
Other
Total
Cationics
Amphoterics
TOTAL

1961
638
524
39
45
3207

81
226
883
6
1195
297
18
4718

1942
821
391
32
170
3356

78
222
653
3
957
252
18
4582

1780
735
374
21
153
3062

82
222
742
-
1046
226
14
4349

1832
839
341
31
133
3176

89
262
866
-
1218
284
19
4697

1524
939
311
28
165
2967

94
246
784
-
1124
260
21
4372

1335
907
330
26
149
2747

88
224
737
-
1048
229
14
4039

1278
872
281
27
137
2595

81
204
736
-
1021
203
10
3828

1331
938
297
27
135
2728

90
204
627
1
922
228
8
3886

1305
959
338
25
126
2753

83
179
706
2
971
169
8
3901

1271
1044
249
22
124
2710

87
164
601
2
854
167
8
3739

N/A
1044
N/A
15
135
2614

92
164
444
5
704
154
7
3479

N/A
962
N/A (X) (X) (X) (X) (X) (X) (X) (X)
13
133
2469 2358 1434 1369 1361 1238 1074 1068 979

93
146
444 (X) (X) (X) (X) (X) (X) (X) (X)
2
686 659 581 525 523 446 426 400 342
162 148 98 83 65 37 31 36 32
5 5 5 3 65 8 31 36 2
3321 3170 2119 1981 1949 1729 1532 1504 1355






td
i
i ^
U)
kD








N/A - not available.




(X)  There was a change  in  the classification  system  that makes disaggregation difficult and inaccurate.




SOURCE:  U.S. International Trade Commission,  Synthetic  Organic Chemicals,  1977  (Washington, D.C.:  Government Printing Office, 1977),

-------
                                                                           TABLE 3
                                                                  U.S. SALES OF SURFACTANTS
                                                                     (millions of dollars)


                    1977   1976   1975   1974   1973   1972   1971   1970   1969    1968   1967   1966    1965    1964    1963    1962    1961    1960    1959   1958
Anionics
Sulfonates
Carboxylic
acids
Sul fates
Phospphates
S poly-
phosphates
Other
Total
Nonioni.cs
Carboxylic
acid amides
Carboxylic
acid esterst
Ethers
Other
Total
Cat ionics
Amphot erics

164

51
97


16
9
335

31

115
229
5
381
141
19

153

54
91


14
4
316

27

105
226
4
362
123
20

131

55
85


12
2
290

29

95
185
-
309
110
13

132 N/A

66 N/A
78 58


14 10
50
228 195

36 20

108 67
171 116
-
315 202
124 89
17 13

78

17
52


10
38
187

18

57
100
-
174
72
9

76

10
53


8
40
169

16

54
92
-
162
67
7

70

11
43


8
37
172

17

49
81
1
148
64
5

78

11
37


9
37
166

15

45
74
1
134
58
5

66

14
37


7
42
149

16

43
70
2
130
57
5

63

N/A
N/A


6
41
141

15

40
58
2
116
48
4

60

N/A
N/A (X) (X) (X) (X) (X) (X) (X) (X)


5
43
133 196 187 188 173 169 167 ' 148

19

40
60 (X) (X) (X) (X) (X) (X) (X) (X)
1
119 113 108 101 100 93 89 87 71
51 51 43 35 30 21 20 18 15
3 3 3 2 30 5 20 18 1










M
H*
it*
o







TOTAL
                    875
                           821
                                  717
                                         746
                                                532
                                                       451
                                                              422
                                                                     387
                                                                            370
                                                                                   357
                                                                                          317
                                                                                                 315
                                                                                                        300
                                                                                                               350
                                                                                                                      325
                                                                                                                             317
                                                                                                                                    292
                                                                                                                                           278
                                                                                                                                                  271
N/A - not available.

(X)   There was a change in the classification system that makes disaggregation difficult and inaccurate.

SOURCE:  U.S. International Trade Commission, Synthetic Organic Chemicals, 1977 (Washington, D.C.:  Government Printing Office, 1977).
                                                                                                                                                         235

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                                                         TABLE 4


                                                U.S.  SALES  OF SURFACTANTS

                                                  (millions of pounds)
1977   1976   1975   1974   1973   1972   1971   1970   1969   1968   1967   1966   1965   1964   1963   1962   1961   1960   1959   1958
Car boxy lie
acids
Sulfates
Phosphates &
poly-
phosphates
Other
Total
Nonion ics
Carboxylic
acid amides
Carboxylic
acid esters
Ethers
Total
Cationic
Amphoteric
Total
134
214
22
25
1,425 1

56
t
191
617
868
204
17
2 , 515 2
146
234
19
12
,440

52
182
640
877
178
17
,512
146
216
16
6
1,280

56
159
512
728
159
14
2,182
177
212
24
--
1,452

56
210
568
833
108
19
2,502
N/A
223
21
221
1.519 1,

59
190
585
834
207
20
2,580 2,
48
226
21
205
274

60
194
533
787
183
14
258
16
208
18
228
1,223

52
182
552
786
167
10
2,186
32
189
16
225
1,163

58
154
523
736
155
8
2,061
31
177
18
248
1,157

53
145
483
682
140
8
1,988
50 N/A N/A
158 N/A N/A (X) (X) (X) (X) (X) (X) (X)
16 12 9
276 281 298
1,161 1,088 1,112 1,078 1,365 1,316 1,311 1,192 1,046 1,024

53 58 63
143 126 121
492 344 337 (X) (X) (X) (X) (X) (X) (X)
689 533 523 492 434 395 389 349 322 314
140 123 127 123 96 75 59 36 31 34
8 7 5 5 5 3 59 7 31 34
1,998 1,750 1,766 1,698 1,900 1,790 1,758 1,583 1,399 1,372

(X)


901



(X)
274
26
2
1,203
N/A - not available.
(X) There was a
change in
SOURCE: U.S. International
the
class if ication
Trade Commission,
system that makes disaggregation difficult and inaccurate.
Synthetic
Organic Chemicals,
1977
(Washington, D.C.: Government Printing Office, 1977).

                                                                                                                                                 M
                                                                                                                                                 I

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                                                                             TABLE 5
                                                                   U.S. PRICES OF SURFACTANTS
                                                                       (dollars  per  pound)


                     1977    1976   1975   1974   1973   1972   1971   1970   1969   1968   1967   1966   1965   1964   1963   1962   1961   1960    1959    1958
An ionics
Sulfonates
Carboxylic
acids
Sulfates
Phosphates
& poly-
phosphates
Other
Total

.16
.38
.45
.71
.36
.24

.15
.37
.39
.73
.38
.22

.15
.38
.39
.72
.37
.22

.13
.37
.37
.59
N/A
.20

N/A
N/A
.26
.49
.23
.15

.10
.35
.23
.45
.19
.15

.10
.63
.25
.46
.17
.15

.10
.34
.23
.51
.16
.15

.11
.35
.21
.49
•15
.14

.10
.28
.21
.47
.15
.14

.09
N/A
N/A
.52
.15
.13

.09
N/A
N/A
.53
.14
.12
Nonionics
Carboxylic
acid amides
Carboxylic
acid esters
Ethers
Other
Total
Cationic
Amphoteric
.55
.60
.37
1.22
.44
.69
1.08
.52
.58
.35
1.21
.41
.69
1.13
.52
.60
.36
N/A
.42
.69
.94
.64
.51
.30
N/A
.38
1.15
.91
.34
.35
.20
N/A
.24
.43
.67
.30
.29
.19
N/A
.22
.39
.67
.31
.30
.17
N/A
.21
.40
.68
.29
.32
.15
1.09
.20
.41
.72
.28
.31
.15
.94
.20
.41
.64
.30
.30
.14
1.03
.19
.41
.59
.26
.32
.17
.46
.22
.39
.62
.30
.33
.18
.87
.23
.40
.66
TOTAL
                      .35
                             .33
                                    .33
                                           .30
                                                  .21
                                                         .20
                                                                .19
                                                                       .19
                                                                              .19
                                                                                     .18
                                                                                             .18
                                                                                                    .18
                                                                                                            (X)    (X)
                                                                                                           .14    .14
                                                                                                                         (X)
                                                                                                                                (X)
                           (X)
(X)
                                                                                                                         .14
                                                                                                                                .15
                                                                                                                                       .16
                                                                                                                                              .16
                                                                                                            (X)    (X)     (X)     (X)
                                                                                                                                       (X)
                                                                                                                                              (X)
N/A - not available.

(X)  There was  a  change in the classification system that makes disaggregation difficult and inaccurate.

SOURCE:  U.S.  International Trade Commission, Synthetic Organic Chemicals, 1977  (Washington, D.C.:  Government Printing  Office,  1977).
(X)   (X)
                                                                                                                                                     .16  .16
                                          (X)   (X)
.23   .35    .26    .26    .27    .28    .28  .26

.41   .45    .47    .50    .58    .63    .52  .56

.60   .61    .65    .50    .60    .63    .52  .49


.18   .18    .18    .18    .60    .20    .20  .20

-------
                                 E-143
                                 TABLE  6

                     LAB PRODUCTION AND DEMAND DATA
Supply

Producer
     Conoco
     Monsanto
     Union Carbide
     Witco
     Total
                             Capacity - 1979 (million Ibs.)

                                      240
                                      225
                                      140
                                       40
                                      645
Demand

     1978:  524 million Ibs.
     1979:  530 million Ibs.
     1983:  560 million Ibs.

Growth in Demand

     1968-1978: -  .1% annually.
     1979-1983: - 1.5% annually.
Uses
     LAS:
     Exports:
     Other:
90%
 9%
 1%
     Source:  Chemical Marketing Reporter, May 28» 1979.

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                 E-144


                TABLE 7

      FOREIGN TRADE OF SURFACTANTS

1970    1971    1972    1973    1974
                                                            1975     1976   1977
Exports
  Million Pounds    134     142     151      174      198      151      163      157
  % of Production   3.4     3.7     3.7      4.0      4.2      3.5      3.4      3.3

imports
  Million Pounds     74      56      42       62       73       75       88       98
  % of Consumption  1.7     1.5     1.1      1.5      1.6      1.8      1.9      2.1

                   Source:   Synthetic Organic Chemicals.


    Diamond Shamrock, ICI united States,  and Stepan are  the  three  large
companies selling their surfactants to other firms.   Smaller companies in this
group include Alcolac,  Emery industries,  Glyco,  Miranol,  Henkel, Lonza,
Millmaster Onyx, Mona,  and Quaker chemical.

    Companies using most of their production captively include Proctor and
Gamble, Lever Brothers, and colgate-palmolive, the  three  synthetic detergent
giants.  Witco Chemical also uses surfactants in its private label
detergents.  About 50 percent of total surfactant production is captively
consumed.
FOREIGN TRADE

    Between 1970 and 1977 estimated annual U.S.  exports of  surfactants
increased from 134 million pounds valued at $41  million to  157 million  pounds
valued at $83 million (see Table 6).  Exports ranged from 3.3  percent to 4.2
percent of total quantity. IV  principal export  markets were Canada, japan,
Holland, Belgium, Great Britain, France, and other European countries.
Nonionics were the largest export group, valued  at $21  million.

    The volume of exports is not expected to exceed 173 million pounds  in 1982
and will probably continue to grow erratically.   High shipping costs and
foreign production levels should limit export growth

    Imports in 1977 totaled 98 million pounds, an increase  of  11 percent over
1976.  This represented 2.1 percent of U.S. consumption.

    Imports consist mainly of non-benzenoid surfactants, including 28.5
million pounds of lignosulfonates.  Total imports are expected to reach 150
million pounds by 1982.
    M/Meegan,  Kline Guide,  p.  166.

    IVu.S. international Trade Commission,  Synthetic Organic Chemicals,
1977 (Washington, D.C.:  Government  Printing Office,  1977).

-------
                                     E-145
INNOVATION

    The surfactant industry appears to have shown a great deal of innovation
in the past and will probably continue to do so.  Many significant new uses
have been found for surfactants in the areas of oil processing, phosphate
ester anionics, cosmetics, dry cleaning, emulsion polymerization, powdered and
liquid detergents, and fabric softeners.  Currently, unknown uses may require
totally new surfactants.  There is still much room for innovation in detergent
surfactants, i.e., a completely biodegradable replacement must be found for
LAS.  We predict that the use of nonionics will continue to grow as detergent
phosphate levels are decreased, and, as energy costs rise, there will be
pressure to develop surfactants that work well in cold water.

    ICF conducted an analysis of new chemicals that are introduced for
commercial purposes.  From a sample of 1978 through 1979 issues of Chemical
Purchasing, 151 new chemicals were identified.  Of these, ten were
surfactants.  Only one of these surfactants had been introduced by a major
producer (Stepan).  Also, five new surfactants were geared toward uses other
than synthetic detergents, and three, introduced by Hodag Chemical
Corporation, were for use in food processing.

    This analysis is not conclusive for it is limited by a small sample size,
a relatively short time span, and publishing considerations.  However, it does
suggest that a substantial amount of innovation is occurring, and that much of
this is being done in relatively small firms.

-------
           E-146
Fatty Acids and Glycerin

-------
                                     E-147
                            FATTY ACIDS AND GLYCERIN

FATTY ACIDS

    Patty acids are carboxylic acids with long, straight hydrocarbon chains.
They are one of two byproducts from the hydrolysis of natural fats; the other
byproduct is glycerin.

    Fats and oils are usually combinations of oleic, palmitic, and stearic
fatty acids with glycerin.  Oleic acid is the principal acid in olive and
cottonseed oils, and palmitic ana stearic acids are the major acids in tallow.
Tall oil fatty acids occur freely in crude tall oil,I/ so the pulp and paper
industry, which produces crude tall oil, also produces some fatty acids as a
byproduct.

    Fatty acids can also be produced synthetically from petroleum
derivatives.  This source is widely used in Europe where there is a shortage
of natural oil.2/ supplies, although some synthetic fatty acids are also
produced in this country.  The rising costs of natural oils, uncertainty about
droughts and storms, and political considerations have motivated the industry
to look for other sources.  Because of soaring petroleum prices, synthetics
are not presently viable; however, there are two exceptions.  High coconut oil
prices and a shortage of alternative supplies have resulted in the continued
popularity of short chain (C5_io) acids found in oil despite rising oil
prices.  The second exception is the group of branched chain fatty acids,
which usually do not occur naturally.

    In 1978 the industry produced 1,351.2 million pounds of fatty acids (see
Table 1), and captive consumption and sales totaled 1.411 billion pounds
(Table 2), about 21.4 percent of which was captively consumed.  Domestic
shipments were $1,066.4 million  (Table 3), and exports were $82.2 million
(Table 4) .

    Between 1967 and 1978 production grew at an annual rate of 4.15 percent.
Since 1975 production has grown at a 11.8 percent rate.  Continued growth is
expected at between 2.5 and 4 percent.  C.H. Kline Company expects shipments
to reach $390 million in 1985, which represents a three percent growth rate.

    Fatty acids are used in many markets.  in 1977, rubber compounding accoun-
ted for the largest share, 10.8 percent,  use in emulsion polymerization,
fooa, plastics, cosmetics, household detergents, soaps, ozonolysis, polishes,
and speciality household cleaners had a total of 61.6 percent  (see breakdown
in Table 5).  Other uses accounted for 27.6 percent.  Exports accounted for
only 6.7 percent of production but were over 10 percent of the total value of
shipments  (see Table 6).  imports were negligible.
    A/Tall oil comes from pine wood.

    2/ln this report, oil refers to vegetable and animal oils, not petroleum.

-------
                                     E-148
    Tall oil, a pine wood derivative, is the most important fatty acid group,
accounting for 29 percent of total production.  in 1975 tall oil fatty acids
were used in intermediate chemicals (48 percent), protective coatings (23
percent), and soaps, detergents,  ana disinfectants. (12 percent).
Approximately 30 million pounds were exported   Other unsaturated.3/ oils
accounted for 29 percent of total production; saturated oils accounted for the
rest.  Oleic acid is used primarily in surfactants.  Stearic acid, accounting
for nine percent of production, is used mainly in rubber compounding, but is
also used in surfactants, plasticizers, metallic soaps, and cosmetics.  Laurie
acid, derived from coconut oil, is used in specialty detergents, plasticizers,
cosmetics, and high-performance synthetic lubricants,  the production of which
is growing very rapidly.  Fatty acids are also employed in textiles, paints,
mining, leather, and metal work.

    Many fatty acids are upgraded through esterification, polymerization,
oxidation, and hydrogenolysis.  Fatty acids are easily transformed into fatty
alcohols, amides, amines, and nitriles, and can also be sulfonated and
chlorinated
    .^/Saturation refers to the number of valence bonds,  (i.e.,  carbon atoms)
in a fatty acid.

-------
                                      E-149
                                     TABLE  1

                       FATTY ACID PRODUCTION, 1974 - 1978
                              (millions of pounds)
Saturated Fatty Acids
                                          1974
                                          98.5
1.  Stearic acid—40-50% stearic content 115.4
2a. Hydrogenated fatty acids having a
    maximum titer of 60°C and a
    minimum i.v. of 5
2b. Hydrogenated fatty acids having a
    minimum titer of 57°C and a
    maximum I.V. under 5
2c. Hydrogenated fatty acids having a
    minimum stearic content of 70%.
3.  High palmitic-over 60% palmitic,
    I.V. maximum 12
4.  Hydrogenated fish fatty acids,
5.  Coconut-type acids I.V. 5 or more
    including palm kernel and babassu,
    hydrogenated coconut acid
6a. Fractionated short-chain acids
    CIQ or lower including capric
6b. Fractionated short-chain fatty
    acids, lauric and for myristic
    content of 55% or more.
         TOTAL SATURATED

Unsaturated Fatty Acids

7.  Oleic Acid                           165.8
8.  Animal fatty acids other than
    oleic—I.V. 26-80                     68.2
9.  vegetable or marine fatty acids
    I.V. maximum 115                       1.6
10. Unsaturatea fatty acids—I.V.
    116-130                               16.4
11. Unsaturated fatty acids—
    I.V. over 130                         27.9
         TOTAL UNSATURATED               279.9
12. Tall oil fatty acids—containing
    less than 2% rosin acids and more
    than 95% fatty acids                 207.6
13. Tall oil fatty acids—containing
    2% or more rosin acids               155.6
         GRAND TOTAL                     1172.1
1975

94.4


86.3
1976   1977   1978
123.5  123.9  127.2


103.1  102.3   98.1
165.7
31.2
14.6
9.1
61.9
14.8
17.8
529.0
99.5
27.2
8.3
5.1
58.9
14.1
15.1
409.0
126.8
30.8
8.3
7.3
69.3
18.4
16.2
503.6
142.8
30.4
11.5
7.0
79.4
19.1
17.4
533.8
158.5
32.3
14.7
6.5
88.8
18.6
16 8
561.4
                                                  118.1  154.6  142.4  158.3

                                                  113.3  135.9  157.6  156.3

                                                     .5    9.5    3.5    0.1

                                                   19.3   17.4   54.7   57.0

                                                   12.2   21.4   27.8   24.2
                                                  263.5  338.7  385.9  396.1


                                                  149.6  201.0  181.0  191.7

                                                  143.6  172.4  178.2  202.1
                                                  966.1  1215.7 1278.9 1351.2
Source:  Fatty Acid Products' Council, Fatty Acid Production, Disposition and
         Stocks Census  (Monthly); and pulp Chemicals Association  (provided
         tall oil fatty acid statistics).
NOTE:    Titer is the solidification point of the fatty acids which have been
         liberated from fat by hydrolysis  (Condensed Chemical Dictionary.
         1971).  I.V. is iodine value.

-------
                                     E-150
                                    TABLE  2
                      FATTY ACID DISPOSITION,  1974  -  1978
                              (millions of pounds)

Saturated Fatty Acids                       1974     1975   1976   1977   1978

1.  Stearic acid—40-50% stearic content.  114.0   128.2   138.4  142.6  146.2
2a. Hydrogenated fatty acids having a
    maximum titer of 60°C and a
    minimum I.V. of 5                       96.8    88.8   103.9  102.9  100.5
2b. Hydrogenated fatty acids having a
    minimum titer of 57°C and a
    maximum I.C. ^nder 5                   162.5   124.8   147.0  165.0  188.1
2c. Hydrogenated fatty acids having a
    minimum stearic content of 70%          29.8    30.4    33.0   32.5   33.8
3.  High palmitic-over 60% palmitic,
    I.V. maximum 12                         13.6     7.9     9.8   12.4   14.4
4.  Hydrogenated fish and marine mammal
    fatty acids                              8.7     6.7     7.0    7.2    6.9
5.  coconut-type acids I.V. 5 or over,
    including piam kernel and babassu,
    hydrogenated coconut acid               61.2    59.9    71.9   82.0   90.1
6a. Fractioned short-chain acids,  CIQ
    or lower including capric               15.3    14.0    18.5   19-8   18.1
6b. Fractionated short-chain fatty
    acids, lauric and for myristic
    content of 55% or more                  16.8    15.3    17.7   19.6   17.6

Unsaturated Fatty Acids
7.  Oleic Acid  (red oil)                   163.8   121.9   157.8  149.6  160.9
8.  Animal fatty acids other than
    oleic I.V. 26-80                        67.3   130.4   157.9  175.6  162.8
9.  vegetable or marine fatty acids
    I.V. maximum 115                         1.6     0.8     9.4    3.5    0.4
10. Unsaturated fatty acids—I.V.
    116-130                                 15.7    19.0    18.6   57.8   56.3
11. Unsaturated fatty acids—I.V.  over
    130                                     27.3    12.5    21.7   29.0   24.6
12. Tall Oil fatty acids—containing
    less than 2% rosin acids and more
    than 95% fatty acids                   202.3   148.1   203.5  178.0  189.6
13. Tall Oil fatty acids—containing 2%
    or more rosin acids                    156.6   133.3   183.9  177.1  ^00.8

         TOTAL                            1152.3  1042.1  1300.0 1354.9 1411.1

    Source:   Fatty Acids Producers' Council, Fatty Acid Production, Disposi-
              tion & Stocks Census  (Monthly); and pulp Chemicals Association
              (provided tall oil fatty acid statistics).

    Note:     Totals may not agree exactly with those shown due to independent
              rounding of figures.  I.V. is iodine value.

-------
                                      E-151
                                     TABLE 3
Saturated Fatty Acids

1.  Stearic acid—40-50% stearic
    content
2a. Hydrogenated fatty acids having a
    minimum titer of 60°C and a
    minimum l.v. of 5
2b. Hydrogenated fatty acids having a
    minimum titer of 57°C and a
    maximum l.v. under 5
2c. Hydrogenated fatty acids having a
    minimum stearic content of 70%
3.  High palmitic-over 60% of palmitic,
    I.V. maximum 12
4.  Hydrogenated fish and marine mammal
    fatty acids
5.  coconut-type acids I.V. 5 or over,
    including palm kernel and babassu,
    hydrogenated coconut acid
6a. Fractionated short-chain acids,
    or lower including capric
6b. Fractionated short-chain fatty
    acids, lauric and for myristic
    content of 55% or more

UnsaturatedFattyAcids

7   Oleic Acid  (red oil)
8.  Animal fatty acids other than
    oleic l.v. 26-80
9.  vegetable or marine fatty acids
    I.V. maximum 115
10. Unsaturated fatty acids—I.V.
    116-130
11. Unsaturated fatty acids—I.V.
    over 130
12. Tall oil fatty acids—containing
    less than 2% rosin acids and more
    than 95% fatty acids
13. Tall oil fatty acids—containing
    2% or more rosin acids

         TOTAL
    Source:
    Note:
'TY ACIDS
pounds)
1974
82.7
94.7
92.3
24.5
6.3
8.4
55.0
13.8
7.8
95.2
58.5
0.7
12.6
26.8
179.2
132.9
891.8
, 1974
1975
71.2
85.5
58.4
24.3
3.2
5.7
45.8
11.9
7.1
60.5
99.7
0.4
10.8
12.1
133.4
124.8
754.7
iil, Fatty Acid
- 1978
1976
92.8
101.9
96.4
25.0
5.2
5.9
54.0
16.0
12.0
85.9
109.9
9.1
9.8
16.4
173.6
163.8
977.7

1977
96.0
100.8
99.7
23.6
6.3
6.2
56.8
16.5
10.1
90.3
119.4
1.3
39.3
26.9
155.7
137.8
986.9

1978
94.5
99.0
115.3
25.4
7.1
5.3
61.4
16.9
9.6
86.4
119.0
0.3
36.1
21.1
196.6
172.4
1066.4
Production, Disposi-
tion & Stocks Census (Monthly) ; and Pulp Chemicals Association
(provided tall oil fatty acid statistics).

Totals may not agree exactly with those shown due to independent
rounding of figures.  I.V. is iodine value.

-------
                                      E-152
                                     TABLE  4
                CAPTIVE  CONSUMPTION  OF  FATTY ACIDS,  1974 - 1978
                              (millions of pounds)

Saturated Fatty Acids                      1974    1975    1976    1977     1978

1.  Stearic acid—40-50% stearic content   28.6    55.5    43.5    45.0     49.6
2a. Hydrogenated fatty acids having a
    maximum titer of 60°c and a
    minimum I.V. of 5                       0.4     1.9     0.6     1.5      0.4
2b. Hydrogenated fatty acids having a
    minimum titer of 57°c and a
    maximum I.V. under 5                   70.2    63.3    50.2    64.8     72.1
2c. Hydrogenated fatty acids having a
    minimum stearic content of 70%          5.1     5.9     7.6     8.8      8.3
3.  High palmitic-over 60% palmitic,
    I.V. maximum 12                         6.6     4.6     4.4     5.8      7.1
4.  Hydrogenated fish and marine
    mammal fatty acids                      0.3     1.0     1.1     0.9      1.5
5.  coconut-type acids l.v. 5 or
    over, including palm kernel and
    babassu, hydrogenated coconut acid      6.2    13.9    17.7    25.1     28.4
6a. Fractionated short-chain acids, CIQ
    or lower including capric               1.4     0.8     0.8     1.0      1.0
6b. Fractionated short-chain fatty
    acids lauric and for myristic
    content of  55% or more                  8.8     8.1     5.5     9.4      7.8

Unsaturatea Fatty Acids

7.  Oleic Acid  (red oil)                   64.7    57.8    69.2    55.6     69.6
8.  Animal fatty acids other than
    oleic I.V.  26-80                        8.7    30.4    47.8    53.2     34.8
9.  vegetable or marine fatty cids
    I.V. maximum 115                        0.9     0.4     8.4     2.2
0.1
10. Unsaturated fatty acids—I.V.
    116-130                                 3.1     8.3     8.9     7-8      8.1
11. Unsaturated fatty acids—I.V.
    over 130                                 —      —     0.2     0.9      1.1
12. Tall oil fatty acids—containing
    less than 2% rosin acids and more
    than 95% fatty acids                    n.a.    n.a.    n.a.    n.a.     n.a.

13. Tall oil fatty acids—containing
    2% or more rosin acids                  n.a.    n.a.    n.a.    n.a.     n.a.
         TOTAL                            205.0   251.9   265.9    282.2    289.8

    Source:   Fatty Acids Producers' Council, Fatty Acid production. Disposi-
              tion & Stocks Census  (Monthly); and pulp Chemicals Association
              (provided tall oil fatty acid statistics).

    n.a. - Not Available.

    Note:     I.V. is iodine value.

-------
                                      E-153
                                    TABLE  5

                   PERCENT OF FATTY ACID USE By MARKET:  1977



                           Market                     percent

                     Rubber compounding                 10.8

                     Emulsion polymerization             9.9

                     Food                                8.0

                     Plastics                            7.5

                     Cosmetics                           7.0

                     Household Detergents                7.0

                     Soaps                               6.3

                     Ozonolysis                          6.1

                     polishes                            5.1

                     Specialty household cleaners        4.7

                     Others                             27.6

                     Exports                             6.7
Source:  "Fatty Acids Use to Increase, Partly because of Plastic Boom,"
         Chemical Marketing 'Reporter.  April 18,  1978.

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                                  E-154
                                 TABLE  6
                     FATTY  ACID  EXPORTS,  1974  - 1978
                           (millions of pounds)
Saturated Fatty Acids
1.
2a.


2b.


2c.

3.

4.

5.



6a.

6b.


Stearic acid — 40-50% stearic content
Hyarogenated fatty acids having a
maximum titer of 60°C and a
minimum I.V. of 5
Hyarogenated fatty acids having a
minimum titer of 57°C and a
maximum I.V. under 5
Hyarogenated fatty acids having a
minimum stearic content of 70%
High palmitic-over 60% palmitic,
I.V. maximum 12
Hydrogenated fish and marine
mammal fatty acids
Coconut-type acids I.V. 5 or
over, including palm kernel
and bassu, and hydrogenated
coconut acid
Fractionated short-chain acids,
CIQ or lower including capric
Fractionated short-chain fatty
acids, lauric and for myristic
content of 55% or more
1974
2


1


0

0

0

a/



0

0


0
.7


.6


.1

.2

.7





.05

.09


.1
1975 1976
1.


1.


3.

0.

0.

a/



0.

0.


0.
5


4


1

1

1





2

1


1
2.


1.


0.

0.

0.

a/



0.

o.


0.
1


3


4

5

2





3

2


2
1977
1


0


0

0

0

0



0

0


0
.6


.6


.5

.1

.1

.05



.2

.2


.2
1978
2.


1.


0.

0.

0.

0.



0.

0.


0.
1


1


7

2

2

1



2

3


3
Unsaturated Fatty Acids
7.
8.

9.

10.

11.

12.


13.


Oleic Acid (red oil)
Animal fatty acids other than
oleic I.V. 26-30
Vegetable or marine fatty acids
I.V. maximum 115
Unsaturated fatty acids — I.V.
116-130
Unsaturated fatty acids — I.V.
over 130
Tall oil fatty acids — containing
less than 2% rosin acids and more
than 95% fatty acids.
Tall oil fatty acids — containing
2% or more rosin acids
TOTAL
3

0

-

0

0


27

23
60
Source: Fatty Acids Producers' Council,
tion & Stocks Census (Monthly) ;
.1

.06

-

.04

.6


.2

.7
.2
Fatty
3.

0.

—

o.

0.


14.

8.
35.
6

3



2.

o.

a/

7

2

3

3

.8

.0

4.

9.

9

0

a/

05 a/

4


8

5
6
Acid
and Pulp

5.


29.

20.
65.

1


9

1
5

10

1


22

39
86
Production,
Chemicals

.7

.1


.7

.7
.7

12.

2.


20.

28.
82.

0

4


3

5
2
Disposi-
Association

          (provided tall oil fatty acid statistics)

         a/  Less than 10,000 pounds.

Note:    i.v. is iodine value.

-------
                                     E-155
    There are about 20 companies manufacturing fatty acids.  The largest
producers are Armak, Ashland Chemical, Emery Industries, Hercules, Humko,
Sheffield Chemical, and Union Camp.  Other companies include Baker Castor Oil,
Darling, General Mills, Glyco, and Millmaster Onyx.  Nearly all of these
companies also make fatty acid derivatives.

    The fatty acid industry should not be affected by a premanufacturing
notification requirement (PMN).  All natural fatty acids come from animal and
vegetable fats so there seem to be no problems with regard to toxicity or
innovation.  The synthetic fatty acids are not toxic and it appears that not
enough of them are being developed to consider this an innovative segment.
Rising petroleum prices continue to seriously limit this market.

GLYCERIN

    Glycerin is the other byproduct of the hydrolysis of natural fats.  it has
many desirable characteristics, giving it many applications.  Glycerin absorbs
and retains moisture up to 50 percent of its volume.  it has strong solvent
powers but is itself insoluble in chloroform and gasoline.  It is clear,
colorless, viscous, very stable, and noncorrosive.  it also has strong
preservative powers.

    Because of all these qualities, glycerin is used in more than 25
industries.  These include:  adhesives and cements, cleaners and polishes,
electrical equipment, explosives, leathers, lubricants, metals, packaging
materials, paper photography, plastics, printing and lithography, paints and
protective coatings, rubber, textiles and dyes, tobacco, glass, agriculture,
cosmetics, beverages, foods, medicine and surgery, dentistry, Pharmaceuticals,
veterinary medicine, and optometry  (see Table 7).
                                     TABLE 7

                            GLYCERIN END USE PATTERN

                                       1979             1978
                                     Estimate         Estimate
       Derivative                     percent          percent

         Drugs and Cosmetics             21               22
         Food and Beverage               17               15
         Alkyd Resins                    15               15
         Tobacco                          9               10
         Cellophane                       7                5
         polyether polyols                8                8
         Explosives                       2                2
         Exports                         15               15
         Miscellaneous                    6                8
Source:  Mannsville Chemical Products, "Chemical Brief", Chemical Age, March
         1979.

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                                     E-156
    The supply of natural glycerin is determined by  fatty  acid production.
Since demand is greater than supply,  there  is a market for more expensive
synthetic glycerin.4/  AS demand changes, synthetic  glycerin production
changes.  The existing market causes  extreme volatility in synthetic
production and tight price competition,   in 1977 synthetic glycerin
represented 45 percent of the total market.  in 1978,  because of decreasing
overall glycerin demand, synthetic glycerin represented only 32 percent of the
total market.  Prices decreased from  $.48 to $.47 per  pound (see Table 8).

    Over the last few years domestic  demand for glycerin has declined.
Glycerin is used as a plasticizer in  cellophane processing; this application
historically accounted for about 15 percent of glycerin demand.  Recently,
however, it has dropped to five percent, as cellophane production has severely
decreased.  The demand for glycerin in the  explosives  industry has also
severely decreased,  and went from five percent to two  percent of glycerin
demand.  The use of alkyd resins, used in paints,  has  shown slow growth as
paint formulations use less glycerin  than in the past.

    Between 1960 and 1970 domestic demand decreased  10 percent.  Nevertheless,
exports grew 270 percent, allowing overall  production  to increase at one or
two percent over the 10 year period,   in the 1970s,  however,  domestic demand
was static while imports rapidly increased,5/ and this caused a drop in U.S.
production.

    Production of natural glycerin was estimated at  more than 200 million
pounds for 1978.^/  The average price was $.47 per pound,  and in 1979 prices
rose to $.58 because of lower domestic production.  During the next few years,
production is expected to decrease by one or two percent annually.

    The major producers of natural glycerin are the  major  manufacturers of
soaps and fatty acids.  These include Armak,  Proctor and Gamble, Colgate-
Palmolive, Emery, Humko, Kraftco, Lever Brothers,  pacific  Soap, Swift, and
Union Camp.

    Because it is non-toxic and has shown no innovation, glycerin will not  be
affected by a PMN.  it may find some  new uses, but its nontoxicity should make
a PMN a mere formality.
    i/Synthetic  glycerin  is classified  in  SIC 28695.

    -S./imports have  since  ceased.

    6/Mannsville Chemical Products, Chemical  Products Synopsis, October 1979.

-------
                                                                            TABLE 8

                                                        AVERAGE PRICES RANGE-GLYCERINE-SYNTHETIC-99.6%
                                                            CENTS PER POUND-DELIVERED-BULK-EASTERN
                      1960          1965
Trade List Prices     29 1/4         23
Average Sales Price    27
                    1970
                   20 1/4
                     19
                         1974
                      22 1/2-50
                          42
                            1975
                            48-50
                             48
                               1976
                               46-48
                                47
                                    1977
                                 50-50 1/4
                                     48
                                                        ESTIMATED GLYCERINE PRODUCTION:
                                                          ALL GRADES-SYNTHETIC AND NATURAL-100% BASIS
                                                                 (millions of  pounds)
                                       1978
                                     51 1/4-49
                                        47
                                            1979
                                            49-58
                                             1980
                                             60-62
    Capacity
      Natural
      Synthetic
    Production
    Demand
    Inventory Change
    Exports
    Imports
1960

 180
 150
 305
 285

  20
  15
1965

 180
 250
 353
 305

  52
   4
1970

 165
 360
 336
 274
 (12)
  74
1974

 165
 335
 358
 296

  66
   6
1975

 165
 335
 272
 218
   6
  45
   1
1976

 165
 335
 325
 277
  (6)
  58
   4
1977

 165
 335
 311
 286
   8
  30
  13
1978

 180
 345
 303
 286
 (16)
  40
   7
1979

 180
 345
 350(Est)
 297
  (8)
  58(Est)
1980

 180
 170

 250
                                                                                                                                           1982
           290
                                                                                                                                                     1985
                     280
Source:  "Glycerine,1 Chemical Products  Synopsis  (a  reporting  service  of Mannsville  Chemical  Products  Co.,  Cortland,  N.Y.),  October 1979.
                                                                                                                                                               Ui
                                                                                                                                                               -J

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        E-158
Soaps ana Detergents

-------
                                     E-159
                      SOAPS AND DETERGENTS -  INTRODUCTION

INTRODUCTION

    Soap and detergent industry shipments were $6.3 billion in 1978 and real
annual growth is expected to be 2.7 percent.!/  Soaps, household detergents,
and industrial cleaners each have different markets and market structures.
The household soap industry is highly concentrated; one product has been the
industry leader for decades.  Both household soaps and detergents involve a
great deal of advertising and a good Distribution system.   The top three ma]or
household detergent producers comprise 83 percent of the industry.  One
product, in fact, has held more than 25 percent of the market for 25 years.
In contrast, industrial cleaners are not concentrated at all.  Most products
are sold on a regional level and many are custom tailored  to specific uses.

    Cleaners can also be classified as either synthetic or natural.  The
natural cleaners, soaps, have been produced for 3000 years; they are derived
from vegetable and animal fats.  The synthetic detergents  were introduced at
the beginning of the twentieth century in Germany; they are mixtures of
surfactants, builders, and other agents.  The two groups are in direct
competition with each other, the synthetics having captured most of the
cleaning market since the 1930s.  Some analysts believe natural soaps are
making a comeback because of environmental issues and cost considerations.

SOAPS

    Soap is the sodium, potassium or triethanolamine salt  of a long chain
prganic acid.  Soaps are primarily made from beef tallow,  palm oil, coconut
oil, and olive oil.

    To have "detergent power", an acid must have more than nine carbons.
Technically, any salt of a fatty acid with more than seven carbons is a soap.
As the number of carbons is increased, so is the detergency; however, if the
soap has more than 18 carbons it is no longer soluble in water.   (The more
carbons in each chain, the less soluble the soap.)  Oleic  acid is one of the
best soaps because it has the detergent power of a 17-carbon soap, but the
solubility of a 12-carbon soap.  Soaps of length greater than 17 carbons are
used in scouring pads where they need not be soluble.

    Soaps were discovered 3000 years ago by the Romans,  in 1791 Nicolas
LeBlanc used electrolysis to make sodium hydroxide from sodium chloride,
thereby making it possible for anyone possessing electrolysis technology to
make soap,  in the early 1800's, M.E. Chevreul explained the chemistry
involved in soap.
    I/Charles Kline & Company, Household and personal Care Products
Industry, August 1979.

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                                     E-160
    The basis of soap manufacture is the splitting of fat stocks into fatty
acids and glycerin.  The glycerin is a valuable byproduct (see Fatty Acids).
The fatty acids are neutralized by adding an alkaline material, usually sodium
hydroxide.  Other minor ingredients are added later for added alkalinity,
odor, and aging stability.

    Soap works well in soft water; but in hard water, it tends to combine with
calcium and magnesium ions to form insoluble curds.  Because these curds leave
residues such as bathtub rings, while synthetic detergents do not, synthetic
detergents have captured the cleaning industry.  Even though synthetics tend
to aegrease and thereby, dry skin, the cleansing bar industry has seen the
entry of some synthetics in combination with natural soaps.

    According to the census of Manufactures, soap and detergent shipments in
1977 were valued at $4,987 million.  industrial and institutional products
accounted for $979 million of this value, and household soap products
accounted for $710 million  (see Table 1).  This incidates that soaps represent
14.2  percent of all shipments and 17.7 percent of the household market of SIC
2841  (soaps and other detergents, except specialty cleaners), but Charles
Kline & Co. estimates that soap has less than five percent of the cleaning
market.  The difference in estimates is caused by ambiguities in the
classification systems used   For soap as defined in this report, the Kline
figure is a better estimate.

    The two major cleansing bar manufacturers are Proctor &  Gamble (Ivory,
Coast, Safeguard, Zest, Camay)  and Armour-Dial (Dial, Tone).  Ivory has the
most unit sales, but Armour-Dial maintains that Dial has the most dollar
sales.  Other large manufacturers are Lever Brothers (Caress, Dove, Lifebouy,
Lux, Phase III) , Colgate-Palmolive (Irish Spring, Cashmere Bouquet) , and
Andrew Jergens (jergens, Gentle Touch).  Other major products that contain
soap are Brillo scouring pads and some liquid dishwashing lotions.  Although
the market for the industrial applications of soaps is more  diversified than
that for synthetic detergents,  it follows the same marketing patterns (see
Synthetic Detergents).   Both markets depend heavily on distribution outlets
and advertising, for example.

    We believe there is no new chemical innovation in the natural soap
industry.  Any innovation at all is process innovation.  Thus, this industry
probably does not warrant further investigation.

    Synthetic fatty acids have been developed for use in soaps, and it is
possible that new ones may be developed.   However, these synthetics are not
dangerous and it appears that recently they have not experienced much
innovation.

    Finally,  any soaps  containing ingredients other than neutralized fatty
acids (this  includes almost all cleansing bars)  are covered  by FDA.

SYNTHETIC DETERGENTS

    A synthetic  detergent is a  mixture of surfactants,  builders,  bleaching
agents,  corrosion  inhibitors, and other agents used to  clean surfaces.

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                                      E-161
                                    TABLE  1

                          SOAPS AND OTHER  DETERGENTS:
                               VALUE OF SHIPMENTS

                              (millions of  dollars)
Total

Soaps and Detergents

   Non-Household

Detergents, Household

   Synthetic Organic
   Detergents, Dry
      Light-Duty
      Heavy-Duty (Phosphate)
      Heavy-Duty (Phosphate-Free)
      Hard-Surface Cleaners

   Synthetic Detergents, Liquid

      Light-Duty
      Heavy-Duty (Phosphate)
      Heavy-Duty (Phosphate-Free)

   Pre-Soaks

Soap, Household

   Toilet Soap
1972
2

1





,852
653
,634
79
808
45
2
299
(D)
(D)
52
412
339
1977
4,987
979
3,807
130
(D)
499
12
483
(D)
147
95
710
613
increase
75%
49%
72%
65%
1014%
500%
62%
83%
72%
81%
(D)  Withheld

  Source:   U.S.  Department of Commerce, Bureau of Census, 1977 Census of
           Manufactures (Washington, D.C.:  Government Printing Office, 1979)

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                                     E-162


Detergents are used to clean textiles,  cooking and eating utensils, walls and
floors, and metals.  They may also be used for human cleansing, ana may appear
in powder, liquid, tablet, or gel form.

Components

    Surfactants are the active component in all detergents.  Because they work
much better in soft water, builders are used to soften water.  Builders
prevent the metal ions in hard water, mainly calcium and magnesium, from
combining with either surfactants or dirt particles; they also help disperse
dirt, provide added and buffered alkalinity, and kill microorganisms.
Examples of builders are the condensed polyphospates, STP  (also called STPP),
tetrasodium pyrophosphate, sodium carbonate, NTA. tetrasodium ethylenediamene
tetraacetate  (EDTA), and the polycarboxylates.

    Bleaches are used to whiten surfaces.  There are two types of bleaches in
use:  Hypochlorites, which include potassium dichloroisocyanurate  (KDCC) and
chlorinated trisodium phosphate, are the more powerful of the two.  The
peroxygens such as sodium perborate however are used more often.  All
detergents containing bleach are in solid form because the liquid bleach
solutions are too unstable.  Bleaches are used in scouring pads, automatic
dishwashing detergents, commercial sanitation, and textile cleaning.

    Corrosion inhibitors prevent the corrosion of washing machines and fine
china.  They are soluble silicates with varying ratios of SiC>2 and Na2O.
They also contribute to detergency because of their alkalinity.

    Sudsing modifiers alter the foaming and sudsing properties of a
detergent.  Mono- and diethanol amides of Cig_i6 fatty acids increase
sudsing, and long chain (Ci6_22) fatty acids and ethoxylated fatty alcohols
decrease sudsing.

    Fluorescent whitening agents, also called FWA, are fluorescers,
brighteners,  and optical bleaches.  They increase the "brightness" of textiles
by  absorbing incident light in the ultraviolet region and re-emitting part of
it as visible light, generally in the blue region of the visible spectrum.
They are organic chromophores modified with an organic substituent to make it
attracted to the textile involved.  Fluorescent whitening agents are derived
from sulfonated triazinylstilbenes, and those for organic fibers differ from
those for synthetic fibers.  The brighteners are usually incorporated into
synthetic fibers when the fibers are produced.

    Enzymes loosen soils and stains that have protein and carbohydrate parts,
including body soils and food, grass, and blood stains.  The commonly used
enzymes (proteolytic and amylolytic enzymes) are derived from fermentation
cultures of specific strains of ubiquitous bacteria.  Research over a long
period of time was required to find enzymes that could react at high
temperatures.   Addition of enzymes to the industry is considered by many to be
the most significant advance in detergent technology since the introduction of
synthetic detergents.

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                                      E-163
    Anti-redisposition agents help disperse dirt into the liquid solution and
prevent it from being redeposited onto the clean surface.  Examples include
carboxymethyl cellulose ana polyvinyl alcohol.

    Other components facilitate production or add to product acceptability.
Hydrotropes, such as xylene sulfonate, increase surfactant solubility and
detergent shelf life.  Colors and perfumes are added to improve product
appearance.

History

    The first synthetic detergents, short chain alkyl napthalene sulfonates.
were produced in Germany during World War I because animal fats were being
diverted to other uses.  Long chain alcohol sulfates were introduced in the
1920s and early 1930s.  Long chain alkyl aryl sulfonates were also introduced
in the 1930s, and by the end of World War II, had replaced alcohol sulfates
(see Surfactants).  Companies began to produce detergent formulations from
these compounds between 1950 and 1955, which led to the explosive growth of
phosphate builders.

    In the early 1960s consumers became concerned about the environment.  The
branched alkyl sulfonates in use at the time were not biodegradable, so linear
alkyl sulfanates (LAS) replaced them.  However, many environmentalists felt
that high phosphate levels in rivers and lakes were causing dangerous levels
of algae.  This effect was "entrophic", meaning that an increase in mineral
and organic nutrients was depleting the waters' dissolved oxygen, and thereby
establishing an environment that favors plant over animal life.  Although it
was not clear that detergents were the major source of the problem, many
areas, especially in the Great Lakes region, banned phosphates in detergents,
and federal agencies and detergent manufacturers arranged for the voluntary
reduction of phosphate levels.  it is still questionable if lower phosphate
levels in detergents have reduced phosphate levels in our water systems.

    Alternatives to phosphate builders that have been tried are zeolites
(Proctor & Gamble), Builder M (Monsanto). NTA, carboxymethyloxysuccinate
(CMOS) (Lever Bros.), and citric acid.  Zeolites are not as effective as
phosphates and NTA may be as harmful.  Because none of these chemicals
presently have the production capacity to replace phosphates, this is an area
with potential for innovation.

    The latest innovations have been the addition of brighteners (which are
losing popularity)  and enzymes.  Enzymes may be dangerous if workers are
constantly exposed to them, but they are harmless in household applications.

Detergent Uses

    The largest use of detergents commercially is in textile cleaning.  Since
World War II, synthetics have replaced soaps in this industry, and soaps now
have less than 5 percent of the market.  Most detergents (80-90 percent) are
powdered, but liquids are gaining popularity.  Ten to 20 percent of a
detergent's bulk is surfactant, 30 to 60 percent are builders, and 5 to 10

-------
                                     E-164
percent are sodium silicates.   The rest of the bulk is provided by
inconsequential components,   presoaks usually contain less surfactants and
more enzymes, builders, and bleach.  Heavy-duty laundry detergents contain
high levels of builders.

    The second largest use is in hard surface cleaners, which can be broken up
into:  automatic and hand dishwashing detergents; floor and wall cleaners; and
scouring pads.  Except for automatic dishwashing detergents, these contain a
relatively large concentration of sudsing agents.

    Hand dishwashing detergents usually come in liquid form,  in comparison to
powders, liquids offer superior ease and convenience, are better suited to the
surfactant type and level used in hand dishwashing, and require no builders.
Dishwashing liquids are 25 to 45 percent anionic surfactants; the remaining
ingredients are solvents, hydrotropes, buffers, colors, perfumes, and water.
The surfactants usually used are LAS, alkyl sulfates, alkyl polyethoxy
sulfates. di- or mono-ethenol fatty acid amides, alkyl glyceryl ether
sulfonates, and alkyl dimethylamine oxides.  These surfactants have shorter
chains than those used in detergents.

    Automatic dishwashing detergents require low sudsing to avoid overflows,
complete rinsing to avoid residual deposits, and complete chelating.
Chelating is the process of neutralizing mineral ions in hard water.
Automatic dishwashing detergents require a low level of nonionic surfactant,
usually polyoxyethylene or polyoxypropylene condensate, a low level of bleach,
a high level of builder  (usually STP or sodium carbonate), and a moderate to
high level of alkalinity in auxiliary sources.  All automatic dishwashing
detergents are powders to accommodate dishwashing machine design.

    Abrasive cleaners have a high level of abrasive, usually silica flour, a
low level of bleach, and a low level of surfactant which serves as a wetting
agent and helps remove stains.

    Large area cleaners come in both liquid and solid form.  The liquids
contain a low level of nonionic and anionic surfactant, a high level of
stable, highly soluble builder (usually tetrapotassium pyrophosphate)
solvents, hydrotropes, and water.  The solids contain very low levels of
surfactant (usually LAS), moderate levels of builder (usually STP), and high
levels of mild alkalinity (usually trisodium phosphate and mixtures of sodium
carbonate and sodium bicarbonate).  All large area cleaners require low
sudsing.

    Personal care products using synthetic detergents include cleansing bars,
shampoos, bubble baths, cosmetic cleaners, and toothpaste.  The cleansing bar
market is still dominated by natural soaps but some synthetic soaps have
appeared.  Unfortunately, the  synthetics degrease skin, although some mixtures
of natural and synthetic detergents have been successful in the market.
Surfactants sometimes added are alkyl sulfates, alkyl glyceryl ether
sulfonates. alkyl esters of sodium isethionate. and alkyl amides of N-methyl
tauride.   Other personal care  products are in SIC 2842 and are covered by FDA
regulations.

-------
                                      E-165
    Industrial and institutional products are analogous to household products
but are more powerful, more specialized and are packaged differently.
Applications unique to certain industries and institutions include yarn
cleaning, metal cleaning, and surgical equipment.

Manufacturing Process

    The most sophisticated method for producing detergents is called spray
drying.  The first step is sulfation and/or sulfonation of anionic surfactant
intermediates (fatty alcohol and/or LAB).  This is accomplished through the
introduction of oleum and intermediates into a special acid-resistant alloy
pump which acts as a mixer for raw materials.  Reaction heat is reduced by
putting the surfactant into a larger mass of recirculating, externally cooled,
reaction product just prior to sulfation.  Key control variables are:

         1)   temperature, which must be high enough for pumpable
              viscosity and rapid reaction, but low enough to avoid
              charring;

         2)   the ratio of oleum to surfactant intermediate;

         3)   mixing efficiency; and

         4)   reaction time.

    The second step is neutralization of the acidity of the surfactant using
sodium hydroxide.  This forms the sodium surfactant salts present in the final
detergent product.  Sodium sulfate is also formed from neutralization of
excess sulfuric acid, and it passes into the finished product.  Heat of
reaction is again reduced by mixing the reactants with a larger, externally
cooled, recirculating mass of neutralized material.  The resultant neutralized
surfactant paste is passed through a cooler to a holding tank.

    Next, the major detergent ingredients—surfactant paste, builders, and
corrosion inhibitors—are mixed together to form a thick paste in a large
closed tank containing a worm screw agitator.  The tank is mounted on a scale
to determine an accurate measurement of each component.  The mixer is called a
crutcher, and the process crutching.  This is usually done in a batch and then
poured into a holding tank for continuous operation of the next step.

    High pressure pumps deliver paste to the atomizing nozzles of a spray
drying tower.  Droplets from the nozzles are puffed into granules and dried by
hot (600°F) air.   Finally, the granules are cooled and the remaining
ingredients are added.

    A simpler method involves just adding the dry raw materials to heated
surfactant, but usually more than one mixing is needed.  Liquid and paste
detergents are mixed in batches, and may be preceded by sulfation or
sulfonation of the surfactant intermediate, or a finished surfactant may be
used.   The key control factors are temperature, time, agitation rate, and the
specific hydrotropes used.

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                                     E-166
The Industry and its Relationship to Other Industries

    In 1978 sales of household soaps and detergents were estimated at $3
billion and sales of industrial and institutional soaps and detergents were
$1.9 billion.2/  m 1977 the industry had 31.900 employees, an increase of
one percent from 1972.  Leading states in employment were New Jersey,
California. Ohio, and Illinois, representing about 40 percent of the total.I/

    The synthetic detergent industry buys all its raw materials from basic
chemical companies.  The industry sometimes uses surfactant intermediates to
make finished surfactants.

    The soap and detergent industry has two separate markets, household and
industrial.  The domestic household detergent market is dominated by Proctor &
Gamble (P&G) with 50 percent of the market, and Colgate-Palmolive Co. and
Lever Brothers, each with 17 percent.  Tide, a P&G product, has had more than
25 percent of the market for 25 years.

    Proctor & Gamble's total fiscal 1978 sales were $4.1 billion and net
income was $512 million, mostly in household cleansers, food products,
toiletries, and disposable paper products.  Laundry and cleaning products had
sales of $3.19 billion.  For 1976, "domestic chemical sales" were estimated at
$245 million, $200 million of which was earned by the industrial Chemicals
Division in natural glycerin, fatty acids, fatty alcohols, surfactants (mostly
for captive use), and specialty textile chemicals.  Sales of industrial
cleaning products, estimated at $45 million, are handled by the industrial and
Institutional Sales Departments of the Proctor & Gamble Distributing Co.

    Colgate-Palmolive Co. had sales of $4.31 billion and net income of $176
million in 1978.   Sales of household and personal care products totaled $2.95
billion.   Colgate has increased sales and earnings for 18 consecutive years.

    Lever Brothers is the only one of the three dominant firms with over half
its sales in the detergent market,  it is a subsidiary of Unilever, N.V. of
Holland,   its major liquid detergent, Wisk, is the industry leader for liauids.

    The other 17 percent of the market is shared by S.C. Johnson, Clorox,
Sterling Drug, Amway, American Home Products, Bristol-Myers, Purex, and a
number of smaller companies.
    yHamilton c. Carson, "Soaps and Detergents." Household and personal
Products industry, January 1979.

    1/U.S. Department of commerce. Bureau of the Census, 1977 Census of
Manufactures (Washington, D.C.:   Government Printing Office,  1979).

-------
                                      E-167
    Distribution and marketing are probably the most important factors in the
industry.  Also, the large capital investment involved in the spray drying
technology appears to limit the number of national distributors.  Proctor &
Gamble's strength in distribution and marketing and its access to substantial
capital appear to be the causes of its large share of the market.

    The industrial and institutional cleaning products market has a high
degree of competitiveness and firms are mostly regional.  Less than 30
companies operate on a national basis and only 14 have domestic sales of $25
million or more.  These 14 companies share 50 percent of the market,  chemical
Week estimates there are 3.000 firms in the industry.!/  Economics
Laboratories, the industry leader, has $400 million in yearly sales and has
increased its earnings for 26 consecutive years and its sales for 44
consecutive years.

    Large producers with at least $10 million in sales include Airwick,
Beatrice Foods, Consolidated Foods, Huntington Laboratories, Merck, Occidental
Petroleum. Rochester Germicide. Stauffer Chemical, and U.S. Borax and
Chemical.  Because of the large number of different surfaces to clean,
products tend to be specialized.  According to Edward Minklein of Klix
Chemical Company ,j>/ the industry has three types of firms:   One type
manufactures and processes the product and then sells it directly to end users
or intermediate formulators.  Alcolac, Stauffer, BASF Wyandotte. and Diamond
Shamrock fall into this group. Another type only processes and sells the
product.  Examples are Oakite. Zep, National Chemsearch, West Chemical, and
Economics Laboratory.  Finally, some firms merely process the material and let
distributors market it.  Klix Chemical Company falls into this last group.

    Industrial and institutional cleaners are associated with much less
advertising and lower distributional and capital expenditures than other
products in the detergent industries.  instead, they require a high degree of
service, which also acts to make these markets more regional in nature.

    Different segments of the detergent industry are growing at different
rates.  Home laundry products have become a mature industry and will only grow
with the population.  Also, energy considerations are motivating consumers to
do larger loads to save energy and simultaneously use less laundry detergent.
Therefore, most forecasters are predicting a 2 to 2.5 percent growth rate.
Heavy-duty liquids seem to be growing faster than any other segment.

    The use of automatic dishwashing detergents will continue to grow rapidly
as more consumers buy dishwashers,  in 1977 only 38 percent^/ Of all
households had dishwashers ana their use is expected to grow at a rate of four
    4/chemical Week, August 22, 1973.

    5/Ibid.
    i/"Detergent Sales Expected to Reach $6.1 Billion by 1985", Soaj
Cosmetics/Chemical Specialties, April 1977.

-------
                                      E-168
percent annually.2/  Hand aishwashing liquid is losing its market to the
automatic dishwashing powders, and its sales are expected to grow 5.5 percent
annually in current dollars..§/  The household specialty products industries
rate for the use of automatic dishwashing powders are not yet mature and will
continue to grow rapidly.

    The use of industrial and institutional cleaners has also been rapidly
growing, but is expected to slow to about 4 percent annually.^/  The use of
acid cleaners, car wash detergents, carpet cleaners, sanitizers, and
disinfectants will grow faster, and conventional floor care products use will
grow slower than it has in the past.

INNOVATION

    The synthetic detergent industry is certainly innovative but it seems that
a  large percentage of that innovation is geared toward new formulations and
better processes.  Some work is being done on new surfactants and builders and
the ecology issues are unsettled.

    After a cursory review, it appears that the detergent producers are
performing much of this research themselves and then licensing it to their
suppliers.  This should be verified, however.

    Some producers are experimenting with a plastic surfactant that would
replace conventional laundry detergent.  Also,  some new uses, one of which is
fatty acid production,  are being introduced into the detergents industry.
    I/John Whitehead, "Slow Growth Seen for U.S.  Detergent Market", Chemical
Age, November 23,  1979.

    8/"Detergent Sales." Soap/Cosmetics Chemical  Specialties.

    I/Mary K. Meegan, ed.,  Klin Guide to the chemical industry (3rd ed.,
Fairfield, NJ:  Charles  Kline & Co.,  1977), p.  136.

-------
                                     E-169


                                    TABLE  2

                  ECONOMIC INDICATORS FOR SOAPS AND DETERGENTS
                       1975   1974   1973   1972   1971
Employees (thousands)   30.0

Payroll (millions     406.3
  of dollars)

Production workers
  (thousands)           19.3

  Man hours (millions)  38.1

  Wages (millions     241.2
  of dollars)
Value added
  (millions
  of dollars)

Cost of materials
  (millions
  of dollars)

Value, industry
  shipment
  (millions
  of dollars)

New investments
  (millions
  of dollars)

End of Year
  Inventory
  (millions
  of dollars)
         30.9   32.4   31.5   30.1

        385.3  371.2  341.6  305.5



         20.0   20.9   20.4   19.2

         40.5   41.3   40.9   38.0

        228.7  222.0  205.9  178.7
 1970   1969   1968

 30.9   30.8   29.6

283.5  269.8  246.7



 19.9   20.5   19.8

 39.8   40.5   38.8

171.6  161.5  150.6
2249.2 2267.4 2011.3 2038.8 1728.1 1647.6 1542.7 1485.9
2383.3 2216.3 1699.4 1373.7 1291.4 1375.3 1346.1 1286.7
4675.6 4383.9 3758.7 3394.4 3020.7 2987.3 2888.6 2763.0
 107.2  103.5   77.0   90.7   96.2   84.7   48.6   46.0
 536.0  592.1  379.7  381.7  326.4  317.8  274.7  266.7
  Source:   U.S.  Department of Commerce.  Bureau of Census, Annual Survey of
           Manufacturers (Washington,  D.C.:  Government Printing Office,
           various years).

-------
           E-170
Elementary Organic Chemicals

-------
                                     E-171
                  ELEMENTARY ORGANIC CHEMICALS SEGMENT SUMMARY
                           Petroleum  Refinery  Products
                                  Cyclic  Crudes
                             Gum and Wood Chemicals
    Elementary Organic Chemicals are the simple alkanes, olefins and aromatics
which can be obtained directly from petroleum, coal, or wood.  Although the
products can be varied to some extent by making minor adjustments in the
production processes, emphasis is always placed on production of the
relatively small number of basic compounds which serve as the building blocks
for the entire organic chemical industry.

    Prior to World War II, the basic chemical building blocks were derived
primarily from coal tar, a by-product of coke manufacture.  But with the
development of the vast Middle East oil fields after World War II, petroleum
displaced coal as the primary chemical feedstock.  Although the basic chemical
building blocks could also be obtained from gum and wood chemicals, in
practice they are not.  The major types of gum and wood chemicals are
turpentine, charcoal, rosin, and tall oil.

    Product innovation in this segment appears to be virtually non-existent.
But, the huge petroleum price increases of the last ten years have brought
about renewed interest in coal-based chemical feedstocks,  it seems that such
a switch would result in significant process innovation in the chemical
industry.  However, in light of the intricate oil-based network which has
developed over the last thirty years, any conversion from petroleum to coal
will be slow.  The energy crunch has also renewed interest in biomass-based
chemicals, but here again any expansion will be slow.

    The production of petroleum refinery products, by far the dominant factor
in this segment, is relatively unconcentrated and has changed little over the
years,  in both 1958 and 1972, the top four firms accounted for 13 percent of
the total value of shipments,  petroleum products are produced by almost all
major chemical and petroleum companies.

-------
           E-172
petroleum Refinery Products

-------
                                     E-173
                           PETROLEUM REFINERY  PRODUCTS

DESCRIPTION

    SIC code 2911 comprises establishments primarily engaged in the production
of gasoline; kerosene; distillate fuel oil; residual fuel oils; lubricants and
other products (from crude petroleum); and fractionation products (through
straight distillation of crude oil, redistillation of unfinished petroleum
derivatives, cracking or other processes).!/

    This category includes common products like kerosene, paraffin wax, and
petroleum jelly in addition to less familiar items like butane, butadiene,
petroleum, coke,  and xylene.  All of these products fall under the broad
classification of basic organic chemicals, which are distinct from
intermediate and  end products,  petroleum products are not further altered
chemically, but are either formulated with other materials or used by other
industries for fabricating products.

    In general, petroleum products are commodities produced in relatively
large volumes and sold at low prices.   in 1976 an estimated 289 billion pounds
of organic chemicals were produced, 74 percent of which could be classified as
basic and intermediate compounds.2/  of these, over 54 percent were basic
petrochemicals such as benzene, toluene,  propylene, ethylene and xylene.I/
ENGINEERING PROCESS

    The chemical composition of crude oil varies widely, especially with
respect to hydrocarbon compound content.  When underground in its natural
state it is at a higher temperature and greater pressure than at the surface.
Changes in pressure and temperature that occur during the extraction process
release or break down some of the hydrocarbons contained in crude oil.

    The hydrocarbons within crude oil can be divided into numerous categorical
series according to their chemical properties.  The four series that comprise
most of the naturally occurring petroleum products are paraffin, isoparaffin,
naphthene, and aromatics.  petroleum products are the result of assorted
chemical reactions and mixtures of hydrocarbons from all of these series.
    i/Executive Office of the President, Office of Management and Budget,
Standard industrial Classification, 1972 (Washington, D.C.:  Government
Printing Office, 1972).

    2/Mary K. Megan, ed., Kline Guide to the Chemical industry (3rd ed.,
Fairfield, NJ:  Charles Kline & Co., 1977).

    .3/Forty-four percent were petrochemical intermediates and solvents, and
the remainder were gum and wood chemicals and fatty acids.

-------
                                     E-174


    Petroleum products are often derived through distillation and
fractionation processes of crude oil (see Table 1).   Roughly 55 percent of the
raw materials for basic petrochemicals  are byproducts or  coproducts of
petroleum refining.  The remainder  is obtained from  natural gas feedstocks.!/
USES

    Petroleum products produced in refineries  have  wide-ranging uses and
applications.  Kerosene that is distilled from petroleum,  for example,  is used
in rocket and jet fuels as well as in solvents and  insecticidal sprays.
Paraffin wax is used in household products,  and petroleum  coke and alkylates
are important in chemical products processes (see Tables 1 and 2).

    Petroleum products generally form a family of basic building blocks  used
in the manufacture of other organic products.   At one time, benzene, toluene,
and xylene were mainly byproducts of coke production for steel, but now  these
building blocks are obtained primarily from  petroleum sources.
INDUSTRY STRUCTURE

    Petroleum products are produced by almost all major  chemical and petroleum
companies.  The latter group,  with its captive feedstocks for chemical
conversion, tends to concentrate only on basic organics  that it supplies to
producers of end-use chemicals.   in contrast, chemical companies produce
organics for captive consumption in their own chemical end product operations.

    Overall concentration in petroleum refinery products has changed very
little since 1958 (see Table 3).  in both 1958 and 1972  the four largest
companies accounted for 13 percent of the total value of shipments.  At a more
specific product level, such as  gasoline or jet fuel, shares of the market
appear to be fairly stable. The two exceptions to this  are residual fuel oil
(where the four largest companies accounted for 34 percent of shipments in
1954 and 41 percent in 1972) and unfinished oils (where  the four largest
companies had 39 percent of shipments in 1954 and 55 percent in 1972).  If any
trend exists, it is toward greater concentration.

    Concentration on a product-by-product basis varies considerably.  The top
four producers of miscellaneous  petroleum products, including waxes, held 28
percent of the market while the  top four producers of jet fuel captured 52
percent of their market in 1972.

    Industry structure has changed markedly since World  War II.  The industry
once depended almost entirely  on steel mills and coke ovens as sources for raw
materials, but it now relies heavily on petroleum feedstocks.^/
    i/Meegan,  Kline Guide.

    5/Ibid.

-------
                                                                            TABLE 1
Product
Alkylate
Asphalt
                   Engineering Process
                                   DERIVATION AND USES OF SELECTED PETROLEUM PRODUCTS

                                                                    Uses
Benzene




1,3 - butadiene



Coke, petroleum




Kerosene


Lubricating
  grease

Naphtha


Naphthenic acid


Paraffin wax
Petrolatum
(mineral was,
petroleum jelly,
mineral jelly)
Derived from reaction between an isoparaffin and an olefin
Mixture of paraffinic and aromatic hydrocarbons and heterocyclic
compounds containing sulfur nitrogen and oxygen; occurs in nature
or obtained as residue in petroleum refining.
a)  Hydrodealkylation of toluene or of pyrolysis gasoline
b)  Transalkylation of toluene by disproportionation reaction
c)  Catalytic reforming of petroleum
d)  Fractional distillation of coal tar

a)  Catalytic dehydrogenation of butenes or butane
b)  Oxidative dehydrogenation of butenes
Destructive distillation  (carbonization) of petroleum.  Petroleum
yields coke during cracking process, the formation acting as
a catalyst poison
Distilled from petroleum
Mixture of mineral oil or oils with one or more soaps.
Generic term applied to refined, partly refined, or unrefined
 petroleum products subject to distillation.

Gas-oil fraction of petroleum by extraction with caustic soda
solution and subsequent acidification

Occurs naturally in crude oil; obtained from high boiling point
fractions.
Fractional distillation  of  still  residues  from  the  steam
distillation  of  paraffin-base  petroleum; or  from steam-
reduced  crude oils  from  which  the light fractions have been
removed.
As a high-octane blending component of aviation and civilian
gasolines.

Paving, road-coating, roofing, sealing, special paints; adhesive
in electrical laminates and hot-melt compositions; diluent in
low-grade rubber products; fluid loss control in hydraulic
fracturing  of oil wells; medium for radioactive waste disposal;
pipeline and underground cable coating: rust-proofing; base for
synthetic turf; water-retaining barrier for sandy soils; supporter of
rapid bacterial growth in converting petroleum components to protein.

Styrene; synthetic detergents; cyclohexane for nylon; aniline; DDT;
maleic anhydride; dichlorobenzene; benzene hexachloride; nitrobenzene;
diphenyl; insecticides; fumigants; solvent; paint removers; rubber
cement; anti-knock gasoline.

Principally in styrene-butadien rubber; as starting material for
adiponitrile  (nylon 66); in latex paints; resins; organic
intermediate.

Refractory furnace lining in electrorefining of aluminum and other
high-temperature service; electrodes in electrolytic reduction of
alumina to aluminum; electrothermal production of phosphorous;
silicon carbide, and calcium carbide.

Rocket and jet engine fuels; domestic heating; solvent; insecticidal
sprays, diesel and tractor fuels.
Source of gasoline by various cracking processes; special naphthas,
petroleum chemicals, especially ethylene.

Production of metallic naphthnates for paint driers and cellulose
preservatives; solvents; detergents; rubber reclaiming agent.

Candles, paper coating; protective sealant for food products,
beverages etc.; glass cleaning preparations; hot-melt carpet backing,
biodegradable mulch; impregnating matches; lubricants; crayons;
surgery; stoppers for acid bottles; electrical insulation; floor
polishes; cosmetics; photography; anti-frothing agent in sugar
refining; packing tobacco products, protecting rubber products from
sun-cracking.

Protective dressing and substitute for fats in ointments; lubricating
greases; metal polishes; leather grease; rust preventive; perfume
extractor; insect repellents; in foods as defoaming agent, lubricant,
release agent, protective coating; softener in white or colored
rubber compounds.
H
    Source-  Gessner G. Howley, ed..The Condensed Chemical Dictionary  (8th ed.. New York:  Van Nostrand Reinhold Company,  1971),

-------
                                     E-176


                                    TABLE 2

                        USES OF OTHER PETROLEUM PRODUCTS

                                                                       percent

Butadiene

    Synthetic elastomers                                                 53.0
    Polybutadiene                                                        18  0
    Nitrile rubber and neoprene                                          10.0
    Adiponitrile and other                                               19.0

Ethylene

    Polyethelene                                                         40.0
    Ethylene oxide                                                       20  0
    Ethylene dichloride                                                  14.0
    Ethylbenzene                                                         10.0
    Other                                                                16.0

N-paraffins

    Linear Alkylate (major raw material for surfactants)                 70.0
    Linear primary and secondary alcohols                                24.0
    Other                                                                 6.0

Propylene

    Isopropanol                                                          14.0
    Polypropylene                                                        23  0
    Acrylonitrile                                                        13.0
    Propylene oxide                                                      10.0
    Cumene-phenol                                                        24.0
    Other

Toluene

    Gasoline (octane improver)                                           90.0
    Benzene                                                               6.5
    Toluene diisocyanate, Benzyl chloride,  and other                      3.5

Source:  Mary K. Meegan, ed., Kline Guide to the Chemical industry  (3rd  ed.,
         Fairfield, NJ:  Charles Kline & Co., 1977).

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                                                                            TABLE 3

                                                         CONCENTRATION  IN  PETROLEUM REFINERY PRODUCTS




                                                                                               Total
                                                                                                       Value of Shipments
Product
 Class

2911
29111
29112
29113
29114
29115
29116
29117
Class of Product

Petroleum refinery products




Gasoline


Jet Fuel


Kerosene


Distillate fuel oil





Residual fuel oil





Liquefied refinery gases  (feed  stock  and  other  uses)
Lubricating oils and greases, made  in  refineries
 (See also code 29920.)
Year

 1972
 1967
 1963
 1958

 1972
 1967

 1972
 1967

 1972
 1967

 1972
 1967
 1963
 1958
 1954

 1972
 1967
 1963
 1958
 1954

 1972
 1967
                                                                                 1972
                                                                                 1967
(million
dollars)

$24,772.8
 19,248.5
 15,557.7
 13,889.4

 13,029.6
  9,844.2

  1,371.6
  1,100.4

    372.4
    430.5

 4,407.7
 3,305.7
 2,896.3
 2,490.9
 2,064.3

 1,107.2
   566.1
   621.8
   817.2
   787.8

 1,152.9
 1,135.7
                 894.8
                 883.6
Percent Accounted for by-
4 largest
companies
31
32
32
31
31
33
52
45
43
34
33
34
36
35
36
41
38
35
32
34
38
39
39
43
8 largest
companies
56
57
55
54
55
58
74
63
64
54
58
58
59
59
59
60
61
55
56
57
57
59
64
65
20 largest
companies
84
84
81
81
86
87
92
86
93
89
87
85
83
83
85
83
83
82
83
84
89
86
98
96
50 largest
companies
96
96
95
93
98
98
99
98
99+
99+
98
98
96
96
(N/A)
96
96
96
94
(N/A>
09+
99+
100
99+

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                                                                      TABLE 3  (continued)

                                                          CONCENTRATION  IN PETROLEUM REFINERY PRODUCTS
Value of Shipments


Year
se stock 1972
1967
1963
1958
1954
1972
1967
1963
1958
1954
luding waxes 1972
1967
Total
(million
dollars)
733.7
613.2
526.2
440.9
294.9
671.5
424.2
360.5
284.6
221.7
1,031.4
994.9
Percent Accounted for by-
4 largest
companies
55
56
51
46
39
43
41
43
39
45
28
36
8 largest
companies
79
76
78
74
69
62
58
58
56
63
48
52
20 largest
companies
98
96
94
94
93
84
82
81
77
83
79
77
50 largest
companies
100
99+
99+
99
(N/A)
98
98
98
96
(N/A)
06
9R
Product
 Class             Class of  Product

29118              Unfinished oils and  lubricating oil base stock
29119              Asphalt
29110              Other finished petroleum  products,  including waxes
                                                                                 1967            994.9            36           52        77            9R

                                                                                                                                                               H
Source:  13.S. Department of Commerce,  Bureau of  Census,  1972 Census of Manufactures (Washington, D.C.:  Government Printing Off ice, 1175).                     H>
                                                                                                                                                               00

-------
                                     E-179
    According to the 1977 Census of Manufactures, the total number of
establishments in SIC 2911 dropped by 18 percent from 1963 to 1977.
                                    TABLE  4

                            NUMBER OF ESTABLISHMENTS


              Year                          Number of Establishments

              1977                                    349
              1972                                    323
              1967                                    437
              1963                                    427
    Source:   U.S. Department of Commerce, Bureau of Census, 1977 Census of
              Manufactures (Washington, D.C.:  Government Printing Office,
              1979) .
SHIPMENTS

    The value of shipments of petroleum refining products increased dramati-
cally from 1963 to 1977.  Much of the increase came after 1973; the value of
shipments percentage increase was 93 percent from 1963 to 1973, and it was
roughly twice that, or 188 percent from 1973 to 1977 (See Table 5).

    Data on the value of shipments over time for individual SIC 2911 products
are not available.  Additionally, data on production quantities for all petro-
leum refining products are somewhat incomplete (census data omit a number of
products, and time trend information is often unavailable—see Appendix A).
It appears, however, that the large increases in value of shipments are price
rather than quantity related.  AS the price of petroleum has risen sharply
from 1974 on, so has the price of petroleum refining byproducts and co-
products.

    Of the 20 Sic 2911 products with production in quantities reported by the
census, eight (kerosene, heavy fuel oil, unfinished oils, naphtha and other
oils, lubricating oil petroleum base stocks, petrolatum, special naphthas, and
aromatics) showed production quantity increases (see Appendix A).  These
increases ranged from a high of 70 percent for aromatics (included in this
category are benzene, toluene, xylenes, etc.) to a low of six percent for
lubricating oil petroleum base stocks.

    As the production increases are rather small in terms of quantity, it
seems that price increases are the main factor in the growth of shipment
values.  As Table 6 shows, prices of refined petroleum products exhibited
marked increases since 1974.

    Value-added figures, obtained from the 1977 Census of Manufactures, appear
in Table 7.  The value-added between 1968 and 1977 almost tripled.

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                                     E-180


                                    TABLE 5

                  PETROLEUM PRODUCTS:  VALUES OF SHIPMENTS!/
                             (millions of dollars)


                  Year                               Amount

                  1963                               16,498

                  1964                               16,802

                  1965                               17,501

                  1966                               18,759

                  1967                               20,294

                  1968                               21,361

                  1969                               22,486

                  1970                               22,783

                  1971                               24,584

                  1972                               25,921

                  1973                               31,846

                  1974                               54,834

                  1975                               65,254

                  1976                               77,507

                  1977                               91,833
                   Source:  U.S. Department of Commerce, Bureau of
                           the Census,  1977 Census of Manufactures
                            (Washington, D.C.:  Government  Printing
                           Office,  1979)
a/Values reflect all shipments made  by  establishments  in SIC  2911.
  Values in Table 3  reflect  shipments of  goods  in  product category  2911.

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Refined Petroleum Products




Gasoline




Light Distillate




Middle Distillate




Residual Fuels




Lubricating Oil Materials




Finished Lubricants




Petroleum Wax
                                                                            TABLE 6




                                                                          PRICE INDEX




                                                                  REFINED PETROLEUM  PRODUCTS
1979
325.7
314.7
407.0
425.5
517.9
382.5
216.0
295.4
1978
314.1
279.0
383.0
396.6
513.0
333.4
197.5
249.4
1977
289.2
261.1
325.6
359.0
492.3
274.3
180.4
206.9
1976
273.1
247.7
310.5
336.7
451.8
267.4
180.7
183.2
1975
242.3
204.9
253.7
299.1
604.4
276.6
179.8
172.0
1974
271.4
257.4
328.3
317.9
450.8
171.6
131.1
N/A
1973
112.3
107.7
112.1
113.9
161.8
102.0
120.0
N/A
1972
106.1
101.1
105.4
109.7
154.3
100.7
111.7
N/A
1971
107.9
102.9
106.2
111.6
165.3
100.0
109.8
N/A
1970
101.0
96.1
110.8
107.3
83.4
114.3
115.6
87.8
1968
98.8
93.6
112.9
105.6
82.2
114.3
109.8 f
87.8 £
tilble from the Department of Commerce.
lerce.
Wholesale Price
Index and
Producer Price
Index,
various years.






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                                     E-182


                                    TABLE 7

                         VALUE-ADDED  PETROLEUM  PRODUCTS

                             (millions of dollars)

              1977                                          $14,274
              1976                                           H'410
              1975                                            8,927
              1974                                            8,364
              1973                                            6,519
              1972                                            4,595
              1971                                            4,614
              1970                                            4,608
              1969                                            4,950
              1968                                            4,839
              Source:    U.S.  Department of  commerce,  Bureau  of  the  census,
                        1977  Census  of Manufactures  (Washington,  D.C.:
                        Government Printing Office,  1979).
FOREIGN TRADE

    In recent years the petroleum refinery  products  industry has been charac-
terized by a trade deficit,   in 1974 the  deficit hit a high  of $8.7 billion as
imports climbed 171 percent  and exports grew at a slower  rate of 53 percent
from the year before.   Despite a 28 percent decline  in imports and a modest
seven percent increase in exports,  the trade deficit in 1975 loomed at $6
billion,  in 1976 the  deficit was down slightly to $5.9 billion.  in 1977 the
trend reversed itself  as imports grew by  27  ercent  and exports by only nine
percent, leaving a trade deficit of $7.7  billion (refer to Table 8 for trade
values).

    Tables 10 and 11 provide a closer look  at the composition of petroleum
refinery product exports and imports.
INNOVATION

    In reference to Table 9  Production Quantities,  there are no products
listed in 1977 that were not available in 1972.   (Although production figures
for some categories such as liquefied refinery gases were not available, this
does not mean the products were not in existence.)

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                                     E-183
                                    TABLE 8

                 PETROLEUM REFINERY PRODUCTS^/:  FOREIGN TRADE

                             (thousands of dollars)
1977
1976
1975
1974
1973
1965
Value of
Exports

1,120,476
1,029,338
  932,894
  874,472
  569,799
  454,891
Value of
imports

8,823,584
6,916,853
6,977,707
9,628,151
3,554,698
  955,652
Balance of Trade

   (7,703,108)
   (5,887,515)
   (6,044,813)
   (8,753,679)
   (2,984,899)
   (  500,761)
      2911
Sources:  U.S.  Department of Commerce,  U.S.  Exports, FT 610, and U.S. imports,
         FT 210.

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                                      E-184
                                     TABLE  9

                   PETROLEUM PRODUCTS:  PRODUCTION QUANTITIES
                              (millions  of  barrels)
Product

Gasoline, inc. finished
  base stocks and blending
  agentsa/

jet fuel

Kerosene

Light fuel oil

No. 4 Type fuel oil

Heavy fuel oil

Liquefied Refinery Gases:
  Ethane and/or Ethylene
  Propane and/or Proplylene
  Butane and/or Butylene
  Other liquefied refinery gases
SIC code
29111
29112
29113 13
29114
29114 14
29115
ises
1977
Quantity
N/A
N/A
87
N/A
23
548
68
120
47
28
1972
Quantity
2,397
311
81
1,033
1,033
337
N/A
N/A
N/A
N/A
Unfinished Oils,
  Naphthenic and
  Paraffin^/

Naphtha and other oils for
  use as petrochemical
  feedstocks, except for
  carbon black

Lubricating oil petroleum
  base stocks for blending,
  compounding, and grease
  manufacture^/
Petroleum

Road oild/

Special Naphthase/

Aromatics (benzene,
  Toluene, xylenes, etc.]
29118 13
29116 16
29118, 51, 52
54, 56, 58

29110 11

29110 31

29110 51


29110 54, 56
 92
 57
 34


  3

  3

 29


122
67
41
32


 2

 9

18


71

-------
                                      E-185
                               TABLE 9  (continued)

                   PETROLEUM PRODUCTS:  PRODUCTION QUANTITIES
                              (millions  of  barrels)

                                                   1977                1972
Product                      SIC code            Quantity            Quantity

Lubricating and similar
  oilf/ made in petroleum
  refineries                 29117 21               46                    50

Lubricating greases made
  in petroleum refineries    29117 31                1                     2


Source:  U.S. Department of commerce, Bureau of the Census, 1977 Census of
         Manufactures  (Washington, D.C.:  Government Printing Office, 1979).


a/Includes all finished gasoline, finished base stocks, and blending agents
such as alkylate, polymers  (dimer, codimer, etc.), hydropolymers (hydrodimer,
hydrocodimer, etc.), cumene, isopetane,  neohexane, iso-octane, motor benzol
(benzene), and other blending agents derived from petroleum.  Excludes natural
gasoline derived from natural gas.

^/Includes such products as cracking stock, unfinished gasoline requiring
further distillation, naphtha stocks, slops, wax distillate, and other
finished petroleum oils.  Excludes lubricating oil base stocks, natural
gasoline, and cycle condensates.

£/Includes light, medium, heavy neutral, and residual stocks.

^/Represents residual asphaltic oil used for surface treatment of road and
highways.

e/Includes petroleum ether, rubber solvent, mineral spirits (petroleum
spirits), varnish makers' and painters'  naphtha, high-solvency naphtha, benzol
diluent, lacquer diluent, cleaners' naphtha, stoddard solvent, extraction
solvents, and other petroleum distillates shipped as solvents.

f/Includes oils for lubrication purposes and such non-lubrication purposes
as transformer oil, hydraulic oil, processing oil, quenching oil, and liquid
rust preventative.

-------
                                                                 TABLE 10
                                              PETROLEUM REFINERY PRODUCTS:  VALUE OF EXPORTS
                                                           (thousands of dollars)
Description

Aviation Gasoline

Gasoline, NEC, and Gasoline  Blending
  agent, NEC

Jet Fuel

Kerosene—except Jet Fuel

Distillate Fuel Oils

Residual Fuel Oils

Butane

Propane

Butadiene Monomer

Butylene

Ethylene

Propylene

Natural Gas Liquids, including
   LPG, NEC

Lubricating Oils and Nonlubricating,
   Nonfuel oils

Lubricating Greases

Petroleum—Partly refined

Petroleum—Asphalt
Product Class
2911 10 10
2911 10 30
2911 20 00
2911 30 00
2911 40 00
2911 50 00
2911 6E 25
2911 6E 45
2911 6E 50
2911 6E 61
2911 6E 62
2911 6E 63
2911 6E 97
2911 70 20
2911 70 40
2911 80 00
2911 90 00
1977
961
4,080
1,915
448
420
23,448
1,345
17,596
13,638
1,581
9,689
1,059
52,638
490,226
29,845
—
6,550
1976
864
4,727
3,404
504
1,333
32,301
2,676
23,766
13,630
1,106
5,745
2,294
72,449
436,170
26,825
~
7,271
1975
901
2,202
3,459
437
1,156
43,179
5,516
22,291
11,423
1,997
362
2,607
72,234
426,671
26,063
8,277
6,222
1974
752
11,350
7,637
525
5,518
41,232
1,328
23,388
12,783
—
—
—
69,748
414,405
24,043
—
5,328
1973
1,573
19,164
4,087
810
25,679
23,579
3,855
23,345
6,132
—
—
—
29,991
238,970
15,981
572
2,981
1965
6,260
18,111
621
1,275
15,493
33,509
N/A
N/A
N/A
N/A
N/A
N/A
27,231
218,565
15,650
2,082
2,827
M
 I
03
cr*

-------
                                                              TABLE 10 (continued)
Description

Petroleum Jelly—All Grades

Petroleum Coke, except calcinated

Microcrystalline Wax

Paraffin Wax—Crystalline, Fully
  Refined

Paraffin Wax-Crystalline, except
  Fully Refined

Benzene

Toluene

Xylene, except Ortho- and
  Para-xylene


     TOTAL:
                                                 PETROLEUM REFINERY PRODUCTS:  VALUE OF EXPORTS
                                                             (thousands of dollars)
Product
2911 XO
2911 XO
2911 XO
2911 XO
2911 XO
2911 XO
2911 XO
2911 XO
Class
10
25
80
33
37
43
47
49
1977
10
172
14
15
7
23
79
44
,919
,858
,419
,263
,442
,694
,950
,517
1976
9,306
158,841
14,749
9,886
6,362
25,879
76,293
53,776
1975
6
150
9
12
5
10
46
33
,907
,416
,239
,689
,574
,192
,955
,730
1974
8
78
16
10
7
25
44
34
,925
,943
,026
,520
,918
,334
,010
,463
1973
6
63
11
7
5
12
28
17
,114
,205
,341
,180
,655
,089
,842
,403
1965
5,589
42,027l/
8,726
21,347l/
N/A
10,670
7,230
—
                                                                                  CO
                                                                                  -J
                                       2911
                                                          1,120,476
1,029,338
932,894
874,472
569,799
454,891
I/Includes calcinated petroleum coke.

UIncludes all crystalline paraffin wax.

NEC - not elsewhere classified.
Source:  U. S. Department of Commerce, U. S. Exports, FT 610.

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                                                                  TABLE 11
                                               PETROLEUM REFINERY PRODUCTS:  VALUE OF IMPORTS
                                                            (thousands of dollars)
Description

Gasoline

Jet Fuel, Naphtha-Type

Jet Fuel, Kerosene-Type

Kerosene Derived from Petroleum,
  Shale oil, or both  (except
  motor fuel)

Fuel Oil and Top Crudes Not
  Further Refined, Saybolt Universal
  Viscosity under 145 seconds

Fuel Oil and Top Crudes Not Further
  Refined, Saybolt Universal
  Viscosity under 145 seconds

Propane

Butadiene

Butylene, Ethylene, and Propylene

Ethane, Propane, & Liquefied
  Petroleum Gases, NES; Derivatives
  of Petroleum or Natural Gas, NES

Lubricating Oils Derived from
  Petroleum,  Shale, or  both

 Lubricating  Greases Derived  from
  Petroleum,  Shale, or  both

Asphalturn,  Bitumen, and
  Limestone-Rock Asphalt
Product Class
2911 10 00
2911 20 20
2911 20 40
2911 30 00
2911 40 01
2911 50 01
2911 6E 45
2911 6E 50
2911 6E 60
2911 6E 95
2911 70 20
2911 70 40
2911 90 00
1977
371,814
40,515
308,672
13,324
741,837
5,187,536
N/A
115,930,256
21,515
738,716
32,336
592
61,478
1976
133,124
337,674l/
N/A
2
306,423
4,363,541
218,859
82,398
12,368
222,477l/
4,987
515
46,220
1975 1974 1973
313,591 574,687 140,991
483,098 676,870 297,816
N/A N/A N/A
511 20,418 6,946
497,792 1,003,366 715,814
3,966,199 5,062,764 1,687,143
191,566 157,071 79,838
67,163 99,603 26,541
19,282 31,483 7,257
181,203 218,288 79,581
3,778 6,652 1,101
381 484 426
52,274 64,144 20,868
1965
27,689
90,480
N/A
3,990
13,904
698,072
N/A
N/A
2,1922
8,462
1,009
110
14,710
00
00

-------
                                                            TABLE 11 (continued)
Description

Paraffin and Other Petroleum Maxes

Benzene

Toluene

Xylene

Naphthenic Acids

Naphthas, Derived from Petroleum,
  Shale Oil, etc., except Motor
  Fuel, Not to be further refined

Hydrocarbons, NES, and
  Hydrocarbon Mixtures, NES

Naphthas, Fuel Oil, and other
  Liquid Derivatives of Petroleum
  to be further refined.

     TOTAL:
                                               PETROLEUM REFINERY PRODUCTS:  VALUE OF IMPORTS
                                                           (thousands of dollars)
Product Class
                      1977
                                    1976
                                                  1975
                                                                1974
                                                                              1973
                                                                                          1965
2911 XD 35
2911 XD 43
2911 XD 47
2911 XD 60
2911 XD 65
2911 XD 75
2911 XD 95
2911 80 00

8,519
44,063
33,250
22,736
1,704
952,543
81,494
N/A
8,823,584
5,318
38,335
20,050
25,429
812
47,625
146,900
903,793
6,916,853
6,128
50,900
9,824
31,145
682
50,613
135,354
916,220
6,978
11,356
111,699
30,264
50,618
615
199,076
98,938
1,209,752
9,628,151
8,899
14,695
20,529
20,742
733
46,583
27,979
350,216
3,554,698
265
6,370
1,962
3,782
803
11,530
N/A
70,321
955,652
                                                                                                                                                    CO
i/Prior to 1977, jet fuel figures were not separated by type.

2/Includes sales of butadiene.

A/Figures prior to 1976 exclude ethane and propane.


NES - not elsewhere specified.

Source:  U.S. Department of Commerce, U.S. Imports, FT 210.

-------
    E-190
Cyclic Crudes

-------
                                     E-191
                                 CYCLIC CRUDES

DESCRIPTION

    Cyclic crudes are organic chemicals which are isolated from coal tar by
distillation.  The raw material originates almost exclusively in the steel
industry as a byproduct of coke manufacture.  Although the components of coal
tar vary greatly, depending upon the temperature, timing, and design of the
coke oven, the most important cyclic crudes are fundamental aromatic compounds
such as benzene, toluene, and the xylenes.  They are used primarily as
building blocks for more complex cyclic intermediates and end products.
However, many crudes have end uses by themselves as solvents, fuels, wood and
leather treatments, biocides, anti-oxidants, and roofing materials.

    Essentially all cyclic crudes,  except the multi-component residual Tac-
tions (creosote oil and tar pitch)  have identical counterparts that are
produced in petroleum refineries (Sic Code 2911).  indeed, coal tars currently
account for only a small fraction of aromatic production (Table 1).  However,
coal served as the basts of the synthetic organic chemical industry until the
discovery of the vast Middle East oil fields after World War II.  Because of
its low cost, availability, and ease of transport, petroleum quickly replaced
coal tar as the primary chemical feedstock, and in the 1950s it facilitated
rapid expansion of the chemical industry.

    As Mideast tensions and the depletion of world oil reserves erode the
price and quantity advantages of petroleum, an eventual return to coal-based
feedstocks (including synfuels and synthesis gas) is expected.1  However, in
light of the intricate oil-based network which has developed over the last 30
years, the conversion will be very slow.   The International Trade Commission
notes that, "in some cases, (chemical)  facilities are so sensitive that even a
change in sources of petroleum feedstocks can cause an increase in operating
cost.  Obviously then, essentially entirely new facilities would be needed to
process entirely new feedstocks."2/  it has been estimated that, in the
absence of an appropriate industrial infrastructure, a coal-chemical plant
would cost 60 to 100 percent more than a corresponding plant based on oil and
natural gas.  consequently, petroleum and gas will remain the preferred
feedstocks for at least the next decade.
    I/The slow shift from oil to coal is already beginning.  On January 9,
1980 Eastman Kodak announced plans to construct a plant that  reduces acetic
anhydride from coal.  The importance of this development is noted in the
February 1, 1980 issue of Science.

    2/U.S. international Trade Commission, Synthetic Organic Chemicals, 1977
(Washington, D.C.:  Government Printing Office, 1979).

-------
                                  E-192
                                 TABLE  1

               COMPETITION BETWEEN PETROLEUM AND COAL TAR
                IN  THE  PRODUCTION OF ELEMENTARY  AROMATICS

                                 BENZENE
Year
  Percent of
 Total Volume
   That Was
Produced from
   Coal-Tar
Price Per Gallon
 of coal-Derived
     Product
1950
1955
1960
1965
1970
1975
1977
94.6
68.1
32.4
14.6
8.2
9.3
4.5
$.27
.35
.32
.23
.21
.75
.82
Price per Gallon
of Oil-Derived
Product
$.36
.43
.31
.24
.22
.70
.76
Coal/Oil
Derived
Price Ratio
.75
.81
1 03
.96
.95
1.07
1^08
                                XYLENES
Year
1950
1955
1960
1965
1970
1975
1977
Percent of
Total Volume
That Was
Produced from
Coal-Tar
13.1
10.9
2.8
1.8
0.8
0 3
0.2


Price Per Gallon
of Coal-Derived
Product
$.27
.33
.26
.22
.20
.55
.63


Price per Gallon
of Oil-Derived
Product
$.23
.26
.21
.18
.17
45
.51


Coal/Oil
Derived
Price Ratio
1.5
1.2
1.2
1.2
1.1
1.2
1.2
Source;  computed from figures in U.S.  international Trade Commission,
         Synthetic Organic Chemicals (Washington, D.C.:   Government
         Printing Office,  various years).

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                                     E-193
INNOVATION

    It is believe that the switch from petroleum to coal-based feedstocks will
result in significant process innovation as old processes are restudied and
entirely new ones are developed.  However,  all of the new research will be
directed toward producing the same building blocks which have always been the
staple of the chemical industry—the elementary alkanes, olefins,  and
aromatics.  As a result, conversion will not by itself lead to the
introduction of new chemicals.3/

QUANTITY AND VALUE OF TRADE

    Since virtually all coal tar is obtained as a byproduct of metallurgical
coke ovens, the supply of cyclic crudes might be expected to follow the
generally increasing demand for steel.  However, this effect has been
countered by the decrease in coke consumption per ton of steel which has
resulted from the use of alternate fuels in blast furnaces,  consequently,
production of tar and tar crudes has declined steadily since 1950  (Table 2).

    A general price index for these products is not currently available,
partially because the information is often obscured by petrochemical data.
However, Table 1 indicates that the prices of individual cyclic crudes have
moved in tandem with those of their petroleum-derived counterparts since
1960.  This relation has been maintained even through the rapid increases in
oil prices during the 1970s.  Since coal prices did not keep pace with oil
prices in this period,A/ prices of coal tar crudes are evidently not based
on cost, but are determined by the petrochemical-dominated markets.

    Since the 1973 oil embargo, the value of cyclic crude shipments has jumped
dramatically, reflecting the increased prices  (Table 3).  For the 20 years
before 1973, though, the value of shipments fluctuated near $90 million—even
in the face of a steady decline in both quantities and production.  This
apparent contradiction can be explained at least in part by the influence of
residual fractions, such as tar pitch, whose prices are not kept down by
direct competition from petroleum products  (Fig. 4).17  The unusual behavior
might also result from an increasing proportion of interplant transfers before
1973.  Unfortunately, this hypothesis cannot be tested with publicly
accessible information.
    J/Of course, the conversion will be accompanied by the development of
new catalytic preparations.  These products, however, are discussed in a
separate profile.

    .1/ICF inc., Discussion of Relationship of coal and Oil Prices, Final
Report to U.S. Department of Energy, February 1980.

    I/The increase in the prices of creosote oil and tar pitch since 1973 is
probably due to the rising prices of both coal and petroleum-derived goods
which are competitive with, but not identical to, the cyclic crudes.

-------
                                     E-194
                                    TABLE  2

          QUANTITIES OF PRODUCTION, SALES,  AND CONSUMPTION OF COAL TAR
                              (millions of  gallons)
         Year
                      Production       Sales       Distillation       Fuel
         1950             988           565             622            205
         1955             914            —             679            142
         1960             709            —             616             85
         1965             802            —             616            122
         1970             760           371             657            108
         1975             645           285             450            162
         1977             592           292

Source:  U.S. international Trade coiranission, Synthetic Organic Chemicals
         (Washington, D.C.:  Government Printing Office, various years).
                                    TABLE  3

                               VALUE OF SHIPMENTS
                              (million of dollars)

                         Year                     Value

                         1954                      87.4
                         1958                     105.3
                         1963                      79.3
                         1967                      87.6
                         1972                      80.9
                         1977                     250.9

Source:  U.S. Department of Commerce,  Bureau of Census, 1977 Census of
         Manufactures (Washington,  D.C.:  Government Printing Office, 1979
         various years).
                                    TABLE  4

                     PRICES OF TAR CRUDES WITH ONLY  INDIRECT
                      COMPETITION FROM PETROLEUM PRODUCTS

               Year        Creosote  Oil            Tar Pitch (Hard)

               1950        $.!6/gallon              $25.17/ton
               1955            .20                       33.30
               1960            .22                       39.07
               1965            .21                       38.11
               1970             16                       38.19
               1975            .50                      104.11
               1977            .58                      131.07

Source:  U.S.  International Trade commission, Synthetic Organic Chemicals
         (Washington, D.C.:   Government  Printing Office, various years).

-------
                                      E-195
    There are no statistics available to translate these shipment figures into
value added.  However, for establishments concentrating in tar crudes during
1972, value added amounted to $26.7 million, compared to $69.3 million in
value of shipments.j>/

INDUSTRY STRUCTURE

    The structure of the cyclic crudes industry has changed little since the
1950s.  Only 12 firms have sales in excess of $100,000,7/ and of these, the
top four control 92 percent of the "market".8/  while these figures suggest
a high degree of concentration, the most important competition comes from the
petrochemical industry.  As previously mentioned, coal tar distillers are
essentially price-takers, as are firms" in a competitive market.

FOREIGN TRADE

    Because trade statistics for chemicals are not collected by source, import
and export data for cyclic crudes are almost invariably obscured by informa-
tion on petrochemicals.  When all data are considered, they show that most
elementary aromatics have had more than a nominal trade surplus since
1973.j*/  However, imports of benzene exceed imports due to inexpensive
overseas sources, and the favorable trade balance is increasingly threatened
by the prospect of a large-scale manufacture of aromatics in the Middle East.
Prevention of further deterioration of the U.S. position, along with expansion
of its trade surplus, may be brought about by technological advancements in
obtaining chemicals from coal.

EMPLOYMENT

    Complete employment figures are not available for the cyclic crude
industry.  However. 800 people were employed in the 21 establishments which
concentrated in tar crudes in 1972.10/
    i/U.S. Department of Commerce, Bureau of the Census, 1972 Census of
Manufactures (Washington, D.C.:   Government Printing Office, 1975).

    JZ/U.S. Department of Commerce, Bureau of Census, 1977 Census of
Manufactures (Washington, D.C.:   Government Printing Office, 1979).

    JL/U.S. Department of Commerce, Bureau of Census, 1972 Census of
Manufactures (Washington, D.C.:   Government Printing Office, 1975).

    2/U.S. international Trade Commission, Synthetic Organic Chemicals, 1976
(Washington, D.C.:  Government Printing Office, 1976).

    10/U.S. international Trade Commission, industrial Organic Chemicals
(Washington, D.C.:  Government Printing Office, 1973).

-------
         E-196
Gum and Wood Chemicals

-------
                                     E-197
                             GUM AND WOOD CHEMICALS
DESCRIPTION

    Gum and wood chemicals are made by either the carbonization of wood or the
distillation of resin.  They are often referred as to "naval stores", since
for thousands of years they have been used for caulking on ships.  They can be
obtained from living and dead trees, but their major source is from the
byproducts of kraft paper production (the production of wood pulp using a
sodium sulfate solution).

USES

    The major types of gum and wood chemicals are the following:

         1)   Rosin:  Used in chemical intermediates and rubber  (39 percent)
              paper sizing (32 percent), ester gums and synthetic resins (22
              percent), surface coatings (2 percent), and other uses (5
              percent);

         2)   Tall oil:  obtained from kraft paper production, tall oil is a
              source of pitch (37 percent), rosin (25 percent), and fatty
              acids (22 percent);

         3)   charcoal:  used mostly for outdoor barbecuing; and

         4)   Turpentine:  used as a paint thinner, and as a source of pine
              oil, insecticides, flavors and fragrances, and other products.

RAW MATERIALS

    Gum and wood chemicals are obtained from living trees and from dead trees,
stumps, and old logs.   Gums are made by wounding living trees and obtaining
the resin, and steam-distilled wood chemicals are made from dead trees,
stumps, and old logs.   Producers of these substances are currently facing
shortages of both the raw materials and the unskilled labor needed for
production.  Therefore, wood chemicals are increasingly being obtained as
byproducts of kraft paper manufacture.  But kraft paper itself is becoming a
less plentiful source of wood chemicals due to changes in paper-making
technology and also due to an increase in the proportion of hardwood used in
paper mills. These changes act to reduce the amounts of turpentine and tall
oil being produced.

PUBLIC DATA

    As can be seen in Table 1, the gum and wood chemicals industry is either
stagnant or declining.  The value of shipments, value added by manufacturers,
and fixed assets have not increased in real terms for the last two decades,
and the number of employees and establishments have both decreased.  This

-------
                                     E-198
                                    TABLE 1

                     GUM AND WOOD CHEMICALS:   INDUSTRY  DATA
Year
1977
1976
1975
1974
1973
1972
1971
1970
1969
1968
1967
1966
1965
1964
1963
1962
1961
Number of
Establish-
ments
121




139




184



246


Employees
(thousands)
5.0
4.7
4.6.
5 1
5.5
5.9
5.2
5.3
5 8
5.7
5.9
5 0
5 8
6.4
6.8
6.2
6 7
Value Added
Manufacture
(million $)
202.2
147.2
130.2
199.5
181.1
155 4
139 8
116.3
102.3
117.2
100.8
99.2
92.6
102.3
100.3
100.5
99.1
  Value of
  Shipments
(million $)
  Gross value
of Fixed Assets
  (million $)
440.3
364.8
314.2
403.3
355.4
332.3
279.4
261.7
228.5
233.3
215.9
208.7
206.2
222.0
212.9
199.6
201.0
227.1
184.6
162.1
148.8
210.6
203.1
167.9
165.3
152.8
147.8
139.2


118.1
115.2
111.2

         Source:  U.S.  Department of Commerce,  Bureau  of the Census,  Census of
                  Manufactures and Annual Survey of Manufactures (Washington,
                  D.C.:  Government Printing  Office, various years).

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                            E-199
                            TABLE  2

       PRICE INDICES OF SELECTED GUM AND WOOD CHEMICALS

                         (1967 = 100)


Year            Rosina        Turpentines          Tall
1976            239.9            247.4                186.2
1975            242.8            276.1                216.7
1974            346.7            242 0                297.4
197.3            219.3            140.3                166.0
1972            182.3            182.2                131.8
1971            163.4            209.1                138.0
1970            145.1            209.1                121.4
1969            113.9            198.3                111.5
1968            100.9            134.1                125.3
1967            100.0            100.0                100.0
a Based on crop yearf running from April 1 to March 31.
b Based on calendar year.
Sources:  Data on rosin and turpentine:  Mary K. Meegan, ed., Kline
          Guide to the chemical industry (3rd ed., Fairfield, NJ:
          Charles Kline & Co., 1977), p. 69.

          Data on tall oil:  U.S. Department of Commerce, U.S.
          Exports;  Commodity by Country, FT 410 (Washington, D.C.:
          Government Printing Office, various years).

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                                     E-200


stagnation is partly due to problems of supply,  as discussed above.   That the
stagnation is due primarily to supply problems is reflected in the prices of
gum and wood chemicals (see Table 2).  Such prices rose steadily even before
the inflation of the 1970s, and during the 1970s they outpaced the general
level of inflation.  This behavior is indicative of products whose supply is
constricted.

    imports of gum and wood chemicals are negligible, but exports are
substantial; the U."S. is a major world supplier  of these products.  Table 3
displays total U.S. exports and exports as a percentage of shipments.
Throughout the period 1967 to 1976 exports accounted for about 20 percent of
total U.S. production.
                                    TABLE 3

                        EXPORTS OF GUM AND WOOD CHEMICALS

                                Total            percentage of value
      Year                   (million $)             of Shipments	

      1976                       81                    22.2
      1975                       53                    16.9
      1974                       88                    21.8
      1973                       72                    20.3
      1972                       58                    17.5
      1971                       58                    20.8
      1970                       62                    23.7
      1969                       47                    20 6
      1968                       49                    21.0
      1967                       46                    21.3

      Source:  U.S. Department of commerce,  U.S.  Exports;  commodity by
               Country, FT 410, various years.

    The degree of concentration in the manufacture of gum and wood chemicals
 is shown in Table 4.  concentration is moderate to high, and appears to have
 increased somewhat in recent years.  Presenting only the concentration ratio
 for the entire industry conceals major differences in the different sectors of
 the industry.  As shown in Table 5, the production of soft wood distillation
 products is highly concentrated.  However, the production of other gum and
 wood chemicals including gums, charcoal,  and tall oil is much less
 concentrated, though concentration has increased in recent years.

 COMPANIES IN SEGMENT

    Crude tall oil is produced by almost all kraft paper producers, but there
 are only eight (according to the Kline Guide) or nine (according to the Census
 of Manufactures)  firms which process tall oil.  The eight firms listed by the
 Census of Manufactures are Hercules, Crosby Chemical, Arizona Chemical, Union
 Camp, Sylvachem,  Reichhold Chemicals, Westvaco, and Monsanto.  Major producers
 of steam-distilled rosin and turpentine are Hercules, Reichhold, and Continen-

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                                     E-201
                                    TABLE 4

                  CONCENTRATION RATIOS FOR PRODUCT CLASS 2861:
                             GUM AND WOOD CHEMICALS
                                  (in percent)
      Year
Four
Firm
Ratio
Eight
Firm
Ratio
Twenty
Firm
Ratio
 Fifty
 Firm
 Ratio
      1972
      1967
      1963
 49
 51
 44
 64
 63
 54
 78
 76
 69
  92
  89
  86
      Source:   U.S.  Department of Commerce,  Bureau of the census,  1972 Census
               of Manufactures (Washington,  D.C.:   Government Printing Office,
               1975).
                                    TABLE 5

                            CONCENTRATION RATIOS FOR
                        PRODUCT CLASSES  28611 AND 28612
                                  (in  percent)
                               Year
                    Four       Eight      Twenty   Fifty
                    Firm       Firm        Firm    Firm
                   Ratio      Ratio       Ratio    Ratio
28611,  Softwood distillation
  products
        1972
        1967
        1963
        1958
        1954
      90
      85
     N/A
      80
      83
 97
 93
 91
 92
 94
100
100
 99
 98
 99
                                                                           100
                                                                            99
                                                                           N/A
28612,  Other  gum and  wood
  chemicals
        1972
        1967
        1963
        1958
      36
      36
      25
      27
 54
 50
 38
 41
 76
 69
 60
 67
95
70
85
88
  Source:   U.S.  Department of commerce,  Bureau of Census,  1972 Census of
           Manufactures,  (Washington,  D.C.:   Government Printing Office, 1975)

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                                     E-202
tal Turpentine and Rosin.   Kingsford,  Georgia-pacific,  Great Lakes carbon,  and
Husky industries are important producers of  charcoal, and Shelton Naval
Stores, Monsanto,  Stallworth pine products,  Taylor-Lowenstein,  Union Camp,
Varn Gum Turpentine and vidalia Gum Turpentine are producers of gum products.
All of these firms are either closely  held firms,  whose financial records are
not available, or  subsidiaries or units of very large conglomerates.
Therefore, the information necessary to determine  the profitability of the gum
and wood chemicals industry is not available.

INNOVATION

    While there does seem  to be some development of new gum or  wood chemicals,
if innovation in the industry is measured by the amount which is mentioned  in
the trade journals, there  is little innovation in  this  sector.   However,  the
huge petroleum price increases of the  last ten years have apparently brought a
renewed interest in biomass-based chemicals.   Given the large oil-based
chemical industry  which now exists, however,  any expansion of the use of  gum
and wood chemicals will be slow.

-------
          E-203
Organic Chemicals, NEC

-------
                                     E-204
                     Organic  Chemicals, NEC  Segment  Summary


                              Cyclic  intermediates

                        Miscellaneous Organic Chemicals

                      Synthetic Oraanic Dyes and pigments

                                  plasticizers

                          Rubber-Processing Chemicals
    The Organic Chemical,  NEC segment consists  of organic chemicals that do
not fit into the other organic chemical  categories because of  their unique
structures and functions.   As a whole, this segment is highly  innovative,
although some of its components (synthetic organic dyes and pigments,  and
miscellaneous acyclic chemicals)  are not.   Cyclic intermediates are
distinguished from other chemicals by both structure and function,   cyclic
intermediates all consist of various functional groups which are attached to
(or built into) a carbon framework that  contains at least one  ring.  Cyclic
intermediates are typically used in the  production of end use  products,
although they also have end uses as biocides,  photographic chemicals,  fuel
additives, and antioxidants.

    There are a few cyclic intermediates which have always dominated the
industry.  A group of eleven (cumene, cyclohexane, ethylbenzene, styrene,
o-xylene, p-xylene, alkyl benzene, arilene, chlorobenzene, phenol,  and
phthalic anhdride)  has traditionally accounted for 65-70 percent of production
volume and 40-50 percent of sales volume.   But despite the dominance of these
large-volume commodity chemicals, innovation in this component is quite high.
In aeneral, there are many paths by which  end-use chemicals can be produced
from the initial feedstock.  Each process  innovation in which  a new path from
feedstock to end use product is discovered may result in the production of
several new chemical intermediates for use in the new process,  in addition,
new intermediates may result from the search for new end-use products, and may
also be produced along with new end-use  products.

    The structure of the cyclic intermediate industry as a whole is difficult
to describe.  The large-volume commodity chemicals typically have more than
ten major producers.  However, many of the intermediates are produced by only
one firm.  Since there are many ways to  produce most cyclic compounds, there
is some competition among the different  intermediates,  in discussing the

-------
                                     E-205
structure of the cyclic intermediate industry, one should also note that oil
companies command a significant share of the market, particularly in the
production of large volume commodity chemicals.  They have been attracted to
the industry by the close relationship between many cyclics and refinery
products.

    Miscellaneous cyclic chemicals include end-use cyclic compounds such as
gas and oil additives, many oil field chemicals, photographic chemicals,
tanning materials, paint driers, enzymes, and some flavorings,  in general,
there is a high rate of innovation among end-use cyclics, just as among
intermediate cyclics.  It is difficult to say much more about the
innovativeness and structure of the industries producing miscellaneous end-use
cyclics, since data on these chemicals is often grouped with miscellaneous
acyclic chemicals - a much larger, though less innovative group.

    Plasticizers are organic chemicals which are physically incorporated into
plastics, either to improve workability during fabrication or to increase
flexibility in the end-use products.  About 85 percent of all plasticizers are
used in the plastics industry (about two thirds of the total in polyvinyl
chloride), with the rest being used in the production of rubber and cellulosic
products.

    There is a great deal of innovation in the plasticizer industry,
particularly involving the relatively new polymeric plasticizers.  Even though
the roster of basic plastics has been relatively unchanged for twenty years,
during that time, thousands of new end-use products have been developed for
these basic plastics.  Often, a new product will be associated with a new type
of plasticizer.

    In the mid 1970s the leading four firms produced just over 50 percent of
all plasticizers, and the leading eight firms just over 70 percent.  in more
narrowly defined markets (e.g., phthalates, phosphate esters, and polymeric
plasticizers) the concentration ratios are somewhat higher.  There has been
some turnover among the leading plasticizer producers in the last twenty
years.  Allied Chemicals and Celanese, both among the leading plasticizer
producers in the 1960s, no longer produce phthalate plasticizers.  U.S. Steel,
Exxon, Stauffer, Tenneco, and BASF Wyandotte have become major plasticizer
producers, either by buying small producers and expanding or by beginning
production from scratch.

    Rubber-processed chemicals include a wide variety of substances that
modify rubber so it can be used in commercial applications.  Not all of the
chemicals which are used in rubber production are included in this category;
such products as sulfuric acid, salt, alum, sulfur, zinc oxide, fatty acids,
silicas, clays, carbon black, nylon, rayon and pigments have many uses outside
the rubber industry, and are not included in this segment.  The major
categories of rubber-processing chemicals (out of a total of several dozen
categories)  are:

         1)    Accelerators — cause rubber to vulcanize faster; in addition,
              they often retard aging;

-------
                                     E-206
         2)    Activators — increase the efficiency of vulcanization;

         3)    Antioxidants — protect rubber from deterioration due to the
              action of oxygen and oxidizing chemicals;  and

         4)    Antiozonants — protect rubber from deterioration due to the
              action of ozone.

    As with  plastics, there has not been much innovation in the roster of
basic synthetic rubbers during  the last  twenty years,  but hundreds of new
end-use products have been developed from those basic  rubbers.   One or more
new rubber-processing chemicals are associated with many of these products.
Not only have new rubber-processing chemicals of a given type been introduced,
but entire new types have been  created.

    The major tire companies are important producers of  rubber-processing
chemicals.  Goodrich, Goodyear, and Uniroyal produce about half of the total.
Much of the  volume produced by  major rubber producers  is used in their own
rubber factories,  it should be noted that the advantage that a high degree of
concentration would normally give the rubber-processing  chemicals industry is
somewhat negated by the high degree of concentration among rubber producers,
the buyers of rubber-processing chemicals.

-------
         E-207
Cyclic Intermediates

-------
                                     E-208
                              CYCLIC INTERMEDIATES
DESCRIPTION

    Cyclic intermediates are organic chemicals which are grouped together
because of a common chemical "architecture".  They all consist of various
functional groups that are attached to (or built into)  a carbon framework
containing at least one ring.  Although the vast majority are used as
intermediates in the production of higher cyclics, they also have end uses as
biocides, photographic chemicals,  fuel additives, and antioxidants.  indeed,
many individual cyclic intermediates are used in more than one of these areas.

    The similarity in the structure of cyclic intermediates causes
similaritity in their production.   The carbon skeleton of these compounds can
be formed either by dismembering a more complex ring frame or, more commonly,
by linking smaller molecules together.  Although the cyclic portion(s)  can be
formed from acyclic  recursors, it is almost always easier to use prefabri-
cated structural units like the phenyl or benzene ring.  For this reason, the
majority o* cyclic intermediates are derived from simpler cyclic compounds
which are produced either inside the industry or in the petrochemical or
cyclic crudes industries.

    The functional properties of the molecules can be adjusted at various
points in the reaction sequence by the introduction, deletion, or exchange of
attached groups.  These alterations typically involve organic compounds (both
cyclic and acyclic)  and industrial inorganic chemicals.  Occasionally,  the
reactions require catalysts.

    Because of the way in which cyclic intermediates are constructed, there
are many different routes to all but the most complicated synthetic goals.
For example, phenol, a widely used organic intermediate, is currently produced
through six distinct commerical processes.!/  Although new synthetic
techniques are always being discovered, many of the fundamental organic
reactions have been known for 100  years.   Consequently, the method of
producing cyclic intermediates is  usually determined by economic rather than
scientific factors.
    1/B.G.  Reuben and M.L.  Burstall,  The Chemical Economy (London:  Longman
Group, Ltd.,  1973).

-------
                                      E-209
INNOVATION

    It seems possible to isolate a large portion of the cyclic intermediate
industry for which virtually no product innovation takes place.  Because of
the way in which cyclic intermediates are synthesized, there are a few
elementary building block cyclics which have always dominated the industry.  A
group of only six has traditionally accounted for 50-60 percent of the
production volume and 30 to 35 percent of the sales value (Table 1).  For the
top 11 of these fundamental cyclics, the proportions increase to 65 to 70
percent and 40 to 50 percent, respectively.  When other compounds that are
reported only sporadically by the International Trade Commission (ITC) are
included, it becomes clear that more than half of the sales value is derived
from a non-innovative portion of the industry.  Yet, despite the dominance of
the large-volume commodity chemicals, innovation appears to be quite high in
the segment,  in general, there are many paths by which end-use chemicals can
be produced from the initial feedstocks.  Each process innovation in which a
new path from feedstock to end use product is discovered may result in the
 reduction of several new chemical intermediates for use in the new process.
In addition, new intermediates may result from the search for new end-use
products.

QUANTITY AND VALUE OF TRADE

    The quantity of cyclic intermediates produced and sold has increased
steadily since the 1950s as a result of rising demand for the end
products—from both inside and outside the chemical industry—which are
derived from these compounds (Table 2).  The segment is very competitive
because, in many product lines, high growth and profit potential coexist..?/

    Pricing trends have not been consistent  (Tables 2 and 3).  Before. 1973
prices declined due to both economies of scale and competition.  Since 1973,
however, increases in the price of petroleum raw materials has caused a
dramatic price rise.

    Despite falling prices during the 1950s and 1960s, quantities increased
enough in this period to permit constant expansion in the value of shipments
(Table 4).  The more recent combination of rising quantities and prices has
accelerated this growth.

    Unfortunately, the shipment figures areatly overstate the impact of cyclic
crudes on the economy.  As the ITC points out, "since many of the
intermediates included in the statistics represent successive steps in
production, the totals necessarily include considerable duplication. ",3/
    2/Mary K. Meegan, ed., Kline Guide to the Chemical industry (3rd ed.,
Fairfield, NJ:  Charles Kline & Co., 1977).

    J/U.S. international Trade Commission, Synthetic Organic Chemicals, 1965
(Washington, D.C.:  Government Printing Office, 1965).

-------
                                                                           TABLE 1

                                                      PRODUCTION AND SALES FOR 11 BASIC CYCLIC CHEMICALS
               Quantity of Production (1000 Ibs   Quantity of Sales (1000 Ibs   Value of Sales ($1000)
Cumene
Cyclohexane
Ethylbenzene
Styrene
O-xylene

p-Xylene

Subtotal
  Percent

Alkyl benzene
Ariline
Chlorobeneze
Phenol
Phthalic
  anhydr ide
Subtotal

Total

  Percent
§5.
663
1700
3023
2864
351
Zi
1983
1841
4827
4335
799
75_
2003
1734
4822
4673
702
T7
2644
3020
8312
6867
985
  396    1590    2484    3172

 8997    15375   16418   25000
•53.3    54.4    52.3    57.2

  645     553     495     526
  196     398     407     584
  546     485     306     325
 1229    1755    1746    2338
   608    734
                702     926
 3224    3925    3656    4699

 12221   19300   20074   29699

 72.5    68.3    63.9    67.9
§i
_
1475
580
1248
344
375
(4022)
(53.3)
583
76
82
533
Zi
1200
1976
513
2013
777
1294
7593
58.5
536
195
67
769
75^
1100
1722
490
1964
697
1879
7862
53.2
428
151
77
927
77
1294
2198
211
2799
810
1841
9152
53.4
456
176
175
1206
65_
_
60
24
95
9
33
(221)
(27.1)
56
10
5
50
70
46
62
19
130
23
82
362
28.7
54
22
7
54
75_
124
211
43
368
58
267
1071
33.8
109
34
20
237
77_
160
261
29
520
271
170
1411
35.2
117
42
35
232
                                   336
                                          441
                                                 436
                                                        567
                                                               28
                                                                      40
                                                                             92
                                                                                        95% intermediate fohenol, acetone, etc.
                                                                                        90% intermediate (adioic acid, canrolactam, etc.
                                                                                        95% intermediate (stvrene)
                                                                                        "5% monomeric "intermediate"
                                                                                        70% intermediate fohthalic anhydride); 10% fuel
                                                                                        and solvent
                                                                                        90% intermediate (TA and DMT)
                                                       Intermediate (detergents)
                                                       95% intermediate (isolyanates,  etc.)
                                                       70% intermediate;  20% solvent
                                                       90% intermediate (phenolic resins, 'bisobenol P,  etc
                                                                                   128   95%  intermediate  (olasticizers and  resins)
1610   2008   2019   2580   149    177    492    554

(5632)  9601   9881   11732 (370)    539   1563   1965

(74.6)  74.0   66.9   68.5  (45.5)  42.8   49.3   49.0
NJ
I-1
O
 Sources:  U.S. International Trade Commission, Synthetic Organic Chemicals  (Washington, D.C.:  Government Printing Office, various vears); and Gloria M.
          Lawler, ed., Chemical Origins and Markets  (5th ed. Menlo Park,  CA:  Chemical Information Services, Stanford Research Institute, 1977).

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                                     E-211



                                    TABLE 2

                  PRODUCTION AND SALES OF CYCLIC INTERMEDIATES
              Production Quantity   Sales Quantity   Sales value
    Year         (million Ibs.)      (million Ibs.)   (million $)   Unit Value

    1955              6,016              2,284           407          1.18
    1960              9,612              3,964           662           .16
    1965             16,865              7,551           814           .10
    1970             28,257             12,976         1,260           .10
    1975             31,413             14,780         3,169           .21
    1977             43,726             17,138         4,008           .23
Source:   U.S.  international Trade Commission,  Synthetic Organic Chemicals
(Washington,  D.C.:   Government Printing Office, various years).
                                    TABLE  3


            WHOLESALE PRICE INDEX FOR BASIC AND INTERMEDIATE CYCLICS

     (Group definitions do not correspond exactly with Census definitions.)


         Year            Basic Cyclics        Cyclic Intermediates

         1968               80.8                    79.7
         1970               79.2                    74.0
         1972              102.7                    89.0
         1974              109.3                   102.2
         1976              243.4                   234.7
         1978              271.0                   241.1
Note:   The base year for the Wholesale Price index figures changes in 1974
from 1958 to 1973.  Adjusting for this difference would have an effect of only
one or two points, and would have no influence on the qualitative
interpretation.
Source:   U.S.  Department of Commerce, Wholesale Price index, 1979.

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                                     E-212
                                    TABLE 4

                               VALUE OF SHIPMENTS
                                                Value  of  Shipment
                         Year                   (millions of  dollars)

                         1954                         $ 466

                         1958                            531

                         1963                            758

                         1967                           1,066

                         1972                           1,538

                         1977                           4,001
Sources:  U.S. Department of Labor,  Bureau  of  the  Census,  1972 Census of
          Manufactures and 1977 Census of Manufactures (Washington,  D.C.:
          Government Printing Office,  1975  and 1979).
For example, 63 percent of all cumene  reduced is used to synthesize phenol.
Fourteen percent of the phenol (which also comes from other sources)  is then
used to manufacture bisphenol A,  a  precursor  of numerous  resins.4/  since
all three compounds are among the highest volume cyclic intermediates,  the
magnitude of multiple reporting is  quite significant,   consequently,  the value
added by the segment is a better  indicator of its importance,  but complete
data is not available.  However,  for the 49 establishments which concentrate
in cyclic intermediates, values added amounted to $504.4  million, or 43
percent of the value of shipments,  in 1972.5/
    I/Gloria M. Lawler,  ed.,  chemical Origins and Markets (5th ed., Menlo
park, CA:  chemical information Services, Stanford Research Institute, 1977)

    JL/U.S. Department of Commerce, Bureau of the census,  1972 Census of
Manufactures (Washington, D.C.:  Government Printing Office,  1975).

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                                     E-213
INDUSTRY STRUCTURE

    The cyclic intermediates industry has been characterized by high and
increasing competition.  In 1977» 85 companies had industry shipments of over
$100,000.17  The top eight firms held a market share of 62 percent, compared
to 81 percent in 1954  (Table 5).  More recently, there have been indications
of a reversal in this trend.  The five largest producers of benzenoid
chemicals (which include a substantial amount of acyclic compounds that can be
manufactured from cyclic precursors) increased their market share from 25
percent in 1973 to 37 percent in 1977.2/

    Of course, these figures are not sufficient evidence on which to base
conclusions about the extent of competition in the industry.  The reason is
that the market structure varies widely depending upon the chemical in
question.  The fundamental, high-volume compounds like phenol, phthalic
anhydride, and styrene typically have more than ten major producers.  However,
the ITC lists only one producer for 65 percent of the 950 cyclic intermediates
that it examines..§/  The extent of competition between the smaller-volume
chemicals is not clear.  Since there are many ways to produce most cyclic
compounds, there is probably significant competition between the substances in
their use as synthetic intermediates.  The same does not necessarily hold for
their end uses, however.
                                    TABLE  5

                              CONCENTRATION RATIOS

     Year        Percent of Value of Shipments Accounted for by X Largest Firms


     1954
     1958
     1963
     1967
     1972
Source:  U.S. Department of Commerce, Bureau of the Census, 1972 Census of
         Manufactures (Washington,  D.C.:  Government Printing Office, 1975).
X = 4
55
52
53
47
43
8
81
72
58
63
62
20
94
90
87
83
84
50
„
99
98
97
97
    6/Ibid.

    2/U.S. international Trade commission,  Synthetic Organic chemicals, 1977
(Washington, D.C.:  Government Printing Office, 1977).

    8/ Ib id.  However, previous ICF studies  on pesticides indicate that ITC
information on producers may not be complete.

-------
                                     E-214
    Besides the factor of competition, another important influence on the
operation of the industry is its relation to the petroleum industry.  Oil
companies command a significant market share—particularly in the production
of elementary, high volume cyclics—despite the fact that chemical products as
a whole account for only 3 to 28 percent of the sales of major petroleum
producers (Table 6).  They have been attracted into the industry by the
potential for high profits and the close relation of many cyclics to refinery
products.  Conversely, many of the large chemical companies have diversified
backwards into the oil industry to protect and supplement their supplies of
raw materials.9/

EMPLOYMENT

    Exact employment figures for the cyclic intermediate industry are not
available, but can be approximated by using a variety of census data.
Together with manufacture of cyclic crudes and organic dyes, production of
cyclic intermediates employed 33,000 people in 1977.iQ/  One way to estimate
what proportion of this labor force actually worked in the cyclic intermediate
industry is by noting that this sector accounted for 74 percent of the
combined values of shipments.ii/  However, one cannot assume a priori that
the three industries are equally labor intensive.  Table 7 shows the 1972
values of shipments and employment figures for establishments concentrating in
each of the sectors,  using these figures as a proxy for labor productivity,
employment in the cyclic intermediate industry can be estimated at 19,200.127
    i/Meegan, Kline Guide.

    iP_/U.S. Department of commerce,  Bureau of the census,  1972 Census of
Manufactures (Washington, D.C.:  Government Printing Office,  1975).

    jj/Ibid.

    12/The estimate was made by assuming a constant ratio of  productivities,
where productivity is defined as the value of shipments per employee.
Mathematically,


              (V772) / (V72)  =
where vlf is the value of shipments in cyclic intermediates,  EI is the
employment in cyclic intermediates, V2 and E2 are the corresponding
figures for the aggregate of other industries, and the superscripts indicate
the year.  The 1972 statistics are only for respective areas,  while 1977 data
are for the entire industry.

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                                      E-215
                                     TABLE 6

          THE  ROLE OF OIL COMPANIES  AMONG THE TOP 20  CHEMICAL PRODUCERS

           (Separate  data for  cyclic intermediates are  not  available.)
 Rank by
  World
Chemical
  Sales
              Company
1
2
3
4
5

6
7
8
9
10

11
12
13
14
15

16
17
18
19
20
        Dupont
        Dow Chemical
        Union Carbide
        Monsanto
        Celanese
        Allied Chemical
        Shell Oila/
        Occidential Petroleums/
        Standard Oil (Ind.)a/

        WR Grace
        Hercules
        Eastman Kodak
        Phillips petroleum.3/
        American cyanamid

        Gulf Oiia/
        Texaco a/
        Stauffer
        PPG Industries
        Atlantic Richfielda/
World
Chemical
Sales
($ million)
7,300
4,320
4,000
3,577
3,238
1,855
1,738
1,574
1,536
1,432
1,385
1,375
1,247
1,230
1,096
1,062
1,000
910
904
826

Total
Sales
($ million)
8,361
5,652
6,346
4,270
48,631
2,123
2,630
9,230
5,534
11,532
3,615
1,596
5,438
5,698
2,094
16,451
26,452
1,100
2,255
8,462

Percent
Chemical
Sales
87.3
76.4
63 0
83.8
6.7
87.4
66.1
17.1
27.8
12.4 '
38.3
86.2
23.0
21.6
52.3
6.5
3.8
82 7
40 1
9.8
  a/Oil companies.
Source: Mary K. Meegan, ed., Kline Guide to the Chemical industry (3rd ed.,
        Fairfield, NJ:  Charles Kline & Co., 1977).

-------
                                     E-216
                                    TABLE 7

               EMPLOYMENT AND SHIPMENT VALUES FOR ESTABLISHMENTS
                       CONCENTRATING IN THREE INDUSTRIES
        Cyclic intermediates
        Dyes and pigments
        Cyclic Crudes
Number Employees

     11,300
     15,600
        800
                                                     Value
                                              (millions  of  dollars)

                                                    $1,176.4
                                                      766.8
                                                        69.3
Source:  U.S.  Department of commerce,  Bureau of the Census,  1972 Census of
         Manufactures (Washington,  D.C.:   Government printing Office, 1975)
                                    TABLE 8

                     FOREIGN TRADE OF CYCLIC INTERMEDIATES
                    imports
                          Exports
   Quantity
(million  Ibs.)
            Unit
   Value     value
(million  $)
                                               Quantity
                                            (million Ibs.)
1973
1974
1975
1976
1977
603
827
486
645
867
186
332
276
354
390
.31
.40
.57
.55
.45
2,971
2,957
2,693
3,418
3,340
                                          Unit
                                Value     Value
                              (million $)  (/lb.)
                                                                356
                                                                732
                                                                564
                                                                764
                                                                740
                                           .12
                                           .25
                                           .21
                                           .22
                                           .22
Sources:  U.S.  Department of commerce,  U.S.  imports, FT 210, various years,
          and U.S.  Exports,  FT 610,  various  years.

-------
                                     E-217
FOREIGN TRADE

    The United States maintains a positive balance of trade in cyclic
intermediates.  Between 1973 and 1977 the value of exports exceeded that of
imports by a factor of 1.9 to 2.2 (Table 8).  A total of 819 benzenoid
chemicals were imported in 1977, the most important ones being phthalic
anhydride and cyclohexane.  imports from member nations of the Organization
for Economic Cooperation and Development (OECD) accounted for 89 percent of
the total value of imported cyclic intermediates.  Exports, on the other hand,
went principally to the Netherlands, Canada, Brazil, Mexico, and Belgium.  The
main items exported in 1977 were styrene, toluene diisocyanates, detergent
alkylates, and cyclohexane.13/

    Close inspection of the trade figures reveal further information about the
nature of the other traded chemicals.  Exports as a group have consistently
exhibited a lower unit value than imports (Table 8).  This relation holds true
despite the fact that the values of individual chemicals, as assessed at the
respective site of export, are typically lower overseas.14/  Apparently, the
U.S. imports a significantly greater proportion of high-priced, specialty
cyclics than it exports.
    13/n.s. international Trade Commission, Synthetic Organic Chemicals,
1977.

    ii/Ibid.

-------
         E-218
Miscellaneous Organics

-------
                                     E-219
                        MISCELLANEOUS ORGANIC CHEMICALS
DESCRIPTION

    The miscellaneous organic chemicals are all the synthetic products which
are not classified elsewhere.  Acyclic organics dominate the group, accounting
for over 90 percent of production and sales value.I/  Like the cyclic
intermediates, these chemicals consist of various reactive functional groups
which are either attached onto or built into a carbon framework.  However,
instead of containing ringed structures, the skeleton of acyclics are strictly
linear or branched.  The compounds are frequently used as intermediates, but
also find end uses such as gasoline additives, refrigerants, preservatives,
oil-well chemicals, foods, antifreeze, and biocides.

    Unfortunately, the acyclic chemicals cannot be treated independently due
to inconsistencies in reporting practices by the International Trade
Commission (ITC)  and Bureau of the Census.^/  in addition to acyclics, the
miscellaneous organic chemicals category includes "end use" cyclic compounds
such as gas and oil additives, photographic chemicals, tanning materials,
paint driers, enzymes, and some flavorings.

PROCESSES FOR PRODUCING ACYCLIC ORGANICS

    Acyclic carbon frameworks are typically synthesized by joining small units
together.  Consequently, most of these compounds are derived from simpler
acyclics  reduced either inside or outside of the industry.  As with cyclic
organic chemicals, changina the functionalism requires some combination of
organic and inorganic reagents, often in the presence of a catalyst,  since a
molecule can be "pieced together" in many different ways—most of which are
based on well known synthetic techniques—the choice of a production process
depends primarily on economic considerations.
    1/U.S. International Trade commission, Synthetic Organic Chemicals, 1975
 (Washington, D.C. Government Printing Office, 1975)  and U.S. Department of
Commerce, Bureau of Census, 1972 Census of Manufactures (Washington, D.C.:
Government Printing Office, 1975)

    2/The ITC and Bureau of the Census changed the methods of classification
between 1975 and 1976 so that acrylic chemicals are no longer separate.
Furthermore, the ITC does not have any category corresponding to SIC 28695.
Finally, the Bureau of the Census removed urea from this group of industries
in 1972 while the ITC did not.

-------
                                     E-220
INNOVATION

    One can isolate a large portion of the industry in which there are
essentially no new products being introduced.  Because of the way in which
acyclics are synthesized, there are a few "building block" compounds that have
always dominated the industry.  Table 1 shows that 24 of these have
historically accounted for 55 to 60 percent of production volume and 25 to 35
percent of sales value.  This portion of the industry will likely remain
non-innovative.  There is a good deal of innovation, however, in the end use
portion of this segment, where the rate of introduction of new "specialty
chemicals" has been high.  Slight modifications are frequently made in the
structure of these compounds in order to bring about marginal changes in their
functional properties.

QUANTITY AND VALUE OF TRADE

    Production of miscellaneous organic chemicals has increased steadily in
response to rising demand for the end products that are derived from these
chemicals (Table 2).  This demand has been generated from other chemical
industry segments and from outside the chemical industry.  Due to both
economies of scale and excessive competition, prices continued to decrease
until the 1973 oil embargo forced a sharp reversal in the trend (Tables 2 and
3).  Even when prices were declining, shipment values were increasing as a
result of increased volumes (Table 4).

    As in the case of cyclic intermediates, calculating value of shipments
involves extensive duplication because many chemicals simply represent
successive steps in a production process,  value added statistics would avoid
this problem, but complete data is not currently available.   Nevertheless, for
establishments concentrating in miscellaneous organics in 1972, value added
amounted to $4 338 million, or 55 percent of the value of shipments.I/

INDUSTRY STRUCTURE

    It is difficult to draw generalizations about such a diverse group of
 roducts and markets as miscellaneous organic chemicals .  Although the
concentration ratios in Table 5 indicate a moderate and increasina degree of
competition, the actual degrees for specific chemicals range widely.

    Synthesis of high-volume compounds is usually quite competitive,  with as
many as 13 producers involved in the same market.^/  (One notable exception
is the $400 million fluorocarbon industry, which Dupont dominates with a 45
percent share.)5/  ^he leading manufacturers are often different from
    3/U.S. international Trade Commission,  industrial inorganic Chemials
(Washington, D.C.:  Government Printing Office,  1975).

    4/U.S. International Trade Commission,  Synthetic Organic chemicals, 1977.

    I/Mary K. Meegan,  ed.,  Kline Guide to the chemical  industry (3rd ed.,
Fairfield, New Jersey:  Charles Kline & Co.,  1977).

-------
                                                                  TABLE  1

                                   PRODUCTION  AND  SALES  FOR  24 BASIC  ACYCLIC CHEMICALS:  VARIOUS YEARS
Quantity of Production (1000 Ibs)
Chemical
Acrylonitrile
Acetic Acid
Acetic Anhydrile
Adipic Acid
Maleic Anhydride
Acetone
Methyl-Ethyl
Ke tone
Formaldehyde
n-Butanol
Ethanol
iso-Propanol
Methanol
Ethylene Glycol
Propylene Glycol
Carbon
Terrachloride
Ethyl Chloride
Chloroform
Ethylene
dichloride
Methylene
chloride
Pechloroethylene
Trichloro-
ethylene
Vinyl chloride
Ethylene oxide
Propylene oxide
Total
Percent
of Industry
Total
65 70
772 1039
1347 1932
1532 1589
866 1082
128 215
1124 1615
318 480
3107 4427
429 468
2039 1957
1538 1919
2869 4932
1798 3038
213 428
594 1011
686 678
152 240
2456 1460
211 402
429 707
435 611
2000 4040
2190 3865
604 1179
27808 45185
57.6 61.9
75
1215
2197
1458
1343
215
1640
425
4558
490
1429
1521
5176
3809
391
906
575
262
7977
497
679
293
4196
4467
1524
47061
59.9
Sources: U.S. International Trade Con
Gloria M. Lawler , ed., Chemi
Institute, 1977) ; and
77
1646
2570
(1500)
1536
294
2219
511
6046
840
1339
1888
6453
3675
489
809
612
302
10997
478
614
297
5986
4364
1866
57229
59.5
Quantity of Sales (1000 Ibs)
65
303
294
180
70
94
741
301
1189
292
1315
582
1345
1198
189
509
274
123
309
195
385
428
688
256
69
11385
58.2
mission. Synthetic
cal Origins
Gessner G. Hawley
70
547
389
161
127
151
1124
427
1381
278
1060
861
1861
2210
395
841
273
175
1314
358
640
569
2720
411
172
18439
60.4
Organic
75
524
599
(150)
107
170
1311
432
1598
328
1110
813
2409
2848
366
484
280
192
726
435
589
290
2245
409
(200)
18669
57.0
77
526
600
139
181
224
1556
509
2790
420
943
1282
3630
2958
487
385
296
285
1526
475
527
295
4127
549
(200)
24945
59.8
Value of Sales
65 70
48
20
18
16
11
34
32
30
27
77
36
44
104
20
37
19
10
14
17
32
36
42
26
8
754
27.0
Chemicals (Washington,
and Markets (5th ed.
, ed..
The Condensed
, Menlo
Chemical
75
60
23
14
20
24
45
39
33
22
67
49
53
146
36
44
17
11
38
29
45
40
107
29
15
1005
25.5
D.C.:
($1000)
122
65
(25)
39
57
156
77
61
60
145
92
136
586
97
65
28
30
62
68
83
44
221
105
(30)
2454
32.6
77
128
no
31
62
69
211
95
128
73
171
162
210
557
121
49
41
49
123
87
K3
47
508
129
(30)
3208
32.5
Government 1
Park, CA: Chemical Ii
Dictionary (8th ed . ,
nformat
New Yo:
                                                                                                                    tlses
                                                                                                   80% monomer; intermediate; funiaant
                                                                                                   90* intermediate (vinvl acetate, cellulose
                                                                                                   acetate, TPA, nw,  etc.)
                                                                                                   intermediate (vinvl arefafe, resins, err.
                                                                                                   90% monomer  (nvlon)
                                                                                                   intermediate (resins, pesticides) ; preservative
                                                                                                   50* intermediate (methvl methacrvlat-e, etc.);
                                                                                                   20* solvent

                                                                                                   Solvent; intermediate
                                                                                                   50% monomer; 4D* intermediate; hiocide;
                                                                                                   corrsion inhibitor
                                                                                                   7D* intermediate; dehvdratina accent
                                                                                                   Solvent; intermediate; beverage; antiseptic
                                                                                                   intermediate; solvent; antiseptic; dehydrating
                                                                                                   agent; preservative
                                                                                                   90* intermediate (formaldehvde, DMT, etc.); 10%
                                                                                                   solvent
                                                                                                   50* antifreeze; intermediate; solvent; hrake
                                                                                                   fluid; coolant
                                                                                                   70% intermediate (resins, etc.); solvent;
                                                                                                   coolant; feed additive; preservative
                                                                                                   90% intermediate (fluorocarhons); rodenticide;
                                                                                                   solvent; fire extinguisher
                                                                                                   intermediate (tetraethvl lead, etc.); solvent;
                                                                                                   anesthetic
                                                                                                   80% intermediate (fluorocarbons, druasl ;
                                                                                                   solvent; insecticide
                                                                                                   95% intermediate (vinvl chloride,
                                                                                                   perchloroethylene, trichloroethylene)

                                                                                                   60* solvent; 20% propellant; intermediate
                                                                                                   80% solvent  (especiallv for drv cleaning); 15%
                                                                                                   intermediate (fluorocarbons)
                                                                                                   95% solvent  (especially for metal degreasing);
                                                                                                   intermediate; anesthetic
                                                                                                   95% + monomer
                                                                                                   intermediate (ethylene and higher glvcols,
                                                                                                   detergents); rocket propellant
                                                                                                   intermediate (glvcols and detergents); funigant
to
to
                                              	                     Van Nostrand Reinhold
Company, 1971) .

-------
                                      E-222



                                     TABLE 2

             PRODUCTION AND SALES OF MISCELLANEOUS ORGANIC CHEMICALS
    Year      Production Quantity   Sales Quantity   Sales value   Unit value
              (thousands of pounds)     (thousands      (thousands     (dollars/

    1965             48,263
    1970             73,019
    1975             78,645
    1977             96,172
 Source:  computed from data in U.S. international Trade Commission, Synthetic
         Organic Chemicals  (Washington, D.C.:  Government printing Office,
         various years).
of pounds)
19,573
30,542
32,760
96,172
of pounds)
2,791
3,940
7,542
9,897
pounds)
.143
.129
.230
.237
                                     TABLE  3


                WHOLESALE PRICE  INDEX FOR ORGANIC  CHEMICALS  OTHER
                       THAN  BASIC AND INTERMEDIATE CYCLICS

 (The group definition does not correspond exactly with the Census definition)
                     Year            Price
                     1968             91.9
                     1970             89 0
                     1972             98.3
                     1974            102.1
                     1976            224 5
                     1978            228 7
    Note:  The base year for the Wholesale price index figures changes in 1974
from 1958 to 1973.   Adjusting for this difference would have an effect of only
one or two points,  and would have no influence on the qualitative
interpretation.


Source:  U.S.  Department of commerce.  Wholesale price index, various years.

-------
                                     E-223
                                    TABLE  4

            VALUES OF SHIPMENTS FOR MISCELLANEOUS ORGANIC CHEMICALS

                              (millions of  dollars)

                     Year           Value of Shipments
                     1954               $ 1,655.2
                     1958                 2.391.3
                     1963                 3,546.7
                     1967                 4,606 7
                     1972                 6,180.5
                     1977                15,213.9
    Sources:   U.S. Department of Commerce,  Bureau of the census, 1972
               Census of Manufactures and 1977 Census of Manufactures
               (Washington, D.C.:
               1979).
                      Government Printina Office,  1975 and
                                    TABLE  5

                              CONCENTRATION RATIOS
1972 SIC
  Code

28691
(cyclics)
28692
(acyclics)
28695
(NEC)
Year
1972
1967
1963
1958
1954

1972
1967
1963
1958
1954

1072
1967
1963
1958
               Percent of value
of shipments accounted for by X largest firms
X = 4
33
31
29
39
44
8
48
45
34
60
66
20
75
70
71
85
88
50
96
94
94
99
—
 43
 47
 51
 59
 64

 28
 30
 32
 42
58
62
65
72
77

43
46
48
62
79
82
84
90
92

69
73
69
80
94
95
96
98
92
93
90
94
Source:  U.S. Department of Commerce, Bureau of Census, 1972 Census of
         Manufactures (Washington, D.C.:   Government Printing Office, 1975)

-------
                                     E-224
chemical to chemical, so that the two largest producers of each of the top 100
organic intermediates—both cyclic and acyclic—total nearly 50
companies.6/  Many of these are oil companies that have integrated forward
into the chemical industry.!/

    Among the over 1,250 smaller volume chemicals, roughly 60 percent have
only one producer listed with the ITC..§/  While many of these compounds
compete with other products when used as synthetic intermediates, they may not
face competition in some of their end uses.

EMPLOYMENT

    Although no complete employment statistics are available, they can be
estimated through analysis of a variety of census figures.  in 1977 the
Industrial Organic Chemicals sector (SIC code 2869)  employed 112,000
people.JL/  Within this sector  miscellaneous organic chemicals accounted for
83 percent of the value of shipments.M/  Table 6 suggests comparable labor
productivities  (value of shipments per employee) between this industry and
those that comprise the other 17 percent of shipments,  consequently, the
labor force for miscellaneous organics can be estimated to be 83 percent of
total employment, or 93,000.il/

FOREIGN TRADE

    The United States consistently maintains a positive balance of trade in
the miscellaneous organic chemicals category.  Since 1973 exports have
outpaced  imports by a factor of 2.1 to 3.1 (Table 7).
    6/U.S. Department of Commerce, 1977 Census of Manufactures.

    2/Meegan, Kline Guide.

    J/U.S. International Trade Commission, Synthetic Organic Chemicals,
1977.  However, previous ICF studies on pesticides indicate that ITC
information on producers may not be complete.

    Jl/U.S. Department of Commerce, 1977 Census of Manufactures.

    M/Ibid.

    ii/It is assumed that the ratio of productivities for establishments
concentrating in the two aggregated "industries" during 1972 is indicative of
the ratio for all establishments in these areas during 1977.  The 1972 ratio
is unity, so the 1977 productivities must be equal.  Since the same number of
employees are required to produce a given value of shipments in and out of the
industry, miscellaneous organics must account for the same proportion of
employment as the proportion of the value of shipments.

-------
                                      E-225
                                     TABLE 6

                    EMPLOYMENT AND SHIPMENT VALUES FOR FIRMS
                  CONCENTRATING  IN  INDUSTRIAL  ORGANIC CHEMICALS
      SIC Code               Employees               value of Shipments
                                                     (million of dollars)

       28691                    5,700                     $  378.4
       28692                   78,600                      7,399.4
       28695                    3,100                        152.3

   Miscellaneous Organics      87,400                     $7,930 1
       28693                    9,700                        713.9
       28694                    3,200                        462.1

   Other industrial organic
       chemicals               12,900                     $1,176.0

Source:  U.S. Department of commerce, 1972 Census of Manufactures,
         (Washington, D.C.:  Government Printing Office, 1975).
                                     TABLE  7

                FOREIGN TRADE OF MISCELLANEOUS ORGANIC CHEMICALS

                              (millions  of  dollars)


                      Year        imports        Exports
1973
1974
1975
1976
1977
223.1
531.1
453.7
460.4
549.3
696.1
1,129.9
1,118.5
1,394.4
1,452.5
Source:  U.S. Department of commerce, U.S. imports, FT 210 and U.S. Exports,
FT 610.

-------
              E-226
Synthetic Organic Dyes an pigments

-------
                                     E-227
                       SYNTHETIC ORGANIC DYES AND  PIGMENTS
OVERVIEW

    This section describes the chemistry of the two major product segments of
this industry and gives a brief history of the industry's development.

ORGANIC DYES

    The synthetic organic dye and pigment industry had its start in England in
1856.  There, William Perkin synthesized the purple dye, mauvine, by allowing
the interaction of coal-tar-derived aniline with potassium dichromate and
sulfuric acid.  Though the synthesis was an accident, Perkin recognized its
commercial potential and shortly thereafter established a plant to produce
aniline dye.

    Developing rapidly through Europe in the 1860s, the dye industry provided
the basis for several of today's largest chemical companies, including BASF,
Hoechst, Bayer, ICI, Ciba-Geigy and Sandoz.  A German pioneer in dye
synthesis, Friedrich Bayer, established the first U.S. aniline plant at
Albany, New York in 1865.

    Although domestic dye production started in 1865, during the later half of
the nineteenth century the majority of dyes were imported from Germany, which
then produced more than 85 percent of the world's dye sales.!/  it wasn't
until 1914, when World War I caused imports to cease, that large scale manu-
facturing began.  As a result, the vast industrial and chemical experience
Germany had accumulated created strong marketing and manufacturing advantages
which exist to this day.

    The original use of aniline dyes was to color fabric.  Success in the
synthesis of dyes led to a rapid advancement of chemical knowledge in many
related areas and to the development of hundreds of coal tar (aniline)  based
dyes.  With the advent of large-scale petroleum production, entirely new
classes of dyes sprang forth.  Today's internationally recognized reference
work, the colour Index, lists more than 8,000 distinct dye products..?/
     I/Mary K. Meegan, ed., Kline Guide to the chemical industry (3rd ed.,
Fairfield, NJ:  Charles Kline & Co., 1977), p. 155.

     2/society of Dyers and Colourists. Colour Inoex, vols. 1-6 (3rd ed.,
Bradford, England).

-------
                                     E-228
     Dyes can generally be classified using two .different bases:  application
and properties, or chemical structure.   The following is a brief description
of the most common categories according to their  characteristics of
application:

     e    Acid dyes.  Also known as anionic dyes, these dissociate
          in aqueous solutions to yield negatively charged colored
          ions.  Many chemical types belong to this category,
          including azo, anthraquinone, azine, nitro, nitroso, and
          triarylmethane compounds.  They are used mostly to color
          polymide fibers, wool, and silk.  Colors generally are
          bright and have good fastness properties.

     •    Azoic dyes.  These comprise a two-component system that
          results in deposit of an insoluble azo  compound on the
          substrate.  They are used to dye and print cellulosic
          fibers, particularly cotton.   They usually impart hues of
          maroon, orange, and red.  Light-fastness of the dyed
          fabric is extremely good.

     •    Basic dyes.  These are also known as cationic dyes.   When
          originally synthesized, they were used  to color natural
          fibers.  Now, a wide range of chemical  types have been
          made that have good light-fastness characteristics on
          acrylic fibers,  usual hues imparted are bright orange and
          red.

     •    Disperse dyes.  As the name suggests, these are applied as
          aqueous dispersions, being essentially  insoluble in
          water.  Compounds belong to three main  chemical
          classes—azo, anthraquinone,  and nitroarylamine.  They are
          used widely to color man-made fibers, acrylic, cellulose
          acetate, polyamide, and polyester.  Some are used to
          surface-color plastics.

     •    Direct dyes.  These chemicals are anionic, and are used
          primarily with cellulosic fibers.  They are applied from
          an aqueous solution containing an electrolyte.  Dyes of
          this class also are used to color leather and paper.

     •    Mordant dyes.  This class requires a mordant to fix the
          dye to the fiber in the form of a complex.  Mordants are
          usually metal compounds.

     •    Reactive dyes.  These chemicals form covalent bonds with
          the substrate.  First introduced commercially by imperial
          Chemical industries (ICI) in 1956, they were used
          originally with cellulosics.   Since then, compounds have
          been made that are suitable for coloring polymides and
          wool.  They have good fastness properties because they are
          chemically linked to groups on the substrate chain.

-------
                                     E-229
    •    Solvent dyes.   These are  soluble  in organic  solvents.
         Principal  uses  are  in lacquers and varnishes, printing
         inks, and  plastics.  They also are used  to color
         cosmetics, candles, soaps, and the like.  The chemicals
         are  related  to  disperse dyes and  are  now being developed
         for  use with polyester fibers.  Solvent  dyeing speeds
         drying time  and obviates  the need to  grind insoluble
         disperse dyes to  fine mill sizes.

    •    Sulfur dyes. These are water-insoluble  compounds  that
         contain sulfur  both as an integral part  of the chromophore
          (the group that gives rise to the color  of the chemical)
         and  are a  component of polysulfide pendant chains.  They
         are  reduced  to  a  water-soluble form before being applied
         to the fiber.   Subsequent oxidation causes the compounds
         to revert  to their  original colored state.   They are used
         mainly with  cellulosic fibers.

    •    yat  dyes.  Like sulfur dyes, these are  insoluble in
         water.  The  reduced, water-soluble form  is applied to the
         fiber and  then  oxidized to its insoluble form.  A  large
         number of  chemicals belong to this class.  Principal uses
         are  the dyeing  and  printing of cotton,  but they may be
         applied also to celluose  acetate, silk,  and  wool,  vat
         dyes have  outstanding fastness properties.!/

    Unlike  many other segments of  the chemical industry, the dye industry  is
characterized  by a large  number of  products in  terms of colors, methods of
application, and the form in  which  they are sold to users.   Many firms have
over 1,000 products  for sale, and Bayer offers  more than 2,000.I/  As a
result,  unlike the inorganic  pigments whose production may be measured in
thousands of tons per  day,  the largest quantities  of individual organic dyes
produced each  year are much smaller.  Table 1 illustrates this by showing six
leading  individual organic  pigments made from dyes produced  in 1970 and 1976
in the U.S.  and, as  a  comparison, the amounts for  three of the largest
inorganic pigment colorants.
     I/General descriptions from Chemical  &  Engineering  News,  February  26,
1979.

     i/Ibid.,  p.  19.

-------
                                      E-230
                                     TABLE  1

                 SALES  VOLUMES OF LEADING ORGANIC  PIGMENTS  (FROM
                  DYES) AND INORGANIC PIGMENTS:  1970 AND 1976
               Colorant
                Organics

                   Benzidine yellow
                   Phthalocyanine Blue
                   Lithol Red
                   Phthalocyanine Green
                   Permanent Red 2B
                   Red Lake c

                inorganics

                   Titanium Dioxide
                   Red Monoxide (Litharge)a/
                   Chrome Yellow and Orange^/
   Production
  (thousands of tons)
                                                  1970
  4.2
  3.9
  3.8
  1.7
  1.4
  1.1
655.3
157.0
 32.0
           1976
  6.0
  5.3
  4.2
  1.7
  1.4
  1.7
711.7
 93.2
 32.5
                a/Data is for 1972 and 1977.
Sources:   U.S.  Department of commerce,  Bureau of the census, 1977 Census of
           Manufactures (Washington.  D.C.:  Government Printing Office. 1979);
           Stanford Research institute,  Chemical Handbook,  1978; and U.S.
           Department of Interior,  Bureau of Mines,  Minerals Yearbook
           (Washington, D.C.:  Government Printing Office,  1971 and 1976).

-------
                                     E-231
     The relative maturity of the dye industry has acted to concentrate the
producers both domestically and abroad.   in 1976 there were 41 producers,  but
the four leading producers accounted for nearly 55 percent of all U.S.
sales.5/  Table 2 shows the seven leading U.S. producers in 1976 and their
sales volumes.
                                    TABLE 2

                      MAJOR U.S. SUPPLIERS OF DYES:  1976
              Rank      Company

                 1      Dupont
                 2      Ciba-Geigya/
                 3      Mobay
                 4      Sandozl/
                 5      Crompton & Knowles^/
                 6      American Cyanamid
                 6      American color & Chemical
                        Other
                          Total
Million of Dollars
       650
                 5/Sales include dyes produced by Toms River Chemical.
                 Source:  Mary K.  Meegan, Kline Guide to the Chemical Industry
                          (3rd. ecu, Fairfield, NJ:  Charles Kline & Co.,
                          1979) .
    Approximately two-thirds of the dyes consumed in the U.S. are used for
textile application on synthetic and natural fibers.  Approximately 20 percent
of sales goes to the paper industry, and the remainder goes to color plastics,
leather, food, and to the manufacture of organic pigments.6/  A later
section will describe the production, price and sales trends, and the
competitive situation.

ORGANIC PIGMENTS

    Organic pigments are insoluable precipitates from dyes and organic
intermediates that are applied in a liquid vehicle.  The two most common
varieties are lakes (originally, pigments derived from lac dyes), which are
     1/Meegan, Kline Guide, p. 158.

     i/Meegan, Kline Guide; and Stanford Research Institute, Chemical
Handbook, 1978.

-------
                                     E-232
organic ayes precipitated on an inorganic substrate,  and toners, which are
full-strength organic pigments with no inorganic diluent.  Because pigments
are insoluable, their application technology is different from dyes, even
though they are derived from organic dyes.

     Because organic pigments are essentially a subset of the organic dye
industry, their development closely parallels that of the larger dye segment.
Like dyes, pigment production is concentrated.  There were 33 producers of
pigments in 1976, with the four largest producers supplying 48 percent of
sales in that year..I/

     The majority of organic pigments are used in printing inks, accounting
for 47 percent of total sales in 1977.  Paints follow closely with 33 percent
of sales.  Unlike the organic dyes, sales of pigments are concentrated with
six individual colors constituting over 55 percent of sales.   These individual
products as well as the volumes and amounts of total  U.S. production will be
discussed in detail in the next section.
RAM MATERIALS, PRODUCTION AND PRICES

     As their name implies,  organic dyes and pigments are produced from organic
raw materials, most notably  petroleum derivatives.   Because of the large number
of products and relatively small quantities of each product, batch processing
is widely used.  Producers are highly subject to changes in textile fashions,
and are called upon to produce new hues annually.   For example,  id's manager
of dye production stated recently that half of iCI's present synthetic organic
colorants were not available 10 years ago,  and the  company introduced several
significant new products just within the last 18 months.  The level of product
innovation is quite high although few patents are issued on them because of
the short market life span for the majority of products.8/  Because the
products are sold based on performance rather than  what they contain, there is
a great deal of product differentiation and industrial secrecy concerning
their formulation.  As a result, public data is not available concerning the
types and amounts of feedstocks that are consumed for dyes and organic
pigments.

     As previously mentioned, the sale of dyes is closely tied to the sales of
textiles.  Figure 1 illustrates the relationship between dye and textile sales
for the years 1960 to 1975.
     I/These four were:   DuPont,  Chemetron,  American Cyanamid, and Sun
Chemical (Meegan, Kline  Guide).

     JL/Chemical and Engineering News,  February 26,  1979.

-------
                                     E-233
            FIGURE 1;   U.S.  SHIPMENTS OF DYES AND TEXTILES, 1960-1975
 ($ Millions)

 800


 600 —




 400 -
                         ($ Billions)

                         40
           1965
1970
                             1975
1980
                                  1965
1970
1975
1980
                       Year
                       DYES
                                               Year
                                             TEXTILES
Source:  U.S. Department of Commerce, Bureau of the Census, Survey of Current
         Business various years; and U.S. International Trade Commission,
         Synthetic Organic Chemicals, 1976  (Washington, D.C.:  Government
         Printing Office, 1976).
    Table 3 illustrates the dollar amounts of dyes and pigments  sold  from  1967
through 1977.  During this period synthetic fibers increased  their market
share of all fibers sold.  Because synthetic fibers require more expensive
dyes, dollar sales in the 1960s and 1970s grew faster than volume.  The  future
should see a slowing of growth in synthetic fibers, and  thus,  a  slower growth
for dyes.£/  While the sales volumes of organic pigments is smaller,  their
projected growth rate is larger due to a wider use by differing  industries.
     9/Meegan, Kline Guide.

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                                     E-234




                                    TABLE 3

                       U.S.  SHIPMENTS  OF DYES:   1967-1977
                                   Total Organic          Total Dye
                  Year           pigment Shipments       Shipments'*/
                              (millions of  dollars)   (millions of dollars)

                  1967                 162                    326
                  1968                 189                    360
                  1969                 199                    389
                  1970                 169                    397
                  1971                 178                    435
                  1972                 225                    474
                  1973                 273                    510
                  1974                 333                    573
                  1975                 304                    499
                  1976                 410                    650
                  1977                 445                    690
                  1980b/                                     745
                  1985&/                                     840
                  ^/includes interplant  transfers.
                  ^/Estimates.

                   Sources:   U.S.  international  Trade  commission,  Synthetic
                             Organic Chemicals (Washington,  D.C.:   Government
                             Printing Office,  various years);  U.S.  Department
                             of Commerce,  Bureau  of Census,  1967 Census of
                             Manufactures  (Washington,  D.C.:   Government
                             Printing Office,  1970); U.S.  Department Commerce,
                             Bureau of Census, Annual Survey of Manufactures
                             (Washington,  D.C.:  Government  Printing Office,
                             various years);  and  estimates by  Charles Kline &
                             Co.
     As previously mentioned,  sales of organic pigments are much more
concentrated than dyes.  Table 4 gives a breakdown of the largest volume sales
by type of pigment.

     The pressure of increased raw material costs after 1971 has pushed
organic dye prices upwards.  Table 5 illustrates the price indices for the
eleven major dye categories  for the years 1967 to 1976.  in 1972 average
prices were only 12.8 percent  higher than they were five years earlier.  They
were 31 percent higher in 1976 than in 1972.  Raw material costs have
continued to increase since  then,  and it is expected that prices will rise
dramatically.

-------
                                      E-235
                                    TABLE  4
               U.S.  PRODUCTION AND  SHIPMENTS  OF ORGANIC PIGMENTS
                         BY TYPE:  1974, 1975, and 1976
  Toners
    Red
      Lithol Red R
      Permanent Red 2B
      Lake Red C
      Toluidine
      Eosin
      Lithol Red 2G
      Lithol Rubine B
      Naphthol reds
      Other
      Subtotal

    Blue
      Phthalocyanine
      Other
      Subtotal

    Yellow
      Benzidines
      Hansa
      Other
      Subtotal

    Green
      Phthalocyanine
      Other
      Subtotal

    Violet
    Orange
    Black and Brown
      Subtotal

  Lakes
    Red
    Blue
    Other
      Subtotal

GRAND TOTAL
                                Production
                          (millions of pounds)
    Production
(millions  of  dollars)
+Plus additional amounts.
£/included in other.
Source:
1974
6.0
2.6
3.7
2.2
1.6
1.7
1.6
1.1
3.7
24.2
11.1
4.4
15.5
13.9
3.4
1.5
18.8
3.3
0.7
4.0
2.9
1.9
0.3
5.1
0.5
a
1.8
2.3
69.9
id.,
1975
5.2
2.2
2.7
1.7
—
1.9
1.5
10
3.9
20.1
7.0
2.4
9.4
8.6
1.9+
1.1
11.6
2.3
0.4
2.7
2.2
1.4
0.3
3.9
0.3
1.1
0.5
1.9
44.6
Kline Guide
1976
6.1
2.9+
3.3
2.2
—
2.2
2.5
1.3
5.1
25.6
10.6
3.6
14.2
12.0
3.2
1.8
17.0
3.3
0.5
3.8
3.0
1.9
0.5
4.4
0.4
0.7
0.6
1.7
67.7
to the
1974
10.2
8.4
7.7
5.3
—
5.3
4.6
4.8
25.5
71.8
39.3
12.3
51.6
33.6
6.2+
9.8
49.6
16.2
3.8
20.0
22.2
7.2
0.5
29.9
1.6
a
3.4
5.0
227.9
1975
11.2
6.6
6.3
4.3
—
5.6
5.0
4.7
21.9
65.5
28.1
11.7
39.8
20.8
6.4 +
9.1
36.3
11.7
2.6
14.3
20.0
5.0
0.9
25.9
1.1
2.3
0.5
3.9
185.8
Chemical industry (3rd
1976
10.2+
9.8+
7.2
5.7
—
—
—
6.4
42.8
90.3
43.1
13.6
56.7
27.7
10.0+
12.4
50.1
17.7
4.0
21.7
28.6
8.5
0.8
37.9
1.4
2.1
0.9
4.4
261.1
ed. ,
         Fairfield, NJ:  Charles Kline & Co., 1977).

-------
                                                  TABLE 5

               INDICES  OF AVERAGE MANUFACTURERS'  PRICES OF SYNTHETIC  ORGANIC DYES:  1967-1976

                                                1967 = 100
Textile  types!*/

    Vat
    Disperse
    Direct
    Acid
    Basic
    Azoic^/
    Reactive
    Mordant

  Weighted Average

Optical brighteners
Solvent
Food, drug, cosmetic

  Weighted Total
                         1967
        1968
        1969
1970
1971
1972
1973
1974
1975
1976
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100,0
100.0
108.6
99.2
104.6
105.0
103.1
101.5
102.8
96.0
106.6
87.5
105.3
102.7
108.2
101.2
104.6
109.1
110.4
103.1
100.9
100.6
110.6
79.8
102.4
98.4
101.3
104.5
109.9
106.3
105.8
108.4
100.7
97.5
110.4
78.8
104.1
97.5
96.9
117.0
113.2
113.6
110.0
115.4
82.3
108.1
118.1
73.6
104.1
106.3
104.3
113.8
113.2
115.8
105.8
123.3
100.7
93.2
121.4
66.8
110.0
117.9
113.0
109.3
110.6
115.8
103. .1
120.7
103.5
—
124.8
64.9
121.8
122.0
112.0
123.1
128.5
132.6
109.3
146.4
109.7
164.6
136.5
61.1
142.4
170.1
120.4
138.9
131.8
137.6
119.7
146.5
118.4
178.3
144.6
76.4
165.3
175.8
136.5
153.8
165.1
146.1
129.0
132.0
126.6
203.1
159.5
70.1
180.4
170.5
100.0
103.5   105.3   104.5   110.0   112.8   116.8   126.3   137.7
                                                148.5
^/Excludes sulfur and miscellaneous textile dyes.

b/Includes fast color bases and salts.
Source:  Mary K. Meegan, ed., Kline Guide to the Chemical  Industry  (3rd  ed.,
         Fairfield, NJ:  Charles  Kline  & Co.,  1977).

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                                     E-237
     During  this same period,  the trade balance of organic dyes has been
decidedly negative,  with 75 percent of imports in 1976 coming from Germany and
Switzerland.10/ (see  Table 6) .   in 1977 DuPont dropped its vat dye line after
losses of $25 million (pretax)  on sales of $105 million.   In 1978 it continued
with unspecified losses on $85 million in sales.  in June 1979 DuPont
announced a  total withdrawal from the market, leaving American Cyanamid as the
only American producer .ii/  it is estimated that the trade balance will
continue to  deteriorate.
                                    TABLE 6

         U.S.  IMPORTS AND EXPORTS OF SYNTHETIC ORGANIC DYES:   1969-1965

                              (millions of dollars)
                   Year

                   1969
                   1970
                   1971
                   1972
                   1973
                   1974
                   1975
                   1976
imports

   63
   70
   97
  101
  100
  106
   80
  132
Exports

   21
   29
   29
   34
   57
   84
   61
   77
 Trade
Balance

  -42
  -41
  -68
  -67
  -43
  -22
  -19
  -55
    Source:    U.S.  Department of Commerce,  U.S.  imports,  FT 135;  and U.S.
              Exports, FT 410.
     Unlike the dyes segment,  synthetic organic pigments enjoy a slightly
positive foreign trade balance,  and may continue to do so.ii/  Table 7 shows
the history of foreign trade in organic pigments from 1969 through 1977.
     iO/Stanford Research institute,  Chemical Handbook, 1978.

     jj/Chemical and Engineering News,  June 11, 1979.

     12/u.s. Department of Commerce.  1978 U.S. industrial Outlook
(Washington, D.C.:  Government Printing Office, 1978).

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                                     E-238
                                    TABLE  7

                     U.S.  IMPORTS AND EXPORTS OF SYNTHETIC
                          ORGANIC PIGMENTS:  1969-1976

                              (millions of  dollars)
                                                     Trade
                   Year     imports     Exports     Balance

                   1969         —        12.0
                   1970       12.4        14.3         1.9
                   1971       14.7        16.2         1.5
                   1972       15.0        19.2         4.2
                   1973       21.2        29.1         7.9
                   1974       31.7        33.1         1.4
                   1975       25.4        25.1         -.3
                   1976       32.3        36.5         4.2
                   1977       36.0        36.0         0.0

              Source:   U.S.  Department of Commerce, 1978 U.S.  Industrial
                        Outlook (Washington,  D.C.:   Government  Printing
                        Office, 1978).
COMPETITION AND INNOVATION

     Rapid expansion of production facilities both domestically and abroad in
the late 1960s and early 1970s, coupled with large price increases and a
depressed textile market in the middle 1970s, have created at present an
overcapacity in organic dyes. 13/  This has led to price cutting, exits from
the industry by large producers, and for some, such as DuPont, large losses
prior to exit.  Foreign competitors claim that because U.S. dye managers are
more geared to mass production at high volume, they have less flexibility to
develop new products to support flagging sales during the cyclical downswings
of the textile industry .
     Coupled with this problem is the emergence of more stringent environmental
regulations regarding waste products.  As a result, the Dyestuffs Environmental
and Toxicology Organization (DETO)  was formed in 1977.  Each member company
provides funds and key personnel to DETO to conduct studies on toxicology and
ecology.  While there is no publicly available data, it is reasonable to
assume this will add to overall manufacturing costs and may result in delaying
or deferring the introduction of some new dyes and pigments.  This may lower
innovation in this segment, which is already quite low.
     A^/Chemical and Engineering News, February 26, 1979.

     IVIbid., p. 20.

-------
    E-239
Plasticizers

-------
                                     E-240
                                  PLASTICIZERS
DESCRIPTION

    Plasticizers are organic chemicals which are physically incorporated into
vinyl and other polymers,  either to improve workability during fabrication or
to increase flexibility in the end-use products.  The first plasticizer was
used in the 1860s,  but the modern plasticizer industry really began with the
development of polyvinyl chloride (PVC)  plastic in the 1920s and 1930s; the
production of PVC now constitutes about two-thirds of all plasticizers
consumed in the U.S.  About 85 percent of all plasticizers are used in the
plastics industry,  and most of the rest is used in the production of rubber
and cellulose products.

USES OF THE CHEMICAL

    plasticizers are by definition intermediate products, being consumed in
the production of end-use chemical products.  Polyvinyl chloride, which
consumes about two-thirds of plasticizer production,  has a wide variety of
uses, as shown in Table 1.  Flooring,  wire and cable  coating, wrapping films,
textile and paper coatings, and moldings and extrusions are all important uses.
                                    TABLE 1

                   CONSUMPTION OF PLASTICIZERS IN PVC:  1975
         Application of PVC

         Film and sheet
         Flooring
         Molding and extrusion
         Textile and paper coating
         Wire and cable coating
         Others

         Total
Amount of plasticizers of pounds)

             244.3
             164.0
             178.4
             147.0
             169.5
             174.2
                                                         1,077.4
Source:  "Plasticizers." Modern Plastics,  September 1975, p. 47.

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                                     E-241
    There are no natural substitutes for plasticizers themselves although
there are substitutes for the end-use products.

RAW MATERIALS

    Plasticizers are produced from a number of chemical intermediates.   Their
production consumes a miniscule percentage of the supply of most of these
intermediates.  However, plasticizer production does account for about  50
percent of the use of phthalic anhydride, from which about two-thirds of all
plasticizers are produced.

PUBLIC DATA

    Table 2 displays the quantities of plasticizers produced and their
relation to the production of PVC, the major consumer of plasticizers.   In
1978 more than two billion pounds of plasticizers, selling for more than $800
million, were produced.  There has been a long-term increase in production of
both plasticizers and PVC.  Although the 1975 recession proved devastating for
both, production has since recovered.

    As shown by the steady decrease in the ratio of plasticizer production to
PVC production, the output of plasticizers is growing much more slowly  than
the output of PVC.  This is due to the increased proportion of PVC being used
for rigid end-products, which consumes less plasticizer than PVC used for
flexible end-products.i/

    Table 3 displays a more detailed breakdown of plasticizer production
during the 1960s and 1970s.  There are few substantial changes between  1961
and 1976.  Phthalic anhydride esters continue to hold over 60 percent of the
market, with di(2-ethylhexyl) phthalate as the most important single product.
The complex polymers, which are substitutes for traditional plasticizers, hold
about three percent of the market.

    imports are a negligible component of U.S. consumption, amounting to only
6.2 million pounds in 1977, 0.4 percent of domestic consumption.^/  Exports
account for a significant amount of U.S. production:  in 1977 the U.S.
exported 152.5 million pounds of plasticizers worth $50.8 million.  These
exports were 8.5 percent of the U.S. volume and about 7 percent of the  value
of U.S. sales (see Table 4).  in recent years, exports have been declining in
importance; in 1972 they equalled 9.9 percent of production volume and  10.6
percent of production value, and in 1967 they equalled 11.7 percent of  volume
and 21.9 percent of value.
    I/Mary K. Meegan, ed., Kline Guide to the Chemical industry (3rd ed.,
Fairfield, New Jersey:  Charles Kline & Co., 1977), p. 89.

    2/U.S. international Trade commission, Synthetic Organic Chemicals, 1977
(Washington, D.C.:  Government Printing Office, 1977), p. 254.

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                                     E-242




                                    TABLE 2

             PRODUCTION OF  PLASTICIZERS AND POLYVINYL CHLORIDE (PVC)
                   Plasticizer
                   Production     polyvinyl Chloride (PVC)   Ratio of plasti-
                   (millions             Production          cizer Production
     Year          of pounds)        (millions of pounds)     to PVC Production

    1978            2,086
    1977            1,792
    1976            1,699
    1975            1,352
    1974            1,892
    1973            1,873
    1972            1,708
    1971            1.494
    1970            1,336
    1969            1,382
    1968            1,331
    1967            1,263
    1966            1,209
    1965            1,073
    1964              951
    1963              835
    1962              781
    1961              630
Source:  U.S.  international Trade Commission,  Synthetic Organic Chemicals
         (Washington,  D.C.:  Government Printing Office, various years).
5,878
5,267
4,545
3,695
4,774
4,594
4,322
3,437
3,115
3,032
2,635
2,142
2,164
1,838
1,637
1,386
1,215
977
.35
.34
.37
.37
.40
.41
.40
.43
.43
.46
.51
.59
.56
.58
.58
.60
.64
.64

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                                                         E-243


                                                         TABLE 3

                                         PLASTICIZER PRODUCTION, SELECTED YEARS

                              1976	  	1971	  	1966	 	    1961
Volume
(millions Ibs.
Total
Cyclic
Phosphoric acid
esters
Cresyl diphenyl
phosphate
1,587.4
1,185.9
74.9
4.5
Percent
, ) of Total
100.0
74.7
4.7
0.3
Volume
(million Ibs.
1,494.0
1,130.4
91.4
20.4
Percent
) of Total
100.0
75.7
6.1
1.4
Volume
(million Ibs,
1,208.9
897.2
68.6
20.0
Percent
. ) of Total
100.0
74.2
5.7
1.7
Volume Percent
(millions Ibs.) of Total
629.7
473.6
47.0
13.0
100.0
75.2
7.5
2.1
Phthalic anhydride
  esters              1,042.9        65.7          978.2        65.5          754.5       82.4         376.5          59.8
Dibutyle
phthalate
Diethyl phthalate
Diisodecyl
phthalate
Dimethyl phthalate
Dioctyl phthalates
Di (2-ethylhexyl)
phthalate
Di-tridecyl
phthalate
Acyclic
Adipic acid
esters
Di (2-ethylhexyl)
adipate
Complex linear poly-
esters & polymers

13.7
16.1

143.1
8.8
314.0

296.7

10.5
401.5

59.6

39.3

52.9
Epoxidized esters 117.4
Oleic acid esters
Phosphoric acid
esters
Sebacic acid esters
Stearic acid esters
9.9

25.7
1.7
12.1

0.9
1.0

9.0
0.6
19.8

18.7

0.7
25.3

3.8

2.5

3.3
7.4
0.6

1.6
0.1
0.8

23
16

135
10
437

386

20
363

63

35

46
99
12

22
9
11

.0
.9

.7
.6
.3

.3

.3
.6

.4

.1

.2
.0
.5

.7
.6
.8

1.5
1.1

9.0
0.7
29.3

25.9

.1.4
24.3

4.2

2.3

3.1
6.6
0.8

1.5
6.4
7.9

20
21

103
4
376

253


.2
.5

.3
.4
.8

.0

19.4
311

51

22

47
86
10

13
12
7
.7

.8

.3

.9
.6
.4

.6
.6
.-_

1.7
1.8

8.5
0.4
31.2

20.9

1.6
25.8

4.3

1.8

4.0
7.2
0.9

1.1
1.0
0.6

5
17

48
4
181

138

2
156

25

8

16
15
8

10
11
7

.6
.3

.3
.1
.5

.3

.7
.1

.7

.5

.5
.9
.9

.6
.5
.4

0.9
2.7

7.7
0.7
28.8

22.0

0.4
24.8

4.1

1.3

2.6
2.5
1.4

1.7
1.8
1.2
Source:  U.S. International Trade Commission, Synthetic Organic Chemicals  (Washington, D.C.:  Government Printing
        Office, various years).

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                              E-244
                             TABLE 4

                       PLASTICIZER EXPORTS
                             phthalic     Cyclic             percent of
plasticizers     Dioctyl    Anhydride     plasti-               Total
except Cyclic  Phthalates  Esters,  NEC  cizers, NEC  Total   Production
1977
1976
1975
1974
1973
1972
1971
1970
1969
1968
1967
1966
1965
NEC -
Source
54.8
48.1
31.8
50.6
58.3
36.3
32.9
24.0
21.3
19.2
17.0
14.0
11.7
9.7
29.9
20.3
23.7
14.6
16.8
14.6
36.0
14.3
25.1
22.9
15.9
23.5
83.9
75.5
50.9
69.3
78.4
105.8
47.6
36.5
107.7
89.4
101.2
79.3
83.0
4.1
10.0
8.6
12.7
10.7
10.4
8.1
8.5
7.1
6.2
6.8
5.6
3.9
152.5
163.5
111.6
156.3
162.0
169.3
103.2
105.0
150.4
139.9
147.9
114.8
122.1
8.5
9.6
8.3
8.3
8.6
9.9
6.9
7.9
10.9
10.5
11.7
9.5
11.4
not elsewhere classified.
: U.S.
Department of
Commerce, U.S.
Exports:
Commodity by
Country,
    FT 410,  various years.

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                                     E-245
    Table 5 displays the average price for all plasticizers produced.  During
the late 1950s the prices of plasticizers dropped and continued an overall
decline until 1943 when they started to rise.  in the inflationary environment
of 1974 they increased sharply and continued to rise more slowly in the late
1970s.  The price declines correspond to declines in the price of phthalic
anhydride, the raw material for the phthalic anhyaride esters, the most
important plasticizer.  Table 6 presents the prices of a number of phthalate
anhydride derivates during this period.  Each of the products' prices shows
the same trends as the prices of the entire group and of phthalic anhydride.

COMPANIES IN SEGMENT

    There are more than 50 producers of plasticizers; the census of
Manufactures lists 49 firms with shipments of $100,000 or more in 1977 and the
U.S. international Trade Commission lists 54 in 1976.  in 1961 the ITC listed
53 firms in the industry and the number remained virtually constant during the
1960s and 1970s.  The stability in the number of firms in the industry.
combined with the reduction in the number of firms producing each product
discussed earlier, suggests that these firms are becoming more specialized.
It appears that most of the producers are large, diversified corporations or
subsidiaries thereof, and plasticizers compose only a tiny fraction of their
business.  Therefore, it seems impossible to estimate the profitability of
this sector from the limited information available.

    Mergers and acquisitions have helped change the roster of producers over
the years.  Monsanto, W.R. Grace, Rohm & Haas, FMC, and Eastman were among the
leading producers in both the early 1960s and the late 1970s.  But Allied
Chemicals and Celanese. both among the leading producers in the early 1960s,
no longer produce plasticizers, and Union Carbide no longer produces phthalate
derivatives.  U.S. Steel, Exxon, Stauffer, Tenneco, and BASF Wyandotte have
become major plasticizer producers, either by buying small producers and
expanding, or by beginning production from scratch.!/

    An examination of more narrowly defined markets also reveals some turnover
among the leading firms.  in the phthalate markets, Monsanto, Grace, and
Eastman have remained leaders, but Union Carbide and Allied Chemical have
dropped out and Exxon and BASF Wyandotte have entered.  Union Carbide and Rohm
& Haas have remained leading producers of epoxidized esters, Witco has
entered, and Swift and Archer-Daniels-Midland have dropped out.  FMC and
Monsanto remain leading phosphate ester producers, Stauffer has entered the
market, and Celanese has dropped out.4/
    3/Comparisons made between Meegan, Kline Guide and Chemical and
Engineering News, November 13, 1961, pp. 134-5.

    I/Comparisons made between Chemical and Engineering News, November 13,
1961, pp. 134-135, and "Additives for Plastics - plasticizers", Plastics
Engineering, January 1977, pp. 32-38.

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                                     E-246



                                    TABLE 5

                               PLASTICIZER PRICES

                                                              Price of
                             Price of  plasticizers        Phthalic Anhydride
            year              (dollars per pound)         Jdollars per pound)

            1978                      -40
            1977                      .38                        .23
            1976                      .39
            1975                      .35                        .21
            1974                      .31
            1973                      .20
            1972                      .18
            1971                      .16
            1970                      .19                        .09
            1969                      .21
            1968                      .23
            1967                      .22
            1966                      .21
            1965                      .21                        .08
            1964                      .21
            1963                      .22
            1962                      .25
            1961                      .29
            1960                      .30                        .18
            1959                      .30
            1958                      .31
            1957                      .31
            1956                      .32
            1955                      .31                        .19
Source:  U.S.  international Trade  Commission,  Synthetic Organic Chemicals
         (Washington,  D.C.:   Government  Printing  Office,  various years).

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                                     E-247
                                    TABLE o

           PRICES OF PHTHALIC ANHYDRIDE DERIVATIVES:  SELECTED YEARS

                               (dollars per pound)
                            1956     1961     1966     1971
Phthalic Anhydride esters     .29



    Dibutyl phtalate

    Diethy phtalate

    Diisodecyl phthalate

    Dimethy phthalate

    Dioctyl phthalates

       Di (2-ethyhexyl)

         phthalate

    Di-tridecyl phthalate
1976
.29
.26
.25
.29
.26
.28
.28
N/A
.25
.27
.24
.24
.25
.23
.24
.29
.16
.19
.18
.15
.20
.14
.14
.22
.13
.16
.18
.12
.20
N/A
.11
.19
.30
.37
.42
.29
.37
.26
.26
.35
N/A - not available.
Source:  U.S. international Trade Commission. Synthetic Organic pesticides
         (Washington, D.C.:  Government Printing Office, various years).

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                                      E-248
    The Kline Guide to the Chemical industry estimates that in 1976, the
leading four firms produced just over 50 percent, and the leading eight firms
produced just over 70 percent of all plasticizers.  There is not much captive
production of plasticizers (somewhat less than 10 percent), so the vast
majority is traded on the market.  In 1961, Chemical Engineering News
estimated the four-firm concentration ratio at about 35 to 40 percent and the
eight-firm ratio at about 55 to 60 percent.JL/  jt appears that concentration
has increased slightly, but the difference may be due simply to different
methods of estimation.

    As usual, the more narrowly defined the market, the higher the
concentraton ratios.  The 1961 Chemical and Engineering News data yields
estimates for narrower markets that are lower than the estimates for the more
broadly defined markets.  As can be seen in Table 7, the markets which are
larger and more inclusive (phthalates, the combined market)  are less
concentrated than the smaller markets.  When we descend to the level of
individual products, production is more concentrated still.   Most products are
made by three or fewer firms, though the more popular ones are manufactured by
a greater number.  There has been a reduction in the number of firms making
individual products over time.  For example, of the 15 phthalic anhydride
derivatives listed in both 1961 and 1976, 12 were produced by fewer firms in
1976, and the other three were produced by the same number.   Di(2-ethylhxyl)
phthalate, the single product with the greatest production volume in both 1961
and 1976, went from 18 producers in 1961 to 11 in 1976.

    During the 1960s, there was an increasing trend toward backward
integration from plasticizers into the alcohols and phthalic anhydride, from
which plasticizers are made.   Before i960 such integration was rare but by
1970 most of the large producers made either alcohols, phthalate anhydride, or
both.
    ^/Derived from data presented in Chemical and Engineering News, November
13, 1961.  Estimates were obtained by aggregating the three tables on pages
134-135.  These estimates cover only about 75 percent of the entire market.
Note that the true concentration ratio for the entire market is probably lower
still.

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                                     E-249
                                       TABLE 7

            ESTIMATED CONCENTRATION RATIOS  IN PLASTICIZER MARKETS:  1961
  Market


phthalatesl/

Polymeric

Epoxidized

Phosphate esters

Total
Four-Firm Ratio


     40-45%

     63-71

     66-68

     70-75

     35-40%
                      Percent of Total
Eight-Firm Ratio   plasticizer Production
60-65%
84-88
85-87
95-96
55-60%
59.8%
2.6
2.5
9.3
74.3%
Note:  The data given in the source refers to production capacity.   The
concentration ratios are constructed by assuming that all producers use about
the same percentage of their capacities during the year.

    5/Phthalate capacity can also be used to make adipates,  sebacates,
azelates, and other monomeric plasticizers.
Source:   Chemical and Engineering News,  November 13,  1961,  PP.  134-135.   The
         data in the last column, "Percent of Total Production" is taken from
         U.S. international Trade Commission, Synthetic Organic pesticides
         (Washington, D.C.:  Government  Printing Office, 1961).

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                                      E-250
INNOVATION

    We believe that the consensus among trade journal articles is that
considerable innovation exists in the plasticizer industry.  One recent
article states that in 1934, 56 different plasticizers were commercially
available, of which eight are still produced.  In 1943, 150 were in use, of
which 60 remain in use today.  By the mid 1960s, 300 products were available,
and by the mid 1970s, 500 were available.6/  There have been a particularly
large number of new polymeric plasticizers introduced in recent years.
    ^/"Additives for Plastics - plasticizers",  plastics Engineering,  January
1977,  pp.  32-38.

-------
            E-251
Rubber-Processing Chemicals

-------
                                     E-252
                          RUBBER-PROCESSING CHEMICALS
DESCRIPTION

    Rubber-processing chemicals include a wide variety of substances that are
used to modify rubber so it can be used in commercial applications.  Rubber-
processing chemicals have been in use since the 1840s, when the development of
vulcanization (treating rubber with sulfur) by Charles Goodyear greatly
improved the properties of rubber and expanded its markets.  The early
twentieth century saw the beginning of the development of a wide variety of
rubber-processing chemicals.  Today there are more than 20 different types of
chemicals and over a thousand products used to process natural rubber and the
many types of synthetic rubber.

USES

    There are many different varieties of rubber-processing chemicals which
are designed to prevent the deterioration of rubber and modify its
properties.  Not all of the chemicals which are used in rubber production are
included in this category; such products as sulfuric acid, salt, alum, sulfur,
zinc oxide, fatty acids, silicas, clays, carbon black, nylon, rayon, and
pigments have many uses outside the rubber industry, and, therefore, are not
discussed here.   The major categories of rubber processing chemicals that are
included here are:

    •    Accelerators.  Accelerators cause rubber to vulcanize faster and they
         often retard aging.  The first accelerators, aniline derivatives,
         were developed during the first decade of this century.  Thiazole
         compounds, which today account for about two-thirds of accelerator
         production, were first developed during the 1920s.

    •    Activators.  Activators increase the efficiency of vulcanization.
         Zinc oxide is the most widely used activator.  Fatty acids, fatty
         acid amines, ana zinc stearate are also used as activators.

    •    Antioxidants.  Antioxidants protect rubber from deterioration due to
         the action of oxygen and oxidizing chemicals.  in the nineteenth
         century the rubber industry used a variety of naturally occurring
         materials to retard oxidation, including cresote, naphthalene,
         asphalt, and coal tar pitch.  The accelerators developed early in the
         twentieth century also protected rubber against oxidation, and
         replaced the earlier substances,  in the 1920s the first nonacce-
         lerating antioxidants, which made rubber last about 67 percent longer
         than earlier antioxidants, were developed, and from then until World

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                                     E-253
         War II there was a burst of innovation in antioxidants.   After  the
         war a whole new class of antioxiciants which  did  not  discolor  rubber
         was developed.   Both discoloring  and non-discoloring antioxidants are
         used today; the discoloring antioxidants are generally more effective
         at preventing deterioration.

    •    Antiozonants.  During World War II it was discovered that ozone also
         ages some synthetic rubber products quite rapidly, although other
         synthetic rubbers are more resistant.  A number  of effective
         antiozonants were developed during the 1950s,  and in addition to
         protecting rubber from ozone,  they help protect  against oxygen,
         prevent cracking, and deactivate  metallic impurities which can  weaken
         the rubber.

    Although these four are the major categories, there are many other types
of chemicals used in rubber-processing; in 1958, 28 different types were
listed in one trade journal.  Many of the  antioxidants and antiozonants  used
primarily in rubber processing are used for the same  purposes in plastics,
petroleum products, and food.  About 70 percent of the antioxidants and
antiozonants are used in rubber products.

PUBLIC DATA

    Table 1 displays data on U.S. production of rubber-processing  chemicals
for the period 1961 to 1978.

    As can be seen, production shows a long term increase over the period
covered, with surges during periods of economic expansion and reductions in
growth or actual declines during periods of recession (1969 to 1970, 1974 to
1975).  The production of rubber-processing chemicals is  dependent on  the
production and use of both synthetic and natural rubber as well as on  general
economic conditions.  Table 2 displays the U.S. production of synthetic  rubber
and imports of natural rubber.  The fluctuations in production of  rubber seem
to be about as close to fluctuations in production of rubber-processing
chemicals as possible, given the changes in inventories and imports for  which
we have no data.  There does seems to be a long-term  decrease in the volume of
rubber-processing chemicals used per unit  of rubber,  which may be  attributable
to technological improvements (although more data on  imports  and inventories
could possibly contradict this observation).  Table 3 displays the value and
the production volume of exports of rubber-processing chemicals, and the
volume of exports as a percentage of total production volume. During  this
decade exports as a percentage of production have risen steadily,  exceeding  20
percent in both 1976 and 1977.

-------
                             E-254
                            TABLE 1

           PRODUCTION OF RUBBER-PROCESSING CHEMICALS
                         Volume                  Average price
Year                 (millions of pounds)       (dollars per pound)

1978                     365.8                     1.26
1977                     402.2                     1.23
1976                     384.4                     1.10
1975                     279.0                     1.02
1974                     383.9                      .83
1973                     400.9                      .64
1972                     361.0                      .63
1971                     323.5                      .65
1970                     298.3                      .65
1969                     303.5                      .63
1968                     312.6                      .64
1967                     264.1                      .68
1966                     283.3                      .66
1965                     251.9                      .64
1964                     260.6                      .67
1963                     233.6                      .67
1962                     228.4                      .66
1961                     205.1                      .67
Source:   u.S International Trade Commission Synthetic Organic
          Chemicals (Washington,  D.C.:  Government Printing Office,
          various years).

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                                     E-255
                                    TABLE 2

                   PRODUCTION OF RUBBER PROCESSING CHEMICALS
                      AS A PERCENTAGE OF RUBBER PRODUCTION
      Year
   Domestic consump-
   tion of Rubber-
   Processing
    Chemicals3
     (millions
    of pounds)	
  Domestic
 Production
    of
  Rubberb
(millions of
 of  pounds)
 Rubber-Processing
    Chemicals as
Percentage of
      Rubber
      1977
      1976
      1975
      1974
      1973
      1972
      1971
      1970
      1969
      1968
       323.9
    7588.2
       306.3
       229.5
       323.7
       332.2
       318.8
       277.0
       254.2
       267.1
       271.4
    6982
    6049
    7268
    7430
    6262.8
    5988.6
    5669.6
    5835.2
    5478.1
       4.3
       4.4
       3.8
       4.5
       4.5
       5.1
       4.6
       4.5
       4.6
       5.0
a/  Domestic consumption equals production minus exports.   Adjustments  for
    imports and changes of inventory could not be made because of the
    unavailability of data.

b/  Production of rubber is  the sum of synthetic rubber production and  natural
    rubber imports; the latter is presumably processed in  the United  States.
    Source:   Production:  U.S.  international Trade Commission,  Synthetic
             Organic Chemicals  (Washington,  D.C.:   Government Printing Office,
             various years).
                                                              Commodity by
Exports;  U.S. Department of Commerce, Exports;
Country, FT 410, various years.
             imports;   U.S.  Department of Commerce,  U.S.  General imports;
             Commodity by Country,  FT 135, various years.

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                                E-256
                               TABLE 3

                          EXPORTS  OF RUBBER
                        PROCESSING CHEMICALS
                                                       Export volume as
              Exports               Exports          percentage of Total
Year     (millions of dollars)  (millions of pounds)      Production	
1977           59.5                  73.4                  20.6
197.6           67.3                  78.1                  20.3
1975           45.8                  49.5                  17.7
1974           38.8                  60.2                  15.7
1973           37.9                  68.7                  17.1
1972           25.5                  42.2                  11.7
1971           27.4                  46.5                  14.4
1970           25.4                  44.1                  14.8
1969           21.6                  36.4                  12.0
1968           24.6                  41.2                  13.2
Source;  U.S. Department of commerce, Exports;  commodity by Country, FT
         140, various years.

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                                     E-257
    The Census of Manufactures does not provide concentration ratios for this
sector, but something can be said  about the degree of concentration in the
industry by piecing together information from several sources.  The Census of
Manufactures states that in 1977 there were 31 firms producing
rubber-processing chemicals and in the same year the International Trade
Commission lists 23 firms.!/  Four of the producers listed by the USITC are
major synthetic rubber manufacturers  (B.F. Goodrich, Uniroyal, DuPont ana
Goodyear)  which produce rubber-processing chemicals for their own use.  As
shown in Table 4, captive production may be related to the exit of Union
Carbide from the industry after 1975.  If Union Carbide sold its
rubber-processing chemical business to one of the rubber producers, there
would be an explanation for the increase in captive production.  However,
inspection of Union Carbide's annual reports during this period shows no such
sale.  According to the USITC, Goodyear, Goodrich, DuPont and Uniroyal must
share at least 40 percent of production.  However, there is no other available
information on the shares of production held by other firms.  The Kline Guide
to the Chemical industry states that the four firms, along with American
Cyanamid,  Monsanto, Pennwalt, and vanderbilt, dominate the market, with
Goodrich,  Goodyear, and Uniroyal producing about 50 percent of the total.  One
should note that the synthetic rubber industry is itself highly concentrated,
with a four-firm concentration ratio of 54 percent and an eight-firm ratio of
73 percent in 1972..£•/  The high degree of concentration among buyers should
negate the advantage that a high degree of concentration usually gives sellers.

    As one begins to look at markets that are more precisely defined than
"rubber processing chemicals" one finds the markets to be more concentrated.
There are  only one or two producers of the vast majority of rubber-processing
chemicals, although any given chemical meets competition from other chemicals.

    In recent years, the number of firms producing rubber-processing chemicals
seems to have been decreasing, falling from 31 in 1969 to 21 in 1978,
according  to the international Trade commission.  Allied Chemical and General
Tire are two large firms that left the industry during that period.  Yet, over
the last two decades, there also appears to have been a slight decrease in the
number of  firms that produce specific chemicals in general.
    !/One possibility is that some firms do not report to the international
Trade Commission.  This might account for the apparent long-run decline in
rubber-processing chemicals as a percentage of rubber production mentioned
above.  One indication that the ITC list is not comprehensive is that
Uniroyal, absent in 1975 to 1976, is present in 1969 to 1974 and 1977 to
1978.  It seems more plausible that Uniroyal would have failed to submit
information for two years, as opposed to halting production for two years.

    2/U.S. Department of Commerce, Bureau of the census, 1972 Census of
Manufactures,  (Washington, D.C.:  Government Printing Office, 1975).

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                                     E-258
                                    TABLE 4

                   PERCENT OF PRODUCTION OF  RUBBER-PROCESSING
                     CHEMICALS USED INTERNALLY BY PRODUCER
      Year

      1978
      1977
      1976
      1975
      1974
      1973
      1972
      1971
      1970
      1969
      1968
      1967
      1966
      1965
      1964
      1963
      1962
      1961
percent of Production

        37.5
        40.8
        41.7
        26.9
        25.4
        22.2
        22.4
        23.9
        23.6
        24.4
        24.5
        24.0
        26.1
        23.1
        29.3
        24.2
        24.6
        24.1
Note:    The percent of captive production was determined by dividing
         "production sales" by production.
Source:  U.S.  international Trade Commission,  Synthethic Organic Chemicals
         {Washington, D.C.:  Government Printing Office, various years).

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                                     E-259
    The price data in Table 1 show that the price pattern of rubber-processing
chemicals looks much like the price patterns of other petrochemicals—
stability during the 1960s and early 1970s, and sharp price increases in the
mid-1970s as a result of the rise in oil prices.  But not all chemical prices
conform to the overall trend.  AS shown in Table 5, the prices of all the
products and categories did jump during the mid-1970s, but during the 1960s
there were a number of chemicals whose prices were not stable,  in particular,
the cyclic dithiocarbamic acid derivatives increased in price by about 60
percent between 1961 and 1971, while the acyclic dithiocarbamic acid
derivatives decreased by about 20 percent.

COMPANIES IN SEGMENT

    The number of companies making rubber-processing chemicals ana the
identities of the leading producers were discussed above.  With few exceptions
rubber-processing chemicals are just one small part of each firm's business,
so no conclusions can be drawn about their profitability.  The few exceptions
appear to be closely held firms, since no data on them is available from the
Standard and poor's indices.

INNOVATION

    We believe that, through 1960, there was a great deal of development of
new rubber-processing chemicals.  As discussed earlier, the 1940s and 1950s
saw a host of new antioxidants introduced and the introduction of a major new
category of rubber processing chemicals, the antiozonants.  One industry
source states that in 1930, there were 12 different types of rubber-processing
chemicals with 203 distinct products; in 1940 there were 14 different types
featuring 246 different products, but by 1958 there were 28 different types of
rubber-processing chemicals encompassing 1,274 distinct products.2/  There
is no quantitative information currently available to indicate the degree of
innovative activity in the industry during the last twenty years.  However,
there has been substantial innovation in the area of specialty elastomers, and
a large portion of this innovation may have resulted from the development of
new rubber-processing chemicals.
    ^/''Rubber chemicals:  Growth with Stability," Chemical Engineering, June
16, 1958, pp. 84-86.

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                             E-260










                            TABLE 5





             PRICES OF RUBBER PROCESSING CHEMICALS
(dollars per pound)
Year
1961
Cyclic Chemicals
Accelerators, activators, &
vulcanizing agents .62
Aldehyde-amine reaction
products .89
Dithiocarbamic acid deri-
vatives 1.64
Thiazole derivatives .55
N-Cyclohexyl - 2-
benzothiazolesulf enamide .66
2,2-Dithiobis (benzothiazole) .50
Other .81
Antioxidants, antiozonants, &
stabilizers .69
Amino compounds .64
Phenol, alky lated .57
Retaraer: N-Nitro sodi-
phenylamine .57
Acyclic chemicals
Dithiocarbamic acid deri-
vatives .97
Dimethydithiocarbamic
acid, zinc salt .76
Bis (dimethylthio
carbamoyl) disulfide .92
N/A - not available
Source: U.S. International Trade Commission,
1966


.60

1.06

1.87
.53

.62
.50
.78

.69
.68
.51

N/A


.62

.47

.42

Synthetic
1971


.61

.91

2.58
.57

.92
.54
.80

.69
.70
.50

.63


.78

.46

.36

1976


1.04

1.66

3.66
.96

1.19
.86
1.51

1.18
1.18
.74

.97


1.35

.91

.78

Organic Chemicals
(Washington,  D.C.:  Government Printing Office,  various years).

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   E-261
CATALYSTS

-------
                                     E-262
                                   CATALYSTS

DESCRIPTION


    A catalyst is a chemical which promotes a chemical reaction without being
consumed by the reaction, i.e.,  after the reaction is over the catalyst is
once again available to promote  another reaction.   Although some chemicals
have been made using catalysts since the nineteenth century, the prominence of
catalytic processes in the chemical industry is a  twentieth century
phenomenon.  The Haber-Bosch process for producing ammonia, developed before
World War I was one of the first important triumphs in the study of
"catalysis", and the introduction of catalytic cracking into the petroleum
industry in 1937 provided another boost to the use of catalysts.

    Many commodity chemicals that have a wide range of uses are also used as
catalysts:  sulfuric acid, phosphoric acid, hydrofluoric acid, and caustic
soda are prominent examples.  More commonly, however, the term "catalysts"
refers to chemicals that have catalytic properties as their most important
attrbute.  Many catalysts contain precious metals  such as cobalt, nickel,
molybdenum, vanadium, platinum,  aluminum, palladium, and copper.
USES

    In 1978 about 35 percent of the value of all catalyst shipments was used
in petroleum refining  (see Table 1) .  Of this 35 percent, 39 to 40 percent was
used in catalytic cracking, 35 percent in alkylation, 11 to 13 percent in
hydroheating, 7 to 8 percent in catalytic reforming, and 5 percent in
hydrocracking.  These processes are summarized below:

         1)   catalytic cracking;  heavier crude oil fractions are broken
apart to make lighter fractions, the most important being gasoline.
         2)   Alkylation;  light hydrocarbons are combined to form gasoline.
         3)   Hydroheating;  sulfur, oxygen, and nitrogen in the petroleum
feed stock are hydrogenated, and olefins and aromatics are saturated.
         4)   catalytic reforming;  naphthenes and straight-chain hydrocarbons
are converted into the aromatics and into branched-chain hydrocarbons used in
high-octane gasoline.
         5)   Hydrocracking;  larger moledules are "cracked" into smaller
molecules, and impurities are hydrogenated.

    Catalytic converters in automobiles accounted for slightly less than 25
percent of the dollar value of all catalyst uses in 1978.  In terms of
production volume, catalyst use in catalytic converters is far less than in
petroleum refining, but the greater use of precious metals (platinum and
palladium) in converters accounts for the high value.  That high dollar value
may not be indicative of the ultimate market for catalytic converters,
however, since in theory the metal can be recovered and reused (although it

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                                     E-263
isn't clear how this would be accomplished in practice).  if the precious
metals could be successfully recovered, this would substantially reduce the
value of the automotive catalyst market in future years.
                                    TABLE  1

                  USE OF CATALYSTS IN PETROLEUM REFINING, 1978

Operation                    Amount (million $)            Percentage of Total

Catalytic Cracking              144.3                          39.2 - 40.1
Hydrotreating                    40.0 - 48.0                   10.9 - 13.3
Catalytic Reforming              27.4                           7.4 - 7.6
Hydrocracking                    19.5                           5.3-5.4
Alkylation                      128.8	                   35.0 - 35.8


Total:                           360 - 368

Source:  Catalysts I:  A $600 Million Market In Cars and Refineries," Chemical
         Week, March 28, 1979, p. 50.


     In 1978 the use of catalysts in the rest of the chemical industry
amounted to about $400 million, or 40 percent of the total use of catalysts.
More than 75 percent of that $400 million was used in six important chemical
operations (see Table 2).  polymerization catalysts were the biggest market,
taking more than 25 percent of total chemical industry use of catalysts.
Organic synthesis, a broad category which includes the production of such
products as pigments, agricultural chemicals, Pharmaceuticals, rubber
processing additives, and a wide range of other chemicals, accounted for about
5 percent less.  Oxidation catalysis used in making products such as ethylene
oxide, nitric acide, sulfur trioxide, phthalic anhydride, and maleic
anhydride, used about 11 to 12 percent of chemical industry catalysts.  About
13 percent of chemical catalysts were used in hydrogenaton to make butadiene,
styrene, and other products, and about seven percent were used in the
hydrogenation of edible and inedible oils and in the hydrogenation of a
variety of other substances.  Steam reforming of natural gas to produce
hydrogen, ammonia- and methane used about 6 percent of all chemical catalysts.

     Table 3 presents some of the changes that have taken place in the market
for petroleum catalysts during the last two decades.  The volumes of
reforming, catalytic cracking, and alkylation catalysts  have remained stable
(though substantial price increases have driven the value of catalysts in the
latter two categories upward).  Hydrotreating and hydrocracking have shown  the
largest gains in volume.  The use of automotive catalysts is entirely a result
of the environmental legislation of the 1970s.  As noted earlier, the current
value of automotive catalyst production may exaggerate the size of future
markets if the precious metals can be economically recovered from the
catalytic converters.

-------
Steam reforming
Hydrogenation
Dehydrogenation
Oxidation
Organic synthesis
Polymerization
Other

TOTAL
                                                         TABLE 2

                                  USE OF CATALYSTS IN THE CHEMICAL INDUSTRY, 1963-1978
1963
Value
(million
3.8 -
5.5 -
4.8 -
11.4 -
6.8 -
21.6 -
27.9 -
Percent
$)
4.
6.
5.
11.
6.
22.
41.

5
0
1
9
9
7
1

4
5
5
12
7
22
32
Total
.0 -
.8 -
.1 -
.0 -
.1 -
.8 -
.8 -
of


Value
(million
5
7
6
14
8
26
43
.3
.1
.0
.0
.1
.9
.3

12
3
20

30
90
10.4
.3 -
.0 -
.5 -
8.7
.0 -
.0 -
1972

$)

13.
3.
21.

34.
95.



3
5
1

0
1
Percent of
Total
5.8
6.8 - 7.4
1.7 - 1.9
11.4 - 11.7
4.8
16.7 - 18.9
50.0 - 52.8
                                                                                                        1978
85 - 95
180
   Value
(million  $)

    23.0
    23.5
     5.3
 45.2 - 49.8
    89.8
 109.9-115.9
  97.7-103.3

     400
                                                                        Percent of
                                                                           Total

                                                                             5.8
                                                                             5.9
                                                                             1.3
                                                                         11.3 - 12.4
                                                                            22.5
                                                                         27.5 - 29.0
                                                                         23.2 - 25.8
                                                                                                                        w
                                                                                                                        CTi
SOURCE:  "CU Report:  Catalysts," Chemical Week, August 24, 1963, 52-64; Donald P. Bruke,  "Catalyst," Chemical Week,
         November 8, 1972, 33-45; Donald P. Burke, "Catalyst II:  Chemicals Make  It a  $1  Billion  a  Year Market,"
         Chemical Week, April 4, 1979, pp. 46-64.

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                                      E-265
                                     TABLE 3

               USE OF  CATALYSTS  IN PETROLEUM REFINING:  1963-1978
 Operation


Catalytic Cracking

Hydro-treating

Catalytic Reforming

Hydrocracking

Alkylation

TOTAL:
      Value
 (millions of dollars)
        Vo lume
(millions of  pounds)
1963
45.6
3.5
20.1
NA
32.2
1972
68.8
10.4
30.3
12.8
45.7
1978
144.3
40.0-48.
27.4
19.5
128.8
1963
305.0
0 4.1
4.7

2,510.0
1972
274.0
10.0
5.0
2.5
3,122.0
1978
286.0
20.0-24.0
5.0
1.5-2.0
3,728.0
101.4   168.0  360.0-368.0  2,823.8 3,413.5
Source:  "catalysts I:  A $600 Million Market in Cars and Refineries,"
         Chemical Week, March 28, 1979, p. 50.

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                                     E-266


       Table 2 displays changes in sales of chemical catalysts over tints.  The
largest increase was in organic synthesis,  while the value of dehydrogenation
catalysts increased very little,   in most cases a substantial part of the
increase in value was due to rising prices  rather than increases in volume.
One exception was steam reforming, in which the increase in the volume of
catalysts used was particularly high.  Dehydrogenation actually used fewer
catalysts in 1978 than in 1963 because butadiene, whose production formerly
consumed a substantial volume of  catalysts, is now more frequently obtained
more as a byproduct of ethylene synthesis.

       With the exception of the  case in which a chemical made by catalysis
can also be made by another process, there  are really no effective substitutes
for catalysts.  Technically, the  reactions  promoted by catalysts would all
take place in their absence; however, they  would take place too slowly to be
economical.
RAM MATERIALS

       The raw materials used in catalysts fall into several categories.   Pre-
cious metals constitute an important component of many catalysts.   Use of a
number of important metals is shown in Table 4.  The most interesting point to
note is the rise in use of silver,  cobalt, palladium and platinum.   The
increases in the latter two were brought about by the introduction  of
catalytic converters,  in addition  to the metals shown in Table 4,  nickel is
an important component of many catalysts.  Compounds which contain  copper,
zinc, iron, chrome, and tin are also used as catalysts.

       Other important materials used in catalysts are alumina (Al203),
alumina-silica compounds, other silica compounds, clays, and diatomaceous
earth (kieselguhr).  These compounds are often used as supports for metals,
and may also be employed as catalysts themselves.  Originally, naturally
occuring compounds were utilized, although now synthetic compounds  are used as
well.  The most important synthetic compounds are the zeolites, which are
synthetic alumina-silica compounds  whose regular crystalline structures
provide efficient catalytic action; these are used  primarily in petroleum
refining.  Ceramics and powdered carbon are also used as supports for
catalysts.

       The raw materials for the commodity chemicals that find uses as
catalysts  (sulfuric acid, phosphoric acid, etc.) are discussed elsewhere.
PUBLIC DATA

       The concentration ratios for product class 28198, Chemical Catalytic
Preparations, are given in the Census of Manufactures (Table 5).   As can be
seen, according to the census of Manufactures, concentration ratios seem to
have been decreasing in recent years, particularly the four-firm ratio.
However, this data must be viewed with caution for several reasons.  First,
1976 concentration ratios constructed from production estimates supplied by
the Kline Guide to the chemical industry show a four-firm concentration ratio
of 55 percent and an eight-firm ratio of 80 percent.  Although it is possible

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                                     E-267
                                    Table 4

          U.S.  CONSUMPTION OF SELECTED METALS  FOR CATALYSTS,  1969-1976


                                                  1969            1976

    Rare  Eartha/                                 10,584          12,040
    Molybdenum*}/                                  1,514           1,843
    Vanadiumb/                                       392             490
    Cobaltb/                                        286           1,446
    Platinun£/» d/                                  234             624
    palladium£/» &/                                 216             329
    Other platinum group£/» §/»  e/                   37              28
    Silvers/                                      4,081          11,758
    Mercury!/                                     2,958           1,264
    a/   Thousand pounds of oxide equivalents.
    b/   Thousand pounds of continued element.
    c/   Thousand troy ounces.
    d/   includes non-catalyst  and catalyst used by the chemical  and
         petroleum-refining industries and, in  1976, the automotive  industry.
    e/   iridium, osmium, rhodium, ruthenium.
    f/   Flasks,  76 pounds each.

Source:   U.S.  Department of interior. Bureau of Mines,  Minerals Yearbook
         (Washington,  D.C.:  Government Printing Office, 1972 and 1979).

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                                     E-268
                                    TABLE 5

                  CONCENTRATION RATIOS FOR PRODUCT CLASS 28198
                        CHEMICAL CATALYTIC PREPARATIONS

                                       4 Firm   8 Firm   20 Firm  50 Firm

1972                                     38       63       93       100
1967                                     46       72       96       100
1963                                     50       70       97       100
1958                                     61       78       99       100

Source:   U. S. Department of commerce, Bureau of the Census, 1972 Census of
          Manufactures, (Washington, D. C.:  Government Printing Office, 1975).

that the 15-year trend evidenced in the Census of Manufactures was reversed in
four years, such a reversal seems unlikely.   Second, both the Census of
Manufactures and the Kline Guide exclude from their calculations captive
consumption and commodity chemicals used as catalysts .  But, these catalysts
comprise a substantial percentage of catalyst production.  A comparison of the
production estimates for 1963 given in Tables 1 and 3 ($185-$195 million)  with
the figure for value of shipments from the 1963 Census of Manufactures ($75.2
million) suggests that captive production and commodity chemicals encompass
the majority of production, although the Kline Guide suggests that in 1976
these categories were somewhat less than 40 percent of all catalyst production.


     Another reason to question the validity of the concentration ratios
provided by the census of Manufactures is that "Chemical Catalytic
Preparations" is not the relevant market- a catalyst that is used for
catalytic cracking, for example, does not compete with a catalyst used for
hydrogenation.  The relevant markets are really much narrower segments of  the
chemical industry, in some cases corresponding to the segments discussed in
the section on the uses of catalysts, and in other cases corresponding to
subdivisions of those segments.  Without going into great detail for each
market, it is safe to say that, based on reports in trade journals, catalyst
markets are highly concentrated.  It is not unusual for one firm to account
for more than half of the sales in a particular market, and for three firms to
account for virtually all sales.  Although the catalysts sold in any given
market may change quite rapidly in a short period of time because of the
development of new products, the same firms tend to remain dominant.
Moreover, even though there is some entry into and exit from each market (a
prominent example being the exit of American cyanamid and Nalco from the
catalytic cracking markets after the introduction of zeolites), the roster of
firms in each market was relatively stable during the 1960s and 1970s.

     No data on catalyst imports are available and nothing in the trade
journals suggested that such imports are important. Thus, the united states
appears to be one of the technological leaders in this area.   As shown in
Table 6, exports were somewhat more than 10 percent of the value of U.S.
catalyst production during the 1970s.

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                                     E-269
                                    TABLE 6

                         EXPORTS OF CATALYTIC COMPOUNDS

                              (millions of dollars)
                                                  Catalysts,  compounds
         Year      catalysts,  nickel compound       other  than  nickel

         1976                 16.3                        95.4
         1975                 13.7                        78.6
         1974                  6.8                        46.4
         1973                  6.6                        52.8
         1972                  6.8                        38.5
         1971                 10.0                        41.8
         Source:   U.S. Department of Commerce,
                  Exports;  commodity by Country,  FT 410,  various years.


     The large increase in the dollar value of  catalyst production is due  in
part to increased catalyst usage, particularly  through the creation of a large
new market for catalytic converters.  But much  of the increase in sales is
attributable to price increases.  As can be seen by examining Tables 7 and 8,
catalyst prices have greatly increased since 1963, especially during the
1970s.  The precious metals used in catalysts have seen particularly sharp
increases during  the 1970s.
COMPANIES IN SEGMENT

     The Census of Manufactures lists 37 companies with shipments of $100,000
or more.  This estimate does not include firms  that produce:   catalysts for
automobiles, commodity chemicals that have uses as catalysts,  and catalysts
that they use themselves.  Excluding captive production and commodity
chemicals, the Kline Guide estimates that there are 20 producers of catalytic
preparations,  chemical Week lists 24 firms which produced catalysts in 1972,
and 23 in 1979.

     It is difficult to determine the profitability of catalyst production
because catalysts are a very small part of the sales of most of the leading
catalyst producers.  The exceptions are closely held concerns, whose financial
data are not available.  Table 9 gives estimated sales, not including
commodity chemicals and captive production, for the major U.S. catalyst
producers.  Of these firms, Filtrol had by far the greatest ratio of catalyst
sales to total sales in 1970, slightly more than 30 percent.  All of the other
firms could only attribute well under 10 percent of their sales to catalysts.

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                                     E-270
                                    TABLE 7

                           PETROLEUM CATALYST PRICES

                               (dollars per pound)
              Operation                             Year
                                           1963     1972      1978

        Fluid bed catalytic cracking         .15      .24       .50

        Moving bed catalytic cracking        .12      .30       .55

        Hydrotreating                       .85     1.04      2.00

        Reforming                          4.28     6.06      5.48

        Hydrocracking                        —     5.12      9.75-13.00
        Source:  "Catalysts I:   A $600  Million Market in cars and Refineries,1
                 Chemical Week,  March 28,  1979, p.  50.
                                    TABLE 8
                            CHEMICAL CATALYST PRICES
                               (dollars per pound)
                                                       Year
Operation             catalyst                1963     1972         1979

Hydrogenation         Nickel (25% in oil)       .77     .75-.87      2.05-2.16

Dehydrogenation       Chrome-alumina           .67     1.00         2.00
                      Promoted iron oxide      .38      .48         1.40

Organic synthesis     Aluminum chloride        .12     .15          .36

    Sources:  "Catalysts," Chemical Week, August 24, 1963, pp.
              52-64;"Catalysts," Chemical Week, November 8, 1977, pp. 35-45;
              and "Chemicals Make it a $1 Billion a Year Market," chemical
              Week, April 4, 1979, pp. 46-63.

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                                     E-271



                                    TABLE 9

            ESTIMATED SALES, MAJOR U.S. PRODUCER OF CATALYSTS: 1976

                                                                Sales
    Companya/                                         (millions of dollars)

    Engelhard Minerals & Chemicals                                85
    American Cyanamid                                             70
    W. R. Grace (Davison Division)                                60
    Air Products and Chemicals (Houdry Divsion)                    50
    UOP                                                           45
    Matthey Bishop                                                30
    Filtrol                                                       25
    Kewanee industries  (Harshaw Division)                          20
    Union Carbide                                                 20
    Girdler                                                       15
    Nalcot}/                                                       15
    ^/Ownership is given as of 1976.  Since then,  UOP has become part of The
    Signal Cos., inc., Filtrol has become part of  U.S. Filter,  Kewanee
    Industries has become part of Gulf Oil, and Girdler has become part of
    United Catalysts, inc.
      incudes $10 million in sales of Katalco, jointly owned by Nalco and
    1C I.

    Source:   Mary K. Meegan, ed., Kline Guide to the Chemical industry,  (3ru
              ed., Fairfield. NJ:  Charles Kline & Co., 1977).
INNOVATION

    It appears that Catalyst producers are some of the most secretive in the
chemical industry.  The catalysts themselves represent only a small fraction
of the cost of producing the final product, but a small improvement in the
catalyst can bring about a significant decrease in costs of production.  For
example, one new catalytic cracking catalyst was estimated to reduce the cost
of a gallon of gasoline by l/3£ per gallon.  Extrapolating this to all
catalytic cracking capacity leads to a savings of more than $250 million per
year, about 60 percent of the value of the entire petroleum catalyst market.
Because of the secrecy surrounding catalysts, details about the introduction
of new catalysts are sketchy, although it is apparent from the trade
literature that innovation is high,  it seems that refiners are often
reluctant to experiment with new catalysts for fear of the economic
consequences of failure (e.g., a cost increase of 1/3$* per gallon)  but once
the value of a new catalyst is demonstrated, refiners quickly adopt the new
product.  For example, zeolites, introduced in 1962, accounted for 90 percent
of all catalysts used in catalytic cracking in 1972.

-------
         E-272
OTHER CHEMICAL PRODUCTS

-------
                                     E-273
                    Other Chemical Products Segment Summary


                           Cellulosic Man-maae Fibers

                          polishes and Sanitary Goods

                           Paints and Allied Products

                             Adhesives and Sealants

                                   Explosives

                                  Printing ink

                                  Carbon Black

                                     Gelatin

              Salts, Essential Oils,  and  chemical Preparations. NEC
    Other Chemical Products includes those portions of the industry that are
not classified elsewhere due to the presence of chemicals which either belong
to more than one other segment or have unique characteristics barring them
from any of the other segments.  Most of the components are not very
innovative, though some develop new formulations basea on new chemicals
developed in other industries.  For example, a new surfactant may be usea lor
new formulations in the polishes and sanitary goods industry.  Two industries,
adhesives/sealants and printing ink, do exhibit a large amount of innovation.

    Adhesives are bonding agents that hold similar or dissimilar substrata
together.  The closely related sealants are used to fill gaps or joints, and
may also function as waterproofing agents.  in the last ten years a number of
important products in this area have come under suspicion because of safety
and health concerns.  One of the intermediates used in making almost all epoxy
adhesives is a suspected carcinogen, and workplace emissions of this

-------
                                     E-274


intermediate have been regulated by OSHA.  Formaldehyde emissions from the
urea formaldehyde adhesives used in construction have also come under
government scrutiny.  Concern about the carcinogenity of materials and the
high levels of energy needed to produce many existing adhesives have prompted
a search for new products, and a number of new products have been recently
introduced.

    The adhesives and sealants industry appears to be very unconcentrated.  in
1977 there were 750 manufacturers,  with the top 50 accounting for 68 percent
of industry sales.  The large companies usually have a wide product line,
while the smaller companies specialize  in specific product or market areas.

    We believe that the printing ink industry has long had a very low degree
of innovation, but that recently a  new  process and new products have been
developed.  Previously, inks dried  on paper through the evaporation 01 a
solvent.  But now ink is being "cured"  with infrared heat.   Unlike most firms
in the industry, the firms developing the new technology and products are not
simply blending existing ingredients—they are developing new products.

-------
          E-275
Cellulosic Man-Made Fibers

-------
                                      E-276
                           CELLULOSIC MAN-MADE FIBERS
DESCRIPTION

    There are  two types of cellulosic man-made fibers:  rayon and cellulose
acetate.  These fibers are used primarily for apparel and home furnishing
fabrics.  Other uses include material for cigarette fibers, fillings for
pillows, and strengthening material for hoses, tires, and industrial belts.
The major end  uses of cellulosics are summarized in Table 1.  As indicated by
the table, rayon and acetate are substitutes for many natural and synthetic
^ibers.

    The manufacture of these fibers is influenced by two major factors:  tne
cost of raw materials, and the demand for cellulosic fiber commodities.
Although the cellulosics industry is substantial, with total product shipments
for 1977 valued at $853 million.!/ it comprises only a small portion of ail
textile manufacturing (See Figure 1).  Since the vast majority of cellulosic
man-made fibers are used for common fabrics, it is clear that these fibers are
highly substitutable.

HISTORY

    intended originally as a low cost replacement of silk, rayon was the first
man-made fiber,  commercial manufacturing began in France in the late 1800s
and was soon followed by production in Germany,  Switzerland and Belgium.
England also joined in and introduced the "viscose process", allowing for
cheaper production.  By 1912 rayon hosiery was being produced in quantity and
four years later knitted rayon fabric for outerwear became available.  World
War I inspired still more production and several new plants were built shortly
thereafter.  As a result of technical advances in the production process,
rayon became entrenched in the American fabric industry.

    British celanese Limited (now celanese Corporation)  made the first
feasible acetate fiber in 1920, and in 1924 began the first United States
acetate production in Cumberland, Maryland,  in 1954 Celanese developed an
economical process for the production of triacetate and commercialized it
under the trade name "Arnel".  Although acetate and rayon demand decreased
during the mid-1950s, it was revitalized in the early 1960s with the
introduction of textured acetate doubleknit fabrics and solution-dyed
acetate.   Demand for acetate also increased for its use as tow in cigarette
filters,   cellulose acetate successfully infiltrated the textile industry, as
had rayon.
    i/U. S. Department of Commerce,  Bureau of the Census, 1977 census of
Manufactures (Washington, D. c.:   Government Printing Office, 1979).

-------
                                                                            TABLE 1
                                                         MAJOR END USES OF CELLULOSIC MAN-MADE FIBERS
                                  Rayon
                                                                                                               Cellulose Acetate

Apparel
Women's and Children's Apparel
Lingerie
Dresses
Suits
Blouses
Sportswear
Coats
Ra inwear
Accessories
Milinery
Underwear


Men's and Boy's Wear
Sport shirts
Summer and year-round suits
Slacks
Rugged outwear
Jackets
Raincoats
Work clothes
Ties
Home Industrial
Furnishings Products
Draperies Automobile
Slip covers tires
Upholstery Hoses
Table cloths V-belts
Bed spreads Conveyor belts
Blankets
Carpets
Mattress Covers
Sheets
Wall coverings













Other
Household
Products
Tapes
Ribbons
Cleaning
Cloths
Baby diapers
Sleeping bag
liners

Hospital
Goods
Scrub suits
Dividers
Drapes



Other;
Casket linings
Book-bindings
Filters

Apparel
Women's and Children's
Apparel
Pantsuits
Lingerie
Knitted Jerseys
Uniforms
Sportswear, blouses
Dresses
Evening Gowns

Men's and Boy's
Wear


Uniforms







Home Industrial
Furnishings Products Other
Carpets Automobile Tow for cigarette
Rugs Upholstery filters (large
Curtains volume)
Draperies
Fillings for
pillows
















                                                                                                                                                                M
                                                                                                                                                                 I
                                                                                                                                                                N)
Uniforms
Sources:  American Fabrics Magazine, Encyclopedia of  Textiles  (2nd ed., Englewood Cliffs, NJ:  Prentice-Hall, Inc., 1973); and
          Mary K. Meegan, ed., Kline Guide  to  the Chemical  Industry  (3rd ed., Fairfield, NJ:  Charles Kline & Co.,  1977).

-------
                                           FIGURE 1

                          BREAKDOWN  OF  TEXTILE PRODUCTS  BY QUANTITY
Nat uralFibers  (30%)
                                 Man-Made Fibers  (70%)
Wool  (1%)
Cotton (29%)
Noncellulosics (62%)
Cellulosics (8%)
   Polyester  (at least  31%)
                    Nylon  (12%)  Acrylics  (polyacylonitile),
                                  Modacrylics, Oletin,
                                  polypropylene, and others
                                  12% or less
                                                                                                             H
                                                                                                             oo
Source:  U.S. Department of Commerce,  1978  U.S.  Industrial Outlook (Washington, D.C.:
         Government Printing Office, 1978).

-------
                                     E-279
PRODUCTION PROCESSES

    Viscose and c up r ammonium processes, from which most rayon is currently
made, consist of the following major steps:  sheets of bleached cellulose
sulfate pulp are steeped into a solution of caustic soda; the alkali cellulose
sheets that result are crumbled, stored for aging, combined with carbon
disulfide, and again dissolved in caustic soda, yielding a viscous solution
called viscose, which is passed through a dilute solution of sulfuric acid ana
extruded through the holes of a spinneret.  Fine filaments are formed which
are spun into yarn or cut into staple.  The cuprammonium process is similar,
except ammonium copper oxide is used, and the filaments are stretched to yield
the finest (thinnest) filaments to be manufactured commercially.

    In the production of cellulose acetate, cellulose is combined with acetic
acid in a process called acetylation.  Hydrolysis and precipitation reactions
yield solid cellulose acetate which is then washed, dried, and liquefied with
acetone.  As with rayon production, filaments are formed by streaming the
solution through a spinneret.

    Cellulose production presents certain health risks from the exposure to
toxic reagents.  The final products are non-toxic, however.

ECONOMIC OUTLOOK

Producers

    Standard and poors  (1978) reported only 22 manufacturers of cellulosic
man-made fibers.  The 1977 Census of Manufactures, however, stated that the
total number of establishments for the industry was 10.  TO add to the
confusion, the Kline Guide to the Chemical industry (1977) listed seven major
cellulosics producers.  These companies are listed in Table 2.

                                     TABLE 2
        CAPACITIES OF MAJOR U.  S.  PRODUCERS OF CELLULOSIC MAN-MADE FIBERS
                          (millions of pounds  per year)

   Company           Acetate Capacity^/            Rayon Capacity^/
Akzona                       —
AvTex                        45                           455
Beaunit                      —                            75
Celanese                    373
Courtaulds                   —                           185
Dupont                       50
Eastman Kodak               265                       _ ™
   Total                    733                           825
    a/1976 data

    b/1975 data
    Source:   Mary K. Meegan, ed., Kline Guiae to the Chemical industiy  (3rd
              ed., Fairfield, NJ:  Charles Kline & Co., 1977).

-------
                                     E-280


    These discrepancies are most likely due to differences in the classifi-
cation of the businesses and establishments associated with the industry.
yet, regardless of such differences, it appears that the industry is
concentrated.  Furthermore, Table 2 shows that celanese possesses 51 percent
of the production capacity for acetate  fibers and that Avtex possesses 55
percent for rayon fibers.

Production

    Table 3 presents the production output of man-made fibers.
These data reveal large drops in production for most categories during the
1974 to 1975 period.  This was largely  due to rising energy costs and a
general economic recession.

Sales vs. costs

    Data presented in the 1977 Census of Manufactures indicate that from 1972
to 1977 the annual percentage increase  (in constant 1972 dollars) of the cost
of raw ma'terials for the cellulosics industry was 8.65 percert.  Nevertheless,
the annual percentage increase (constant 1972 dollars) from 1972 to 1977 in
the price of cellulosics was 0.27 percent.^/

    The sales volumes for 1972 and 1977 (in constant 1972 dollars)  also
indicate that the industry's real growth is stagnant.  Furthermore, the number
of firms competing in the industry has  been reduced during this period as
several marginally profitable firms, faced with the aforementioned marginal
squeeze, left the industry (See Table 4).  The major reascn for the marginal
squeeze has been competition from other synthetics.  The drastic price
advantage of these synthetics (illustrated in Table 4-5) has contributed
heavily to sales stagnation and industry consolidation.

    The differences between the Kline Guide and the Producer Price index are
primarily due to differences in the way these data were collected.   The PPI
data reflect the manufacturer's list prices for items, while the Kline Guide
data attempt to reflect actual market prices.

    An aspect of the industry that has  improved over the last few years is
foreign trade.  Table 4 shows the compound average annual growth rates from
1967 to 1976 for the real value of cellulosic exports and imports.   Although
the foreign market appears to be continually improving, Table 6 also shows
that this market is only 8.7 percent of all industry shipments.
    .2/GNP price deflator from:  Executive Office of the U.S., Economic
Report of the President (Washington, D.C. :  Government Printing Office, 1979).

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                                                                            TABLE 3
                                                             PRODUCTION OUTPUT OF MAN-MADE FIBERS
Product
                                                                                      Year
                                                 1978
                                                         1977
                                                                 1976
                                                                         1975
                                                                                 1974
                                                                                         1973
                                                                                                 1972
                                                                                                         1971
                                                                                                                 1970
                                                                                                                         1969
                                                                                                                                 1968
                                                                                          Per  Annum
                                                                                          Annual Change
                                                                                            (percent)

                                                                                           1977-78  1968-78
CELLULOSIC FIBERS
Acetate^/
Rayon
 308
 597
290
598
298
543
313
436
382
817
462
895
429
965
476
915
498
875
 498
1078
 490
1104
-5
-6
SELECTED NONCELLULOSIC FIBERS
Acrylic^/
NylonS./
Polyester!/
 726     709
2550    2326
3800    3642
        621
       2075
       3340
        525
       1857
       2995
        631
       2124
       2926
        742
       2175
       2888
        626
       1974
       2328
        545
       1595
       1142
        492
       1355
       1022
        533
       1411
        939
         521
        1350
         827
             2
            10
             4
 3
 7
18
                                                                                                                                                               NJ
                                                                                                                                                               CD
    3/includes diacetate and triacetate; excludes production for cigarette filtration.
    Is/includes modacylic.
    S/includes aramid.
    {•[/excludes yarn and raonofilaments.
    Source:  Chemical and Engineering  Mews,  June  11,  1979.

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                                     E-282
                                    TABLE 4

                        ECONOMIC INDICATORS:  1967
      Variable
                                        77

                                         Year
Total Number of Establishments

Value of product Shipments
      (1972 constant dollars,  in millions)
                                            1967
                               23
                 1977

                   10

                602.1
Sources:   Executive Office of the  U.S.,  Economic Report of the President
           (Washington,  D.C.:   Government Printing Ofiice,  1979); and U.S.
           Department of commerce,  Bureau of the Census, 1977 Census of
           Manufactures  (Washington,  D.C.:  Government Printing Office, 1979)
Year
                       TABLE  5

INDICES OF AVERAGE  PRODUCER PRICES  OF  MAN-MADE FIBERS

                      Source
      Kline Guide to the Chemical industry3/
                                    Producer Price
          Synthetic
              Cellulosic
Synthetic
Cellulosic
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
100.0
92.5
86.2
82.1
78.3
65.6
74.6
74.0
81.9
-
-
-
—
                              100.0
                               96.1
                               98.0
                               98.6
                               99.6
                               99.8
                              111.6
                              152.5
                              218.8
                                    100.0
                                     98.8
                                     98.7
                                     98.5
                                     98.0
                                     98.0
                                     97.9
                                    100.8
                                    101.5
                                    102.2
                                    106.5
                                    107.6
                                    117.8
                    100.0
                    100.4
                    100.9
                    100.9
                    102.4
                    106.2
                    109.0
                    129.2
                    145.8
      a/Mary K. Meegan, ed., Kline Guide to the chemical industry  (3rd ed.,
Fairfield, NJ:  Charles Kline & Co., 1977).
      j-yU.S. Department of Commerce, Producer Price index, various years.

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                                     E-283
      The major factor leading to the apparent downturn and consolidation of
the cellulosics industry seems to be the inability of manufacturers to
underprice the other synthetic fiber competition.  The recent large increases
in petroleum costs seem to have made cellulosic production too expensive to
sucessfully compete with the less expensive but equally substitutable
synthetics.  Because raw material costs constitute a large fraction of total
production costs, it is very difficult for manufacturers to produce cellulosic
fibers that can be sold at cheaper prices.  However, if production or raw
material costs increase substantially for the noncel-iulosic man-made fibers,
then cellulosics could experience a comeback, althouch it would be a very slow
one.  It appears unlikely, given the fixed nature or manufacturing processes
and the emphasis on reducing processing costs, that nan-made cellulosics will
be affected by TSCA.

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                             E-284
                            TABLE  6

VOLUME AND GROWTH OF FOREIGN TRADE OF CELLULCSICS:  1967-1976

        Factors                              Averages

   Exports as a percent of
        industry shipments	         8.7
   imports as a percent of
        apparent consumption.	         7.9
   Compound average annual
        rate of growth 1967-76
        (percent):
        Value of shipments
          (current $)	         0.5
        Value of exports
          (current $)	        12.3
        Value of imports
          (current $)	         7.4
Source:   U.S. Department of Commerce, 1P78 U.S. Industrial Outlook
          (Washington,  D.C.:  Government printing Office, 1978).

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           E-285
polishes and Sanitary Goods

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                                     E-286



                           POLISHES AND SANITARY GOODS

DESCRIPTION

    This section gives a general description of SIC 2842 and its relation to
other industrial segments.  A later section discusses industry structure and
production.

    This SIC includes a diverse set of products,  producers, and markets and
cannot be classified as a homogeneous segment.  The "industry" includes
producers of polishes; waxes; deodorants; household, institutional, ana
industrial disinfectants ; dry cleaning solutions; household bleaches; and
other sanitation preparations.

    Shipments were valued at $2,610 million in 197?1/ and were distributed
to a wide range of users.  Bureau of the  Census data indicates there were 1015
establishments in this SIC in 1977, with  780 (76.8 percent)  having less than
20 employees.  Census data also indicate  that there were 1108 establishments
in 1972.

    The use of industrial cleaning products extends to almost every other
segment of the economy. Table 1 shows sales only  to major market segments,
some of which are for further resale.

PRODUCTION

    The elements for the formulation of cleaning  and polishing products for a
wide variety of uses come from a relatively limited group of chemicals.  The
following list of products shows their chemical sources and some general usess

         •    Bleaches—sodium hypochlorite or calcium hypochlorite, used in
              laundries.

         •    Alkaline Cleaning Compounds—mixtures of inorganic alkalies such
              as hydroxides, carbonates,  silicates, often with soaps,
              detergents or bleaches.  Their major uses are in metal cleaning,
              dishwashing, paint-stripping and laundry alkalies.

         «    Scouring Cleaners—basically inorganic abrasives like pumice,
              silica, felspar or volcanic ash, often containing detergents,
              bleach or phosphates.

         •    Synthetic Detergents—usually organic surfactants, the active
              ingredient in laundry detergents, and used as a mixer in many
              products.  (The surfactants are described in a separate chemical
              profile and will not be discussed here.)
    1/U.S. Department of Commerce,  Bureau of the Census,  1977 Census of
Manufactures (Washington, D.C.:  Government Printing Office,  1979).

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                                      E-287
         •    Hand Soaps—based on synthetic detergents or natural products
              using tallow, used in lavatories.

         •    Acid cleaners—mixtures of inorganic acids and bisulfates, often
              with a minor amount of synthetic detergfnts.  They are used in
              metal cleaning and dairy processing.

         •    Deodorants—a mixture of perfume oils, occasionally with a
              disinfectant, either for aerosol or natur?! diffusion
              application.

         •    Disinfectants—various fungicides, bactericcides and
              mildewcides, used in combination with surfactants and deodorants.

         o    Waxes—natural vegetable or synthetic polyolefin substances,
              used on furniture, floors, leather, and exterior finishes.
                                     TABLE 1

                   SALES OF CLEANING AND POLISHING PRODUCTS BY
                               USER MARKETS:  1977

    Market Segment                          Percent of Total

    Retail stores                               12.8
    Commercial laundries and dry
         cleaners                               11.1
    Contract cleaners                            9.2
    Industrial and office buildings              9.2
    Public food service                          9.2
    Hospitals and nursing homes                  8.9
    Food processors and farms                    8.9
    Transportation services                      8.2
    Schools and colleges                         4.9
    Metal processors                             4.9
    Hotels and motels                            4.6
    Government                                   4.6
    Other                                        3.5

         Total                                 100.0%

    Source:  Mary K. Meegan, ed., Kline Guide to the Chemical incustry (3rd
ed., Fairfield, New Jersey:  Charles Kline & Co., 1977), p.  137.

Industry Structure

    As previously suggested, the industry is highly diffuse witn less than 30
companies operating on a national basis.  There are no publicly available data
that comprehensively list all of the producers or even major suppliers, since
there are broadly divergent market groups and more than 1,000 manufacturers.

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                                     E-288
One large market group, industrial and institutional cleaning compounds  (which
includes acid cleaners, deodorants, disinfectants,  bleaches and synthetic
detergents), is relatively concentrated;  the top 10 producers h?d about 44
percent of total sales in 1976.   Table 2  lists these producers end their 1976
sales volumes.
                                    TABLE 2

                SALES VOLUMES MAJOR U.S.  PRODUCERS OF INDUSTRIAL
                   AND  INSTITUTIONAL CLEANING COMPOUNDS, 1976
      Rank

       1
       2
       3
       4
       5
       6
       7
       8
       9
      10
         Company

     Economics Laboratory
     S. C. Johnson
     Chemed
     National Chemsearch
     National Service industries
     West Chemical Products
     BASF Wyandotte
     Procter & Gamble
     Diversey
     Purex
    Sales volume
(millions of dollars)

         135
         110
          80
          65
          60
          50
          45
          45
          40
          35
    Total Sales of all Producers in the Industry:  1976

    Source:
                                                  1,525
Mary K. Meegan, ed.,  Kline Guide to the Chemical industry  (3rd
ed., Fairfield, NJ:  Charles Kline & Co., 1976), p. 338.
    Although this market segment can be broadly categorized by type of
product, final products in retail markets are diverse.   Many of the larger
firms have their manufacturing and sales organized along product lines.  For
example, Economics Laboratory is divided into four divisions:  institutional
(food service and janitorial), Klenzade (dairy farms,  food processors), Magnus
(metal finishing and transporation)  and Magnus Maritec (marine).^/

    The major categories of substantial raw materials used by this Jndustriy
are indicated in Table 3.
    .2/Mary K. Meegan, ed., Kline Guide to the chemical industry (3rd ed.,
Fairfield, New Jersey:  Charles Kline & Co., 1977), p. 138.

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                                      E-289
    In addition to chemical synthesis, the production of polishes and sanitary
goods requires a great deal of mechanical mixing.  However, PMN submiosion
requirements only affect new processes of chemical synthesis.  Therefore, only
firms that formulate and/or synthesize the ingredients would be affecttct. This
involves a minority of firms, as most merely purchase and mix ready-madf
components.  in fact, with respect to polishes and sanitation goods, BAoF
Wyandotte and Proctor & Gamble are probably the only major firms that would be
directly affected by TSCA.

    Many materials are unlikely to undergo changes in chemical synthesis
because their composition and application are relatively simple.  As an
example, it is unlikely that the chemical formula for bleach could be changed
and still have it retain its oxidation power, the source of its
effectiveness.  (Stronger oxidizing agents such as perchlorates are much more
expensive and do not compete commercially on a large scale with the common
household and industrial bleaching agents.)  Furthermore, it appears extremely
unlikely, for chemical and processing reasons, that a less expensive but
equally strong bleaching agent would be substituted.  Of the materials
associated with the industry, surfactants, because of their diversity arc
innovativeness, would primarily be involved in chemical changes.  (See
Chemical Profile on Surfactants.).
                                     TABLE 3
                 MAJOR GROUPS OF RAW MATERIALS USED IN POLISHES
                       AND SANITARY GOODS PRODUCTION,  1977
                                                 Sales volume
        Item                                  (millions of dollars)

    Surfactants and wetting agents                   80.3
    Perfumes                                         24.2
    Builders                                         10.7
    Sodium Silicates                                   -8
    Labels, containers                               344.6
    Oils & Greases                                    5.0
    Caustics                                         36.0
    Other, not classified                    	690.0

        Total                                   1,181.7

    Source:   Department of commerce, Bureau of the  Census, 1977  Census of
              Manufactures  (Washington, D.C.:  Government Printing Office,
              1979).

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           E-290
paints and Allied Products

-------
                                      E-291
                           PAINTS AND ALLIED PRODUCTS

DESCRIPTION

    Paints and allied products are categorized into two types:  trade sales
paints and industrial finishes.  Trade sales paints are often sold in retail
markets and are used as coatings for buildings, ships, etc.  industrial
finishes are made to user specifications are are sold to manufacturers for use
on automobiles, appliances, furniture, and other items.  From 1966 to 19V6 the
industry experienced relatively slow and steady growth, as indicated in Tarle
1.  Between 1973 and 1976 inclusive, production gains slowed due to the
general recession in 1974 and 1975.  Thus, the large gains in sales from 1°73
to 1976 were primarily due to price increases.

    paint technology remained static for many years prior to World War I,
consisting basically of mixing a limited number of vegetable oils with
solvents, minerals, and some synthetic dyes.  After the war, many new
synthetic raw materials and additives were developed, producing a wide variety
of consumer and industrial coatings.

    The paint segment is relatively more mature than most of the other
chemical segments but is also relatively small in terms of revenue.  Its spall
size is illustrated in Table 2. which compares the sales of paints with
several other representative segments.

    Although paints are often categorized by market, the chemistry of coatings
is largely determined by the product specification desired and, thus, by the
components within the paint necessary to obtain the desired characteristics.
All paints are composed of at least two and usually three major components:
(1) the film-forming binder, consisting of resins or oils, (2) the dispersion
medium, which maintains fluidity (usually water or an organic solvent) and  (3)
a pigment system, to impart color and opacity.  The first two components are
sometimes called the vehicle.  When applied, the solvent evaporates, leaving
the binder and pigment.

    Because coatings are designed with different substrates, application
techniques, curing methods, costs,  durabilities, and a host of other
specifications, the variety and specialization of finished products are among
the highest in any of the chemical industries.A/  These many varieties and
specializations result from various combinations of the aforementioned
components.
   oan Huber, ed., Kline Guide to the paint industry, (5th ed., Fairfield,
NJ:  Charles Kline & Co., 1978), p. 28.

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                                     E-292
                                    TABLE 1

              U.  S.  PRODUCTION AND SHIPMENTS  OF TRADE SALES PAINTS
                       AND INDUSTRIAL  FINISHES,  1966-1976
                           Production
                                          Shipments
                                      millions  of  dollars
Year

1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1966-1971
1971-1976
V
Trade
Sales
Paints
415.9
398.4
423.7
430.3
427.6
431.1
451.5
424.0
474.6
451.5
473.5
111^-Ai.k^*^!' '-'•--. v
Industrial
Finishes
421.1
383.1
419.5
450.1
399.2
443.5
475.3
473.0
457.3
438.1
455.2


Total
837.0
78.5
843.2
880.4
826.8
874.4
926.9
897.0
932.0
889.6
928.7
Trade
Sales
Paints
$1,312.4
1,329.5
1,427.5
1,473.5
1,497.6
1,562.8
1,659.3
1,658.9
1,870.9
2,079.0
2,446.2

industrial
Finishes
$1,051.9
1,018.7
1,159.3
1,303.5
1,239.4
1,268.2
1,349.8
1,473.9
1,800.7
1,947.6
2,231.9


Total
$2,364.4
2,348.3
2,586.8
2,776.7
2.737.1
2,830.9
3,009.2
3,133.1
3,671.6
4,026.6
4,686.0
0.7
1.9
                       Average Annual Growth (in percent)
1.0
0.5
0.9
1.2
3.6
9.4
 3.8
11.9
 3.7
10.6
Source:  U. S. Department of Commerce,  Bureau of the census,  Current
         industrial Reports (Washington,  D. C.:   Government Printing Office,
         various years).
                                    TABLE  2

    SALES  COMPARISON OF THE PAINT  INDUSTRY WITH OTHER CHEMICAL SEGMENTS,  1977

         Segments                                  Revenue in Millions
         Paints

         Basic organics
         Inorganics
         Agricultural chemicals
         Plastics
                                            5,100

                                           21,755
                                           10,350
                                            9,685
                                           11,615
    Source:   Mary K. Meegan, Kline Guide to the Chemical industry  (3rd ed.,
              Fairfield, NJ:  Charles Kline & Co., 1977).

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                                     E-293
RAW MATERIALS,  CLASSIFICATION

Natural Oils and Resins

    Natural oils and resins account for approximately 20 percent of all
binders used.  They include oils such as linseed, soybean, tall, tung, fish
(menhaden), castor, coconut, and safflower.  The only natural resin, shellac,
has been largely replaced by synthetics.  Natural oils, once the onl/ drying
oils available  for coatings, are used singly or in combination with other
natural or  synthetic binders.  Their use has declined from 624 million pounds
in 1965 to  419  million pounds in 1972, and is expected to continue to
decline.2/

    Natural oils are slower drying and less durable than synthetics.  Their
primary advantage is that they are less expensive and non-toxic, and their
properties  are  well known.  Linseed oil is the largest selling natural oil,
comprising  35 percent by volume of all natural oils used in 1977.  It has
excellent exterior durability, and is relatively fast-drying.^/  Fish,
castor, coconut, tall, and soybean are semi-drying oils, and are used in
combination with other binders.  Their main advantage is lower price.

Synthetic Resins

    Synthetics  were first used in 1923 when cellulosic nitrate was introduced
to lacquer.  Since then, their growth has been at the expense of natural
oils.  The  major categories, in order of their volume of use, are alkyds,
acrylics, vinyls, epoxies, aminos, urethanes, cellulosics, styrenes, and
phenolics.4/ These resins are used singly or in combination, and new
mixtures are constantly being devised.

    Alkyds  are  relatively low in cost, have a high degree of compatibility
with other  resins, and are often used in combination with other synthetics and
natural oils.  They are the products of saturated polycarboxylic acids and
polyfunctional  alcohols modified by fatty acids.  They are used in interior
and exterior enamels and coatings, but are hardly used in water-based
coatings.  Alkyds lost some price competitiveness during 1974 and, as a
result, lost some of their market share.I/  Research is currently being
conducted to develop water-based alkyds.

    Acrylics are predominantly copolymers of esters and polymers of acrylic or
methacrylic acid.  Because a number of esters can be copolymerized together,
there are many  varieties of resins available.  Acrylics are used extensively
    j/lbid., p. 31.

    3/ibid., p. 32.

    i/Ibid., p. 29.

    1/lbid.

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                                     E-294


in exterior and interior high-gloss and semi-gloss coatings, as well as in
automobile finishes.   Acrylics are used both in solvent and latex-based
coatings.

    Vinyl resins are  formed from the polymers and copolymers of vinyl acetate
and vinyl cloride by  copolymerizing with fumarates, maleates, acrylates, and
methacrylates.  Vinyls are used primarily in interior latex paints, since they
are less expensive than acrylics ana more durable than styrenes.

    Epoxy resins are  made by the reaction of bisphenol with epichlorohydrin,
followed by cross-linking with hardeners.  They are experiencing increases in
a wide variety of applications due to their excellent adhesion, chemical
resistance, and overall durability.  They are used in solvent, aquatic, and
powder coatings.  The interest in developing a replacement for solvent-based
coatings will result  in powder coatings doubling their market share by 1982,
according to the American Paint and Coatings journal.6/

    Amino resins are  urea-formalaehyde  and melamine formaldehyde, and are
always used in combination with other binders.  They have excellent color and
gloss retention, and  are used in high-gloss baking finishes.J/

    Urethane resins,  a newer form of binders, are formed by reacting isocya-
nates with hydroxyl compounds.  They have excellent durability, corrosion
resistance and adhesion.  They are more costly than acrylics, and are being
used in automotive finishes.]*/

    The remaining binders, cellulosics, styrenes and phenolics, are older
products whose growth has been slowed by replacement from the newer
synthetics.  They are lower in cost, but their price advantage is not enough
to offset their eventual decline.9/

    Pigments used in  paints are described in detail in the profile "inorganic
Pigments", and no discussion of their chemistry is made here.

    Solvents are used in large quantities in all paints to add fluid
properties and to affect drying time, flow characteristics, and consistency of
application.  The most widely used solvents are water, ketones, esters,
alcohols, mineral spirits, toluene, xylene, naptha, and glycols.  Data on
their use is incomplete.  The solvent used depends on its ability to dissolve
the binder and mix with the pigment, along with its cost.  Solvents do not
react chemically with the binder and pigment other than to dissolve the
binder, so the choice of solvent until the late 1960s was based solely on
dissolving properties, volatility, and price.
    VAmerican paint and Coatings journal,  June 16,  1979.

    2/Meegan, Kline Guide,  p.  31.

    8/Ibid.

    i/ibid.

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                                     E-295
    The  advent  of federal and state air quality regulations has had a great
impact on the choice of solvents now in use.   While petroleum solvent-based
paints presently enjoy a 60 to 70 percent market share of industrial coatings,
they are steadily losing market share to water-based coatings, powders,  and
high solids. iP_/  Research and development efforts are examining more
efficient processes of applying and curing finishes without the use of
petroleum solvents.    These processes include powder coating,
electrodeposition,  and thermal and radiation   cur ing .ii/  it is projected
that, by the mid-1980s, regular solvent-based paints will have only 25 percent
of the market.
    The  paint industry is one of the few remaining chemical segments
characterized by many small firms.   Table 3 shows the trends in the number  of
producers in 1963,  1967,  1972, and  1977.  The total number of producers has
been getting smaller, mainly due to mergers and acquisitions.il/  Because
the products are relatively heavy per unit of value they are not shipped long
distances.   There high shipping costs have created a barrier to effective
nationwide distribution by large firms.  Thus, smaller manufacturers are very
competitive on a regional basis. 14/

RAW MATERIALS, PRODUCTION AND SALES

    As has most other segments of the chemical industry, the paint industry
has had large increases in the costs of raw materials since 1973.  Table 4
illustrates this trend for several  major raw materials .  Producers of trade
sales paints face a mature competitive market, where price reductions to gain
and maintain market share commonly  occur.  Thus, margins on sales have been
reduced significantly during the 1970s.

    Table 5 illustrates the reduction in average profit margins on paints as
compared to all manufacturing industries' average margin on sales.

    Trade sales have suffered more  than industrial finishes, because
industrial coatings are more specialized and can command higher margins.
Table 6 compares the price indices  of trade sales and industrial finishes for
1967 through 1977.
    i°/Ibid., p. 35.

    2J/U.S. Department of commerce, 1978 U.S. industrial Outlook
 (Washington, D.C.:  Government Printing Office, 1978), p. 120.

    ii/C. H. Kline & Co. estimate.

    ii/U.S. Department of Commerce, 1978 U.S. industrial Outlook, p. 120.

    ii/U.S. Department of commerce. Bureau of Census, 1972 Census of
Manufactures (Washington, D.C.:  Government Printing Office, 1975); and U.S.
Department of Commerce, Bureau of Census, Current Industrial Reports
 (Washington, D.C.:  Government Printing Office).

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                                     E-296
                                    TABLE 3

     PRODUCERS AND CONCENTRATION IN THE PAINT INDUSTRY,  FOUR SELECTED YEARS
                                                          Top Eight Producers'
                                                            Share of Market
Year                           Number  of Producers            (in percent)

1963                                 1,579
1967                                 1,459
1972                                 1,317                          33
1977                                 1,275                          44
Sources:  Mary K.  Meegan,  ed.,  Kline  Guide  to the  Chemical industry (3rd ed.,
          Fairfield,  NJ:   Charles Kline  & Co.,  1977);  U.S. Department of
          Commerce,  1978 U.S.  industrial Outlook  (Washington,  D.C.:
          Government Printing  Office,  1978) ;  amd U.S.  Department of Commerce,
          Bureau of  Census,  1972 Census  of  Manufactures and 1977 census of
          Manufactures (Washington, D.C.:   Government  Printing Office, 1975
          and 1979) .

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                                      E-297

110.9
115.2
—

343.7
137.8
—

318.5
175.7
—
106.9
206.3
186.9
100.0
112.4
197.0
198.5
106.4
112.4
155.3
206.3
110.8
                                     TABLE  4

            PRICE INDICES OF SELECTED PAINT RAW MATERIALS, 1973-1978


                                   1967 = 100


                        1973      1974      1975      1976      1977      1978

Paint resins
  Linseed oil
  Nitrocellulose
  Epoxy, unmodified
  Toluene
  diisocyanate             —        —        —     112.1     120.6     113.6

paint pigments             —        —        —     102.7     104.4     105.2
  Calcium carbonate     122.2     126.8     150.0     150.0     160.4     168.5
  Titanium dioxide      100.0     117.4     152.4     170.9     178.0     178.1
  Zinc oxide            130.1     235.4     262.4     260.7     253.2     237.0
  Chrome yellow            --        —        —     108.5     117.4     124.5

Paint solvents             —        —        —     101.9     105.5     112.0
  Methyl ethyl ketone    81.7     118.7     149.0     161.8     168,9     175.7
  Mineral spirits       105.2      NA       175.7     185.2     201.0     237.9
  Xylol (mixed
  xylones)               106.7     193.6     244.0     244.2     238.5     218.9
isopropyl alcohol          —        —        —     100.2     110.6     119.6

Average paint
Materials               113.2     152.3     177.2     189.8     205.9     208.3


Source:  U.S. Department of Labor, Bureau of Labor Statistics.

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                             E-298
                           TABLE  5

           PROFIT COMPARISON BETWEEN PAINT COMPANIES
            AND ALL MANUFACTURING FIRMS, 1950-1977
Year

1950
1955
1960
1965
1970
1972
1974
1975
1976
1977

Sources
                                   Average Margin on Sales  (percent)
                                        Paint     All Manufacturing
                               6.4
                               6.7
                               6.3
                               5.6
                               2.6
                               3.6
                               3.1
                               2.4
                               2.5
                               2.8
7.7
6.7
5.5
6.4
4.7
5.1
5.2
4.4
5.1
5.0
Mary K. Meegan, ed., Kline Guide to the Chemical industry
 (3rd ed., Fairfield, NJ:  Charles Kline & Co., 1977).
                           TABLE 6

     AVERAGE MANUFACTURERS' PRICES FOR PAINTS, 1967-1977
                          (1967=100)
                                            index
     Year

     1967
     1968
     1969
     1970
     1971
     1972
     1973
     1974
     1975
     1976
     1977

     Sources
Sales
Paints
100.0
101.0
102.6
104.9
108.6
110.1
117.3
118.1
137.9
154.8
160.3
Industrial
Finishes
100.0
104.9
108.9
116.8
107.6
106.8
117.2
148.1
167.2
184.3
194.1
     Mary K.  Meegan,  ed.,  Kline Guide to the Chemical
     Industry (3rd ed., Fairfield, NJ:  Charles Kline &
     Co., 1977).

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                                      E-299
COMPETITION AND INNOVATION

    The trend toward higher prices for industrial finishes is indicative of
the search for more sophisticated paint "systems," including both the coating
and the method of application and cure.  As previously discussed  reaulatory
pressures have caused reformulations that are easier and safer to apply by
home consumers and cause less environmental pollution.JL5/  in the industrial
finishes area, the manufacture of powdered or high solid coatings now calls
for more sophisticated technical requirements and greatly increased capital
expenditures.16/

    The National Paint and Coatings Association estimated R&D for new products
at 2.2 percent of sales in 1977.12/  As research in more sophisticated
coatings increases, many smaller companies may not be able to afford the funds
necessary to develop and produce the new formulations that will meet both
regulatory standards and purchasers' needs.i8/  AS a result, the trends
toward industry consolidation already discussed will probably continue. (It
should be emphasized that the necessary innovation will involve new
formulations rather than new chemicals).

    Foreign trade has never been a significant portion of business in the
paint industry, and amounted to $1.13 million in exports, about two percent of
total sales in 1977.H*/  Although the balance of trade is favorable, growth
is expected to be moderate since high shipping costs relative to the cost of
goods makes overseas distribution unattractive.  Future import growth or
product substitution by imports will be low because of environmental
restrictions.
    is/Regulations include:  1970 Clean Air Act; 1972 Fresh Water pollution
 Control Act Amendment; 1976 National Education and Disease Preventon Act; 1970
 Occupational Safety and Health Act; 1970 Hazardous Materials control Act.

    M/U.S. Department of Commerce, 1978 U.S. industrial Outlook, p. 119.

    i2/National paint and Coatings Association, Operating Cost Survey.

    M/The top 34 companies accounted for  72.4 percent of sales in 1977,
 leaving 1,241 very small firms with average sales of only $1.13 billion per
 firm.

    19/U.S. Department of Commerce, U.S. Exports, FT 410, 1978.

    .2JL/C.H. Kline  & Co. forecast.

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        E-300
Adhesives and Sealants

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                                     E-301
                             ADHESIVES AND SEALANTS

DESCRIPTION

    An adhesive is a bonding agent that holds similar or dissimilar substrata
together.  "Adhesive" is a generic term that applies to a wide variety of
chemical compounds including glues, cements, and mucilage.  "Glue" orginally
referred to animal-derived adhesives used to bond wood together,  but now
refers to all classes of adhesives.  Mucilage is a solution of vegetable gums
generally used for bonding paper.  Cements include a wide class of natural
rubber, thermo-plastic resin, and synthetic elastomer bonding agents.
Sealants (and caulks) are used to fill gaps or joints, and may also function
as waterproofing agents.

    The base material of adhesives and sealants can be mineral, natural
organic, or synthetic.  The industry is defined by application rather  than by
chemical type, and measurements of the activity of the industry have varied
because of differing categorizations.  The Bureau of the census1  definition
includes firms engaged in the manufacture of industrial and household
adhesives, sealants, and caulks for further resale; it excludes firms engaged
in "the manufacture of plastics and resins. . . for protective coatings,"!/
as will this discussion.  Also, the manufacture of adhesives for captive
use^/ and inorganic adhesives such as Portland cement, soluble silicates,
hydraulic cements, phosphate cements, and thermosetting powdered glasses will
not be considered.

Natural Adhesives

    Until the advent of petroleum derived adhesives, the industry was composed
of animal and vegetable based products.  These included hide and bone glues,
protein adhesives, vegetable adhesives, coal tars, and rubber-type cements.
In general, these natural products are less expensive than their synthetic
counterparts, but they are also are less versatile.  Table 1 shows the change
in product mix between natural and synthetic products in 1967, 1972, and 1977.

    Currently, the animal glues are widely used in paper packaging and in some
wood furniture applications,  vegetable adhesives such as dextrin are among
the lowest in cost per pound, and are used where water resistance is not
important, such as with can and bottle labels.  Rubber cement, sold as such,
is used for rubber bonding and bonding where the ease of later removal is
important, e.g., with graphic arts.
    1/U.S. Department of Commerce, Bureau of the Census, 1977 Census of
Manufactures  (Washington, D.C.:  Government Printing Office, 1979), p. 1.

    2/Examples are shoe or plywood manufacturers who purchase raw materials
and make their own glues for use in the finished product only.

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                                     E-302
                                    TABLE 1
             U.S.  SHIPMENTS OF ADHESIVES BY TYPE:  1967, 1972, 1977
                              (millions of dollars)
                                                   U.S.  Shipments
                                   1967           1972           1977
Natural base adhesives
     Animal                         35             31               51
     Protein                        16             12               23
     Vegetable                      27             46               43
     Other                          20             31            _ 44

     Subtotals:                     98 (20.6%)     120 (14.4%)       161 (11.4%)

Rubber Cements                      67 (14.1%)      94 (11.3%)       160 (11.3%)
Other                               20             41               81

Synthetic Resins                   290 (61.0%)     578 (69.4%)     1,016 (71.7%)

     Grand Totals:                 475            833            1,418

Source:  U.S. Department of Commerce, Bureau of the Census, 1967 Census of
         Manufactures (Washington,  D.C.  Government Printing Office, 1970) ;
         1972 Census of Manufactures (1975) ; 1977 Census of Manufactures
         (1979) .
     The natural and rubber adhesive segments of the adhesives industry were
in existence long before the advent of synthetics and are naturally more
mature in terms of products and pricing.  Generally, animal and natural rubber
base adhesives are pseudo-commodity products with low cost as an important
selling feature.I/  They must compete against more versatile synthetic
adhesives, and usually this is possible only with lower prices.

Synthetic Adhesives

     The advent of synthetic products started with synthetic rubber-based
cements and spread to petroleum-based glues and cements.  Currently there are
several major classes of synthetic cements, including epoxies, phenolics,
amino resins, polyvinyls, hot melts and specialty adhesives.

     Table 2 shows the growth of the major classes of synthetic adhesives
between 1972 and 1977.
    1/C. H. Kline & Co. defines pseudo-commodities as differentiated end
products but, like true commodities, they are sold in relatively large
volumes, are widely used, and may have the bulk of their sales concentrated  in
a few large customers.

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                                     E-303


                                    TABLE 2

                   SALES OF  SYNTHETIC ADHESIVES,  1972 and 1977

          Adnesives        Salesa/(miilions o£ gpiiars and percent of total)
                                            1972                     1977

          Epoxies                        48.2    (8.3%)              70.8  (7.0%)
          Phenolics                      53.4    (9.2%)             114.7 (11.3%)
          polyvinyls                    183.9  (31.8%)             258.7 (25.5%)
          Hot melts                      27.6    (4.8%)             114.0 (11.2%)
          Synthetic Rubbers             149.8  (25.9%)             289.9 (28.5%)
          Other specialty               115.4b/  (20.0%)            167.4 (16.5%)
                         TOTALS:        578.3 (100%)              1015.5 (100%)

          Source:   U.S. Department of Commerce,  Bureau of Census, 1977 Census
                    of Manufactures, (Washington, D.C.:  Government Printing
                    Office, 1979).

          a/  Overall data may be 15-20 percent too low according to C.H.
Kline &
              Co. estimates.

          b/  Estimated.


     Epoxies are among the most expensive adhesives per pound and accounted
for slightly more than $300 million in sales in 1978-i/  The markets for
epoxies are in stable, high performance areas, and growth projections ranged
from 3 to 8 percent over 1978.17  These market areas include automobiles,
appliances, protective coatings, electrical laminates and construction.
Ninety percent of sales are epoxies that are made from a reaction of biphenol
A with epichlorohydrin.  OSHA currently has a 5 ppm (parts per million)
exposure standard for epichlorohydrin,  and may lower this standard because of
carcinogenic concerns..§/  The long  term economic effects of such an action
are unclear at this time,  although  formulation of epoxy without the use of
epichlorohydrin is more expensive.

     Phenolics are the largest volume class of synthetic adhesives sold.
Their primary use, about two-thirds of their volume annually, is in plywood
and particle board applications; therefore,  sales are tied to the construction
market.  Phenolics, considered pseudo-commodities, were among the first
synthetic adhesives developed, and  replaced animal glues in many wood
applications.
    i/Chemical and Engineering News. August 16, 1979-

    j/lbid., p. 14.

    6/Ibid.

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                                     E-304


     The polyvinyls, including polyvinyl acetate and polyvinyl chloride, have
extensive uses in food packaging, furniture assembly, and general purpose
household glues.2/  Because of their variety of applications, they are
considered more like general purpose chemicals than like specific use
chemicals, and they are commodity items,  in 1977 their tonnage of sales was
exceeded only by the phenolics.8/

     The hot melts, introduced in the last 15 years, are the fastest growing
class of synthetic adhesives.2/  There are several types including nylon and
polyolefin.  Hot melts typically contain up to 40 percent ethylene-vinyl
acetate copolymer in paraffin wax, and are melted to produce adhesion.  This
makes them unique because there is no solvent to evaporate; thus, they are
becoming increasingly important in terms of lowered air pollution from
evaporated solvents.  Hot melts have a wide range of applications including
packaging, bookbinding, shoemaking, metal bonding in cans, and furniture
assembly.   Thet are also used in the aerospace, transportation, and
construction industries..10/

Sealants and caulks

     The sealant industry is closely aligned with the adhesives industry.
There are a wide variety of natural and synthetic sealants including
bituminous asphalt, oleoresins, natural and synthetic rubbers, polymeric
resins, polysulfides, and silicones.

     Bituminous asphalt sealants are used to seal concrete pavement and pipes
and have automotive applications as well.  Oleoresins are used as putties and
architecural glazing compounds.  The natural and synthetic rubbers have a wide
variety of applications in building construction and windshield sealing.
Polysulfide sealants have industrial applications in aircraft and fuel tanks
and in expansion joints for bridges, buildings and roadways.  Silicone
sealants and caulks have high and low temperature applications for metal,
concrete, plastic, and wood.  They are used extensively in automotive and
marine applications and in the aerospace industry to encapsulate electric
connections.

INNOVATION

     Some firms in the adhesives and sealants segment seem to engage in little
new chemical entity creation.  However, a large number of companies in the
segment produce chemicals for manufacturers seeking adhesives with special
properties.  These companies do have a high rate of innovation.
2/Mary K. Meegan, ed., Kline Guide to the Chemical industry (3rd ed.,
Fairfield, New Jersey:  Charles Kline & Co., 1977), p. 153.

il/U.S. Department of Commerce, Bureau of the census, 1977 census of
Manufactures (Washington, D.C.:  Government Printing Office, 1979).

1/Meegan, Kline Guide.

jLS/Encyclopedia of Chemical Technology (3rd ed.. New York, N.Y.:  John Wiley
& Sons, N.Y., 1978), vol. 1.

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                                     E-305
PRICE AND PRODUCTION TRENDS

     This section presents a discussion of industry structure,  price and
production trends, the likely impacts of concerns over toxic substances, and
the increased costs of energy and raw materials.

     Because of the wide variety of applications for adhesives  and sealants,
the industry is relatively diverse and has a large number of medium and small
size firms.  in 1977 there were 750 manufacturers, only 100 of  whom had sales
in excess of $2 million. ll/  of these 750, however, 50 companies accounted
for 68 percent of the $954 million in industry sales for 1972 (an average of
approximately $13 million per firm) , leaving $305 million among 700
companies. 12/  The large companies usually have a multiple product line, and
the smaller companies specialize in product or market areas.

     Recent prices reflect the impact of higher petroleum and process costs.
Table 3 shows the wholesale price indices of three major types of adhesives
from 1967 through 1977.  The production of many adhesives, such as hot melts,
is energy intensive.  This factor resulted in increased expenditures on R&D
over the past several years in an effort to find less energy intensive ways of
making and applying adhesives and less expensive raw materials.
     In addition, increased concern over the carcinogenicity of materials and
solvents has prompted the search for new compounds whose intermediates are not
toxic and whose solvents are not as polluting .M/  For example, formaldehyde
emissions from the urea formaldehyde adhesives used in construction have come
under government scrutiny.  This concern has prompted a high degree of
innovation.  For example, in June 1979 General Electric 's Plastic Division
announced a one component epoxy that is set by heat, citing advantages of lack
of storage problems and the elimination of vapor emissions.  However, prices
are 25 to 100 percent higher per pound than the industry averages for epoxies
presently used.iS/  "clue sniffing" in 'the past has received widespread
public attention, and manufacturers haye looked for substitute solvents and
compounds for general purpose glues.
ii/Meegan, Kline Guide, p. 134.

jj/lbid., p. 135.

jj/Encyclopedia of Chemical Technology, p. 155.

M/For example, the 4-4'-methylenebis  (2-choloraniline) intermediate found
in several varieties of phenolics, which is listed as a carcinogen by OSHA.

!5/chemical and Engineering News, June 4, 1979, p.4.

16/Ibid., P- 156.

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                                     E-306




                                    TABLE 3

           WHOLESALE PRICE INDICES FOR SELECTED ADHESIVES, 1967-1977

                                   1967 =  100


                                   Animal          phenolic/       Rubber/
     year                          Glues            Vinyls        Phenolics

     1967                          100.0             100.0          100.0
     1968                          100.0           102.2             100.4
     1969                          104.0           107.6             102.8
     1970                          105.6           113.5             107.6
     1971                          110.5           116.7             111.3
     1972                          110.5           116.9             111.7
     1973                          128.0           119.5             111.7
     1974                          196.1           138.1             137.2
     1975                          279.0              —             174.3
     1976                          221.1              —             178.8
     1977                          163.2              --             184.9

Source:   U.S. Department of  Commerce, Wholesale price index,  various years.


     Production of adhesives,  caulks,  and  sealants will  parallel the consuming
industries, as previously mentioned.   Although growth in the  past has been
moderate and oriented towards traditional  users, new applications in other
industrial areas will be the  major fields  of future growth.   These areas
should include metalworking,  aerospace, and  transportation.17/

     Table 4 illustrates the  growth in sales of adhesives and sealants from
1967 through 1977 with estimates for  1980  and 1985 total sales.

     In summary, pressure from rising  raw  material and  recessing costs as
well as more stringent air quality standards may force major  changes in the
products and manufacuring techniques  for  adhesives and caulks.  TSCA's impact
may be somewhat felt in the area of epoxy  but OSHA standards  may ultimately
have more impact here.  Thus,  TSCA's  eventual impact will probably be
overshadowed by broader, more compelling,  and more urgent concerns of
pollution and rising input costs.
12/Meegan, Kline Guide, p. 133.

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                            E-307
                          TABLE  4

      U.S.  SHIPMENTS OF  ADHESIVES,  CAULKING COMPOUNDS
                   AND  SEALANTS,  1967-1977
                    (millions of  dollars)
                          Caulking
                          compounds
                         and sealants        Adhesives      Total

1967                        $68                 $475         $543
1968                         76 a/               524          600
1969                         86 a/               580          666
1970                         96 a/               548          644
1971                        108 a/               608          716
1972                        121                  833          954
1973                        163                  989        1,152
1974                        232                1,172        1,404
1975                        262                1,209        1,471
1976                        300                1,350        1,650
1977                        355                1,425        1,750

1980 a/                      ~                   —        2,175
1985 a/                      —                   —        3,125

a/  Estimate.

Sources:  U.S. Department of Commerce, Bureau of the Census, 1967
          Census of Manufactures and 1972 Census of Manufactures
          (Washington, D.C.:  Government Printing Office, 1970 and
          1975); and estimates by C. H. Kline & Co.

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   E-308
Explosives

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                                      E-309
                                    EXPLOSIVES
OVERVIEW
    This  section gives the basic chemistry of widely  used  explosives and a
general description of their uses,   it does not include  government-owned
contractor  plants,  civilian ammunition,  or fireworks  and pyrotechnical
production.   A later section discusses production,  sales,  and competition.

    An explosive is a material that undergoes very  rapia decomposition or
autocombustion (auto-oxidation) . There  are two principal  classifications for
explosives:

    •     low explosives,  which autocombust at speeds  less  than 400
          meters/second (the speed of sound) ,  and

    •     high explosives, which detonate at speeds  ranging up to 8,500
          meter s/second .

    In addition, high explosives are subdivided into  categories that
     (a) explode when subjected to heat,  impact or friction; thus they can be
    used  as detonating agents, and  (b)  those  that are insensitive to external
    forces  and must be exploded using a  detonating  agent.
     insensitive  hiah explosives are  called  blasting agents,  in 1856 Alfred
Nobel developed  the first blasting agent — dynamite, which is nitroglycerine
soaked  in  cellulose or  other  inert material — and for a century it held the
major market  share  for  mining explosives,   in 1955, however, ANFO, a mixture
of approximately 90 percent ammonium nitrate and 10 percent fuel oil began to
replace dynamite because it was much less sensitive to shock, less expensive,
         ^*                                                  ft. *
and  could  be  mixed  on-site to yield  greater explosive power. ±/  Other
blasting agents  used today include Tri-nitrotoluene  (TNT) , nitroglycerine,
ammonium picrate and cyclotrimethylenedinitramine  (cyclonite) .  initial
detonating  agents include lead azide, mercury fulminate, and
diazodintrophenol.   These agents are produced in smaller quantities than
blasting or low  explosive agents due to their more hazardous nature.

     Explosives are  also categorized  by function:

           •   Propellants — low explosives  that generate large
               volumes  of gases and  are used for rockets,
               missiles,  flares,  shearing bolts, driving
               turbines,  and  signaling.  They can be liquid or
               solid and  can  be individual compounds or
               mixtures of several compounds.
    1/Marv K. Meegan, ed., Kline Guide to the Chemical industry (3rd ed.,
Fairfield! New Jersey:  Charles Kline & Co., 1977), p. 146.
    2/stanford Research institute, chemical Handbook, 1978.

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                                     E-310
          •    permissible explosives—approved for use in coal
               mines because of their safety when used in a
               coal dust atmosphere; usually modified
               nitroglycerine.

          •    Military explosives—those used in shells and
               bombs; TNT and ammonium picrate are widely used.

          •    Ammunition primers—formerly potassium nitrate,
               now lead styphirate or tetracene.3/

          •    Blasting agents—ammonium nitrate and fuel oil
               mixtures or slurries of TNT, sulfur  aluminium
               and ammonium nitrate.

     None of the high or low explosives are toxic in use, although many are
extremely dangerous simply by the nature of their function and  sensitivity.
With the exception of the ANFO  mixtures, the actual chemicals in explosives
are tightly packaged for use and have little or no physical contact with
users.  Production is made under carefully controlled and often isolated
conditions, where automated and remote control mixing, handling, and packaging
equipment removes much of the inherent physical danger from inadvertent
explosion.A/
PRODUCTION, SALES AND COMPETITION

     As might be expected,  there are no substitutes for explosives other than
cheaper, more powerful,  and safer-to-handle explosives, and there is a very
restricted market for the majority of products.   These markets,  mining and
heavy construction, have exhibited a relatively  slow and stable  growth rate in
the past 15 years.5/  AS a result of this stability, volume growth of
explosive sales has averaged just over 5.8 percent yearly between 1967 and
1976.  Table 1 illustrates the slow growth in production for the major
categories of industrial explosives.

     Although it shipped $450 million worth of products in 1977, the industry
is small in comparison to most other chemical segments.  Table 2 compares the
sales of the industrial explosives industry with several other representative
segments.
    1/Meegan, Kline Guide,  p.  148.

    i/Illustrated Science and  Invention Encyclopedia (New York, N.Y.:   H.S.
Stuttman Co., 1977), Vol. 7, 1977.

    1/U.S. Department of interior,  Bureau of Mines, Minerals Yearbook
(Washington, D.C.:  Government Printing Office, various years).

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                                 E-311


                                TABLE 1

 U.S. CONSUMPTION OF INDUSTRIAL EXPLOSIVES BY TYPE:  1967, 1972, 1977

                          (millions of pounds)
Blasting Agents

     Cylindrical agents
     Water gels
     Other
          Subtotal:

Fixed High Explosives

     Permissible
     Other
          Subtotal:

          Grand Total:
1967
   69
  305
  374
1,895
1972
   46
  270
  316
1976
66
167
1,288
1,521
266
226 a/
1,862
2,354
350
339 a/
2,393
3,082
   45
  202
  247
               3,329
a/   Classification changed from 1967, now excludes some explosives
     formerly in that category which are not included in "Other"-

Source:  U.S. Department of interior, Bureau of Mines, Minerals Yearbook
         (Washington, D.C.:  Government Printing Office, various years),
         and U.S. Department of interior, Bureau of Mines, Mineral
         industry Surveys, 1967, 1972, 1976.
                                TABLE 2

            COMPARISON OF INDUSTRIAL EXPLOSIVES SALES WITH
                    OTHER CHEMICAL SEGMENTS:  1977
         Segment
         industrial explosives

         Petrochemicals
         inorganics
         Plastics
         Pesticides
         Catalytic preparations
         Organic dyes and pigments
                    Sales
          (millions of dollars)

                       450

                    21,000
                    10,350
                    11,615
                     2,850
                       365
                     1,135
         Source:  Mary K. Meegan, ed., Kline Guide to the chemical
                  industry (3rd ed., Fairfield, New Jersey:  Charles
                  Kline & co., 1977) , p. 4.

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                                     E-312


     The relatively mature nature of the market,  coupled with the
pseudo-commodity nature of the products has acted to concentrate the
producers.6/   The three largest, Dupont ($110 million), Hercules ($90
million), and Atlas powder ($87 million), dominated the  industry in 1977 with
66 percent of total sales.  The top eight companies comprised 83 percent of
U.S. shipments in 1977.27

     As previously mentioned,  the markets for industrial explosives are both
concentrated and limited.  Table 3 illustrates the relative consumption of
explosives by user industry for 1970,  1974, and 1976.
                                    TABLE 3

               INDUSTRIES CONSUMING EXPLOSIVES:   1970,  1974,  1976

                               (percent of  total)

                                        1970       1974       1976

               Coal mining                44         49         54
               Metal mining               20         17         15
               Quarrying                  19         20         15
               Construction               17         13         16

                    Totals:              100        100        100

               Source:   Minerals Yearbook,  1970,  1974,  1976.
     There have been rapid increases in the prices of explosives in the last
five years.  Bureau of the Census data show annual price increases of 18.3
percent for ammonium nitrate slurry explosives and 15.0 percent for ANFO
explosives between 1972 and 1977.  These two categories made up 31.6 percent
of total sales in 1977.8/  However, raw material prices of ammonium nitrate,
the main constituent in these explosives,  increased 20.7 percent per year
during the same time period.^/  This margin squeeze has caused American
    .6/C.H. Kline & Co.  defines "pseudo-commodity"  chemicals as those which
are differentiated end  products but are formulated in large volumes and often
have the bulk of their  sales concentrated in a few large customers.

    2/Meegan, Kline Guide,  p.  149.

    1/U.S. Department of Commerce,  Bureau of the Census, 1977 Census of
Manufactures (Washington, D.C.:  Government Printing Office, 1979).

    9/Ibid.

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                                      E-313
Cyanamid, once a major explosives producer, to leave the industry.  In fact,
the squeeze may continue to further concentrate the industry ..10/

     We believe that no urgency to develop new explosives currently exists
since there is little risk of substitution by other products and sales growth
is expected to remain very slow.  Rather than seek new ones, R&D seems to have
concentrated on improvements and refinements to existing products to make them
safer to handle and use.  Efforts to  hold down or reduce processing costs are
somewhat stymied by the batch processing nature of manufacture!!/ and the
elaborate safety precautions that must be taken to avoid premature
detonation.  As a  result of these restrictions, we feel that TSCA should have
little or no effect on this relatively isolated and mature  industry.
     iO/Meegan, Kline Guide, p. 149.

     JL-L/Illustrated Science Invention and Encyclopedia.

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    E-314
Printing ink

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                                     E-315
                                  PRINTING INK
    The printing industry produces mixtures of pigments and binders made from
inorganic and organic pigments and organic dyes.  The average firm employs 13
people and had slightly over $2.1 million in sales in 1977.i/

    Most printing inks are colloidal mixtures, and chemical reactions are not
employed to make these items.  Thus, aspects of this segment will not be
affected by TSCA and will not be discussed.  Although the printing ink
industry has long had a very low degree of innovation, recently a new process
and new products have recently been developed.  Previously, ink dried on the
paper as a solvent evaporated.  Now ink is being "cured" with infrared heat.
Unlike most firms in the segment, the firms developing the new technology and
products are not simply blending existing ingredients; they are developing new
chemicals and will therefore be affected by TSCA.
     1/U.S.  Department of Commerce,  Bureau  of  Census,  1977  Census  of
 Manufactures (Washington, D.C.:   Government Printing  Office,  1979).

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        E-316
Toilet Preparations

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                                     E-317
                              TOILET PREPARATIONS


    Major categories in the toilet preparations industry  include:

              Shaving preparations;
              Perfumes;
              Hair preparations;
              Dentifrices;
              Creams, lotions;
              Lip, eye cosmetics;
              Deodorants;
              Manicuring preparations;
              powders, and
              Bath salts, oils,  and bubble baths.

    Section 3(B)(vi) of the Toxic Substances Control Act  precludes  regulation
by the Act of any cosmetic as defined and controlled by the pood, Drug  and
Cosmetic Act of 1938.  Section 201 of the Act defines cosmetics as:

         "(1)  articles intended  to be rubbed, poured,
         sprinkled, or sprayed on, introduced into,  or
         otherwise applied to the human body or any  part
         thereof for cleansing,  beautifying, promoting
         attractiveness, or altering the appearance, and
         (2) articles intended for use as a component of  any
         such articles; except that such term shall  not include
         soap."

    Therefore, SIC 2844 will not be affected by TSCA and  will not be discussed.

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      E-318
Carbon Black

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                                     E-319
                                  CARBON BLACK
    Carbon black serves as a relatively cheap reinforcing agent for  rubber.
It is a single element, carbon.  The most common production process,  which
accounted for 92 percent of production in 1976, i/ is furnace combustion.
Virtually all carbon black is synthesized from "carbon black oil," a  liauid
petroleum refinery fraction which uses heat, does not use catalysts,  and
produces no intermediates.

    Because there is no chemical substitute for the element, there will be no
"new products".  Therefore, this industry will not be discussed.
    1/U.S. Department of Commerce, Bureau of Census, 1977 Census of
Manufactures  (Washington, D.C.:  Government Printing Office, 1979).

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                        E-320
Salts, Essential Oils,  and  Chemical  Preparations, NEC

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                                      E-321


               SALT,  ESSENTIAL OILS  AND  CHEMICAL  PREPARATIONS, NEC

SALT

    This SIC includes evaporated salts from seawater and brine.   Because there
is no chemical conversion, this industry will not be discussed here.

ESSENTIAL OILS

    The SIC Essential Oils includes flavorants derived from natural sources
such as peppermint, lemon, orange, spearmint.  Section 2(B)(vi)  of the Toxic
Substances Control Act precludes any food additive, including essential oils,
that are controlled by the Food, Drug and Cosmetic Act of 1938 and amendments,
from coming under the provisions of TSCA.  Therefore this industry will not be
addressed.

CHEMICAL PREPARATIONS, NOT ELSEWHERE CLASSIFIED

    This SIC includes a widely divergent set of chemical products.  It cannot
be easily classified by size, chemistry, market or producers.  The approximate
volume for this diverse group was over $2.3 billion in 1977.17  Table 1
shows the major categories, the number of firms in each category with over
$100,000 in shipments, the average sales per firm, and the total sales for
each category.

                                     TABLE 1

       MAJOR CATEGORIES OF CHEMICAL PREPARATIONS NEC, TOTAL SALES, FIRMS,
                AND AVERAGE SALES  OF FIRMS IN EACH CATEGORY,  1977

                                            Number of Firms
                                            with shipments
                             Total           greater than       Average Sales
Category                Category Sales         $100,000           per Firm
                          ($ millions)                            ($ millions)

Automotive Antifreezes       299.8               34                   8.82
Plating Compounds            254.1               21                  12.10
Boiler Compounds             218.3               38                   5.74
Water Softening compounds    199.8               27                   7.40
Metal Treating Compounds     169.7                 3                  56.57
Foundry Supplies             153.5               24                   6.40
Drilling Heads               124.6               15                   8.31
Sizes                        103.4               10                  10.34

Source:  U.S. Department of Commerce, Bureau of Census, 1977 Census of
         Manufactures  (Washington, D.C.:  Government Printing Office,
         1979);and  ICF estimates.
    i/U.S. Department of Commerce, Bureau of the Census, JL977 Census of
Manufactures  (Washington, D.C.:  Government Printing Office, 1979); and ICF
estimates

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                                     E-322


     There are no publicly available data that identify the actual relative
standing by sales of firms, or that identify the total number of producers or
producers by name in any of these categories.  With the exception of the metal
treating compound category, which appears to be highly concentrated, little
else can be surmised about the industry structure without going directly to
firms themselves for information.

     Antifreeze compounds are ethylene and propylene gycols,  which are made by
several methods.  One such method includes the heating of ethylene or
propylene chlorohydrine in a bicarbonate solution, and the oxidation of
ethylene or propylene with air ,  followed by hydration with weak acid.
Processing is done in large quantities and is usually continuous..£/  Used
since before World War II, glycol antifreezes form a commodity product whose
growth closely follows that of the auto industry-  No product substitution is
foreseen due to the low cost and  excellent properties of glycols.

     Plating compounds are ionic  solutions of metals, either  acidic or basic
and are plated onto a substrate by electrodeposition.  The most common metal
is chrome, followed by copper. Other metals include silver,  gold, tin,
nickel, barium, platinum, selenium, and palladium.  No data are available for
amounts of each metal used in any year.

     The chemistry of each plating compound may differ depending on the
primary metal being plated and the substrate.  Because of the
nonsubstitutability of metals and the necessity for a particular solution for
any given plating process, the probability is small that changes will occur in
plating solution products.

     Boiler compounds are used to scavenge oxygen and chlorine from feed water
as well as to inhibit the deposition of magnesium and calcium scale on tube
walls.  These chemicals are added to the feed water at a boiler installation.

     These chemicals are of two major varieties:  acid cleaners, used to
remove scale and particle buildup from boiler tubes; and water treatment
compounds, used to scavenge free  oxygen, chloride, and metallic ions from the
feed water.  Acid cleaners are simply mixtures of acids and surfactants, whose
manufacture is discussed in separate chemical profiles.  Metal scavenging
compounds are generally sodium polyphosphates or other complexing compounds.
These inorganic compounds cannot  be substituted by other more effective
additives because they are suitable for the reaction sought.   Therefore, it is
extremely unlikely that innovation will change the nature of these compounds;
thus, we believe that TSCA will have no impact on them.
    2/Gessner G. Hawley, ed.,  The Condensed chemical Dictionary (8th ed.,
New York:  van Nostrand Reinhold company. 1971).

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                                      E-323
     Water softening compounds are used industrially and in private homes to
remove calcium and magnesium ions that "harden" water.  Typically, an exchange
medium like zeolite, a natural hydrated silicate of aluminum and sodium,
ionically exchanaes the calcium and magnesium ions in hard water for sodium
within the zeolite.  Once the resin is saturated with these ions, it is
flushed with a strong salt solution to reverse the reaction and regenerate the
exchange medium.

     Artificial exchange resins are made in a variety of forms but are
generally cross-linked polymers (organic resins of sulfonic, carboxylic,
phenol, or amino groups) in small bead form.!/  They are packed in towers or
tanks that water passes through and are regenerated in the same fashion as the
natural zeolites.  Dow and DuPont are major suppliers, but no indivdual public
£ata are available on production for either company.  The water softening
industry has been in existence more than 40 years, and generally the products
are sold not purely on a basis of price for the chemicals but for a service
package that includes installation and periodic regeneration.

     Metal treating includes the use of acids, gases, and detergents.  The
production of these items are discussed separately in different chemical
segment profiles.

     Sizes include dextrin and resins.  Dextrin is made by acid hydrolysis of
starch and has been in use for many years,  its low cost and wide acceptance
make it unlikely that product substitution will occur.  Resin is a natural
product and will not be discussed here.  The use of sizes is closely tied to
the textile industry.

     Foundry supplies include different oils.  The production of these items
is discussed in a separate chemical profile.

     Drilling muds are basically clay and water, occasionally with cellophane
flakes added.  Because these muds are mixtures of naturally occurring products
(except cellophane which is discussed in a different chemical profile) they
will not be discussed here.
    I/Ibid., p.474.

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                                    TECHNICAL REPORT DATA
                             ;Please read Inzmtc'iuns on ;he reverse before co/nnletini;!
 i. PEPORT NO.
   EPA-560/ 12-80-005
              3. FECIPIENT'S ACCESSION>NO.
 J. TITLE AND SU3TITLE

 Economic  Impact Analysis  of Proposed
 Section 5  Notice Requirements
              5. REPORT DATE
               September 1980
              6. PERFORMING ORGANIZATION CODE
 7. AUTHOR(S)
 Robert  Dresser, James Edwards, Joseph Kirk,
 Stuart  Fribush
              3. PERFORMING ORGANIZATION REPORT NO.
 }. PERFORMING ORGANIZATION NAME AND ADDRESS

 ICF  Incorporated
 1850 K Street, N.W., Suite 950
 Washington,  D.C.  20006
              10. PROGRAM ELEMENT NO.
                2LS811
              1 1. CONTRACT/GRANT NO.

                68-01-5878
 12. SPONSORING AGENCY NAME AND ADDRESS
 Office  of Pesticides and  Toxic Substances
 U.S.  Environmental Protection Agency
 401 M Street, S.W.
 Washington,  D.C.  20460
              13. TYPE OF REPORT AND PERIOD COVERED
                Proposed Report	
              14. SPONSORING AGENCY CODE
 '3. jiJrPLt vi£f-jTAH Y NOTES
 EPA Project Officer;  Sammy K.  Ng
 16. ABSTRACT

    This  report presents  the analysis of  the  economic impact of  TSCA section 5 rules  on
 the chemical industry.   The industry will  be impacted when it introduces new chemicals.
 Of the  six distinguishable  consequences  for  the chemical industry,  the most important
 are the  nonquantifiable  uncertainty consequences.   The more unclear EPA's rationale  in
 making  section 5 notice  decisions, the greater are the uncertainties.

    There will likely be  a short-run drop in  the number of new chemicals introduced into
 commerce as chemical companies shift their innovation activities  into "safe" chemicals.
 'urrent  data do not allow a quantitative estimate  to be made of the rate of chemical
 introductions, or the extent of the reduction caused by the section 5 notice require-
 ments; and, even if the  data were available,  it is doubtful that  accurate quantitative
 predictions could be made.

    Smaller companies will face greater uncertainties and the direct costs will more  often
 be a factor in company decisions.  In the  long run, this regulation may cause the chemi-
 cal  industry to be composed of a fewer number of larger competitors better able  to absorb
 the  direct costs and regulatory uncertainty  associated with the requirements.
                                 KEY WORDS AND DOCUMENT ANALYSIS
                  DESCRIPTORS
                                               b.IDENTIFIERS/OPEN ENDED TERMS
                              COSATl Field. Group
 'SCA Section  5  Notice Requirements
 iconomic Impact Analysis
 !. DISTRIBUTION STATEMENT

 elease Unlimited
19. SECURITY CLASS (Tllis Report)
  Unclassified
                                                                           21. NO. OF PAGES
                                               20. SECURITY CLASS (This page)
                                                  Unclassified
                                                                           22. PRICE
EPA Form 2220-1 (9-73)
                                                               •U.S. GOVERNMENT PRINTING OFFICE: 1980-0-31(1-085/4603

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