Back to the Future
Plastics Industry Hurt by Lack Of Raw Materials Made of Oil
By Gerd Wilcke
- Nov. 30, 1973
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Randel Plastics, Inc., of Long Island City used to have 95 persons on its payroll. Last week there were only 48.
In Leominster, Mass., the Tucker Manufacturing Company has reduced its labor force by 15 per cent and has cut back from a three‐shift six‐day work week to 2.5 shifts five days a week.
What these two companies and hundreds of others have in common is that they cannot get enough raw materials made from oil to make their products. The products are plastics—in their multitude of variations that go into toys, automobiles, furniture, doorknobs or packaging materials.
The dramatic impact of the shortage was illustrated yesterday when the Chrysler Corporation announced a brief shutdown of four plants that manufacture compact cars. Chrysler said that the plants had experienced a shortage of plastic parts.
According to industry estimates, the average 1973‐model car used 138 pounds of plastics, and each 1974 model is using about 153 pounds.
In the New York area, the Plastics and Metal Producers Manufacturers Association said that its 174 member companies that normally employ 14,000 workers had to put 4,000 of them on short work weeks or on furlough.
PPG Industries, Inc., which is a joint venture partner in the Puerto Olefins Company at Penuelas, Puerto Rico, said it was being forced to shut down the plant for two weeks beginning Monday because of shortages of petrochemical raw materials.
American consumers facing the prospect of a cold winter may, at the moment, be more concerned over a cold home, school or an empty gasoline tank. But if Randel Plastics, Tucker Manufacturing and other fabricators are forced out of business the ripple effect could be enormous.
This is the third of a series of articles on the impact of the energy crisis on United States industries, which will appear at intervals.
Not only would thousands of products become scarce, but many thousands of people would lose their jobs.
Like the rest of the petrochemical industry, makers of plastics have to rely on oil for the hydrocarbons that go into building blocks for their products.
There are large companies such as E. I. du Pont de Nemours & Co., the Dow Chemical Company, the Monsanto Company, the Union Carbide Corporation, the Allied Chemical Corporation, or the Celanese Corporation that are major suppliers of building blocks such as ethylene, styrene, butadiene or phenol.
Although many of the major companies make their own end products, they are at the same time the key supply sources for companies such as Randel and Tucker Manufacturing.
Is the source drying up?
Executives of major companies do not deny that there is a shortage of key materials that has forced them to use an allocation system, However, they insist that they are attempting to be evenhanded in supplying domestic customers and are not ignoring them in order to make higher profits overseas.
Edward R. Kane, president of du Pont, and Werner C. Braun, the chief executive of Hercules, Inc., said in interviews the other day that there was no overt effort to ship more plastic resins overseas because of price controls in the United States. “The incidence of people taking advantage of the situation is small,” Mr. Kane said.
Mr. Braun said that there was no sudden upsurge in exports during the year and, although the dollar export volume was higher in reflection of monetary realignments, the physical volume of goods shipped showed a “normal” trade growth that was in line with domestic sales growth.
Plastics makers and fabricators, through the Society of the Plastics Industry, have argued for the lifting of price controls and, for the short term, a raw materials allocation plan patterned exactly on the basis of the 1972 distribution of oil and gas and all their derivatives.
Recent Study Cited
Ralph L. Harding Jr., president of the society, in this context cited a recent study by the Arthur D. Little Organization that pointed out that a 15 per cent cutback in feedstocks of raw materials to the petrochemical industry would mean the loss of 1.6 million jobs and a production loss of $65‐billion. The plastics industry accounts for about 25 per cent of the petrochemical industry and employs about 225,000 work ers. A 15 per cent cutback in feedstocks would, because of the domino effect, result in a $22‐billion curtailment in end products and in a loss of employment to 550,000 workers in both the plastic industry and the industries it supplies.
Theodore Riky, the president of Randel Plastics, does not think in these dimensions. He wants enough raw materials so he does not have to lay off more workers. He stressed that major resin suppliers had cut him off completely and that secondary suppliers were doing so little by little.
Can he afford going to the “open market,” a polite term used for the gray, or black. market?
‘45 Cents a Pound’
“If I pay cash on the line or by certified check before the supplier unloads a shipment, and paid 45 cents a pound for polypropylene and 53 cents for styrene, I might get the matesaid.
With the list price for both plastics standing at 17 cents a pound, Mr. Riky implied strongly that he could not afford to buy at such prices.
Sheldon Edelman is the president of the Plastics and Metal Producers Association, a group of fabricators in the plastics and metal fields. He complained bitterly that price controls came at a time when plastic resin prices were at a nine‐year low.
He said that companies buying directly from major suppliers were on allocation anywhere” in the 60 to 80 per cent area but that, as of last week, not even these reduced amounts reached the fabricators.
90 Per Cent of Capacity
In a recent study, Mr. Harding’s group said that, although production of plastic resins would increase this year by 10 to 15 per cent, to about 27 billion pounds, industry was operating at only 90 per cent of capacity.
As a result of the underutilization of capacity, the society said that most resin sales were on strict allocation by suppliers, there were significant shortages of formerly plentiful resin formulations, and there were severe shortages of certam formulations where intermediate, chemicals were not available, such as styrene monomer for polyester resin.
Mr. Harding has noted in this context that the plastics industry was facing a paradox. “Having reached the status of full membership in the industrial community,” he said, “the plastics industry finds itself threatened by limitations on its vitally needed raw material feedstocks.”« Previous Post Next Post »