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Show I mm I mmmm t.i.,f ii r urn " - ..-? I REBOUND IN PLASTICS FORECAST The sharp contractions in the automotive and construction industries this year, together with weakening foreign demand, severely depressed business for U.S. plastics manufacturers. manufac-turers. However, the industry had expected the general economic recession and the companies were better prepared to weather the downturn than in the 1974-75 decline. For example, the plastics producers were quick to reduce inventories and cut production rates sharply. Thus, the industry placed itself in a better position than previously to absorb the overcapacity which developed. Moreover, new production techniques had already been introduced, in-troduced, along with new processes for capitalizing on cost and energy savings. Finally, the U.S. plastics companies initiated concerted moves towards specialized markets in addition ad-dition to creating wider penetration of old and new sectors. In the opinion of the Research Department of Babson's Reports, U.S. plastics producers are poised to bounce back from the recession and return to their normal growth in 1981 despite the' sluggish performances anticipated for the automotive and construction markets. MARKET PROJECTIONS FOR THE 1980's Production of plastics is expected to grow at an average annual rate of about 8 percent into the mid-1980s. For 1981, the forecast is for an expanded capacity in the fast-stepping polypropylene resin as well as the other high-volume thermoplastics-polypropylene thermoplastics-polypropylene resin as well as the other high-volume thermoplastics-polyethylene, thermoplastics-polyethylene, polyvinyl chloride, and polystyrene. These are all expected to make further inroads into their respective markets. Overall, the Gross National Product in the U.S. (and Canada) is expected to grow at a higher rate than in Europe and Japan through 1985. In fact, our production is expected to grow at 1.5 to 2 times that of GNP. Plastics account for over 20 percent of the chemical industry's sales and dynamic growth has been achieved despite highly competitive conditions and the rising costs of petroleum and natural gas.,. Feed-stock supplies should be adequate . to support the projected growth through the mid-1980s. NKW TECHNOLOGICAL DEVELOPMENTS The introduction of1 low-pressure "processes for producing polyethylene offers vast improvements in chemical properties (including more tensile strength), capital cost savings of up to 50 percent and energy savings of about 25 percent. As a result, U.S. producers expect the new polyethylene plastics to displace 30 percent of the current market, plus presenting a formidable challenge to markets served by non-plastics. non-plastics. As for the fastest growing of all plastics, polypropylene, new catalysts and process betterments are resulting in reduced plant equipment and broader product lines plus new polymer resins. All of these could accelerate its growth potential. SLACKENING EXPORTS The booming export business which buoyed profits for American plastics producers in 1979 slackened off in 1930 due to the the expiration of low-price fuel contracts, together with phased decontrol of oil and gas prices. As a consequence, the gap between domestic and foreign manufacturing costs is narrowing. Moreover, inventories in-ventories are building up overseas because of the lower demand and the business recession now taking hold in Europe and other countries. Nevertheless, Never-theless, the domestic pickup slated for 1981 should offset this temporary situation. RECOMMENDATION The Research Department of Babson's Bab-son's Reports is of the opinion that U.S. plastics producers will enjoy a rebound in 1981. We are currently recommending recom-mending the purchase of Dow Chemical, Hercules, Inc., and Stauffer Chemical. Their common stocks are Liaded on the New York Stock Exchange. Ex-change. inflation and help put our country on a sound economic eco-nomic basjs. It is now government's responsibility to see that revenues from the crude oil tax are used for positive results. Even though funds for energy production will be reduced, we at Phillips Petroleum Company are committed to programs helpful to the supply and distribution of domestic energy. We are committed to working with the rest of the industry, government and the public toward developing devel-oping a unity of purpose in making America more energy self-reliant. Mr. Martin is Chairman of Phillips Petroleum Company, Com-pany, an international energy producer. |