News of the Week

CHEMICALS REGAIN FAVOR ON WALL STREET For the first time since early 1976, U.S. chemical companies are in the spotlight on Wall Street. After three years of the sort of low-priced exile to which the stock market assigns in­dustry groups that have fallen out of favor, chemical stocks are now enjoying a sharp pickup as investors discover them once again.

Since early summer, prices for the 20 largest basic chemical companies have jumped four times the rate of blue-chip stocks as a whole. For the three months from June 22 to Sept. 25, the median increase of these 20 stocks was 16%. For C&EN's histori­cal chemical stock price index, the rise was from 192 to 216 (1954 = 100) or 13%. This index is a weighted average for Allied Chemical, American Cy-anamid, Celanese, Dow Chemical, Du Pont, Monsanto, and Union Car­bide.

At the same time, the widely fol­lowed Dow Jones Industrials average moved up just 4%, from 849 to 886 in a summer rally.

Before this summer, chemical stocks languished in a C&EN index range of 170 to 200 for a year and a half after a two-year retreat from the

Chemical stock prices have jumped 16% since June

Air Products Allied Chemical American Cyanamid Cabot Celanese

Diamond Shamrock Dow Chemical DuPont Ettty! Corp. W. R. Grace

Hercules International Minerals Monsanto National Distillers Oft*

Pennwalt Rohm & Haas Stauffer Chemical Union Carbide Williams Cos.

MEDIAN

l*r Sep*. 25

$33 4 1 % 30Ya

43% 47%

26 Y2

33Y4

45% 26% 38Υ2

2 1 % 58% 58 % 28 23

35Υ4 46% 24% 43% 23%

k& June 22

$31 34% 26 38% 45%

23% 27% 43% 28% 28

13% 48 50% 22% 20%

32% 39Υ4 21 30 19%

% change

6.5% 20.9 15.9 12.9 5.5

12.8 19.8 4.0

-5 .8 37.5

15.9 22.1 16.1 25.1 11.5

7.6 18.9 17.9 14.1 20.6 15.9%

record high of 307 in February 1976. The last big increase for the index was in the year and a quarter before the 1976 peak, when it nearly doubled.

Some similarities in basic business conditions exist between 1975, the last big year for chemical stocks, and 1979. Both times, chemical product prices had been jumping and capacity for many chemical products running short after raw material oil and nat­ural gas costs soared. Both years, chemical profits outdid early expec­tations and promised more of the same.

However, the recession in 1975 brought financial performance in the chemical industry down to earth. There followed a prolonged period of excess production capacity and downward product price pressure in 1976, 1977, and 1978. This disap­pointed the stock market, which penalized chemical stocks heavily.

This time around, price and profit conditions have not been so super­heated as in 1974 and 1975. Opinion from companies and Wall Street is generally that, if there is a recession now, it will be milder than in 1975.

Another essential difference be­tween 1975 and now is the state of chemical plant expansion. Although spending on new plants is rising this year, it still is at a cyclically low point in relation to chemical sales. Even in raw numbers the rise in capital spending, perhaps 20% this year after a 5% decline in 1978, is modest com­pared to the 59% and 15% gains in 1974 and 1975.

The result could be much less danger of prolonged overcapacity at chemical plants than in the mid-1970's. Some Wall Street analysts have assumed this to be the case as they recommend chemical stocks for the early 1980's.

For now, investors like chemical stocks nearly across the board. Some of the increases this summer have been extraordinary for stocks previ­ously mired near their low points for the past several years. Leading the pack is W. R. Grace with a 38% rise this summer. Other big gains have come for National Distillers & Chemical, up 25%; International Minerals & Chemical, up 22%; Allied Chemical and Williams Cos., both up 21%; and Dow Chemical, up 20%. Companies with gains from 10 to 20%

include American Cyanamid, Cabot, Diamond Shamrock, Hercules, Monsanto, Olin, Rohm & Haas, Stauffer Chemical, and Carbide.

These increases have pushed leading chemical stocks slightly ahead of relative values for stocks in the Dow Jones Industrials average. Stock prices for the 20 largest basic chemi­cal companies in late September were a median eight times earnings for the most recent 12 months. This multiple is a bit more than the price-earnings ratio of 7 for the Dow Jones Indus­trials. In June, the price-earnings ratio was 7 for both the DJI and chemical stocks.

Dividend yields on chemical stocks are down slightly from early summer. The median annual dividend for the leading 20 chemical stocks was 5% in September after 6% in June. The dividend yield for the Dow Jones In­dustrials was 6% in September, un­changed from June. D

Nitrosamine found in many brands of beer A Food & Drug Administration study has confirmed that 28 brands of do­mestic and imported beer contain trace amounts of iV-nitrosodimethyl-amine (NDMA) a known carcinogen in laboratory animals. However, the agency says that on the basis of in­formation to date, there is no reason for moderate beer drinkers to alter their consumption habits.

The results of the study show levels of NDMA ranging from undetected to 7.7 ppb in the 18 U.S. beers tested, with an average concentration of about 2.5 ppb. The NDMA levels in the 12 imported beers tested ranged from undetected to 3.6 ppb, with the average concentration being about 1.8 ppb. The two beers tested in which no NDMA was detected are Coors and Guinness Stout.

Last year West German scientists reported finding NDMA levels rang­ing from 0.2 ppb to 68 ppb in most commercial West German beer. In August a National Science Founda­tion-sponsored study found NDMA at levels up to 2 ppb in six of seven Scotch whisky samples tested (C&EN, Aug. 13, page 18). Barley was implicated as the possible source of

6 C&EN Oct. 1, 1979

nitrosamine found in Scotch whisky.

The U.S. Brewers Association says it is reasonably certain that the ni­trosamine found in beer is the result of a chemical reaction that takes place when sprouted barley malt is dried directly over a hot flame. The barley malt for Coors beer, in which no NDMA was detected, is dried by an indirect process in which hot air is piped into the drying kiln. The asso­ciation says that since June approxi­mately 80% of current malting is being done using a technique of sulfur application which helps prevent the formation of NDMA and has resulted in a reduction in malt NDMA content of up to 94%. Experiments combining this procedure with the use of new low NOx emission burners should produce malts with no detectable level of NDMA.

Following are the highest levels of NDMA found in domestic beers listed in parts per billion (FDA warns that the detection limit for mass spectro­metry confirmation for NDMA in these beverages is about 5 ppb): Schlitz, 7.7; Colt 45,6.4; Blitz-Wein-hard, 6.2; Tuborg, 6.2; Budweiser, 5.8; Carling Black Label, 4.6; National Bohemian, 3.8; Lowenbrau, 3.3; Colt 45-Silver, 3.0; Schaefer, 2.5; Old Milwaukee, 1.9; Olympia, 1.9; Miller, 1.8; Ballantine, 1.0; Old English 800, 0.9; Pabst, 0.7; and Stroh's, 0.9.

Results for imports were: Heine-ken, 3.6; Molson (Ale), 3.4; Stauder Spezial, 3.1; Molson (Beer), 3.1; San Miguel, 2.7; Gosser Golden Rock, 1.9; Kaiser Export, 1.0; Diekirch, 1.0; Theakston Old Peculiar, 0.9; Dort-munder Union Special, 0.6; and Paulander Munchen, 0.4. D

New GM battery makes electric car practical General Motors president E. M. Estes termed the company's zinc-nickel oxide battery developments a "breakthrough in technology." And the company brought along an ex­perimental Chevette outfitted to show the battery. But Estes provided precious few specifics on what con­stitutes the breakthrough.

"I can only tell you about the re­sults of our development, not the de­tails," Estes said at a press conference called by the company in Washing­ton, D.C., to announce the develop­ment.

GM in the past has stated that its goal for an electric car is a top speed of 50 mph, a range of 100 miles be­tween recharges, and a battery life of 30,000 miles. With that level of per­formance, electric vehicles, GM says,

GM zinc-nickel oxide batte

can fill an important niche in the U.S. transportation system.

"What our people have done," Estes says, "is make major progress in improving components in the battery, so that the plates in it do not deteri­orate and lose capacity and power after relatively few recharges. We've been able to approach the longer battery life we need."

Judging from Estes' remarks, GM's zinc-nickel oxide battery is near its final form for a first generation of electric vehicles. Currently used lead-acid batteries are rated at an energy density of about 12 watt-hours per lb. The current zinc-nickel oxide cells have a rating of 27 watt-hours per lb, and GM wants to push that up to 32. Recharging the batteries takes eight hours.

But an electric vehicle isn't coming on the market soon. GM previously had stated that it expected to start producing an electric vehicle by the mid-1980's. But, Estes points out, there always has been a caveat: if there is a breakthrough in battery development.

GM now has made what it consid­ers that breakthrough, Estes says. This means that the forecast of an electric vehicle by the mid-1980's is on firmer ground. Estes says GM will launch an automotive development program and start working on pro­duction economics.

There is no commitment to what sort of vehicle will be coming. It might be a small urban or commuter car or it might be a delivery van. Whichever it is, Estes says, it will be a specially designed, specific-purpose vehicle for relatively short trips.

GM estimates that, based on to­day's general prices, it would take 1.5 cents' worth of electricity to run a

in experimental Chevette

small electric vehicle a mile. For a small internal-combustion-engine car getting 27.5 miles per gal, the cost would be 3.6 cents' worth of gaso­line.

But, says Estes, the costs aren't really comparable, because the bat­teries would have to be replaced at some point during the life of the ve­hicle. Amortizing the batteries, Estes says, right now the operating cost of an electric car with zinc-nickel oxide batteries is higher than, say, that of a Chevette.

The battery developments have been funded entirely by GM. Estes estimates that the company has spent some $33 million on electric vehicle R&D since the mid-1960's. D

TVA sees fertilizer patterns shifting The decline in supply and increase in price of natural gas, the primary feedstock for ammonia production, is causing a shift in production of ni­trogen fertilizer to areas having the largest and cheapest reserves of nat­ural gas, according to Richard M. Freeman, director of the Tennessee Valley Authority.

Speaking to the World Fertilizer Conference in New York City last week, Freeman said that between now and 1985 about 17 million tons of new fertilizer capacity is scheduled to come on stream. About 40% of this new capacity is slated for rhe mid-eastern and Asian countries with their abundant supplies of natural gas. Another 32% is going to the U.S.S.R., which ranks second in the world in total gas supplies.

By comparison, no new capacity is

Oct. 1, 1979 C&EN 7