CHEMICAL & ENGINEERING

NEWS VOLUME 38, NUMBER 33 T h e C h e m i c a l W o r l d T h i s W e e k AUGUST 15, i960

Price Cut Aggravates Rayon's Troubles Low prices, depressed earnings, stiff competition in tire cord add up to woeful outlook for rayon industry

A fortnight ago, makers of rayon tire yarn reduced their prices up to 5% — for the month of August only. But before the week was out, Beaunit Mills said it would stick to the new schedule beyond August, and it seemed likely that other rayon producers would fol­low Beaunit's lead. Meanwhile, nylon firms stood pat.

These moves left more than the usual amount of question marks strewn about the arena. Last week, the in­dustry hummed with speculation, but nobody even whispered answers. Still, a sketchy view of the future could be drawn from an analysis of facts and opinions. Most probable outlook: Nylon prices will be cut again, most rayon producers will have earnings trouble for the rest of the year, perhaps longer, and nylon will grasp the major share of the tire cord business but not without a vigorous fight.

Prosaic tire cord draws a lot of attention in the textile business, and with good reason. It is a $300 mil­lion market; it accounts for more than a third of all the rayon and nylon fibers consumed in this country. Back in 1954, rayon yarn had almost 90% of the market. This year it will have under 6 5 7 . Nylon sales to the tire in­dustry have jumped fivefold during this period, from 29 million pounds in 1954 to an estimated 150 million pounds this year.

Rayon has not given ground easily. Two years ago, five producers (Ameri­can Viscose, American Enka, Cour-taulds, Beaunit, Industrial Rayon) formed Tyrex, Inc., to promote a new high-strength rayon cord. When nylon cord prices fell twice last year, rayon makers quickly made matching cuts to

stay competitive. Rayon-nylon com­petition no doubt was a factor in this month's price decrease. But equally important was the intense competi­tiveness of the rayon industry itself.

Soft Prices. Rayon tire yarn prices reportedly have been soft for several months, with a minor price war going on among producers. The usual sea­sonal slowdown that comes this time of year was a contributing factor. And the fact that rayon shipments to tire manufacturers have been down since the first of the year didn't help matters. For the first quarter of 1960, rayon sales were off more than 1.0% compared to the like period last year.

Rayon price trouble came out in the open the first week in August when

producers confirmed that 21/.) cents per pound had been shaved off the price of high tenacity viscose tire yarn. This put Tyrex 1100 denier at 541/., cents and Tyrex 1650 denier at 47Vi>-But the reductions were to be effective only for August. Beaunit's extension, however, almost assures that prices will not snap back.

In the background are several con­fusing factors. Even though rayon cord shipments are down slightly this year, producers are still running com­fortably close to capacity. Total out­put of high tenacity rayon yarn should be over 300 million pounds this year— the industry's capacity is estimated at 340 million pounds annually.

Earnings Off. Rayon's earnings pic-

A U G . 15, 1960 C & E N 23

ture is anything but favorable to price reductions. American Viscose's first-half profits were off more than 50%— from $7.8 million in 1959 to $3.7 this year. The culprit: decreased ship­ments of rayon yarn and staple and lower prices on these products. In­dustrial Rayon, which gets three quar­ters of its volume from tire cord, turned up with a discomforting $1.4 million loss in 1960's first six months. And American Viscose and Industrial Rayon are not unusual examples of the industry's profit troubles.

While prospects for higher prices on rayon tire yarn look dim, producers may find other ways to raise earnings. A reduction in the amount of low-price fiber imports would be a help. And companies are striving to get their own operating costs down. The real hope of the industry, some believe, is in re­search that creates new products.

Nylon's Reaction. As long as the rayon cut was billed as temporary, there seemed to be little pressure on nylon prices. Extension of the rayon reductions may change the picture. Officially, both Du Pont and Allied have no comment to make about prices, other than that the situation is being studied closely. Ohemstrand says it plans no change right now.

But the odds are in favor of lower prices on nylon cord. The industry's long sought victory over rayon won't be held back because of cost, trade sources believe. Cuts made in August and December last year pulled the price of 840 denier nylon yarn from

$1.20 per pound to $0.97. These re­ductions were made to win the total tire cord market. Had not rayon pro­ducers countered with matching re­ductions, nylon would have been slightly cheaper on a use basis.

Rayon cord prices have gone about as low as they can. On the other hand, it's generally agreed that there is enough leeway in nylon's cost-profit scheme to pare prices further. And aside from nylon's desire to beat out rayon, the industry is faced with a key ingredient of price reductions—excess capacity.

Annual capacity for nylon tire yarn now stands at 190 million pounds. Output this year will be about 150 million pounds, a nice gain over the 124 million pounds turned out in 1959. Based largely on expected growth in tire cord, nylon fiber producers are expanding at a rate that may cause trouble in a year or two.

Just two months ago, Du Pont re­vealed plans to boost fiber capacity at Richmond, Va., from 40 million pounds per year to 100 million. Last January, Allied said it would triple nylon-6 capacity at Hopewell, Va. This will mean a 75 million pound plant by mid-1961. Some 75 ('< of the plant's output is earmarked for the tire cord market. Also expanding are Dow with a 12 million pound plant at Williamsburg, Va., and Firestone with 12 million pounds slated for Hopewell. These moves, plus nylon fiber plans being laid by American Enka, Indus­trial Ravon, and Beaunit, will add 50^

to the industry's capacity by the end of next year.

The number of nylon expansions in the works makes it seem that rayon's demise in tire cord is inevitable. And many think it is. But nylon has yet to invade the important original equip­ment tire business. Auto firms will use rayon cord tires on 1961 models and have no comment to make about what will happen after that. The re­luctance to use nylon cord tires on new cars still seems to be a combination of cost and "flat-spotting" problems.

Pauling Asks Court to Void Senate Subpoena Dr. Linus C. Pauling has asked the U.S. District Court for the District of Columbia to rule that a subpoena is­sued by the Senate Internal Security Subcommittee is illegal. Last June at a public hearing the subcommittee is­sued a subpoena to Dr. Pauling order­ing him to appear Aug. 9 with the names of the scientists who helped him get signatures to a petition urging an end to atomic bomb tests (C&EN, June 27, page 17). The date of his appearance before the subcommittee has now been set for Sept. 15.

In the complaint filed with the court Dr. Pauling says that the committee order violates his constitutional rights. He charges that the order would "pro­duce reprisals against high minded workers for peace" and would invade his "freedom of conscience and speech." And he charges that the committee's order to produce the names is "not pertinent to any lawful inquiry of the committee."

In the complaint Dr. Pauling asks the court to set aside the committee order, enjoin the U.S. Attorney from prosecuting him for failure to comply with the order, or delay the effective date of the order until the courts have a chance to adjudicate the issues.

Harassment Scored. Meanwhile, 178 members of the faculty of the University of Pennsylvania (Penn's faculty includes more than 3000 mem­bers) have sent a resolution to Sen. James O. Eastland (D.-Miss.), chair­man of the Senate Internal Security Subcommittee, protesting the commit­tee's "harassment" of Dr. Pauling. The resolution says that Dr. Pauling "can do no less as an honest scientist than publicize his opinions concerning the hazards of fallout and nuclear weapons testing."

24 C & E N AUG. 15, 1960