Compared to the uncertain supply outlook, fertilizer demand is easier to predict, Mr. Lenon thinks. He does not believe that fertilizer will remain short forever. "The market," he says, "is de­mand backed by supply. We confused need with demand once before and we must not do it again." By what he calls this hard-nosed definition, Mr. Lenon doesn't think that the fertilizer market will grow more than 5 to 6% annually, and probably less than that in the U.S. Mr. Lenon also thinks that this coun­try is the control market, and that when growth in demand slows here, the problems become worldwide very quickly.

Chemical shipments, investment climb The chemical industry is still in a de­cidedly expansionary mode, whether judged by sales or investment.

This spring, in fact, was something of a milestone for the industry. Ship­ments of industrial organic and in­organic chemicals (other than pigments) moved solidly above the $2 billion mark for the first time. They hit that level after adjustment for seasonal varia­tions in April; actual dollar volume, without making allowance for seasonal factors, had edged above $2 billion in March and bounded on up to $2.22 billion in April, normally a high-volume month for chemical producers. (It was in April 1964 that the industry first shipped more than $1 billion worth of industrial chemicals in a single month.)

More significant, though, than the mere topping of $2 billion is the sharp run-up in industrial chemical shipments this year compared with last year. For all of 1973, shipments totaled $19.4 billion, 16% higher than in 1972. And 1973's final quarter was also 16% ahead of the like period of 1972. But this year's first quarter was 22% higher than 1973's initial quarter. And April was up 34% over April 1973.

The recent sharp gains stem more

Chemical shipments surged this spring

$ Billions3

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1974

1973

J F M A M J J A S O N D

a Shipments of industrial chemicals, except pigments, seasonally adjusted. Source: Department of Commerce

from higher prices than from increased volume of physical production, however. During this year's first quarter, output of industrial chemicals was only 6% above that in 1973's corresponding period, the Federal Reserve Board's production indexes indicate. On the other hand, prices of industrial chemi­cals have been climbing sharply. The Bureau of Labor Statistics' wholesale price index for these products was up 11.5% in this year's first three months from the like quarter of 1972. And for April alone, the index this year was 28% higher than a year ago.

If, as seems likely, demand remains strong this year and price trends con­tinue to slant upward, shipments of industrial chemicals for the year as a whole should at least top last year's total by 25%, which would boost them to $24.5 billion. And they could easily exceed $25 billion.

Shipments for the chemicals and allied products industry as a whole similarly are running well ahead of last year's levels, although the year-to-year comparisons are not quite so spectacular. The dollar volume through the first four months was 17% ahead of a year earlier. And April was the first month ever in which shipments (without seasonal adjustment) were more than $7 billion, rising 20% from April 1973.

However, here again, it's prices rather than physical volume that are largely responsible for the good showing. BLS figures indicate prices of chemicals and allied products overall were 17% higher during the first four months of the year than in 1973's first four months, with prices in the month of April up 23% from the year before. But Federal Re­serve data show output during the same four months running just 5% above last year. And although the dollar value of shipments had climbed by 5% since December, physical production has been essentially unchanged over the same period.

Meanwhile, producers of chemicals and allied products have been jacking up their capital spending plans slightly. A survey completed last month by the Department of Commerce's Bureau of Economic Analysis indicates the over­all chemical industry now is ticketing $5.46 billion for new plant and equip­ment in 1974. That's $150 million more than chemical firms said they would spend this year when they were surveyed in January and February, putting cap­ital outlays 22% above last year's $4.46 billion. After spending at an annual rate of $5.26 billion during 1974's first half, the industry will be plowing money into plant and equipment at a $5.66 billion a year clip during the sec­ond half.

As of the end of March, chemical companies were already working on capital projects that would cost them $5.5 billion to complete; a year earlier the similar carryover on projects then under way stood at only $3.5 billion.

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