Oils & Chemicals — Hot, Cold and Otherwise

by David Jenyns on February 13, 2009

Diversification-minded companies regarded chemicals as their prime outlets, just as they regard electronics today. In the last decade alone the chemical industry advanced 140 percent in production against 60 percent for all manufacturing.

The oil industry in particular has made significant inroads into total chemical production in the form of petrochemicals.

Whatever might be the effect of oilmen’s inroads on chemical growth, the chief limitation to the growth of the chemical industry is its own size. Remember the comparatively poor performance of chemical stocks in 1960? In about a year’s time ending September 1961 chemical stocks fell 25 percent in market valuation against only about a 10 percent decline for the industrial average.

What’s in store for chemical stocks? Some experts see new profit opportunities just around the corner. They predict a fundamentally long- term growth factor in the industry. Perhaps as much as 8 percent annually or two-and-a-half times the growth rate of the economy as a whole.

Of course, this growth will not be enjoyed by all the thousands of chemical products. Some will boom. Some will grow slowly. And, inevitably, some will decline.

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