U.S. Chemical Balance of Trade Will Turn Positive If New Administration Changes Tax Law

imgresAs an unreconstructed cheerleader for the petrochemical industry and its massive exports, it has always been annoying to me that our balance of trade is nevertheless negative due to our similarly massive import of pharmaceuticals.pharma-imports The line with dots represents the balance of trade, as shown in the American Chemistry Council’s Guide to the Business of Chemistry 2016. Pharma imports (in blue) are at historic highs  ( most likely due to Obamacare, though we should acknowledge that millions of people are now getting the meds they could not previously afford). Note that these high imports have nothing to do with labor costs (as, China-, Mexico- and other imports from low labor cost countries do), since labor plays essentially no role in pharma production. This is, as said earlier, largely a tax issue. The ten top global pharma companies include Pfizer, Merck, Johnson & Johnson and GlaxoSmithKline, and have annual sales totalling $ 150 billion. These firms produce a substantial percentage of their pharmaceuticals outside the U.S., send them to the U.S.  yet are allowed by our tax laws to keep much of the profits on these sales building up in countries with lower corporate income taxes.(e.g. Ireland). It has been estimated that U.S. companies as a whole have around $ 400 billion of cash stashed overseas in profits taxed at low levels in those countries. Pharma firms lead in this area.  so two questions arise: First, if these U.S. firms are allowed to moved some of this cash to the U.S. at a relatively low tax rate, the “windfall” to the U.S. government could be used to pay for badly needed infrastructure improvements. Just as importantly, lower U.S. corporate taxes would presumably induce these companies, as well as the big European firms (Roche, Novartis, Sanofi, etc) to shift more of their production to the U.S. where their biggest market exists. again

Looking at the numbers in this graphic leads one to a few tentative conclusions relative to U.S. pharma imports, which totaled 86.1 billion dollars in 2015. Firstly, China, India and Japan export a total of only $ 20 billion in pharmaceuticals to the whole world, so we know right away that the bulk of U.S. imports come from Europe. Secondly, the largest pharma exporters by far are Germany and Switzerland. Not surprisingly, the largest global companies are headquartered in the U.S., Germany and Switzerland. Germany has already decided that the best way to serve the U.S. market with Mercedes, BMW and Audi cars is to build in the U.S.  The pharma industry is, of course, quite different (think of car styles and shipping costs for cars), but it seems reasonable to believe that global pharma companies will produce more in the U.S. and that our balance of trade in chemicals/pharmaceuticals will therefore be favorably affected under the new administration.

Looking at the broader picture, electronic imports to the U.S. in 2015 amounted to $ 332 billion!.Vehicles $ 283 billion! Apple is warehousing its cash (greater than Pfizer’s) abroad. Trump is already challenging the company to move production of the iphone to the U.S. Perhaps our infrastructure problems may soon receive some help.

(Full disclosure: I voted for Hillary, but perhaps some good will nevertheless come from the other guy’s victory, assuming Congress and the pharma lobbyists can fashion a new tax approach)

 

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Fish drowning in plastic garbage!

kkkkkiHere is an interesting sequence from someone who has happily chronicled the amazing growth of petrochemicals over the past sixty years: (a) Dustin Hoffman learns about  “plastics” from a Dutch uncle upon graduation (b) Ethylene becomes the largest-growing petrochemical and still is because of polyethylene packaging material (c) About a third of all plastic packaging ends up in lakes and oceans. (d) By 2050 the weight of plastics in the ocean will equal that of the weight of all fish in the ocean! Is there something we can do about that?ccccBoth graphics courtesy of Chemical & Engineering News, Oct. 17, 2016 and Ellen McArthur Foundation, The New Plastics Economy. Rethinking the Future of Plastics

It has now become quite clear that recycling and incineration of plastic garbage has not solved the problem of disposal of (primarily plastic) packaging material of which 70% ends up in bodies of water or landfill. Municipalities have taken baby steps to reduce the use of plastic packaging, but if we want to solve or at least mitigate this problem, much more needs to be done.

Interestingly, the plastics industry is now engaged in a campaign to increase the use of plastics packaging for produce and meats, rightly pointing out that cucumbers will stay fresh much longer on grocery shelves if they wrapped in plastic and that steaks can last weeks on shelves if packaged in more sophisticated plastic packaging than currently in use. It estimates huge reductions in food waste (important, as population grows) through greater use of plastics.

Folks (as Trump likes to say), we are heading for a messy future as by 2050 plastics share of the carbon budget will grow from the current 1% to 15% and sea levels will rise remarkably. I guess the good news is that fish and plastics will have more water to swim in.

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Burning wood instead of coal?

burnwoodThis blog has frequently commented on the now controversial use of coal as a source of energy for power plants and other industrial energy uses. Since this became a “front-and-center” issue, a lot of research and plant-scale experimentation has gone into how to keep coal as a fuel, an approach termed “Clean Coal” technology. This concept has now reached the end of the road: (a)Scrubbing flue gases with alkalis such as ammonia or caustic is too expensive and/or produces sludges that are difficult to dispose of. (b)Carbon dioxide capture (e.g. in underground caverns) is  also too expensive and only makes sense when a large carbon dioxide demand (e,g, from tertiary oil recovery is nearby(see Sept 8th, 2014 post) – not the case for a most large power plants) and (c) Gasifying instead of burning the coal, which concentrates the CO2 stream has led to the construction of two hugely expensive plants in Missouri (see January 2nd, 2016 post)and Sasketchewan that, even if and when onstream at design capacity, will never be duplicated. There is also the Skyonic approach (see June 26, 2014 post) that makes sodium bicarbonate from the CO2 scrubbed from flue gases, but this technology is nor scalable, since there is limited worldwide demand for sodium bicarbonate. China, which has much greater pollution from coal than the U.S. (particulates as well as carbon dioxide) still talks about Clean Coal, but seems willing to spend the large amount of extra money to, for example, gasify coal instead of burning it.logs

Recently, we have heard that Congress will soon pass a bill that would encourage the use of wood (and other biomass) as an energy fuel that does not add to the carbon footprint. This is conceptually true. The decay of wood releases the contained carbon into the atmosphere, in a sense similar to burning it. The releases carbon is then reabsorbed as a new tree needs the carbon to grow. So, what’s wrong with this picture? Firstly, we need to restrict CO2 release now to deal with global warming, not many decades from now when the presumably (but not guaranteed) reforested trees start to absorb large mount of CO2. Secondly, to make any impact, we would have to decimate much forested land to make any appreciable impact on replacing coal with wood, leaving aside the logistical problem of getting massive amounts of wood to power plants.   It has been pointed out that switchgrass and other such waste biomass has a much shorter carbon cycle, but this again begs the question of getting this material in huge quantities to power plants.

The push for wood as an energy source comes from legislators from states with huge forests. Need I say more? But perhaps readers of this post will cheer that they are really not polluting the atmosphere when they burn wood in their fireplace, because somewhere a tree is being planted that will reabsorb all of the carbon going up their chimney.

 

 

 

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New Analysis on Antarctica doubles sea level rise projections

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Source: Google Images

Continuing from my last post, I want to bring readers up to date on what many scientists now project for increases in global sea level rises caused by Greenhouse Gas emissions. Before getting to Antarctica, let’s look at the latest EPA projections on atmospheric CO2 levels. Starting at 400 parts per million(ppm) in 200, CO2 levels would rise to 1300ppm(!) by 2100 at current emission levels or, more likely to 600-800ppm as countries take steps to reduce carbon burning. The corresponding rises in average U.S. temperature  vary from 12 degrees F to 3 degrees, the latter figure corresponding to a dramatic future reduction in carbon emissions.

Sea level rise comes from two sources, (a) melting of Arctic, Greenland and other ice and (b) warming and consequent expansion of the sea water. Between 1870 and now, the sea level has risen about 7.5 inches. The EPA study projects levels to rise between 1 and 4 feet (depending on scenarios) by 2100. The base case shows New York City levels to rise by 2.3 feet and Galveston, Texas by 3.5 feet. Other studies give relatively comparable projections. What climate change “deniers” point out is that you have to accept these exponential (not linear) projections of the effect of CO2 accumulation in the atmosphere.

A new study of Antarctican ice has come up with a hypothesis that would accelerate the melting of the huge ice sheet there. Observations of Greenland’s glaciers have shown destabilizations termed “hydrofracture” in which water formed by the melting of snow and ice on top of a glacier causes it to break up and collapse. If this were to occur in Antarctica, massive ice sheets would crash into the sea when cliffs 100 meters or more above sea level become unstable and collapse.

Over the years of Earth’s history, there were two warm eras where seas were much higher than they are now. In the Pliocene period, about 3 million years ago, the atmospheric CO2 level was about where it is right now and sea levels were about 30 feet higher(!). In the Eemian period, about 120,000 years ago,  sea levels were 20 to 30 feet higher and global temperature about where it is now. Interestingly, if the entire Antarctica ice sheet were to melt, seas would rise about 50 feet.

So, these are some numbers to ponder, particularly if you live in a coastal areas and look out at the sea.

 

 

 

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Surprised? Scientists knew about Greenhouse gases long ago

imgresIt was fascinating to learn that the concept of “global warming” (or cooling) by the presence (or absence) of certain gases in our atmosphere was discovered about two hundred years ago, as discussed in a recent article in Distillations, the magazine of the Chemical Heritage Foundation. This is how scientists came to this knowledge.

Joseph Fourier, best known for his mathematical genius, made calculations to try and determine what set the temperature of the earth. He balanced the energy coming from the sun against the outgoing energy (in infrared form) and concluded that the average earth’s temperature should be around zero degrees Fahrenheit. He didn’t know or understand about the effect of atmospheric gases trapping infrared radiation. Another French scientist, Claude Pouilet speculated that water vapor and carbon dioxide might act to do this. A British scientist, John Tyndall  in 1859 set up an experiment to measure the amount of radiant heat absorbed by various gases. He demonstrated that oxygen, nitrogen and hydrogen are transparent to infrared radiation, while water vapor, carbon dioxide, and methane absorbed such radiation. Tyndall speculated, perhaps concluded, that aqueous water vapor was responsible for the higher-than calculated (by Fourier) earth temperature and therefore created the beneficial climate of our planet.

Several decades later Arrhenius thought about this and continued Fourier’s calculations, now also thinking about carbon dioxide. He recognized that the amount of water vapor in the air varies substantially with the seasons, while the amount of carbon dioxide is relatively constant, though very slowly increasing. He calculated that a doubling of carbon dioxide could increase the earth’s temperature 11-14 degrees F. (This remarkably close to current models which postulate a 5.5 to 9 degrees F  increase for a doubling of CO2) .He also concluded that historical ice ages could have come about due to a large decrease in atmospheric CO2.

Living in a cold climate, Arrhenius did not worry about a possible rise in the earth’s temperature. In fact, he suggested that an increase in atmospheric CO2 would beneficially affect the colder regions of the earth, bringing about more abundant  crops, etc.

So, it seems that the scientific community has long been aware of the effect of Greenhouse gases. But there was more concern about the possibility of another ice age than about the melting of glaciers and the rise of ocean levels. This is now our problem.

 

 

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Intelligent textiles: Another technology breakthrough

imagesIn my previous post I discussed how chemical companies are trying to cope with how technology is changing the workplace: the need to train insufficiently skilled/ educated workers to use the automated controls and robotics now increasingly used in plants that must compete in a globalized world. Now a broad-scaled initiative to help the U.S. in creating jobs and develop leadership in technology is starting to make progress in another area: the production of specialized fabrics that weave in tiny ceramic, metal and fiberglass fibers as “semiconductors, LED’s, solar cells and sensors that can see, hear, communicate, store energy, warm or cool a person or monitor a wearer’s health.” Clothes that include sensors and chips will then become another form of “wearable technology”, joining the Apple Watch and fitness monitors.

This is still in its early stages, but is receiving strong support.  MIT, the Department of Defense and a number of textile and other companies are cooperating in a private-public consortium Advanced Functional Fabrics of America (AFFOA) to accelerate innovation in high-tech, U.S.-based manufacturing involving fibers and textiles. The developers state that the fabrics made from these fibers will have the ability to see, hear and sense their surroundings; communicate; store and convert energy; monitor health; control temperature; and change their color. The consortium, with $75 million in Federal funding out of total initial funding of $ 317 million, will focus on developing these new technologies and training the workforce required to operate and maintain these production systems. Two dozen start-up incubators are planned at different locations.

The aim is to create an entire new industry, based on a number of breakthroughs in fiber technology and use in the manufacture of fabrics. With a history of losing textile manufacturing, first to Southern U.S. and then to China and elsewhere, the government of Massachusetts, which is a partner in AFFOA, claims that the consortium will unlock new advances in military technology and support the development of new manufacturing methods, bringing new employment opportunities back to the state.

In an example of how new technology of this kind is already being applied, Inman Mills, a South Caroline company founded in 1901, has successfully transitioned from making shirting and apparel lining – a business lost to overseas competition – to making flame-resistant fabrics, with fibers including silica to fiberglass. The next step is to make these fibers “smart”, leading to the technologies being developed by AFFOA.Smart textilesCredit: Bloomberg Business News

 

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Chemical Manufacturing: Worker education a new priority

images First, the good news! The U.S., perhaps surprisingly to some, has now topped China in Manufacturing Competitiveness, according to a Deloitte study. The other news is not necessarily bad, but is worth noting. Jobs in manufacturing have been changing rapidly, as automation has proceeded in almost every industry. And that has created a conundrum: Lots of new jobs have been created, but a large “skills gap” has developed, with close to half of the estimated 3-4 million new jobs being created going unfilled, unless extensive training can be provided.

An article in the May 23rd issue of Chemical & Engineering News discussed what a number of chemical companies are doing to deal with this issue, with help from SOCMA and other agencies. There are basically two problems. First, a number of older workers are retiring, taking with them a great deal of knowledge. Secondly, a substantial part of the pool of potential new workers is sadly lacking in STEM knowledge and skills as needed to operate the increasingly sophisticated controls and machinery being installed in both existing and new plants. And some millenials are hesitant to apply for jobs in industry.

Turning to the chemical industry, SOCMA is offering, free of charge, a worker training curriculum called Chemical Operator Training (COT) that includes some of the necessary math, chemistry and work process skills. This course doesn’t guarantee quality instruction, but is helpful to a number of firms. But some small or Community colleges that offer an associates degree in industrial systems technology are considering grafting COT to this program so that participants can obtain a degree that includes operator training. SOCMA is also working on grafting COT to a course offered by the Manufacturing Skill and Standards Council which offers a certification program called Certified Production Technician, a 160-hour course accredited by the American National Standards Institute. People involved in developing these combined programs are enthusiastic about the potential for a “wholly new career path in manufacturing”, including a degree.

Still, many millenials are not used to or happy about the prospect of working a five day, eight hour job. Manufacturing jobs are often not considered attractive career paths. This may, in part, account for the fact that there were an estimated 600,000 unfilled jobs in 2011!

Studies have shown that people with degrees earn more than those without. So, programs that offer degrees in courses that offer STEM education as part of operator training for chemical jobs may be a real sweet spot, as the U.S, continues to pursue industrial competitiveness.

 

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