93,134,000 francs ($5,700,000) in 1936 to 190,358,000 francs ($7,700,000) in 1937, accounting for 12 percent of the total French exports to the United States.

Coal-tar derivatives, one of the principal imports from the United States, declined from 79,582 metric tons in 1936 to 59,131 tons in 1937. There was a large volume of trade in pigments, paints, varnishes, and blacks, imports of which rose from 12,079 metric tons in 1936 to 15,892 in 1937. A gain was shown also in imports from the United States of such products as toilet preparations, soaps, and cosmetics, from 100 tons in 1936 to 136 tons in 1937. There was also an increase of almost 50 percent in imports of miscellaneous chemicals, from 20,237 tons in 1936 to 29,922 tons in 1937.

The chief chemical exports to the United States are essential oils and other perfume materials, perfumes, cosmetics and toilet preparations, prepared medicines, tartaric acid and tartrates, potash salts, and unspecified products. Increases in both volume and value were made in practically all items.

GERMANY

Consul Sydney B. Redecker, Frankfort-on-Main

Production of chemicals and allied products in Germany recorded marked expansion in 1937. The continued steady upward trend of the last 3 years reached a new all-time peak, surpassing even the 1928-29 boom level. Chemical activity, measured by number of performed man-hours, increased 12 percent in 1937 to a new record index figure of 112.1, compared with 100.0 for 1936, 90.3 for 1935, and 80.0 for 1934. Based upon fuel consumption, production expanded considerably more markedly, the index of fuel consumption by the chemical industry having risen to 114.4 for the first 10 months of 1937, from 92.1 for the corresponding 1936 period, and 79.5 for the entire year of 1935.

GAINS IN 1937

As in preceding years, production gains were caused by increased domestic consumption, as well as from larger exports. The increased domestic consumption was the result of the continued acceleration of industry generally, especially in those manufacturing branches created by the "4-year plan" of replacement of imported raw materials by substitute domestic products, usually synthetic. The augmented production was aided also by an expansion of 18 percent in exports.

Virtually all divisions of the highly ramified chemical industry showed production gains, although the trend varied considerably. In general, the heaviest gains were recorded for industrial chemicals, alkalies, acids, solvents, carbon bisulphide, coal-tar, and carbide derivatives, which are required as basic raw materials for the new synthetic products, such as textile fibers, plastics, rubber, motor fuel, fats, and light-metal alloys, to replace imported items. In some of these lines, virtually boom conditions prevailed and it was impossible to advance output to keep pace with demand.

In these branches, expansion was hampered by too small producing units, since there was a complete utilization of production capacity. Difficulties were encountered in securing prompt and adequate de

liveries of new plant equipment for enlargements and replacements, because of shortages of steel, alloys, and other materials. There was also a shortage of professional and skilled workers in the industries manufacturing equipment. Another handicap was the financing of the new plants and enlargements, owing to the paucity of the national capital market.

Considerable production gains also were recorded in the branches which furnish supplies to those divisions carrying out the extensive projects of the Government. National rearmament; construction of dwelling houses, barracks, labor camps, and public works; improvement of automotive and railroad transportation; exploitation of lowgrade mineral deposits; and regeneration of waste materials all contributed to considerably increase the demand for building supplies, paint materials, and various miscellaneous chemical products.

Even chemical-consuming industries not particularly stimulated by the autarchic policy, such as those manufacturing paper, textiles, and shoes, recorded increased activity, and augmented the demand for chemicals although the increases were less marked than for the synthetic-substitute industries.

The production of cosmetics, medicinals, household chemicals, and soaps expanded moderately, in consequence of the improved national income and greater purchasing power of workers. It was estimated that national sales of cosmetics expanded about 15 percent; medicinals and drugs, 10; and technical chemicals, paints, varnishes, and oils, 12 percent.

Production of commercial fertilizers, except superphosphate, recorded further expansion. Domestic consumption of nitrogen was up and exports advanced. The national policy of expanding crops to maximum levels, expressed in officially required compulsory reductions of domestic prices of fertilizers, presages further notable gains in fertilizer production in 1938-39.

Although the volume of chemical production in 1936, the latest year for which statistics are available, was only 5 percent less than the previous high record of 1928-29, the total value continued under the record level. The disparity in ratio of gain in volume and value. is accounted for by the markedly lower export prices in recent years, compared with prices for many leading commodities in the late 1920's. Progressive price reductions in the home market for some products, especially fertilizers, also contributed to the less rapid gains in value. The total value of chemical production has increased 50 percent since 1933 to 4,200,000,000 marks in 1936, with indications of further notable gains in 1937. This figure covers the chemical industry, in the narrow sense, except it includes mineral-oil refining and excludes such items as rubber, asbestos, and cellulose fibers. The chemical industry ranks fifth in point of value among all the industries.

IMPROVED FINANCIAL TREND

In 1936 there was a notable tendency toward higher earnings of chemical companies, especially the larger corporate units, following 3 years of only relatively slight gains. Although data for 1937 are lacking, there were indications that the improved financial trend continued, with the attainment of a still higher average rate of earnings as compared with invested capital.

The only major company for which 1937 data are available, the Deutsche Gold- und Silber-Scheideanstalt A. G., showed an expansion in gross income to 37,461,000 marks, from 33,241,000 for the year 1935-36; and in net profits to 5,535,000 marks, from 4,302,000 marks. Notwithstanding the expansion in net profits, the company continued, unchanged, its dividend upon 35,000,000 marks of common stock, at the rate of 9 percent, in force since 1932.

In 1936, the larger German chemical companies, for the first time since the 1928-29 period, showed signs of expanding net profits. The net profits of 46 representative chemical companies, excluding the I. G. Farbenindustrie A. G., increased to 24,670,000 marks from 21,090,000 in 1935, and the net profits of the I. G. to 55,430,000 marks from 51,440,000. The rate of dividend of the majority of the chemical companies was between 4 and 6 percent.

In general, the chief financial improvement from 1933 to 1936 had been confined to small companies. The large companies, such as the I. G., which had been in strong financial condition throughout the depression and had continued to disburse dividends, recorded relatively little improvement of net earnings until 1936. These large companies had been required to carry the main fiscal burden of national policies of costly synthetic raw-material production, exportpromotion, labor employment, public-works improvement, and national rearmament.

The improved financial condition of the chemical industry, as a whole, is shown in the following table which is taken from the composite balance sheet of chemical companies having capital of 1,000,000 marks or more, each, and accounting for about 70 percent of the industry's production:

1 Includes companies producing cellulose fibers, rubber products, and roofing paper. • Percent.

The large sums invested by chemical concerns in new plant equipment to develop new synthetic raw materials, including plastics, fibers, rubber, fats, and motor fuel, as well as the enlargement and modernization of plants, have restricted net earnings, since virtually all capital required was provided by the current earnings. It was estimated that around 1,000,000,000 marks were invested by chemical concerns in plant equipment in 1936 and 1937. In 1936, chemical companies financed around 250,000,000 marks of new investments from their own resources; of this amount, 130,000,000 marks were immediately written off and a little over 70,000,000 financed by increases of the companies' owned capital. Newly formed companies,

chiefly of the limited liability type, accounted for an approximately similar amount. Indications are that the amount of investments in new chemical plants showed further increase in 1937.

Although company reports released in 1937 revealed signs of financial improvement, the indications arethat the further growth of earnings. will be restricted in coming years because of the following factors: Required investment of large sums in new synthetic raw material enterprises some of which are of doubtful remunerativeness and economic value; rapid obsolescence of these newer enterprises; increased corporate income tax (effective 1937 raised from 20 to 30 percent); compulsory contributions to national export-subsidization funds; growing raw-material and other production costs; restricted returns from exports; increasing official pressure for downward revision of domestic prices, especially those established by cartels or applying to trade-marked and "monopoly" goods; and, in general, the declared policy of the Government of preventing the rise of corporate profits beyond certain restricted levels.

The disparity in rates of increase of production and profits of the larger producing units is revealed by the financial statement of the I. G. Farbenindustrie, whose value of output expanded over 43 percent from 1933 to 1936, whereas net profits advanced only 13 percent and dividend payments remained stabilized at 7 percent.

Earnings of Representative German Chemical Companies in 1933 and 1936

RESEARCH AND NEW DEVELOPMENTS

The progress of the "4-year plan" advanced scientific research by chemical companies to higher levels than ever before. This was reflected in increased appropriations for research, augmentation of scientific staffs, and perfection or improvement of new manufacturing processes in various important production spheres, especially those concerned with synthetic raw materials. So strong was the demand for scientific personnel that it was difficult to secure adequate staffs of physicists, chemists, metallurgists, laboratory assistants, and engineers. The I. G. reported that of its total staff of 2,500 chemists and physicists, about 100 leave the concern, annually, and that it was proving impossible to fill more than a fraction of the vacancies, because of the scarcity of unemployed chemists. Germany has a total personnel of around 12,000 trained chemists, all of whom are employed.

A new official agency, the Reich Research Council, was established in 1937, charged with coordinating and supervising all research throughout Germany with a view to avoiding duplication of effort and concentrating upon those tasks deemed of paramount importance to the nation, especially for the consummation of the "4-year plan." Although the Research Council would regiment scientific research indicating the problems upon which research work should be concentrated, the actual methods of carrying out the work in the designated spheres of activity would be left to individual initiative.

Many processes for producing new synthetic materials recorded considerable technical progress, and some went into actual large-scale commercial production. Intensified efforts were devoted also to developing new and improved methods of conserving materials and in utilizing byproduct and waste materials as part of the self-sufficiency program.

Motor fuel. Because of the gain achieved in 1937, Germany was able to supply over one-half of its requirements of light motor fuel from domestic sources. Three large new synthetic gasoline plants were brought into production in 1937, and 10 smaller ones were constructed. Benzol was used to an increased extent as motor fuel, and reached a peak output of over 500,000 metric tons in 1937, compared with 421,000 in 1936, the bulk of which was consumed as motor fuel. Consumption of ethyl alcohol in light motor fuel decreased because of lessened required admixture, whereas that of methanol expanded. Consumption of ethyl alcohol in motor fuel declined from 2,100,000 hectoliters in 1935-36 to 1,823,700 in 1936-37, whereas consumption of methanol increased from 274,900 hectoliters in 1935-36 to 534,500 in 1936-37.

Cellulose fibers.-Production of synthetic cellulose fibers showed marked expansion. The output of "cellwool" advanced to around 100,000 metric tons in 1937, from 46,000 in 1936 and 19,600 in 1935, and further increases are expected in 1938. The expanded cellulosefiber output required marked increase in consumption of requisite chemicals, including carbon bisulphide, alkalies, and sulphuric acid. Synthetic fatty-acid. The first large-scale commercial plant for producing synthetic fatty-acid by the oxidation of paraffin hydrocarbons started operations in the latter part of 1937, with an annual capacity of 20,000 metric tons; two additional plants of like capacity