Business
ABS market a mix of optimism and problems Producers of the copolymer of
plus some unrelated corporate shuffles, have proved too much for two acrylonitrile, butadiene, and ABS producers. During the past year, Uniroyal, which practically invented styrene forecast steady ABS and has the original patents on resin, sold out to U.S. Steel. Dart growth in face of overcapacity, the Industries' ABS operations went to Mobil. pressure from other resins Problems are really nothing new to ABS. For instance, market growth, including exports, between 1973 and William J. Storck 1978 averaged only 3.8% per year. C&EN, New York And there was a near debacle in the recession of 1974-75. It began with a "The ABS business is a bitch." 12% decline in ABS sales to 816 milThat's how one former market- lion lb in 1974 from 1973. But this ing manager for acrylonitrile-buta- looked moderate in 1975 when dediene-styrene resin describes the mand fell 24%. By the end of 1975, business. Just when it seems that the demand for ABS had dropped one industry will show some life, he says, third from its peak in 1973. something comes along to dash its Both producers and marketing hopes. consultants say that nothing like the ABS makers like to say that they 1974-75 episode will happen if there see market growth of 6 to 8% annually is a recession this year. For the most for the next seven to 10 years. Others part, producers' inventories are much are not so sure. One marketing con- trimmer than they were then, in both sultant says that the industry is al- product ABS and feedstock. ways overoptimistic in its forecasts The lack of excess feedstock is not and wonders why this year should be entirely by ABS producers' design, any different. however. Two of the three monomers But even if the ABS producers are have been in tight supply. Butadiene correct, the market will still be strewn supply was short earlier in 1979 when with such problems as overcapacity, feedstocks for ethylene, which is coa two-producer slugfest for market produced with butadiene, were dominance, and pressures from switched to lighter materials with a competing materials. consequent decline in butadiene These problems in the industry, output. Also, butadiene imports dropped. And styrene, which constitutes 50 to 75% of the raw material for ABS, suffered because its own feedABS market is dominated stock benzene was squeezed. by Borg-Warner, Monsanto In fact, the benzene situation is still one of the biggest worries for ABS producers. Users of benzene and its derivatives in the chemical industry have had to compete hard with the gasoline makers, who want the compounds to raise the octane number of unleaded gasoline. The shortage of feedstock earlier this year did, in a way, alleviate anU.S> other perennial problem of ABS Dow Steel producers—low plant capacity use. 11% 13% For 1976 through 1978, nameplate Mobil capacity use has been very low— 3% between 66 and 68%. It looks as if caADiec >IO/_ pacity use may be down to about 65% this year. Some of this excess capacity Total1979 sales = 1.12 billion lb a must be in place to take care of a spring production bulge to supply a Estimate, excludes captive use sales. seasonal demand in construction and 8
C&EN July 30, 1979
ABS at a glance Sales 1976—More than $500 million Growth—5 to 6% per year in next five years Price—67 cents gsr lb for highnmpaot molding and extrusion grade; 54 cents a lb for pipe grade. Capacity, end of 1978—17 billion lb, nameplate Recent developments—Monsanto adds 100 million lb capacity increase; BorgWarner schedules 40% increase Sri ABS capacity by end of 1982; Uniroyal sells its business to U.S. Steel; Dart sells its ABS facilities to Mobil
automobiles but not nearly the excess that now exists. Because of styrene shortages earlier this year, effective capacity, which seems normally 85 to 90% of nameplate, was lowered, and the use rate rose to 93 to 96%. However, with at least another 320 million lb per year of capacity, 19% more than levels at the end of 1978, scheduled to come on stream by the end of 1982, overcapacity may be something that ABS producers will live with for some time. On the basis of 1978 production of 1.13 billion lb, the official figure issued by the Society of the Plastics Industry, an 8% annual growth rate
Demand for ABS will grow moderately through 1982 Billions of lb a 1.61
1972 73 74
75
76 77
78
79
80 81
a U.S. consumption plus exports. Sources: Society of the Plastics Industry, C&EN estimates
Capacity utilization for ABS will remain in doldrums Percent 100
1972 73 74 75 76 77 78 79 80 81 82
would put 1982 output at 1.54 billion lb. This would leave about 480 million lb per year, or 24% of ABS capacity, unused. Many producers consider 8% an optimistic growth rate. Even more optimistic growth estimates leave a lot of ABS capacity out of service. At a recent press conference in New York City, while announcing a $50 million, 150 million lb-per-year ABS capacity expansion, Borg-Warner said that the U.S. market would hit 2 billion lb by 1985. But this was figured as 8% annual growth based on sales of 1.3 billion lb in 1979. If the industry does achieve sales of 1.3 billion lb in 1979, it will mean a 15% increase over SPFs 1978 sales figures. Other producers and market consultants are predicting sales growth of about 5% in 1979 over 1978. At this rate, production of 1.37 billion lb in 1982 seems more likely. Overcapacity in the industry traditionally has put pressure on ABS prices, which are about 50% above the prices of other major thermoplastics. Although producers say that prices are holding firm now, in the past it was not unusual for prices to be discounted as much as 15 cents off the list price. In fact, one marketing consultant says, probably the only reason prices are holding firm now is the styrenerelated capacity-use increase from earlier this spring. The ABS price poses other problems for the resin. Because ABS is made by a two-step graft polymerization process, the price is naturally higher than for the other major thermoplastics, which are made by much less expensive one-step processes. Thus, if another thermoplastic can approach ABS in performance, ABS may lose out in that application. This is the main reason ABS is
giving ground to polyvinyl chloride in the plastic pipe market (C&EN, March 19, page 15). ABS also is getting pressure from both polypropylene and high-impact polystyrene in the automotive industry, one of the big hopes for ABS producers as auto makers reduce the weight of cars to meet mileage requirements. Meanwhile, over the next few years, there could be a shakeup in the ABS business. Monsanto, now the number two producer both in terms of production capacity and market share, has declared its intention to overtake industry leader Borg-Warner for the number one position. At the same time, Borg-Warner has said that it intends to continue to dominate the market. The war between these two companies could have quite an impact on the smaller producers. Most observers feel that Dow Chemical will not be hurt much. But U.S. Steel and Mobil may be hit hard by the battle at the top. They are newcomers to the business, they are much smaller, and their technology is older and more expensive than that being used by the top two companies. Thus, to compete, U.S. Steel and Mobil may have to operate on smaller profit margins. As to who will win the battle between the leaders, it's anybody's guess. Some observers are betting on Borg-Warner because it is already dominant. Others are saying that, in the long run, Monsanto will come out on top because it is the only producer integrated backward in all three feedstocks and it has experience in marketing commodity chemicals. The outcome may hinge on which company has the best crystal ball and can avoid the most pitfalls over the next few years. For ABS, pitfalls may dot the course in the future, just as they have in the past. •
Pipe is still largest ABS resin market
Captive jse and other 27.5%
Appliances v 20.5% J
Export 3% Business machines Automotive and electronics 15.5% 8.5% Total 1979 consumption = 1.17 billion lb a a Estimate.
ABS capacity to increase 18% by 1982
Producer
U.S. capacity (miffiofis of lb) 1978 1982
total U.S. capacity
nm
13*f
BorgWarner
580 800 3 4 , 1 % $9J%
Monsanto
S2§ B$0 00J 250 %m147
Dow Chemical
200 250 110 Abtec 76 100 4A Mobil 60 60 3.5 Carl Gordon 10 10 o,e U.S. Steel
27.2 12,4 12.4 $•0
2J 0J
Inc.
Sources: First Boston Corp.f company data, CS£H esti-
The automotive industry is one of the big hopes of ABS producers, as auto makers reduce car weights to improve mileage July 30, 1979 C&EN
9
