COVER STORY
SHUTTERED To cut costs, Bayer closed one of its Sarnia, Ontario, butyl rubber plants and a polybutadiene plant.
SYNTHETIC RUBBER Amid a faltering economy, North American producers struggle to hang on in some sectors, while other segments post modest gains ALEXANDER H. TULLO, C&EN NORTHEAST NEWS BUREAU
According to the International In stitute of Synthetic Rubber Producers (IISRP), the 2.2 million-metric-ton-perH E RUBBER INDUSTRY HAS BEEN SUFFERING FROM A year North American synthetic rubber in dustry showed no growth in poor economy and rising feedstock costs 2 0 0 2 . Demand for S B R - t h e just like the rest of the chemical industry. 3i largest segment—fell by 1.8% %tPO:Rf^ during the year. Polybutadiene Yet, in some sectors, its problems go even and isoprene rubber showed some growth in 2 0 0 2 , E P D M further. Styrene-butadiene rubber (SBR) is and polychloroprene declined, ΡββίΙ in such bad shape that some producers are shutting and acrylonitrile-butadiene rub wmmsm ber was flat. capacity and putting their businesses up for sale; one T h e rubber industry group forecasts a moderate 1.6% annu company even declared bankruptcy. Ethylene-propyl SYNTHETIC al growth rate for synthetic rub ene rubber (EPDM) makers are faring a little better, RUBBER ber through 2007, with 1.3% growth for SBR, 2.2% for poly but a decline in the auto industry and additional ca butadiene, and 2.9% for EPDM. pacity may dampen this sector as well. Timothy Rae, Bayer Polymers' head of
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COVER STORY regional product management forpolybuticularly for polybutadiene and emulsion ber that is made. "The rubber industry goes tadiene rubber and butyls, says slowgrowth SBR, is competition with natural rubber, as the tire industry goes," he says. has combined with a 1990s capacity which can be substituted for polybutadiNelson says operating rates for plants buildup, particularly in Asia, to create inene in tire applications by 3 to 5% and up making emulsion SBR, a commodity tire tense oversupply in synthetic rubber, and to 20% in other applications, according to rubber, are between 60 and 65%—and this producers are cutting back production to Goodyear's Nelson. When natural rubber is up from about 55% a couple ofyears ago. adjust. "Overall, the rubber industry is goprices are low, tire makers change their "There is a lot of old capacity out there being through a couple of years of difficult formulations. cause most of the emulsion SBR plants in times, and production has pulled Jack McLaughlin—head of back significantly to reflect the | Bayer's marketing unit for tires demand," he says. « and high-impact polystyrene— Observers say the North AmerS says that five years ago, when ican tire industry is in a state of g natural rubber prices were very decline. For example, earlier this low, tire producers added more month, Goodyear Tire & Rubber natural rubber to their formulareported that sales volume for its tions. Recently, natural rubber North American tire business deprices have climbed significantcreased by 7.2% in 2002, to 104 ly, although tire makers have not million units, while volumes for yet switched back to synthetic most other regions increased. rubber. StephenJ. Zinger, an elastomers On the supply side, the synconsultant with Chemical Market thetic rubber industry is being Associates Inc. (CMAI), says tire squeezed by high petroleum production has been moving to costs spurred by the run-up to Asia. "Labor is a big component the war in Iraq and an oil workin the production of tires," he says. ers' strike in Venezuela. Also, the natural gas supply crisis that has But Thomas J. Reese, a former hit N o r t h America has been executive with Continental Tire, hurting tire makers and other speaking at a CMAI conference rubber fabricators. in Houston late last month, said the tire industry's problems run O n top of the energy price deeper than that. He pointed out problem, the industry's single that tire makers improved their biggest chemical raw material, warranties from 2 0 , 0 0 0 to butadiene, is in short supply. 80,000 miles over the years but Observers explain that naphdidn't cut capacity to compensate. tha-based ethylene crackers — Whitewall tires, which used to get throttled back because of high a 5% premium in Detroit, are RUBBER CHECK Goodyear expanded its Beaumont, naphtha prices and low demand gone, as are snow tires. He pre- Texas, plant in 2000 to make both styrene-butadiene for ethylene derivatives —are dicts cell phones will make spare rubber and polybutadiene rubber. producing little coproduct butatires obsolete. diene. "%u have fewer molecules going through the ethylene crackers and North America and Europe were built in fewer by-products coming out because you MOREOVER, Reese said, tires are becomthe early 1940s," he says. are using lighter feeds," Goodyear's Neling a commodity that consumers buy on Part of the problem for emulsion SBR, son says. the basis of price and warranty alone. Tire Nelson says, is that it is being replaced by CMAI's Zinger agrees. "The price of companies, however, are pouring millions solution SBR in many applications requirbutadiene is moving up significantly, and ing higher performance. He notes, for exof dollars into their brand names. Reese ample, that tire makers looking to decrease that is putting a lot of pressure on rubber pointed out that "40,000 miles is 40,000 rolling resistance without sacrificing tracproducers," he says. CMAI says butadiene miles, but majors are still trying to get a tion are turning to solution SBR, or even prices will increase by nearly 50% this year, premium for their 40,000." isoprene terpolymers or other copolymers. having increased by 100% since the beBob Nelson, general sales manager at As a result of this substitution, demand for ginning of 2002. Goodyear Chemicals, says tire production emulsion SBR decreased by 4.3% last year, McLaughlin says tight butadiene supis the biggest consumer of synthetic and while solution SBR demand rose 3.8%, acplies impact more than just prices. "Bunatural rubber. The business uses the vast cording to IISRP. tadiene is not easily available," he exmajority of the emulsion and solution SBR, plains. "Just getting the raw materials to polybutadiene rubber, and isoprene rubAnother issue for synthetic rubber, par-
Styrene-butadiene rubber is in such bad shape that some producers are shutting capacity and putting their businesses up for sale. 24
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produce is causing problems throughout the industry" All these factors have led to trouble for synthetic rubber producers. Three — Goodyear, Ameripol Synpol, and DSM— are considering selling their businesses. Goodyear says it is putting its chemical business up for sale to improve its finances; the company has also restructured nearly $3 billion in debt to the same end. The chemical business had sales in 2 0 0 2 of nearly $ 940 million and operating income of about $70 million. About 65% of the chemical business' output goes to Goodyear's own tire business. International Specialty Products is in discussions to buyAmeripol Synpol, which filed for bankruptcy in December. Last year, Ameripol shelved its Odessa, Texas, SBR plant; it laid off about 80 workers at its remaining Port Neches, Texas, facility earlier this year. Observers say DSM's elastomers operations, which contain SBR and E P D M businesses, are up for sale. The company, which is focusing on fine and specialty chemicals, sold its European petrochemicals business to Saudi Basic Industries Corp. last year, and rubber is now seen as nonstrategic. "Ever since SABIC's acquisition of their petrochemical assets, this business has kind of stood alone," Zinger says. Zinger says financial industry buyers— and he puts ISP, which has no direct connection to rubber, in this category—are the most probable purchasers of these businesses. "Because profit margins have been poor, there hasn't been a lot of interest. The companies that would be interested do not have a lot of cash flow," he explains. IN THE MEANTIME, rubber producers are responding to poor profit margins through cost cutting. "Everything is being impacted," Bayer's McLaughlin says. "How many visits to a customer do you need during a year? How much tech service do you supply? What custom work do you do? Or do you strip down to having one product in a wooden crate that goes out the door at a certain rate?" Bayer has closed a 36-year-old polybutadiene plant in Sarnia, Ontario. Bayer's Rae says the company has moved production to its plant in Orange, Texas, which was expanded in 1999 and can make both solution SBR and polybutadiene rubber. "It gives us the flexibility to react to changing market requirements," Rae says. Goodyear is using the Six Sigma efficiency program to improve operations. Nelson credits Six Sigma with lowering HTTP://WWW.CEN-ONLINE.ORG
costs by $40 million in the firm's chemical business. The company also closed 48,000 metric tons of capacity at its Houston SBR plant in May 2001. The company had expanded its Beaumont, Texas, plant by 110,000 metric tons a year earlier to make, like Bayer, both solution SBR and polybutadiene. EPDM has performed better than most other synthetic rubbers, but its growth has slowed from the 1980s and 1990s, when automotive and commercial roofing markets were expanding at a 6 to 8% annual
clip, according to Joe Gatto, who heads Crompton Corp.'s EPDM business. The slowdown came to a head in 2001 when, thanks to the recession, EPDM consumption declined by 14% in North America and 7% globally, Gatto says. Last year was flat, and he expects 3% growth this year. "I think there has been a solidification in the downstream markets, so I would expect some growth," he says. Torkel Rhenman, global business director for Nordel EPDM at the DuPont Dow Elastomers joint venture, contends
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COVER STORY taking significant share from the that the industry is in a process older Ziegler-Natta technology of renewal. 'As modern capaci SLOWPOKE due to greater product cleanli ty is being brought on-line, old Synthetic rubber is projected to post little growth in ness and significant advantages er, higher cost units are being North America during the next five years in manufacturing efficiencies," mothballed," he says. 2002 DEMAND ANNUAL he maintains. The company is Gatto is concerned about a (THOUSANDS OF GROWTH GROWTH expanding its Plaquemine, La., decline in sales to the automo 2002-07 METRIC TONS) " 2002 2003 nonmetallocene EPDM unit by tive industry, which comprises 1.3% 1.7% -1.8% 768 Styrene-butadiene 35,000 metric tons next year. about 50% of the EPDM mar 1.9 2.2 3.7 Polybutadiene 583 ExxonMobil is building a ket, either directly through ap 2.7 2.9 -1.6 Ethylene-propylene 301 1.2 1.6 plant in Baton Rouge, La., that plications such as seals or indi Acrylonitrile-butadiene 0.0 84 will make metallocene EPDM rectly as an impact modifier for 0.0 0.3 3.6 Polyisoprene 58 and other ethylene elastomers. automotive plastics. Ford and -0.8 -1.9 -5.3 Polychloroprene 54 The 90,000-metric-ton plant General Motors recently an 0.6 0.5 -0.3 Others 367 is expected to be completed nounced a reduction in car out 1.5% 1.6% Total 0.0% 2,215 during the third quarter of this put for this year. However, SOURCE: International Institute of Synthetic Rubber Producers year. Rhenman expects stronger growth in Asia to offset the Crompton doesn't make met North American results. from thermoplastic olefins, particularly in allocene EPDM, but Gatto claims he isn't Overall car output aside, Gatto says automotive interior applications, Gatto concerned about its arrival, saying his com more and more EPDM is being used acknowledges. EPDM is also under pres pany can achieve the flexibility it needs sure as an impact modi with Ziegler-Natta catalyst systems. "We per vehicle. He says fier for polymers because feel that the products we can make with EPDM's high heat re new catalyst systems al our systems are meeting and exceeding the sistance is winning it low rubberlike proper market needs, and that is where we ought more applications under ties to be incorporated to be," he says. the hood, where it per Gatto is concerned, however, by all the directly into the poly forms better than natu mers, which eliminates capacity coming onstream. It may take a ral rubber. It is also re the need to compound while, he says, for demand to catch up to placing polychloroprene the new supply them with EPDM. in belt applications. But as competitive as the EPDM busi In addition, use of Rhenman is excited EPDM/polypropylene about the impact that ness gets, it's not likely to approach the dif thermoplastic vulcanthe metallocene-catalyst ficulties of the rest of the synthetic rub izates (TPVs) is growing in sealing appli EPDM is having on the market. DuPont ber industry. For Goodyear's Nelson, cations and in dense parts. "TPV is prob Dow makes metallocene-based EPDM at there's only one thing to do when the mar ably the fastest growth market for EPDM, a plant that it is leasing from Dow Chem ket gets as bad as it's been. "You try to con although it is partly replacing thermoset ical in Seadrift, Texas. Dow obtained the trol the things you can control and let the EPDM," Rhenman says. Unipol-technology plant in the Union Car other things put a knot in your stomach," But TPVs are facing stiff competition bide acquisition. "Metallocene EPDM is he says. •
"You try to control the things you can control and let the other things put a knot in your stomach."
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COVER STORY RUBBERMAKING Dow Coming's Kenneth Gruszynski monitors processing conditions for thermoplastic elastomers. along with Flexsys and Crompton, didn't want to talk about the rubber chemicals business because of government price-fixing investigations. In October, Crompton, Flexsys, and Bayer acknowledged that they had received inquiries from U.S. and European authorities about the fixing of rubber chemicals prices (C&EN, Oct. 14, 2002, page 17). These big three, which together control roughly half the global market for rubber chemicals, said they are cooperating with the authorities. THE RUBBER CHEMICALS business has been difficult for along while, so it's no surprise that a number of makers have been looking for a way out. Flexsys' owners put the business up for sale a few years ago but withdrew the offer when no takers came along. More recently, Bayer had a deal to sell its Rhein Chemie subsidiary a maker of specialty process promoters and waxes for the rubber industry But after Advent InNEWS BUREAU ternational, a financial buyer, backed out, Bayer decided to keep the subsidiary Now, Goodyear is exploring the sale of To cope, "we've had to rationalize proits U.S. chemicals business. The unit makes duction and make hard choices about plants," Exton says. Not long ago, Cromp- synthetic rubber as well as Polystay antioxidants. Goodyear sold its specialty ton closed its Naugatuck, Conn., manuchemicals business, including the Wingstay facturing site and moved rubber chemiphenolic antioxidants line, in December cals production to plants in Geismar, La.; Elmira, Ontario; Latina, Italy; and Al- 2001 to private investment firm LittleJohn &Co. tarnira, Mexico. In some cases, Crompton shifted production to third-party custom Rubber chemicals are a sizable business, manufacturers. but they grow only at about the same annual rate as gross domestic production— A spokesman for Flexsys, a rubber now a little more than 1%. Industry sources chemicals joint venture between Akzo Noestimate the size of the rubber chemicals bel and Solutia, admits that "profitability market at $1.7 billion globally already very poor, has been furAbout 2 0 % of these process ther squeezed by eroding rubber PRODUCl chemicals are sold to US. makchemicals prices and rising raw REPORT ers of tires, hoses, belts, window material prices driven by the runseals, engine mounts, and roofup of oil and gas prices." ing materials. Noveon's Carbone, though, The fastest growing markets takes a philosophical view of the are in China, where demand for business. "This is a tough time. rubber chemicals is growing at 8 Passing on a price increase is difto 10% a year, according to ficult. But this is a cyclical busiCrompton's Exton. Crompton ness," he says. Rubber chemicals' has four plants in Asia to supply raw materials derived from oil— SYNTHETIC customers there. But at the same such as aniline, benzene, acetone, RUBBER time, Chinese rubber chemicals and toluene—are pricey now but producers are "putting big-time pressure" are likely to moderate in the future. on European and U.S. makers, says Eugene Price is an especially sensitive issue M. Urban, vice president of Akrochem, a these days among producers of rubber US. distributor of rubber chemicals. chemicals. In fact, Bayer, one of the big Cheap labor and lower environmental three global rubber chemicals makers
RUBBER CURE-ALLS
High prices for energy and raw materials put rubber chemical makers in a bind MARC S. REISCH, C&EN NORTHEAST
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ITHOUT RUBBER CHEMI-
cals, rubber objects would simply be gooey masses. But even though these additives play a critical role in the manufacture of tires, conveyor belts, and other rubber articles, the firms that produce them say the business is ailing. Rubber chemicals are a "steady business and have provided reasonable returns until recently," says John N . Carbone, vice president ofpolymer additives for Noveon. "Normally they are a good cash generator." But these are not normal times for makers of chemicals such as rubber-curing accelerators, textile and steel-belt adhesion promoters, and antioxidants. High raw material costs, excessive energy prices, and overcapacity have conspired to place a lid on what chemical makers can charge their customers. And tire makers, the largest users of rubber chemicals, want to keep costs down because their major customers, auto manufacturers, are capping the prices they will pay Because of their size, the three major tire makers — Goodyear, Michelin, and Bridgestone—"carry a lot of weight when they negotiate prices," says Chris Exton, rubber chemicals vice president for Crompton Corp. As a result, prices have been declining since the mid-1990s. 28
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SPECIALTY
ELASTOMERS
rubber with the melt processibility and chemical resistance of engineering ther moplastics, Cuccioli says. Target mar kets for TPSiVs are industrial hoses, soft-touch handles, and gaskets. And d d ^ ^ he general situation is just cations for these products include rub they can be made, much like typical awful," says Britt Theismann, berlike grips that are applied over hard plastic parts, by extrusion, injection information and systems man substrates like tool handles, cutlery, and molding, and blow molding. ager for the International Institute of Syn kitchenware, Mattix says. Urethane elastomer makers are trying thetic Rubber Producers (IISRP), of the AES has come up with elastomers to push the envelope, too. Stan Nerderthermoplastic elastomer business. Not that bond to nylon- and polystyreneman, director of marketing for Noveon, long ago, TPE use in North America was based polymers, as well as new grades says his firm is working on more "breath growing at 7 to 10% a year. Last year, of TPVs that bond to metal and textile able" grades of urethane elastomers for consumption grew less than 1% com substrates. Awnings, sound-dampened use in sports equipment and apparel. In pared with 2001, to 524,000 metric tons. metals, and inflatable boats can be fash addition, Noveon has developed a new ioned with these latest TPVs. This year doesn't look much better. product line that allows easy extrusion of IISRP's survey shows that producers ex The newest kid on the TPE block, Dow hard thermoplastic urethanes for hose, pect growth of slightly more than 1% for Corning, bought plastic compounder Multitube, wire, and cable. the broad TPE category, which in BASF has something similar. cludes everything from low-cost According to Stéphane Mori, develstyrenic block copolymers to midopment specialist, "A harder therpriced polyolefins and urethanes to moplastic urethane permits a thinhigh-cost copolyester-ether and ner wall for tubing, which requires polyamide elastomers. less material." This new family of TPEs grew at a rapid pace be urethanes can save a tubing maker cause they have the properties of money, Mori says. thermoset rubbers but can be One new TPE competitor falls processed as easily as thermoplas below the radar, however. Accordtics. Producers still hope to expand ing to IISRP's Theismann, plasthe business, but they are stretching tomers—metallocene-based the envelope and trying new ap polyolefins—are sometimes subproaches. "The replacement of rub stitutes for TPEs and thermoset ber with a thermoplastic elastomer TUBE TYPE Thermoplastic elastomers are rubber. But it's still difficult to is not as important as it was before," used in products ranging from tubing to gauge their impact. Theismann says Margaret M. Mattix, global rubber handle grips. says plastomer producers such as marketing manager for Advanced ~~ ExxonMobil Chemical and Dow Chemical Elastomer Systems. "All the simple re base in May 2002 and is expanding the don't provide data and thus aren't countplacements have been done." Multibase family of thermoplastic silicone ed in his TPE survey. AES specializes in TPEs that contain vulcanizates. TPSiVs are vulcanized sili Growth in the TPE category may have vulcanized ethylene-propylene rubber cone rubber in a matrix of either slowed, but competition for market share compounded with a polyolefin. Many of polyamide or polyurethane, explains Fer and new opportunities continues. Producits thermoplastic vulcanizates [TPVs) are nando Cuccioli, global marketing manager. ers say they'll continue to push the enveused in automotive parts such as air They combine the high-temperature lope in hopes of sparking new demand. ducts and weather seals. But new appli elastomeric performance of silicone
Stretching The Envelope
τ
standards give Asian producers an advantage, Urban says. And with the help of government subsidies, Chinese producers have built up capacity in excess of local demand and are exporting at very low prices. Asian rubber production may one day soak up output of Chinese rubber chemicals. But by then, manyWestern producers will have been driven out of business, and^Western rubber makers will find themselves paying much higher prices, Urban believes. To make Crompton's business less commodity oriented, Exton says his firm is trying to shift: production to more specialized rubber chemicals. It's an undertaking that is more easily said than done. One new product is an ultra accelerant, Royal AC HTTP://WWW.CEN-ONLINE.ORG
150, that does not generate potentially harmful nitrosamines. Bayer and Flexsys have similar products in their lines, Exton says. U.S. rubber product makers have been slow to adopt any of the new accelerants. Another new product, XPE1, is based onxanthate chemistry It allows the use of carbon black filler in "green" tires, replacing more costly silica and organosilanes, Exton says. Crompton is nowworking with Continental Carbon to develop an all-carbon black "green" tire that helps improve fuel economy Rohm and Haas, though not a traditional rubber chemicals supplier, says it has developed proprietary chemistry to make rubber more useful. The company recent-
ly introduced a new line ofwaterborne adhesives used to bond rubber to metal for automotive seals, gaskets, and vibrationcontrol components. Another new product, RoSlip, is a low-friction slip coating used on auto window channels and door seals. But even Rohm and Haas doesn't expect its rubber-related business to boom in the current economy Donald Ε Branek, commercial manager of the rubber auxil iaries business, says lower auto production this year compared with last year "will af fect us." "This is a tough industry" Akrochem's Urban says. "No one is saying they are hav ing fun." • C & E N / A P R I L U , 2 003
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