BUSINESS bought by lion Chemical Capital LLC and ACI Capital. Business cycles in the rubber industry tend to last a long time, and the challenges of price and competition are here to stay, Quinn says. But for companies that work smarter and leaner, respond quickly to cus tomer needs, and focus on maintaining high quality, these challenges are being at least partially offset by opportunities for growth. LINDA R. RABER, C&EN WASHINGTON After several years of flat or declining consumption, growth seems on the way HE PAST FEW YEARS HAVE BEEN dustry will soon be seeing "rapid growth of Worldwide, rubber consumption is grow tough for U.S. synthetic rubber sales not only in the Americas and Europe ing. According tofiguresjust released by producers and their customers. but especially in the Asia-Pacific region." the International Institute of Synthetic Beset by skyrocketing energy and The industry will soon have an opportuni Rubber Producers (IISRP), total rubber consumption willrise4.8% this year over raw material costs, many compa ty to improve its profitability he says. nies have seen their profit margins become John E. Quinn, president of Excel Poly 2003 to 17.6 million metric tons. Looking vanishingly thin—that is, if they exist at all. mers, a producer of elastomeric com ahead, the group expects consumption to Some companies have merged with oth pounds formerly owned by PolyOne, be reach 20.3 million metric tons by 2008, up ers. One declared bankruptcy and sold its lieves that further "industry shakeout is 21% over 2003. These predictions are up business. Others have been struggling with inevitable as legal expenses, lack of prof significantly from last year's best guesses. While demand picks up, prices for raw economic uncertainties by trying to sell itability and shifting global demand will businesses to raise needed capital and to make some current domestic operations materials are also on therise.The fortunes obsolete and draw investment to China." of companies that make or use synthetic streamline their operations. rubber are tied to the price of crude For example, Goodyear Tire & | oil. Synthetic raw materials, notably Rubber put its chemical business up £ styrene and butadiene, are products for sale last year only to take it off > ofthe petroleum-refining stream, and the market this summer. Bayer spun 1 there's no way to get around that. off its rubber business as part of Christopher J. Mudd, general Lanxess, which says it is committed manager of Dexco Polymers, a 50to slow-growing commodities. 50 joint venture of Dow Chemical International Specialty Products and ExxonMobil, says, "In the good bought Ameripol Synpol's styreneold days, crude oil cost $20 to $25 butadiene rubber assets after per barrel." A barrel of crude was Ameripol declared bankruptcy late close to $50 in August—nearly dou last year because of the depressed bling in price over the past year. Nat synthetic rubber business in North ural gas is $6.00 to $7.00 per million America. ISP, which was not previ Brus, double its normal range. ously in the synthetic rubber busi ness, now owns AmeripoPs Port Mudd speculates that when prices Neches, Texas, plant. first went up, many customers may have thought it was "just a spike" and Polimeri Europa has agreed to put off some purchases. 'As a result, sell its Baytown, Texas, thermo last year, demand was not strong for plastic elastomer plant to Taiwan's our materials because people were Lee Chang Yung Chemical Indus waiting it out," he says. "This year, try Corp. Lee Chang already oper we've seen solid demand in all mar ates thermoplastic elastomer plants ket segments, and we have been more in Taiwan, China, and Qatar. successful in being able to restore our All the while, price-fixing law margins to some extent by pushing suits have funneled millions of HE'S GOT PULL A fabric conveyor belt strip is price increases through. scarce dollars away from rubber readied by Kevin Xie, a Goodyear rubber businesses to settlements and liti compounder, for a dynamic modulus test. "Our customers have to try to pass gation defense. these increased costs down to their Is it possible that brighter days are ahead? Quinn was president of PolyOne's elas customers, and it's a very difficult process Rainer Rueffer, a Germany-based tomers and performance additives group every step ofthe way The further away you spokesman for Lanxess, believes the in- until August, when the company was get from a barrel of crude, the more diffi-
WHERE RUBBER HITS THE ROAD
Oil prices, material shortages, and legal complications force the industry to change
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Business cycles in the rubber industry tend to last a long time, and the challenges of price and competition are here to stay. 12
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cult it is to pass these costs on to the market," he says. By far, the biggest consumer ofrubber of all kinds is the tire industry And demand for cars in China is causing supplies to slirink and prices to rise. In addition, cutting-edge technology in tire engineering is making the product safer but more expensive. "The pneumatic tire is among the most complex composite products in mass production. It consists ofa variety of elastomers including natural rubber; synthetic rubbers such as polybutadiene and styrene-butadiene rubber; textiles such as nylon, rayon, and polyester; and a range of different coated steel wires," says M. Brendan Rodgers of ExxonMobil Chemical, Baytown, Texas. Presenting a paper at the American Chemical Society Rubber Division's spring technical conference in May, Rodgers explained that tires have undergone a major evolution over the past 4 0 years. "In the 1960s," he said, "tires were primarily of a bias construction, and automobile tires typically reached 20,000 to 25,000 miles, after which they were replaced. In the late 1960s and 1970s, the radial tire emerged with significant improvements in mileage, fuel economy, and safety" NATURAL RUBBER, the single largest component of a tire, is derived from latex from certain plants—particularly, the Hevea brasiliensis tree. Natural rubber is, essentially, of-l,4-polyisoprene. Southeast Asian countries produce the vast majority of the world's natural rubber. The three largest producers are Thailand, Indonesia, and Malaysia, whose equatorial climates are ideal for growing hevea trees. China's rapidly developing economy and concomitant love affair with the automobile have played major roles in sending natural rubber demand sky-high. IISRP expects natural rubber use to grow steadily In 2004, worldwide consumption of natural rubber is projected to be 7.9 million metric tons, a 4.6% increase over 2003. In 2008, the institute expects natural rubber consumption to crest at 9.0 million metric tons: a 20% increase over 2003 and a sharp upward revision from earlier predictions. The biggest consumers ofnatural rubber are countries in the Asia/Oceania region (excluding China) with anticipated 2004 consumption of3.1 millionmetric tons. In these areas, consumption is expected to grow modestly at a rate of about 1.4% per year through 2 0 0 8 . Demand in China is expected to rise an average of 10.5% per year to nearly 2.5 million metric tons by 2008 from 1.5 million metric tons in 2003. Shortages in natural rubber supply are looming. HTTP://WWW.CEN-ONLINE.ORG
A T H L E T I C
SHOES
A Vibrant Market For Thermoplastics
A
n athletic shoe may contain more than 50 components. Like any composite structure, the final product is much more complex than it seems at first glance. Presenting a paper at the American Chemical Society Rubber Division's spring technical meeting in May, Kim Ames of shoemaker Nike in Jakarta, Indonesia, said, "Thermoplastic materials account for about half of all footwear outsoles today and include thermoplastic rubber, thermoplastic polyurethane, ethylene vinyl acetate, polyvinyl chloride, and polyolefin elastomers." Engineering and performance demands for athletic shoes are rigorous. "There isn't just an outer-sole compound for running," Ames said, there are also "compounds for training, racing, trail running, adventure racing, extreme hill running, winter running conditions, and so forth. Each compound is designed for different needs in terms of durability, traction, and weight." Thermoplastic elastomers are attractive to producers because they are easy to process and have excellent low-temperature properties and a rubberlike look and feel and are easy to color and paint. Consumers love them because the materials offer good traction on ice and wet surfaces, and especially because of the fashion choices the materials allow. A lot of people, she said, "are wild about shoes—particularly athletic shoes, virtually all of which are made in Asia." "There are magazines devoted just to shoe collecting," Ames said. "And if you pick up a copy of Runner's World or other sports-specific magazines, they cite specific outer-sole compounds by name for specific shoe manufacturers. They give details on weight, filler type—carbon or not, soles that do or do not leave scuff marks—and so forth," she said. Consumers, like manufacturers, "are very passionate about the product." If the shoe fits, they are more than willing to wear it—or collect it.
In comparison, consumption of natural rubber in North America and in Western Europe is leveling off in the 2.0 millionmetric-ton range for the near future. Natural rubber has certain properties that can't yet be duplicated with synthetic rubber. So synthetic rubber can't entirely replace natural rubber needed in items like tires and conveyor belts. But that hasn't stopped makers of these products from trying to increase synthetic rubber content, depending on the economics and performance demands of the situation. 'Tire manufacturers are trying to use all
the synthetic rubber that they can, and people who make synthetic rubber that goes into tires and other things are seeing pretty good demand right now," Mudd says. In fact, Goodyear, one of the world's largest producers ofsynthetic rubber, has developed several new proprietary synthetic rubber formulations that could help it reduce its natural rubber dependency by as much as 15% over the next few years, according to Goodyear spokesman Keith Price. "While our newly developed synthetic rubber products do not totally solve raw material cost concerns, we have gained for
Cellular Process Chemistry, Inc Don't take it from us.... Take it from Sigma-Aldrich's Dr. Wahl. His expectations that microreactors would reduce development time by 40% has been met so far.^ MICROREACTORS EYED FOR INDUSTRIAL USE I A. MAUREEN ROUHI, C&EN WASHINGTON CHEMICAL & ENGINEERING NEWS, 82 (27), JULY 5, 2004
For more information please contact: One Broadway Street Suite 600 i Cambridge, MA 02142 Phone: (617) 621-4015 i Fax: (617) 621-4025 www.cpc-net.com I
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BUSINESS ourselves greaterflexibility,"he says. Although supply-and-demand is sues seem to be getting resolved, lit igation costs are dogging the rubber industry Recent price-fixing investi gations by the Federal Tirade Com mission and the European Union have created instability and insecuri ty For example, inJune, DuPont Dow Elastomers, a joint venture between the two chemical giants, agreed to pay $36 million to settle claims from cus tomers who say they were over charged for polychloroprene. InJuly Bayer agreed to plead guilty and pay a fine of $66 million to set tle charges that it participated in an KEEP ON TRUCKIN' An associate at a tire international scheme to fix prices of plant in Topeka, Kan., prepares medium radial rubber additives. In March, Cromp- truck tires for curing. ton agreed to pay $50 million to settie similar charges. U.S.-based group of rubber product mak ers released a report detailing how ex On the bright side, waste is becoming panding markets now consume four out of less of a problem. The industry has under five scrap tires. In addition, it says, stock taken aggressive recycling campaigns, and "for thefirsttime ever, used tire stockpiles piled scrap tires have been reduced by near ly 75% since 1980. are not growing—they're actually shrink ing," Rubber Manufacturers Association The report says that 80%, or about 233 spokesman Kevin D. Ott says. In July, the million, of the 290 million scrap tires gen-
5 £ ξ I
erated last year are being put to use, comparedwithll%inl990.Ottsays scrap tires are being used to make nonengineered products like play ground coverings, floor mats, and mulch. Also, road builders now use ground rubber incorporated into as phalt for more durable highways. Although the current round of sales and spin-offs and antitrust dif ficulties seems to have died down a little, continuing consolidation and reorganization seem to be in the cards. "I expect to see a much dif ferent industry in five years as com pared to today," says Jim McGraw, managing director of IISRP. "Cer tainly, there will be fewer players, as the most inefficient plants will be closed. I also see the more efficient operations being owned by investment groups rather than the traditional petro chemical companies. "This appears to be becoming more of a trend," he says, "and this in itself will spark rationalization as investors demand high returns, forcing less efficient operations out of the market." •
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