business There was also a history of survival under the thumb of one empire or another for hundreds of years. Even when it was part of Yugoslavia, important decisions were made in Yugoslavia's capital, Belgrade, and resources trickled down only slowly to smaller states such as Slovenia. So perhaps it is understandable that the country and its chemical companies have an almost fierce desire to protect their independence, even while—10 years after national independence—they same token, he adds, the industry must are entering into the rapidly changing Patricia L. Short open itself to competition—and cooper- and competitive world of global industry. C&EN London ation—with the outside world. Every company in the Slovenian That the chemical industry has done chemical industry has its own way of copn an area just slightly larger than New Jersey, Slovenia's 2 million peo- as well as it has is a measure of what one ing with the changing business environple rattle around in a countryside of observer has called "very pragmatic ment, of course. One common thread exalmost stunning natural beauty and in businesspeople." They have had a lot ists for all of the successful companies, charming towns and villages frequently thrown at them in the past 10 years. One however: an awareness that, in a small hurdle to business was an ownership domestic market, exports are key to surscattered with Roman ruins. But its small size and bucolic appear- structure so vague that companies fre- vival. Five of Slovenia's strongest chemiance are deceptive. Slovenia is one of the quently did not have any formal owners, cal firms illustrate the various ways that front-runners for inclusion in the Europe- thus making privatization difficult until companies have to adapt—through exports, foreign investment, innovative an Union (EU) in the next batch of en- owners could be created. marketing, or other approaches. tries. It has one of the most success-
SLOVENIA'S SUCCESS STORY
Chemical industry helps pull country up as fast-track EU candidate
I
ful records in rebuilding an economy since breaking away from Yugoslavia in 1991, after the breakup of the Eastern bloc in 1989. Its per capita gross domestic product (GDP), by one measure, has already overtaken that of two EU member countries, Portugal and Greece. Slovenia also supports a chemical industry that in 1999 contributed 11% of the country's GDP. In addition, the industry last year edged its way in front of that of much larger Slovakia in the annual statistics collected by the Brussels-based European Chemical Industry Council. Slovenia chalked up sales of roughly $2.33 billionfrom587 firms. And the chemical industry is an important part of the Slovenian industrial structure, according to Janez Furlan, general secretary of Slovenia's Chemical & Rubber Industry Association, based in Ljubljana, Slovenia's capital. The chemical industry—including chemicals, fibers, and rubber and plastic products— employed more than 23,000 people in 1999. That was more than 10% of all employees in manufacturing in the country. With that importance, Furlan adds, the industry has a strong case to make for favorable governmental treatment in such areas as tax incentives for research and development, for example. But by the
Slovenia at a glance
General information: Established in 1 9 9 1 by withdrawal from Yugoslavia Population: 1.99 million Capital city: Ljubljana, population 2 7 0 , 3 0 0 Land area: 7,827 sq miles Gross domestic product (GDP): In 1992: $ 1 2 . 5 billion Forecast for 2 0 0 0 : $20.8 billion Per capita: (1992) $9,740; (2000) $14,100 Structure: Agriculture, 4%; industry, 38%; services, 58% Chemical industry: No. of companies: 5 8 7 No. of employees: 2 3 , 3 0 0 Sales in 1999: $ 2 . 3 3 billion Contribution to GDP: 1 1 % Exports in 1999: $1.47 billion Imports in 1999: $1.71 billion Sources: The Economist Intelligence Unit, European Chemical Industry Council
Pharmaceuticals lead Pharmaceuticals is the largest single sector in the chemical industry in Slovenia, accounting for onequarter of the industry's total sales in 1999. Of the 15 companies in the sector in Slovenia, Lek Pharmaceuticals, based in Ljubljana, is one of the largest It has specialized up to now in production and marketing of generic drugs, but thefirmis beginning to enter innovative areas in drug discovery and delivery. Publicly traded Lek was privatized about six years ago. It has about 3,000 employees and had 1999 sales of roughly $250 million, with net profits of $16.5 million. That performance puts the company among the top 100 pharmaceutical producers worldwide, says Uros Urleb, a member of the board of directors with particular responsibility for the company's R&D. Lek produces generic drugs for the worldwide market—it is the world's biggest generic producer of clavulanic acid, used as an adjunct with amoxicillin, for example. Other products include cymetidine HS, vancomycin, and ergot alkaloids. Urleb says: "Our own expertise startedfromfermentation but now includes synthesis. The dosage forms arefromour research. About 12% of our sales are spent on R&D." OCTOBER 30,2000 C&EN
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Urleb: 12% of sales goes to R&D
According to Urleb, the company's R&D "is wholly integrated, with the orientation to enter more innovative fields, especially in the design of advanced drug delivery systems" in areas such as controlled release and in developing new chemical entities. In early October, Lek began construction of a new R&D center, which will have about 9,000 m2 of labs and other space. "We will try to move into new labs in early 2002," Urleb says. "The actual number of research professionals will grow very slowly. But the working conditions will be very much better, so productivity will be much better. The domestic market is very important, but exports are even more important," he points out Sales on the domestic market now make up just 20% of Lek's total sales, with the restfromexports. Lek has also built alliances and cooperations with Western companies, he notes. International cooperation in research work "is very important, and we are participating in this," Urleb notes. "Lek can survive. There are always niches. There is a constant need for cooperation or partners on different levels. We are aware of the consolidation processes [going on in the international pharmaceuticals industry]. This company is open for cooperation of different kinds. But for the moment, we are an independent company, conditions are stable. There will be processes we will enter—we are entering them proactively."
Western ties ensure survival Ties to Western industry early on ensured the survival of commodities producer Belinka Industrial Chemicals, 16
OCTOBER 30,2000 C&EN
which four years ago was restructured into Belinka Holding Co., which is based in Ljubljana. According to Branko Paè, assistant general manager, Belinka was founded after World War II as a part of German reparations. A hydrogen peroxide plant was built at that time, but it was based on old technology. The company almost went bankrupt in the 1970s, he says, because of the antiquated technology. However, in 1973, the company established a joint venture with Britain's Laporte, which had an auto-oxidation process for hydrogen peroxide—"Still the best process," he says. Laporte had 20% of the venture through transfer of technology and know-how. With that base, in 1977 Belinka built a plant featuring the newer process. Subsequently, Laporte sold its hydrogen peroxide business to Belgium's Solvay, which now has the 20% share of Belinka Perkemija, one of the companies in Belinka Holding. Belinka Holding is made up of Perkemija, a hydrogen peroxide and sodium percarbonate producer, which provides roughly 80% of the company's income; Belles Woodpaints, established in the 1960s; Kemostik, a recently acquired producer of adhesives, primarily for do-it-yourself markets; and KTM, a manufacturer of aluminum sulfate and hydrate for water treatment, acquired about two years ago. Before 1991, Paè recalls, "some 90% of our market was to Yugoslavia. When Yugoslavia fell apart, we lost our markets and had to establish new ones." The company built on the limited exports it had, and now, in a complete reversal, he says, "we export 95% of our products." In 1996, the company went through privatization, and was one of those firms that had to create a set of owners before it could be privatized. Belinka is now owned 74% by investment funds and the remaining 26% by private individuals, including about 9% by employees. And on Oct 19, the company was listed on the Ljubljana Stock Exchange. "For us, this change of owners is no problem," Paè says. As he points out, Belinka was used to cooperating with capitalists in its dealings with Laporte and Solvay. The governing board of Belinka Holdings is the management board of Perkemija. Decisions are made 50-50 by Belinka and Solvay. "We are very satisfied with this cooperation," Paè says. "It
Pas: Western technology helps
was undoubtedly very helpful in finding new markets." The cooperation with Solvay has also been helpful, he points out, in keeping up-to-date with process improvements. Most of that work is done by Solvay. The company's customers run the gamutfromlocal industries to the big multinationals. Multinational detergent makers, including Henkel and Procter & Gamble, "make up 90% of our sales. They have their companies all over Europe. We are very confident We see a great future for hydrogen peroxide," Paé says. "We think the Southeastern European markets will be revived, especially in pulp and paper. There is a place for expansion, in the long term, for our products," including sodium perborate tetrahydrate and monohydrate, and sodium percarbonate. Moreover, he adds, "we see further opportunities with our cooperation with Solvay. We would have no objections to Solvay expanding its ownership." The field of wood coatings poses a more fundamental challenge to the company's strategy, however. As Paè concedes, in wood coatings, "we are at a crossroad. Belles produces only coatings for wood, and we have a share of about 80% of the Slovenian market. It would be senseless to try to get a larger share—it would be too costiy. We need a big step forward, doubling or tripling production. We could do mergers in the paint business, and we would profit in all sorts of ways—R&D, marketing, and so on. "Our problem is we are a small country," he says. "There are only 2 million of us. Any decent company in the West
lished zinc-based products such as titanium-zinc sheet plate; zinc alloys, wire, and anodes; and roof-covering plates. The turning point in the developT102 maker cleans up ment of the company from métallurgie Cinkarna—the name means "zinc to mostly chemical production came in smelter" in Slovene—was established in 1973, with the construction of a titanium Celje, east of Ljubljana, in 1873 by a de- dioxide plant The current site is about cree of the Ministry of Mining for the 150 acres. It is physically dominated by Austro-Hungarian empire, explains Vili a 220-meter-long sheet-metal roller mill, RaznoMk, deputy manager of Cinkarna although metal processing is a small Celje. The ministry settled on that area portion of the company's business. because a railroad had just been comThe site also produces sulfuric acid for pleted from Vienna to Triest, via Celje internal consumption and for sale. Sulfuand Ljubljana, and there were local de- ric acid is a legacy of the company's early posits of zinc ores and cheap coal depos- zinc ore extraction, because the smelter its for energy. processed sulfitic ores. As Raznoznik Over the years, Cinkarna has evolved in points out, The sulfur oxides had to be response to dwindling local resources, en- processed into something feasible," vironmental pressures, and changing mar- namely, sulfuric acid. That began the deket demands. Under all those pressures, velopment of the chemical industry the company eventually decided to con- here," he says. centrate on developing a chemical busiThere were various sulfates—for exness, abandoning the production of zinc ample, copper sulfate, a plant protection metalfromzinc concentrates. Although it agent used in Bordeaux mixture fungidoes still have a metal-processing busi- cides; chromium sulfate, used in the ness, this depends strictly on raw sheet leather industry; and potassium sulfate. metal imported for processing into estab- The company also produced a variety of could buy the whole of Slovenia. I really don't care about the nationality of investors, if they have the money."
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inorganic pigments but has stopped producing those to focus on ΤΊ02, he says. Titanium dioxide is now the most im portant product for us," Raznoznik says. The business was established in 1973 as a joint venture with Lacke und Farben, a German concern based in East Berlin. "Nameplate capacity at the begin ning was 20,000 metric tons per year," he says. One-half was posttreated by treating pigment grains with a thin layer of aluminosulfate or with zirconium ox ide for more specialized pigments. "Now we have capacity for 44,000 met ric tons per year. And the whole quanti ty is posttreated," he says. Raznoznik notes that "the original tech nology is still the same as that which was bought in the late 1960s. But in the mean time, a lot of technology has been devel oped by us, by our own R&D. We are very proud of our latest development—the pig ment coated with zirconium oxide. "We are planning to expand our pro duction to a level of about 55,000 to 56,000 metric tons per year," he adds. "Getting to that will provide long-term survival of our operation."
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[email protected] to find out howi'.'ijimnMiiKi:," he and Veber agree, "is attractive." Veber says, "From our point of view, it is important to encourage chemical engineering. The chemical industry is one of the leading industries in Slovenia, so the qualify of the people from our universities will affect the industry. It is not a question of the number of students—we want to attract good students," he emphasizes. But overall, he says, "we want to make chemistry more popular with high school students." Macek notes, "In the grammar and secondary schools, we have very well developed research projects, especially about the environment." There is a
"beautifully organized competition99 for secondary schools, named for Frederik Pregl, who won the Nobel Prize in Chemistry in 1923forinventing the method of microanalysis of organic substanc-
Maéek (left) and Veber
es. "The pity is," he adds, all the competitors who prepare proposals for projects in natural sciences "then go into medicine or business or something else" and don't study chemistry. If Ljubljana's faculty has common concerns about students and space, the independence of Slovenia in 1991 has added some opportunities. According to Macek, there was never a problem in freedom to travel or publish, for example, when Slovenia was part of communist Yugoslavia. "We could always travel. Now, perhaps because of more independence, we are getting more initiative" to take advantage of other freedoms. Now, Veber says, "it is easier to get instrumentation, more books, and so on. And things function more efficiently—everything before [came] through Belgrade. And," he adds, "there was no Internet before." The university faculty now also competes for funding more directly with the country's national research institutes, primarily the National Institute of Chemistry (NIC), which has about 180 to 190 people, and the Jozef Stefan Institute, which has about 700 people. Both the university faculty, to some extent, and the national institutes are funded through the Ministry of Science & Technology.
Raznoznik is candid about the pollu A photograph from early in the century tion problems the Cinkarna operations shows an almost Dante-like aspect of have faced in the past He says that at emissions pouring from the plants out one point, "the emissions in the late over the city surrounding the old site. 1950s were a catastrophe for a town like By stopping its ore extractions, the Celje. They were due to development company has massively reduced its sul that was far from being healthy in both fur dioxide emissions. It has also tack regards—economy and environment. " led the problems linked to the process
Stane Pejovnik, a professor of materials science on the faculty and former director of NICfor16 years, explains the relationship. The institutes were foundedrightafter World War Π on the Rus sian model. "After Yugoslavia split from the U.S.S.R.," he says, the in stitutes became independent research organizations. The role of the institutes, Pe jovnik says, is to "take care of research work where large equipment is needed. Their or ganization is very strict In uni versities, on the other hand, the individual role of profes sors is very important "It is a good combination,99 he believes, "enabling the country to run research requiring large equipment, and allowing profes sors to have individual scientific freedom.99 Unfortunately» "the rivalry is sometimes too high," he says. "Many research groups in Slovenian industry have been closed down,99 Pejovnik points out "We dont have moneyforlong-term investment It is very tough for all of us to get needed contract research at the moment The business environment—tax incentives, for example—is not friendfy to research·99 Janez Furian, secretary general of the Slovenian Chemical & Rubber Industry Association, agrees there is a need for tax incentives to encourage industry to fund research contracts in the universi ties and institutes. With such incen tives, he argues, it "would be cheaper for industry to support research. Ap plied research work would be directed by the99 managers who know the market need. He points out that the country's chemical industry gets only 1.3% of the Ministry of Science & Technology's re search funds. "Why?99 he asks. "We are a successful branch of industry, we pay a lot of money in.99 "For the faculty, research is very im portant,99 Veber says. "Most work is done with the Ministry of Science & Technology. But also it is important to work with industry—to share informa tion back and forth.99 Macek adds: "In chemical engineer ing, we should have more contacts with industry. We want more long-term con tracts, since they are more appropriate forfacultiesthan short-term problems.99 es it has continued. For example, the firm is changing the way in which it han dles wastes from its sulfate process for Ti0 2 production. "Until now, we deposited all our slur ry wastes into two ponds on the site. Now," he says, "we will filter the waste and deposit it in a dry form. This investOCTOBER30,2000C&EN 19
business ment is under way." Eventually, he says, the ideal solution would be to reclaim the land, once it isfilledin. Cinkarna has only about a 1% share of the global Ti0 2 market, but ifs 1% of a market estimated at $6 billion to $7 billion per year. As Raznoinik points out, "You can imagine how important this business is to the locality, and even to the national economy." The company's total sales are just under $100 million per year, with 80% sold outside Slovenia; so it is clear how significant T102 is. And yet, he concedes, "there was a possibility that the community would have closed us down had we not cleaned up." In fact, he adds, "I think that the beginning of the end of the old political regime was the ecological movement They were not capar ble of controlling it" What is the company's long-term future? "I can only guess," he responds. "In getting to a level of 55,000 to 56,000 metric tons per year of T102, the company will probably continue. But sometimes I wonder why we are outside all these consolidation streams" within the international industry.
"We had one offer of cooperation on a more profound basis with a German competitor," Razno2nik says. But he mirrors the concerns over independence that run as an undercurrent throughout the country. The continuing independence of Cinkarna would seem to be the best indication of the ultimate answer to those discussions.
Bind customers tightly
Raznoznlk: we had to clean up
Cinkarna was a "public" company, in that vaguely government-owned category of companies, until 1994. Then it was sold to the workers and is now fully privatized. Most of the shares are held by investment funds, with employees holding about 20%.
Second National Symposium on Medical and Public Health Response to Bioterrorism
^ 0 0 1
For Mile Radivojevic, the independence of Slovenia was the finalfilliphe needed as an entrepreneur to set up a new company, Unichem. The company supplies fertilizers, pesticides, and other care chemicals for amateur gardeners to use on their houseplants, lawns, and garden plants. It offers a line of synthetic chemical products and another of biological and biotech products for "green" gardeners. As director, he and his wife, Vida, a codirector of the privately held company, have been working to establish markets both in Slovenia and outside. But they also have been developing a variety of unorthodox marketing techniques to capture—and hold—their customers.
Department of Energy
November 28-29, 2000, Washington, DC Topic Areas Include:
• • • • •
Medical and Public Health: Global Security Challenges Detecting Epidemics: Current Approaches, Future Possibilities Treating the Sick: Capacity of the U.S. Health Care System to Respond to an Epidemic Containing Epidemics of Contagious Disease: Making Difficult Decisions Bioterrorism: Public Health Emergency & National Security Threat
The Symposium is intended to increase understanding of the threat of bioterrorism among national policy makers and medical and public health leaders. It will also serve as a platform to consider actions that the nation and its leaders might take to diminish theriskof bioterrorism and, should it occur, its potentially serious consequences. Sponsored By:
Johns Hopkins Center for Civilian Biodefense Studies Department of Health and Human Services Infectious Diseases Society of America For More Information: www.hopkins-biodefense.org 1-800-431-5638 or 847-384-7654 CIRCLE 12 ON READER SERVICE CARD
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Computational Science Graduate Fellowship The Computational Science Graduate Fellowship program is designed to support students pursuing graduate study at U.S. universities who are studying scientific or engineering disciplines with applications in high performance computing. Fellows also participate in research at a DOE laboratory.
undergraduates or in their first or second year of graduate school and working toward a PhD. Appointments are reviewed annually and may be renewed up to four years.
The program offers a $21,600 annual stipend and payment of tuition and fees. The program is open to U.S. citizens and permanent resident aliens who are exceptional senior
This is an equal opportunity program and is open to all qualified persons without regard to race, sex, creed, age, physical disability or national origin.
For the 2001-2002 awards, applications must be received by January 24, 2001.
For an application packet or more information: The Krell Institute 2401 Chamberlain Street · Ames, IA 50014 515.292.4257 ext. 22
[email protected] · www.krellinst.org/csgf Sporaomi by thr U S . Department of Energy Office of Srirnrr and Office of Defense Program». A.lmmnlrn·.! for USIHIE l.v ih.- K n l l Imtilut.· umlcr < .Hilrw I l)K.-R^I2">7KR2.S.'«W.
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K t ELL
Vida (left) and Mlle Radlvojevlé: unorthodox
advice on diseases, pests, and other topics, as well as a company information telephone hotline. However, the Radivojeviés know they cannot rely on just the Slovenian market. So they are also active in exports. Five years ago, the company began marketing in Croatia; it has subsequently marketing also entered the Hungarian market in a limited way. It exports to Italy and early in October registered thefirmin Poland. One of the bottlenecks the company has found is in obtaining registrations for its products. Slovenia is in the process of adopting into its own legislation EU laws on registration, and this is expected in 2002. And then, Mile says, "When we become a member of the EU, a registration in X country will be valid in Slovenia," and vice versa. Mile notes that Unichem has just added a line for professional gardeners, those who produce plants to be sold on the retail market He points out that when one orchid plant can be sold for 15 deutsche marks, compared with 3 deutsche marks for 1 kg of corn, professional gardeners are a much more attractive market for suppliers than are farmers.
In 1989, Unichem became the first private company registered for this business. "You can see that Slovenia's houses and gardens are full of flowers, especially in summer," Vida says. But despite what the couple saw as an obvious market, the bigger companies in agrochemicals did not offer small packages. 'This market was open for us. So we started with this hobby program— first for plants, and then as a synergy to this, we started with insecticides," Mile says. It has also expanded into pet health, with such products as dog and cat foods and flea products. But even more than just selling products to satisfy current demand, the company has worked on ways to widen demand. "We had to start with something special after Slovenia became independent," he says. "Marketing for these products is very demanding." There are a number of hurdles. "We don't have enough money Going global counts for TV advertising. These are seasonal Prior to 1991 and Slovenian indepenproducts. And many people like to have dence, there were four paint companies nice gardens, but don't have enough in Yugoslavia, points out Matjai Hafner, knowledge about, for example, plant dis- vice president of Helios Group, a eases. They don't know what to do. So we started with something new— an amateur gardener club," Vida says. The club charges a small fee to join—about $6.00. According to Vida, the club now has about 20,000 members. For the club, Unichem publishes a monthly magazine, tided "Gaia," complete with columns by Slovenian gardening personalities and writers. "We arrange members' visits to botanical gardens elsewhere in Europe, and some are going to China," she says. There is educational advice: "Every year we hold three-day courses, which as many as 50 or 60 members attend. Every year there is a different program." There is also a radio show, one hour each Tuesday, with Hafner: an eye on multinationals
Ljubljana-based coatings company. There was one in Serbia, one in Croatia, and two in Slovenia. "Here," he says, "both have survived. The others have failed. "Helios is now one of the largest independent companies in Middle Europe," he says. "In Hungary, there are only [multinationals] now, companies such as Akzo Nobel and Totalfina. In the Czech Republic, all the independent companies more or less have failed. In Poland," he adds, "the paint business is good, and the companies are larger than we are. But the market there is 40 million people." The result, according to Hafher, is that "we are learning how to survive. In the past, we exported," he says. "But after the breakup [of Yugoslavia], it was very difficult. The first years after that were quite hard. But we survived." The key, he suggests, was that the company, which was privatized four years ago, entered the export market. The result now is an intriguing mixture of geographic markets. For example, Slovenia accounts for 33% of the company's sales. Other countries of former Yugoslavia account for about 19% of sales. The former Soviet Union accounts for 12%; and Central European countries, 13%. Helios also exports to Germany, France, Italy, and Spain, as well as to more far-flung countries such as the United Arab Emirates (UAE), Iran, and Egypt. Its sales lines range from decorative coatings to wood coatings to industrial coatings. A joint venture with PPG Industries, established this spring, is helping the firm build its presence in automotive original equipment manufacturer (OEM) coatings, a move that Hafher says is being pushed by Helios' customers. "The car industry is all multinationals. For example, Renault is in Slovenia; they have pushed us to go global—all their suppliers are global." PPG holds 60% of the venture and Helios, 40%; it has been structured to market into countries such as Russia, Romania, and former Yugoslavian countries, including Slovenia. A variety of other businesses make up the corporate whole. In coatings, there are refinishes, fire-resistant coatings, appliance and metal coatings, and wood stains and lacquers. There is an industrial grouping, with a roster of chemicals, mostly dextrins and adhesives. A synthetic resins unit produces alkyds, polyesters, acrylics, melamine, and polyols. OCTOBER 30,2000 C&EN
21
business "If the [multinationals] come, they will close us as a small region," he reflects. "The capacities in Europe are too high for us to be kept open. So we want to be independent in everything except OEM and refinishing. We do not have a fight against the [multinationals], but we must be aware of them, to see some possibilities elsewhere." He cites as a case in point the venture with PPG. "PPG came to Slovenia and saw the advantages of a venture: Our understanding of this market and Russia's was better than theirs." In Russia, he notes, "the crisis is ended, so the economy is getting better and better." Helios has a presence in regions such as the UAE and Egypt in the form of paint factories, Hafner says, and in Ethiopia, facilities for refinishes. "In 10 years, maybe Western companies will find opportunities there, but we will be there already," he says. "In the small Slovenian market, we are still large, and are growing. And we still are independent" Richard Zahren, PPG Industries vice president of automotive coatings, says his company decided to enter the venture with Helios because "we wanted to jumpstart our business in Eastern Europe. We
didn't have the infrastructure there and didn't want to invest to build up infrastructure there, given all the uncertainties. We wanted a partner for the early stages of development of our auto coatings business." PPG wanted, he adds, to establish a joint venture to provide a marketing structure into the former Soviet Union, in particular, that "we could use as our global auto customers moved into that region, as well." Helios came up "as a primary candidate—they had the infrastructure, and they had the need for world-class coatings technology to serve their customers," Zahren says. "Also, we found they had an approach that was a good bridge for us as an American company trying to do business in the region." Helios had a "compatible mind-set," Zahren adds. "They are very concerned about protecting their home markets and protecting their jobs, understandably. But they clearly saw that even if they just wanted to survive in Slovenia, they still have to be a regional player. And in the future, they would really be under attack by global competitors as the international companies moved into the region. They are good, pragmatic businesspeople."^
Regulatory Issues Heat Up For Blowing Agents New EPA proposals may make life harder for the foam blowing industry
T
he complex process of phasing out ozone-depleting foam blowing agents could get even more difficult if a proposed change to government rules goes through. In an unexpected response to a petition filed by fluorocarbon producer Atofina last year, the Environmental Protection Agency has proposed accelerating the phaseout of three commonly used fluorocarbons used to blow polyurethane and other foams. Atofina and other companies are now protesting the proposal, calling it fundamentally flawed. The chain of events leading up to the proposal started in 1995, when the longtime polyurethane foam blowing agent chlorofluorocarbon (CFC)-ll (CFC13) was banned. However, waiting in the 22
OCTOBER 30,2000 C&EN
wings as a replacement was hydrochlorofluorocarbon (HCFC)-141b (CHaCFCy, a product with similar performance and handling attributes. Making the transition even easier, existing CFC-11 producers such as Atofina (then Elf Atochem), Honeywell (then AlliedSignal), and LaRoche Industries were able to adapt their existing plants to produce the new product. They continued supplying the foam market with relatively few problems. Although HCFC-141b has much less ozone depletion potential than CFC-11, it and other HCFCs were still seen as only stopgap measures until nondepleters such as hydrofluorocarbons (HFCs) could be developed. Moreover, of the common HCFCs, 141b has the highest depletion potential; as a result, it was tar-
geted for phaseout on Dec. 31, 2002, while other products had until 2010. Last year, with the 141b phaseout date looming, the three U.S. manufacturers embarked on three very different courses of action. LaRoche, suffering from low prices in its main commodity chemical markets, halted a 141b alternative development program. The company eventually filed for bankruptcy and later shut down its fluorocarbon plant. Honeywell had a licensefrompolyurethanes producer Bayer allowing it to market an entirely new blowing agent, HFC245fa (CF3CH2CHF2), to the foam industry. However, in order to justify building a plant, the company needed commitments from customers, and these were slow in coming. A planned 1999 start-up date came and went as customer negotiations dragged on. Sensing Honeywell's troubles and lacking the necessary license to make 245fa on its own, Atofina took another tack: It submitted a petition to EPA seeking approval of three HCFCs—124 (CHCIFCF3), 142b (CHsCCUy, and 22 (CHC1F2)—as substitutes for 141b in foam blowing applications. Appliance manufacturers, meanwhile, were starting to get nervous. They began to evaluate the three HCFCs on their own, preparing for the possibility that 245fa would not be available in time to meet the phaseout deadline. General Electric struck out on its own and adopted HFC-134a (CHgFCFa), known mostly as an automobile air conditioner, in a refrigerator plant in Alabama. However, by October of last year, Honeywell was able to strike a deal with Maytag under which the appliance maker agreed to exclusively use 245fa in its refrigerator and freezer products. Honeywell subsequently signed a similar pact with Whirlpool and, in March, won board approval to build a 245fa plant in Geismar, La. The plant is slated to start up by July 1, 2002, in time—although barely—for customers to switch to the new product by the end of that year. Following these developments, it came as no surprise in July of this year when EPA responded to Atofina's petition by rejecting the use of the three HCFCs in foam blowing. However, in a surprise move, the agency went a step further and proposed significant new reductions in the use of these HCFCs in foam blowing. Specifically, EPA proposed moving the phaseout dates for HCFCs 142b and 22 from 2010 to January 2005. Further,
