The PU market in Australia is steadily developing this year thanks to the ending of the pandemic in the country, and subsequent growth in demand from some major consuming industries. The Covid-19 pandemic led to a significant drop of the demand for PU in the country, caused by stagnation in most sectors of the Australian economy. However in 2022 the situation generally stabilised, while the local market almost returned to its pre-pandemic growth figures.
Among developed nations, Australia was one of the most badly affected by the Covid-19 pandemic. The country established some of the strictest quarantine measures during the peak of the pandemic, and this negatively affected the entire industrial sector of the country – including the PU industry – which was completely paralysed during the periods of strict quarantine in 2020-2021.
According to data from research agency Mordor Intelligence, the size of the Australian polyurethane (PU) market accounted for around USD 400m (€427m) in 2022. According to its predictions, the market is likely to grow with a compound annual growth rate (CAGR) of approximately 5% between 2023-2028. This year the growth of the industry is also estimated at about 5%.
The key end-user industries for PU in Australia are building and construction, automotive (OEM and aftermarket), electronics and appliances, furniture, and the mining and mineral-processing sectors.
Construction stimulating demand
The market is characterised by a general high level of maturity, with the flexible foam segment accounting for the largest share. Based on application, the furniture and appliances segment accounted for the largest share in the market.
At the same time, there is also a stable growth in other segments of the market, being driven by the increased consumption and demand.
According to the Australian Bureau of Statistics, the construction sector of the country is actively growing this year, which stimulates growth of PU demand.
Many analysts agree that the construction sector will continue to be the main consumer of PU in Australia in years to come because of several large-scale housing and infrastructure projects: including the government’s commitment to build affordable and social housing outside the major conurbations.
According to business newspaper Australian Financial Review, up to 30,000 new social and affordable housing properties will be built in Australia in five years, funded by the AUD10bn (€6bn) Housing Australia Future Fund. According to analysts, that will contribute to a stable demand for PU from the Australian market.
Mining and minerals
A similar situation is observed in mining and mineral processing – a key sector in Australia – where PU is primarily used as a coating for cone bits, the interiors of dust extractor pipes, pump interiors, and also as a sealant for pipes. As the Australian mining sector has fully recovered from the consequences of the pandemic, many local mining giants have announced acceleration of their activities this year.
But more active consumption of PU in other sectors will be restricted by the generally high level of inflation in Australia, and high energy prices.
In general, Australia has a well-established supply chain for PU products. Some of the key PU manufacturers operating in Australia are Era Polymers, Flowcrete Group (a part of Tremco CPG) and Pacific Urethanes. In addition to local manufacturers, global manufacturers with a significant presence in Australia include BASF, Covestro, Dow, Huntsman and Lanxess. Because these global manufacturers are long-established in the market, many analysts believe it would be difficult for new global players to capture significant market share in the country.
In recent years Covestro has strengthened its presence in the local market and expanded its local product range. Covestro’s Lars Phillips, a VP in the Asia-Pacific regions, told Urethanes Technology International [UT]: “In Australia our PU business success relies on our ability to deliver high and consistent product quality, ensure supply reliability and build on our strong customer relationship. In each of these areas we have reinforced since the pandemic challenges, more recently we are now offering sustainable products across our PU portfolio which will help expand our business.
“One of the solutions we offer are our mass-balanced isocyanates, which are based on bio- and bio-circular raw materials. Product stewardship with safety as number one priority is also of high importance and Covestro is part of the Australian Bedding Stewardship Council, which invests into mattress recycling projects.”
Phillips considers the general PU market in Australia to be stable. While construction and mining are significant PU consumers, Covestro’s largest market in Australia is soft furniture, which Phillips describes as “bearish”.
Phillips said: “Short-term, growth may be limited by economic uncertainties around domestic inflation and global recessionary tendencies, although the outlook slightly improves. Mid-to-long term we believe in the growth of PU based on the established industry network and a high ability to innovate».
In the meantime, another leading global player Lanxess also has hopes for further development in the Australian PU market, considering it one of the most important for the company’s future growth.
Michael Fahrig of Lanxess told UT that the company has already launched several innovative products in Australia and is planning a further expansion of its local range. Fahrig said: “Lanxess Urethanes business have developed cast polyurethane systems that enable customers to save over 40% of their energy costs in the production of polyurethane parts, when compared with traditional grades. These systems are available in hardness range from 60 to 95A, they require less heat exposure to develop their properties during the cast process, thus resulting in lower energy consumption and consequently reduced CO2 emissions.
“Another innovative product from Lanxess is the WRM Premium repair kit, used for repair of mining conveyor belts, spiral classifiers and other applications.”
Fahrig added that his company has had a strong presence in Australia for many years and is confident of business growth in the region: “This growth will be driven mainly by the mining segment, with its high performance and [environmental health and safety] demand, the demanding needs of mining applications benefit from the high performing features for our polyurethane portfolio”.
In the meantime, a representative of another German major, BASF, admitted its presence in the Australia (and New Zealand) region was too limited to give general predictions for the PU market. Sebastien Cherpion told UT: “We only cover some segments and we are then not in a position to talk about the whole market.”
Market fragmentation
Similar to other Asia-Pacific PU markets, the market in Australia is a highly fragmented market, with the presence of considerable regional and local players.
Many analysts expect sustainability will become the major challenge for both local and foreign PU manufacturers operating in the Australian market. Many are already exploring new processes to reduce emissions from foam (including using less-emissive amine catalysts and surfactants) and reducing the use of VOC precursors. As a consequence, additional funds have been allocated to accelerate research and development. PU manufactures are also looking at a more active use of online distribution channels to enhancee cost-effectiveness.
Representatives of producers, and market analysts, believe demand will grow for sustainable PU materials that are produced using less than 50% of the energy needed to manufacture traditional products. This demand will mainly come from the construction sector, particularly from rapidly growing green building projects designed to reduce environmental pollution.
However the issues of price volatility and supply chain disruption, which have presented major challenges to producers in the Australian market in recent years, will probably continue, although the volatility may be somewhat diminished.
