Better productivity, more automation, good training and strong industry collaboration needed
By Erman Tan, chief executive officer, Asia Polyurethane Mfg Pte Ltd
Industry potential
According to Transparency Market Research, revenue for the global polyurethane (PU) product market was $40.6 billion in 2011. This is expected to grow at an annual rate (CAGR) of 7.12 percent from 2011 to 2016, to reach $57.4 billion.
Asia Pacific is the fastest growing polyurethane region in the world, forecast to expand at about 6 percent through 2017.
The market is dominated by the furniture and construction industries. Electrical appliances, however, are seen as the fastest growing market for PU.
Much as the PU industry has shown great growth potential, it is necessary to factor in macro-environmental factors (economic, political and environmental) which can pose great impediments to its smooth growth journey.
Economic –The eurozone debt crisis dramatically worsened in 2011 and did not improve in 2012. Economists forecast a double-dip recession in 2012. Slower growth in Asia is evident, with a GDP contraction seen in China, the second largest economy in the world. Against this backdrop, the International Monetary Fund has cut global growth forecasts for 2012 and 2013 and warned of a steeper slowdown.
Political – The world is seeing unrest in the Middle East with heightening tension between Turkey and Syria. Within Europe, Greece is experiencing instability caused by economic tension. In Asia, hostility also exists between China and Japan over Diaoyu Island.
Environmental – Significant environmental pressures such as global warming, long-term shortages of energy due to higher demand from a rising world population and industrial activities have led to a limited supply of fossil fuels. This means higher future energy costs.
Official energy statistics from the US government predict oil use to rise from 81 million barrels per day (bpd) in 2012 to 121 million bpd in 2025. Electricity demand will continue to increase, and is projected to reach 5168 billion kWh by 2030 (from 3660 billion kWh in 2005).
Worldwide challenges in the PU industryApart from the macro-environmental factors, growth in the PU industry is also affected by industry-specific challenges.
There are difficulties in keeping supply and demand balanced within the PU industry. The main manufacturers have added new plants and debottlenecked, causing marked supply increases of PU raw materials.
On the other hand, weak economic conditions have seen decreasing demand for the raw materials. This oversupply and under-demand situation caused a further dive in PU prices.
Poor industry collaboration is also evident in the non-synchronisation of common industry standards, such as fire ratings. Each country has its own localised standard. This has caused the industry to operate in a fragmented mode which limits creativity.
Prices of polyurethanes are dependent on those of feedstock such as crude oil, benzene and toluene. Instability in crude oil prices has affected prices of raw materials (such as MDI [methylene diphenyl diisocyanate], TDI [toluene diisocyanate]) and eventually polyurethanes.
Lack of value-added products leads to lower profit margins, since the players are unable to offer highly differentiated products. The entry of more PU players into the market, including domestic ones, worsens the oversupply situation.
Stricter eco-regulations
Environmental regulation has been made more stringent to reduce further harm to the environment. The Montreal Protocol was set up to phase out CFCs (chlorofluorocarbons) –used extensively as blowing agents in the manufacture of polyurethane, phenolic, polystyrene and polyolefin foam polymers but causing ozone depletion at the same time. Now the early CFC replacements such as hydrochloro-fluorocarbons are also being phased out because of their contribution towards global warming. All these mean searching for other blowing agents, which cost more.
Make PU attractive to work in
The industry also suffers from insufficient diversified PU talents. The chemical industry does not appeal to the younger generation due to the perception that the products are toxic, dangerous and that the job processes are laborious and manual. The non-competitive remuneration, lack of training and development programmes, and limited career advancement opportunities have created an unattractive perception of the industry. Without diversified talents, innovations are clearly limited.
Doing more with less
In terms of doing more with less, APU aims to achieve higher productivity through innovation. APU’s polyurethane systems come with different blowing agents to meet requirements for zero ODP (ozone depletion potential). Its GAP 611 (GAP = Green Alliance of Polyurethane) blowing agents meet both zero ODP and zero GWP (global warming potential). The product is suitable for applications including spray foam, panels, and refrigeration.
In automotive uses, it can be used for structural foam and integral skin components.
Such materials are appropriate for less environmentally damaging cars, such as the new plug-in hybrid cars being developed, which promise exceptional gas mileage with far fewer emissions than standard gasoline-powered automobiles or even traditional hybrid cars.
Polyurethanes can be used in the bumpers, steering wheel, dashboard, the car body, its spoilers and in all the doors.
To increase profitability, raising productivity is key. This can be achieved through embracing technology and automation to streamline operations and cut down on workflow deficiencies. Providing training and upskilling employees is also vital to ensure that they are ready to embrace a productivity and improvement culture.
More collaboration amongst the industry players is also needed to fuel PU industry growth. Stronger partnership from industry players could involve setting up different polyurethane centres and establish a framework based on common goals and directions. Certain industry practices could be standardised. The industry could also make concerted efforts in research and development arena, specifically towards more environmentally friendly products.
The PU sector could also encourage innovation and creativity through sharing best practice and knowledge.
Another approach that could be taken is the setting up of an international polyurethane body to present industry issues to global organisations such as the United Nations.
Nurturing and developing talent
The PU sector also needs to better exploit its human assets to raise productivity and efficiency. To achieve this, continuous training should be provided to existing employees to ensure their skills stay relevant. Companies can develop competency roadmaps to nurture and develop employee’s talents. Employees will be able to see where their career paths are and how they can achieve success. Succession planning programmes should be put in place for those employees who show leadership potentials and capabilities. Companies should retain talents within the company with equitable recognitions and rewards, and enhance job satisfaction by redesigning job specifications and encouraging job rotations (where skills are transferable).
Conclusion
To cater to business and industry changes, the PU industry should aim to build efficiency through innovation. It should continuously find new ways to build efficiency and productivity in the search for better and more sustainable raw materials.
Finally, the PU industry will need to attract and manage talents in order to discover new ways of doing things and breathe a new lease of life into the industry.
Paper presented at the Polyurethane Market & Innovation Conference Oct 2012 in Hong Kong and at the ICIS Polyurethane Chain Conference, Dec 2012, Singapore.
First SEA systems house
Asia Polyurethane Mfg Pte Ltd (APU), established in 1985 in Singapore, was the first polyurethane system house in South East Asia. For more than 27 years it has provided tailor-made PU solutions in the region. Over the years, it has grown to become the largest independent system house in SEA in terms of sales revenue and geographical coverage.
More than 98 percent of APU’s revenue is derived from exports to more than 40 countries. The facilities cater to more than 15 different industries ranging from building materials to furniture, from automotive to oil pipe applications.
Its product range covers rigid, flexible (slabstock and moulded) and structural foam, semi rigid and integral skin types, viscoelastic foam, as well as solid and syntactic types and polyurea coatings.
APU has obtained many certifications and accolades, including ISO 9001, 14001, OHSAS 18001 and People Developer Certification.
The company will forge alliances and exploit the strengths of its worldwide network of partnerships to continue innovating and offer more value to our customers.
APU’s philosophy involves a commitment to contributing to a more sustainable environment. The Green House developed by APU is the first dwelling in Singapore to achieve Green Mark Award in 2007. APU was also the first PU company to achieve the Singapore Green Label Certification for products primarily used in building construction for roof top spraying, for sandwich panels as well as partitions and claddings.
