Opportunities abound in China's market for polyurethane

A dominating theme among the exhibitors at PU China was the environment. How is China’s drive to higher quality, environmentally friendly products and production is playing out?  Simon Robinson investigates.

China has changed. Under the latest five-year plan, the environment is more important than flat-out economic growth, and this is working to western polyurethane companies’ advantage at the moment.

China takes the environment to mean the space inside and outside of buildings, so factory conditions are improving as well as the air and water in the wider environment.

Kenny Pan, vice president, Asia Pacific at Huntsman Polyurethanes explained, the 19th people’s congress featured the environment heavily in the government’s key performance indicators, and environmental protection is now number one.

‘GDP is now China’s first priority with no harm to the environment top of the list. “Green water, blue mountain is better than a gold mountain and silver mountain” is the new approach,’ Tan said.

This view is reflected by Daniel Meyer, who is head of Covestro’s polyurethane segment. He said: ‘We are in an environment where the government is putting legislation and money where its mouth is in terms of sustainability and upgrading the industry and securing the highest standard of safety.’

Huntsman’s Pan explained how, in the past, flexibility and the drive for GDP led to a confused situation in which the environment could suffer. ‘In the past, it was possible, in some situations, to build a power generation plant outside a zoned area and justify it because it generated additional GDP,’ he said.

‘That GDP argument is no longer accepted, and the government has stopped it. Full compliance and the safe operation of all industrial facilities is now mandatory. The centre is driving this, not the provinces.’

Driving the message home

Pan estimated that 30% of chemical plants have been closed by the central government’s Environmental Protection Bureau. ‘They’re closed if they are not operating safely, or if they are not located in an approved zone,’ he said. ‘But if you are safe, that is your opportunity.’

Meyer at Covestro recognises the change in direction as a great opportunity. ‘We have the technology, the ambition and the innovation power here in China, with Chinese people in a Chinese organisation, to tackle those challenges,’ he said. ‘And because it is enforced by the government, it is economically viable.

He believes it would be more complicated to be innovative in those segments in the US right now. ‘The bet that China is making is driven towards its people, to the health of its population,’ Meyer said. ‘But it creates a fantastic dynamic for us to get into new applications and materials with a big sustainability focus.’

He added that it is a market that accepts technology much more quickly than is the case in Europe or the US, with a much higher acceptance of challenge.

As an example, Meyer pointed to a new wind turbine made from polyurethane. ‘We have the first pilot windmills working,’ he said. ‘We’ve done it in China and we’ve done it in Europe. It was quickest in China. The combination of innovation power, academics and legislative pressure which makes this economically viable.’

Keep it clean

Power generation and the need to improve air quality have led to opportunities for the large-volume application of polyurethane, as Huntsman’s Pan pointed out.

China is very concerned with atmospheric PM 2.5 particles, which are particles with an average diameter of 2.5 µm and are associated with lung and cardiovascular disease. According to the UK government report ‘Fine Particulate Matter (PM.25) in the United Kingdom, there is a ‘6% increase in death rates per 10 µg/m³ PM 2.5 concentration’.

China is tackling the problem in a very dynamic way. Pan explained that the installation of a pipeline between a power station and the city of Taiyuan in Shanxi Province has significantly improved air quality.

‘Taiyuan has a population of 4.3 m people and the is the coal capital of China,’ Tan said. ‘It is now connected to a power station, which is 38 km away, with an insulated pipeline. This is the longest in China, and includes 15 km tunnel for a district heating system.’

The district heating system pipes have a diameter of 140cm. and are insulated with 10 cm of water-blown MDI foam. ‘In the winter, superheated water is piped to the town’s heat exchangers, where it is re-distributed to 2m people,’ he explained. ‘A second benefit of the project is that 5000 coal-fired boilers have been removed from the town.’

According to Pan, there are about 10 similar projects each year, benefitting about 20m people. He estimates that about 150m people in China have benefitted from previous projects, representing about 10% of the population. ‘A large number of coal-burning boilers have gone,’ he said. And the Taiyuan project has a projected life of 50 years.

District central heating projects in China are booming. ‘This year, we have seen many projects,’ Tan said. ‘We want to deliver more of them in the next five years. Can we save 300m people or 20% of the population? The PM 2.5 situation has been improved.’

Relieve tension headaches

These are positive developments in a country where there is always tension between the demands from the top and what actually happens on the ground. For example, an NGO recently discovered that a number of companies in the rigid foam sector were using CFCs, despite them having been off the market in China for over a decade.

Conversations held with numerous exhibitors at PU China 2018 suggested that the central government is taking environmental protection very seriously. There are tales of investigators being parachuted into provinces unannounced to ensure that laws are being followed.

Markus Eckert, SVP head of business unit urethane systems at Lanxess at Lanxess, explained that his company’s customers are mid-sized companies with specialised applications. ‘This is not an industry which is, from my perspective, heavily polluting or heavy energy using or water resource consuming,’ he said. ‘The impact on our customers has been small compared to other sectors. In those sectors, companies are being shut down from one day to the next because they do not have a wastewater treatment plant, for example.’

He added that Lanxess customers in China make parts and adhesives that neither use much energy nor create much pollution; so the effect of environmental enforcement on them is limited.

‘I don’t say it is zero,’ he said. ‘There are also companies which are affected because they are part of an area which is being closed down. They are in the wrong place.’

Within and without

However, Eckert added, the problem is not just air pollution. ‘The working environment, closed rooms and also interiors are all considered the environment in China,’ he said. ‘Any kind of solvent or free monomer is being watched much more closely than in the past.’

There has been a real push with government regulations to reduce the VOC levels. ‘This is pushing to the industry to use solvent release agents with higher flash point or water and hybrid release agents,’ according to Josep Maria Pelach, commercial and marketing director, Productos Concentrol.

Lanxess, Covestro’s Baule business and Concentrol are all producing materials designed to help the nation meet its air quality goals. For example, Pelach said that Concentrol has opened a technology company in Wuxi, 150 km from Shanghai, to give technical service to Chinese and other Asian customers. ‘For many years, the Chinese market was focused on solvent-based release agents. Now water-based release agents are becoming more relevant,’ he said.

It is not just release-agents where water is making inroads as China’s environment drive takes effect. Eckert said that in the world of polyurethane dispersion in China, there is significant growth, citing a number of reasons.

‘It is more environmentally friendly [than solvent-based products],’ he said. ‘Because of this trend, these products are growing over-proportionally in all kinds of leather and textile coatings and flexible surface coating businesses.’

He believes that Lanxess can capitalise on that in China. ‘First, we have the PUDs and that knowledge; secondly, we have the leather business,’ he said. ‘We have more technical expertise and service here. This develops the business growth and volume. We would like to do more in the future and build on the capabilities we have in Lanxess.’

Elsewhere in the world of CASE, Eckert said that customers are showing increased interest in its Low-free products with very low free content of diisocyanates. ‘They also value that we produce locally in Nantong,’ he said. ‘When it comes to the increasing regulation with a focus on environmentally friendly products, we can leverage developments from Europe and North America in China and support our customers.’

Covestro Elastomers makes both machinery and raw materials for the CASE segment. Its president, Thomas Braig, said: ‘Changing environmental standards and the need for safe handling inside factories are in line with our latest developments. Our low exposure oven helps a great deal.’

On the materials side, he explained that the company can offer alternative systems, such as its Desmodur MDI-based products.

‘This range of materials can produce products with the same properties and processing characteristics as products made with TDI and MbOCA,’ Braig said.

‘It can also simplify materials requirements at processors since they only need to keep track of three to four products, instead of more than 10 with TDI-MbOCA systems to cover the same range of hardness.’

Covestro was using PU China to promote its Desmopan TPU + Desmodur Cast Pu composite solution and Desmodur MDQ75 system. These are designed to exceed high performance rubber in mining applications.

He added that the final product is still competitive against rubber because conversion costs are lower. ‘This is because productivity is higher and energy consumption is lower than with rubber parts,’ he said. ‘Our high-performance oven enables processors to pre-heat materials twice as fast as conventional ovens without extra energy consumption.’

Eckert from Lanxess claimed that raw material prices were an issue at the lower end of the polyurethane elastomers market. ‘Customers have a choice depending on the rubber price and the polyurethane systems price,’ he said. ‘There were times when the raw materials were cheaper, and it was easier to compete at the lower end. But this is not our business focus.’

Remain cautious

One way to measure the optimism of a nation’s polyurethane industry than by asking a machinery company about the market.

Wong Lee Meng, managing director of Cannon Far East, said, ‘With five more months to run in the financial year we are on line,’ he said. ‘We had a couple of good projects now, and if we strike hard we can reach more than last year.

‘In general, refrigerators are still very strong, with 50 plants this year and a number of single machines sole is higher than last year. The growth of automotive in China is this year is still positive, but the growth is lower than last year. Our seating carousel plant is full to the end of the year.’

Stafano Andreiolli added a note of caution, though. ‘There are three reasons for concern: tight money control, the trade war with the US, and the second half of last year was less brilliant than the first,’ he said. ‘But at the same time, there are reasons to be optimistic. The first half of this year was better than last year. The momentum could carry through if there are no external threats from the trade war coming through.

Investment is being delayed. We have already heard Europeans withholding investments to understand the right place to invest given duties and tariffs.’