After a mostly successful but subdued 2012, the PU industry is looking to 2013 with confidence and pragmatism
By Louise McHenry, senior reporter
For many in the polyurethanes industry, 2012 was a year of struggles with pricing volatilities and slow but mostly stable growth. This pricing challenge is expected to continue into 2013, though companies are looking to the future with a tentative optimism in a market often surrounded by uncertainty but recognised for its ability to adapt and innovate.
“The scale of volatility was unprecedented [in 2012],” Nick Webster, vice president EAIME, Polyurethanes, Huntsman told UTI in a 30 Jan telephone interview. This defining factor of the past year was more marked than ever before. “I don’t think it was a one-off thing. We are moving into a world where some of the key materials that we’ve based our industries on are getting more expensive,” Webster commented.
Huntsman, which makes MDI- (methylene diphenyl diisocyanate) based polyurethanes amongst other differentiated chemicals, uses benzene as a key raw material. Webster noted that benzene is a global market, though with regional overtones, affected for example by the price of US shale gas, which is “having a very profound effect on the whole upstream balance of materials.”
Though pricing volatility has always been something of an issue, Webster believes that in 2012, the world has changed dramatically, and this is a challenge for all, not just the polyurethanes market. He added that it places pressure on the whole value chain as companies attempt to get the right level of return to deal with price increases and volatility. “I can still remember when it used to be quarterly prices from materials and that’s long gone,” he said.
Joachim Wolff, head of the Polyurethanes business at Bayer MaterialScience, added that BMS also found that material prices remained on a high level throughout the whole of 2012 and were “characterised by high volatility in different regions.” BMS was able to adjust prices, and to compensate – at least in part – for high raw material costs, he said. In 4 Feb email correspondence with UTI, Wolff noted that he expects a similar situation in 2013.
European challenges
Europe was a challenging market in 2012, though this varied by region. Both Wolff and Webster noted that conditions in southern Europe were still difficult but Western Europe remained reasonably steady. Webster noted that in “the UK-and German-centred world” business was “reasonably robust,” partially because these are the traditional heartlands of some of the main PU outlets, such as insulation and automotive.
In Eastern Europe, there is significant growth. “I can see the date not so far from now when [these markets] will be the same size as the markets in Western Europe. Fundamentally they are growing faster so it’s a matter of time,” Webster said. In 2012, Huntsman completed the hundred-percent acquisition of a systems house in Russia and bought a systems house in Turkey. The Huntsman executive said that these acquisitions are important building blocks for developing a sustainable position in the areas, transferring and adapting technology to local needs.
For BMS, Russia is continuously making good progress; the company inaugurated a new systems house near Moscow in 2012, Wolff said. For Europe as a whole, BMS expects the market to grow only slightly in 2013, supported by the increasing usage of polyurethanes in insulation. The company is preparing for future demand however, with increases in isocyanate capacity. The chemical giant received approval from the city of Cologne for its 300 kilotonnes-per-annum TDI (toluene diisocyanate) plant in Dormagen, Germany in January, and it plans to increase MDI (methylene diphenyl diisocyanate) capacity at its Brunsbüttel, Germany site from 200 kpta to 420 kpta. Wolff also noted further capacity increases through debottlenecking of MDI plants in Baytown, Texas and Shanghai.
Tooling and equipment company Frimo Group GmbH expects stability in Europe in 2013. It celebrated its 50th year in 2012 by expanding its product range, and developing a flexible plant concept for making seat cushions for passenger cars, according to Armin Daniel, technical director for PU equipment and machinery. Several of these PURe floor systems are under construction and will come into operation in 2013.
Lotte, Germany-based Frimo claims to be the market leader in tooling for semi-rigid PU, and has been making strides in mixing and metering equipment in recent years. The majority of its business, about 90 percent, is in automotive. “[In 2013], we see Europe on a constant level for automotive products such as instrument panels and interior trims,” Daniel told UTI in a 4 Feb written statement. Daniel added that Frimo sees growth potential in areas such as seat-cushion production and carpet backfoaming, “as well as with the implementation of equipment using innovative process technology along with PUReLiner (release-agent-free foaming) or silicone skin (Dummyhaut).”
Looking to Asia, Daniel said Frimo expects fast growth in the Asian market, “where we have already localised our standard PU tooling and machinery equipment in our Shanghai-based production facility.”
China slows
However, in 2012 chemical companies noticed a slowing of growth in China. Dow Chemical Co. ceo Andrew Liveris noted in a 31 Jan news release that in the second half of the year, the company saw “significant deterioration in the markets we serve, particularly in China.”
Wolff noted that for BMS “growth of demand was lower than predicted,” in China but that business developed fairly well in south-east Asia as a whole.
For automotive acoustics company Autoneum, sales in China were impacted in the last quarter of 2012 by the decline in sales to Japan, which it said was “a consequence of political tensions between China and Japan.” The company did not give 2013 outlook in its 1 Feb interim annual report.
However, for BMS Wolff noted that he expects China to “regain strength, in particular for insulation applications,” in 2013 and BMS has prepared for this momentum by setting up a new systems house with a focus on insulation in North China.
He added that India continues its “almost unrestricted growth,” while Webster agreed that markets such as India and the Middle East were becoming a “bigger and bigger part of the overall picture.”
For Dow’s Performance Materials business, which includes polyurethanes, it reported price and volume declines in Europe, Asia Pacific and Latin America in Q4 2012. However double-digit volume gains in polyurethanes drove sales growth in North America.
The company also noted in its annual report that there was a decline in propylene oxide / propylene glycol sales, driven primarily by lower prices in all regions.
Liveris said the company “enters 2013 squarely focused on driving earnings growth,” and that its investments in Sadara and the US Gulf Coast will help achieve this.
Growth in Americas
In the Americas, Wolff said the US did well for Bayer last year, while in Brazil, the market is expected to remain on a high level of growth, “which will be supported by the forthcoming sports events in 2014 and 2016” – the World Cup and the Olympics respectively. In response to a question on whether Brazil would become the new powerhouse of the global economy, he noted this would be too optimistic.
Daniel added that for Frimo, South America offers “high market potential” for 2013. He also noted that Frimo expects the US to grow further in the coming year. The company’s US subsidiary, Frimo Inc., told UTI last year that it sees strong potential in the non-automotive market, with plenty of room for growth in the equipment market – metering machines and spray heads for example.
Lee Salamone, director of the US Center for the Polyurethanes Industry, spoke positively about the future of the US market, telling UTI in a 6 Feb email that the building and construction market is expected to be an area of growth for polyurethanes in 2013.
“Recent reports show a positive outlook for the housing market in the US and energy building code updates may increase demand for energy-efficient insulation materials like polyurethanes,” she said. CPI steering committee chair Gerry Podesta added, “The industry also has an opportunity to provide innovative solutions and help meet energy-efficient goals that remain a priority in many sectors and uses.”
CPI, part of the American Chemistry Council, is due to release its Polyurethanes End-Use market survey at its September 2013 technical conference in Phoenix, Arizona. This biannual survey offers “a more complete look at the industry’s recent past and provides valuable insight into what is driving changes in polyurethanes markets.”
Salamone added that the automotive sector will continue to provide opportunities for growth, particularly in flexible foam as automakers seek ways to improve fuel-efficiency of vehicles.
And for companies such as Autoneum, if North American growth continues as it did in 2012, then signs for the coming year are good. The Winterthur, Austria-headquartered company reported a 39-percent increase in sales, which it said “significantly [exceeded] the market boom trend.”
In conclusion, most agree that there is potential for 2013 even if the challenges of oscillating seasonal demand and pricing concerns remain. Webster finished on a positive note, commenting that the fundamental strength of the polyurethane industry makes the business more robust. “Every year I discover just how much space polyurethanes has for innovation, developing and finding new things,” he said. “I’m biased but it really does have space to find new ways to make the products that our customers make it more attractive.”
Tempur-Pedic confident about return to growth in 2013
Premier mattress and pillow maker Tempur-Pedic saw sales fall in the fourth quarter of 2012 and in the year as a whole. However, the company said it was “very confident” about returning to growth in 2013 with a series of new product introductions.
Tempur ceo Mark Sarvary said in the company’s annual report that its performance in the fourth quarter was in line with its projections. He added that the company continues to see signs of stabilisation in the North American market, driven by initiatives launched in the third quarter. Tempur also has plans to introduce new products in the first quarter of 2013.
Internationally, sales fared slightly better. “Our fourth quarter results were consistent with the recent projections, but reflect a softening in demand due to macroeconomic weakness in Europe as expected,” Sarvary commented.
He noted that he remains with “very confident” about the company’s growth potential and strong brand, and it is “very excited” about its proposed combination with bedding manufacturer Sealy Corp.
