A surprisingly strong start to 2012 may signal some healthy PU growth
Report by Liz White, UTI editor
As we move into 2012, and many in the PU sector look forward to meeting up at UTECH Europe 2012 in Maastricht, Urethanes Technology International took the opportunity to ask industry representatives about the sector’s prospects for this year.
The good news is that they think industry is in a rather better state than you might imagine if you only read media reports about the dire state of the global economy.
The bad news is that no one expects the pricing situation in polyurethanes to ease: high volatility in the prices of feedstocks for materials to make urethanes will continue.
Most PU industry experts UTI canvassed are optimistic that this year will see — not any great surge in growth — but a pick-up in demand.
Some sectors have better prospects than others, with insulation regarded widely as a winning segment to be in.
As Kingspan Insulation’s managing director Peter Wilson put it, “We are pleased that we are in insulation, because we feel that it will continue to generally outperform the market.” For 2012, “we would see a business that in new builds probably will be softer, but hopefully being compensated for by retrofit and refurbishment. Overall we see the market for 2012 showing slight growth compared to 2011.” Kingspan saw “a reasonable level of growth in 2011 versus 2010,” Wilson added, in a 26 Jan interview.
The picture is a little different for flexible foam, as Rik De Vos, new head of the flexible foam business of Belgian group Recticel, commented. He sees “a very mixed picture, with clear nervousness in the market and, as we are in consumer goods [it is] still wary of spending.” In difficult economic times, the furniture and bedding markets are always hit hard early on, he noted.
“For 2012, the first indicators are clearly better than expected from the end of last year,” de Vos commented, explaining that this is despite the “quite dramatic” gloomy scenarios around from end of last year for 2012.
“It is early days to make a judgement, but so far there is a fine balance between hope and concern,” he said, noting a sales pattern which “may be just below last year’s on a very early estimate.” But, he cautioned: “For us as a business I am probably more concerned about volatility of raw materials than I am about market demand.” His main concern is that raw materials pricing volatility is “dramatically affecting overall costs. This is not a minute part of the total cost picture,” the Recticel executive said, in a 31 Jan interview.
De Vos sees “very little room to manoeuvre how to manage the overall quality of our business and I think we need to translate this to the whole value chain.” For Recticel, “one matter here is the time delay between the oil/derivatives rises, where we are confronted from the supplier side with … almost a ‘take it or leave it’ sort of attitude to price changes, and very strong distributors in the end market,” De Vos said.
For Kingspan Insulation, the picture is a little different. In its steel-faced panel business, prices are more directly linked to those of steel.
Also, insulation’s downstream chain is different. One pressure here, according to Wilson, is that, “the house-building fraternity would like to see fixed prices for the whole year.” At a minimum they want three-months notice of price increases. “Needless to say we currently have an industry which is working on relatively low margins, so people don’t like a heavy price increase,” Wilson said.
But, like Recticel, Kingspan is also keen to recover price rises “in a timely fashion. A lot of our contracts would require notice periods.
Announcements at the beginning of the month don’t always sit well with us. We then have to absorb those costs ourselves before we can recover them from customers,” he added.
Extreme pricing volatility in hydrocarbons
Raw materials suppliers put their case on pricing: “What we are faced with in this industry is extreme hydrocarbon volatility,” said Steven English, head of Dow Polyurethanes, noting that 2011 saw “people looking for a bargain when prices dropped and wanting to keep those when costs rose again,” which “caused problems across the whole supply chain.” The sector has started 2012 with a spike in prices, with benzene rising: predictions are that it will continue to go up, English added, in a 25 Jan interview.
This is “another one of those horrible cases where we are being forced to put prices up ...we’re not holding back, we can’t afford to see our margins, which are quite badly squeezed, tighten further,“ he stressed.
Also, oil producers have cut refinery capacity, English said. As a result, “I think it’s going to be more volatility but at higher levels: the first half year will see a big push upwards on prices.” Nick Webster, head of Huntsman Polyurethanes for Europe, the Middle East, Africa and India, made similar points, noting severe pressure in raw materials, which is “not just prices going up and up and up, but extreme volatility.” Webster also said that a graph of the last ten years would show relative stability and sensible pricing, a point Kingspan’s Wilson also made.
Then “it’s like someone clicked a switch in the middle of it, and we went from that to extremes of cost and volatility,” Webster commented.
That challenges Huntsman to ”rethink the way we look at pricing,” but Webster said there are “no magic bullets. It is a combination of how we contract with suppliers, how we manage formulas with suppliers, how we deal with customers, a whole basket of different measures.” “The fact that we went with a price increase in December gives you a pretty strong insight that margins were completely unacceptable,” he said.
Surprisingly strong start to 2012
Most of those UTI spoke to pointed to a surprisingly strong start to 2012. “I am really surprised at how strong Q1 is in terms of demand,” said Webster of Huntsman.
And Webster’s comments on why this is the case were also echoed by other industry observers. “First there has been some restocking of inventory through the supply chains of our customer,” where it was evident at the end of 2011 that they were “working down inventory levels and placing orders as late as they dared.” English of Dow Polyurethanes agreed, saying that in December 2011, “there was a run on polyols and isocyanates,” caused by a “huge push on bedding for customers for the holiday.” No one had predicted this, and “people had run materials supply down, so inventories were low. ... In the run-up for Christmas, they then had to buy truckloads of material at short notice.” Also, Webster observed, “I look out of my window and it doesn’t look like late January,” so building projects have been able to continue.
And finally, Webster made a point many others noted as well “If you read the papers, with the Eurozone crisis and the potential default of Greece, that’s one view. But if you look at the reality of industrial activity and consumer spending, it’s not that bad, it’s actually quite robust.” In this context, John Garbutt, Kingspan Insulation’s marketing manager said: “If you look at official government statistics particularly again in the UK, they would say that life is much worse than it is in reality.” Garbutt feels, “A lot of work is being done under the radar, being done for cash, by non – VAT registered builders because they’re too small — all these builders laid off by the big house-building groups are now becoming one-man bands.” Discussing Eurozone worries, Kingspan’s Wilson agreed that “Of course we have concerns about the financial and political instability of all markets.
That is the reality, and the hiccup in the middle of last year was related to that.
“But I do think there’s a part of the world that just ignores that and gets on and does business, thankfully.” Wilson hopes that insulation, year-on-year, … will “be relatively flat, with contraction in new build and government related spending on construction being compensated by initiatives on energy efficiency.” “Overall that’s the same model wherever we trade. We believe insulation will do relatively well. Are we saying the markets are strong? No the reality is the UK is only building 100 000 houses a year when it used to build 200 000, and … today demand is for 300 000 a year. It’s not a buoyant market,” said the Kingspan executive.
The retrofit business has been, “highly beneficial to our product,” and in 2011 this was accompanied by some increase in small projects, extensions and improvements, and oneoff builds, Wilson added.
“The reality today is that we are all trying to manage input costs, also things like distribution costs, transport energy costs, which traditionally was not a strong focus but is now big driver as a significant cost escalator. So it’s more about trying to manage the business well.”
A fair amount of optimism
English of Dow Polyurethanes said he thinks 2012 will see continued steady growth back to a higher consumption rate, starting slowly and then picking up.
North America has seen “some green shoots of recovery,” in housing starts. If the construction markets really pick up, that will “kick start the growth we’ve all been waiting for the last five years,” he added.
In Europe and North America Dow is seeing “good orders: In North America we are allocating polyols, because we are inundated with orders.” In Europe, construction is more related to refurbishment and do-it-yourself also, that’s where a lot of effort is being put, with “people talking about 18-19 percent growth in the refurbishment market last year,” English said.
There has been a boom in spray foam applicators in both North America and Europe, he added.
He feels it’s possible that, “at some stage 2012 may see a recovery to 2007 levels in construction,” – not to the highs of 2004/5, but to better levels than now.
Also, the shoe business seems to be booming in Europe, in Spain and Italy. “We are running one plant extremely hard at the moment, just for shoe uses,” English said.
Furniture and bedding continue to show good growth, and at the moment “all the signs are that it will continue, we are seeing health here in Europe, North America, Latin America,” English commented.
English also thinks there is a consensus that for Asia and China, 2012 will be a time of recovery. China no longer has double digit growth, this has dropped to 7-8 percent, but while China is down, in the rest of Asia growth is rising, English said.
China’s government is still operating an austerity programme, trying to control spending and inflation, but this is less emphatic than in mid-2011, he added.
Bayer MaterialScience said 2012 started with a stable market for rigid foam: “We expect a reasonable growth for the rest of the year in EMEA, based on current forecasts,” with further strong growth for flexible foam in Africa and the Middle East, and a stable market in Western Europe,” BMS said, in written answers to UTI’s questions.
In systems, sales at BMS were quite strong in construction and automotive in Europe in 2011. BMS expects automotive to be a strong market well into 2012, including flexible foam for car seats, which it said also will also benefit from “healthy development of the car industry.” At BASF, Raimar Jahn, new president of the polyurethanes division, said that for 2012, “We see raw material prices going up and putting pressure on our profitability. The target for this year will be to come back to healthy margin levels.” BASF is also waiting for Asia to return to better growth, once government actions take effect, said Jahn, in written answers for UTI.
Other commentators spoke of the effect of the slump in Asian demand in the second half of 2011, with Dow’s English saying demand “slowed in all segments except appliances in Asia Pacific.” Machinery maker Cannon also noted China’s “major interest in energy-efficient domestic refrigerators.” Here, “we are applying the new vacuum-based new foaming technology,” said Davide Lucca, sales manager of Cannon Afros.
Thermal insulation uses are “our driving force almost anywhere, and we see the same trend for 2012,” Lucca added.
But he cautioned, “The push of China in this sector has been dramatic in the past two years and cannot reasonably continue at the same rate of growth.” For 2012, BASF expects “solid growth in all PU relevant markets, especially in construction and in automotive/transport,” said Jahn.
Flexible foams focus on technical outlets
Major US flexible foam group FXI has its market firmly in North America, and thus has no immediate concerns relating to the Eurozone crisis. New chief executive officer John Cowles said FXI itself is in a strong position. But, “Right now we’re predicting slow growth [in 2012] and will continue to see this over the coming years as the consumers work off their excess leverage,” he said, in a 19 Jan interview.
“So we continue to ... make changes inside FXI to ensure FXI can be competitive in a market with low growth.” Cowles said FXI has invested in the technical foams side, “to ensure our product and delivery are superior,” with the company launching some new consumer products. “We’ll continue to put emphasis on providing solutions to our customers driven by innovation, and excellence in our technical foams areas.” The flexible foam business is split between commodity areas — for the consumer market and the automotive business — and the more specialist technical foams, which is where FXI aims to put more focus in future, said Cowles.
Similarly, Belgian group Recticel’s business is a mix of commodity and specialist technical foams. One major push in Recticel’s strategy, to counter the highly competitive, low-margin commodity market in Western Europe is to expand geographically with its technical foam business, “where we can export more easily, distances can be further,” commented Ward Dupont, who has just retired as head of Recticel’s flexible foam business (see box p 26 for more on Recticel’s strategy).
While Italy, like Greece, has been a focus of concern over the Euro crisis, “We don’t think Italy will be worse or better than the rest of Europe, at least in our sector,” commented Lorenzo Brunetti, marketing manager at Italian thermoplastic PU producer API.
While access to credit is tighter and interest rates will be higher, they don’t affect API much, due to its strong financial position, he said.
In the coming tough years, API will use “careful and smart,” management and strengthen its focus on “what we consider strategic in the future — TPUs, thermoplastics elastomers and bioplastics,” said Brunetti.
In Germany, which has a strong PU industry, “We expect a positive and steady, yet still minimal, growth for industry and for the polyurethane sector,” for 2012, said Dr Hans-W.
Schloz noting that “individual markets for soft foam, rigid foam and specialities are developing very differently. The automotive industry will relax a little and not be as high flying as 2011—although here too we are still optimistic.” The soft foam and furniture sectors depend a lot on consumer markets, where FSK also expects a strong increase in Germany.
As almost universally noted, Schloz said, “Rigid foam will continue its positive development in view of energy conservation,in particular in the building sector, but also in refrigerated vehicles, campers etc.” The FSK director noted that investments in the building sector throughout Europe — and in Germany — have been declining for several years, but that there is great demand for renovation. Rigid PU foam will experience “enormous growth” here in helping conserve energy, he said.
And he commented that PU suppliers will be involved in lightweight design in the automotive industry.
For 2012, Schloz said, a big problem is escalating political influences in the Eurozone with credit shortages continuing. But despite weakness in Eurozone economies, “Germany, with its worldwide exports and good domestic demand, will develop quite steadily,” the FSK representative said, in written answers to UTI.
Schloz feels price increases for raw materials, especially in Europe, “should be quite moderate.” Healthy German exports and domestic demand should not lead to a national increase in raw material prices isolated from the world market,” he stressed.
Associations focus on energy efficiency
Energy efficiency is high on the agenda of all the PU associations. Not surprisingly the rigid foamers’ European association PU Europe has strong views here: “The main European piece of legislation with a direct impact on building efficiency, the Energy Efficiency Directive, is still far from adoption,” emphasised Oliver Loebel, secretary general of PU Europe.
ISOPA, the European association of diisocyanates and polyols producers, sees the EU’s Energy Efficiency Directive as a “great opportunity” to position PU as a very sustainable material and a solution provider to the climate change challenge, said Dr Wolfram Frank, ISOPA secretary general.
ISOPA’s Passive House Project and its new LCA (life-cycle analysis) study, to be presented at UTECH Europe, are part of ISOPA’s campaign, Frank noted.
And in the US, there is also a strong focus on PU’s contribution to energy efficiency. At the US Center for the Polyurethanes Industry, Lee Salamone, senior director, sees energy saving uses in buildings as one of the growth areas for polyurethanes. She said, “While the housing sector has not fully recovered here, nearly 40 percent of energy in the US is used to heat, cool and operate homes and buildings. Building and homeowners are looking to save energy by using polyurethane building products to insulate and air seal.
So, weatherisation needs could continue to be a source of growth for polyurethanes, as well.” Back in the EU, “Our goal is to oblige member states to develop national building renovation roadmaps with a view to reducing the energy demand of the EU’s building stock by 80 percent by 2050,” said Loebel, commenting that, “while the European Parliament supports this idea, member states maintain their opposition.” Loebel nevertheless feels the European PU insulation industry has “good reason to be optimistic for 2012. The European roadmap towards nearly zero-energy buildings for new build, and increasing requirements for the renovation of the existing building stock will drive the demand for high-performance insulants. The PU industry offers a wide range of products responding perfectly to this demand.” But he noted that Europe’s debt crisis does affect the insulation industry, with government incentives for refurbishment cut or abolished in a number of countries, banks over-cautious in lending money to renovation projects and private funds increasingly scarce. “On top of that, certain countries still face an oversupply of buildings due to excessive real estate booms before the 2008 crisis,” he said.
Global group meeting
In Maastricht, to coincide with the UTECH event, the world’s PU associations are coming together at a meeting of their global coordinating group.
Salamone emphasised CPI’s involvement in addressing this “critical need” for polyurethane associations and companies.
“We are no longer acting as separate regions; the interconnectedness of the global economy and global communications has made working together on a global basis ever more critical to the success of the industry,” she said.
ISOPA, will participate in this third global meeting “to have an exchange on global issues like product stewardship, sustainability and communication and intensify our cooperation on these issues, said Dr Wolfram Frank, ISOPA secretary general.
While these associations are working at a global level, the FSK, mainly representing processor companies, has a different focus in its networking activities, where it seeks to have “intense contact with customer and related industries.” The FSK’s aim here is for “a lively exchanging of thoughts and ideas” on environmental matters, production and energy efficiency, political issues and active exchange in technical matters, to aid development of the industry.
This year the FSK is celebrating its fiftieth anniversary, Schloz said, noting also the 75th anniversary of Otto Bayer’s discovery of polyurethane, which will be celebrated during the UTECH Europe conference, and also at the FSK annual meeting later this year.
The FSK heads into 2012 with a meeting in Northern Italy, continuing its communication and exchange plans across Europe.
In the US polyurethanes industry, Salamone sees “a number of avenues of potential growth, for instance, the lightweight automotive sector has shown some recovery in the US.” PU processors continue to innovate with lightweight materials that can help fuel economy, and “these exciting innovations could help the American automotive sector continue to move ahead in 2012,” Salamone added.
CPI represents the rigid PU foam sector, including makers of board stock, sealants and one component foams, as well as spray polyurethane foam — a market which is increasing. In 2012, Salamone said, CPI will release data on spray foam sales in North America by region and type of foam from 2008 through 2011.
Salamone said CPI “continues to focus its efforts on issues that contribute to the sustainable growth of the polyurethanes industry in the US. Our plans for 2012 include advocacy and product stewardship on raw materials used in the manufacture of polyurethanes, promotion of the use of polyurethanes in various end markets.” Frank noted that for ISOPA, 2011 was “strongly marked for our members by follow up work for REACH (update of chemical safety reports, electronic safety date sheets ) and preparation for the next volume-band registration in 2013.
The ISOPA representative also highlighted the key activity of communication “to show how PU fulfils society’s needs, in a world that “shows more and more signs of chemophobia.” Loebel also commented on chemophobia’s “potentially negative effects on the position of our products in the market.” And PU Europe is also sponsoring LCA studies “to prove that PU has a similar environmental performance than other major insulants when measured at the building level.” Loebel said a significant number of EU regulatory initiatives progressed in 2011 with a clear focus on environment, health issues. He noted breakthroughs in the former two areas, despite the slow progress with the Energy Efficiency Directive.
Schloz commented that, in the long run recycling and reuse will also be an important factor, particularly in view of the shortage of raw materials and high prices.
Rik De Vos at Recticel also emphasised that sustainability and recycling will prove to be major issues for the flexible foam sectors in coming years.
“Post consumer flexible foam recycling is another theme which is part of Ward Dupont's future role at Recticel fitting nicely with his mandate as Europur president,” he said.
SUPPLY TIGHT IN MID-2011
In mid-2011, the PU market went short: for 3-4 months, “there were customers who couldn’t find what they were looking for anywhere,” said Webster of Huntsman.
Dow’s English thinks this tightness resulted from various force majeures, as well as a lot of maintenance shut-downs. That is partly related to the fact that, “the scale of TDI and MDI plants is enormous, 300-400 kilotonnes-per-annum plants,” he said. “When you turn around a polyol plant of 3-4 ktpa capacity, you are taking out a plant that is 5 percent of world output,” he said.
Couple that with a few force majeures and “you could have 15 percent of world output down at any one time,” English said, adding that propylene oxide was also in short supply.
Tightness for MDI in the first half of 2011 was confirmed by Bayer Material Science, who saw robust growth for MDI in EMEA. In H2 2011, “demand dropped slightly,” the company said.
For TDI, Bayer said sales also increased at the beginning of 2011 in EMEA, but demand then dropped “between April and August, and new TDI capacities supported a strong price decline from mid-2011,” BMS said, noting that this trend now “seems to have come to an end.”
2011 — A YEAR OF TWO HALVES
At Kingspan, 2011 turned out to be reasonably successful, with a strong first half. “The third quarter I would say was a little bit disappointing, but then we came back with a bang with a strong final quarter — partly down to a particularly benign winter,” Wilson said [speaking before the freeze hit Europe].
He ascribes the disappointing third quarter to “the nervousness of global economies.” Wilson said Kingspan in the end “had no problems sourcing materials. ... The wobble midyear probably relieved some tightness,” he added.
Kingspan, saw prices increase at the beginning of the year, then saw slight softening,” in Q3, “but are now seeing a correction back to prices which were in place at the end of Q2, beginning of Q3.” Most commentators agreed that 2011 was a year of two halves. For example, Huntsman’s Webster, speaking only about the EMEAI markets, said 2011 was a mixed year: “Overall if I look at the market, the positives outweigh the negatives.” One big positive is the “really robust growth we saw in the now emerged newer economies in Eastern Europe, and elsewhere. For me, I see those economies as really coming of age,” Webster said.
He also sees a “gathering momentum and growing and diversifying of the whole insulation area. This is not just PU insulation, but all types, and this growth is happening, while “overall construction as a whole was steady,” Webster said.
Raimar Jahn of BASF’s polyurethanes division, said BASF’s PU business had a “great start” in 2011, with sales volumes improving in all areas, driven by higher volumes and prices, an effect most pronounced in Europe. BASF successfully raised prices for MDI, polyurethane systems and polyols, while TDI prices were slightly lower.
“Unfortunately this ... did not continue in the second half of the year, as margins came under pressure, especially for our basic products business,” Jahn commented. The main drivers for this were declining selling prices and high raw material costs for benzene, propylene and toluene, Jahn added.
He noted also that demand, “especially in China, has been weaker than expected.” As a result of “erosion of polyurethane margins in all regions, we had to raise prices globally on all polyurethane products,” Jahn continued.
BMS painted a similar picture, with strong demand for both rigid and flexible foam in EMEA in the first half of 2011. Rigid foam demand dropped significantly in H2. “Price increases allowed Bayer to compensate in part for high raw material prices, thereby increasing sales in EMEA in the two-digit percentage area over the year,” said the company.
For flexible foam, summer was weaker, but demand at the end of 2011 was “very strong, a trend which continues ... due to a robust demand for slab material, and ... a strong market for mattresses,” Bayer said.
BMS noted that, for MDI and TDI, high raw material costs and price declines in H2 2011, “had a significant impact on our EMEA business.” The company stressed that it “will use all business opportunities, including but not limited to further price adjustments, to turn this trend around and to increase our profitability again.” The FSK’s Schloz said, “from our point of view, the greatest success in 2011 was the fact that the decline in 2008 and 2009 was more than made up for and ... markets developed excellently.” But, he noted, “raw material prices also increased, and energy prices ... have become a main topic.” Dow’s English commented that, “Overall, business was better in 2011 than 2010, with a continued slow but steady recovery from the low point of the recession in 2009.” He looked at Europe and North America together, “because they both showed good growth and were in relatively good shape,” saying ”furniture and bedding had a good year. Appliances were very stable in both regions but in construction there was some weakness.” Here the refurbishment market has been booming. English said: “If you talk to any of the major players in construction that’s’ where the focus has been,” with DIY also booming.
Latin America showed strong continuous growth, and is a market in relatively good shape, the Dow Polyurethanes boss continued.
English also noted that, “One spot in regional weakness in 2011 was Asia Pacific,” with slowing demand across all segments, “apart from the appliance market, which remains healthy.” This means, “If they’ve been having double-digit growth, it’s probably into single digits now,” and English commented that, “with all the capacity in the region that led to some export of raw materials.” As a result, in 2011, English said, the business saw “great parcels of raw materials appearing at distressed prices, as I guess people tried to balance their plants across the whole region.” The year also had two sides for machinery maker Cannon. In developed markets, demand for specialised applications surged. ”We developed interesting solutions for window frames made in different ways, or for glass-reinforced structural parts to replace iron manholes in the road industry, said Davide Lucca, sales manager of Cannon Afros.
In emerging countries and for traditional applications, Cannon “experimented once more with the importance of a strong local presence, with service teams close to our customers to help them fulfil demanding production schedules.”
INVESTING IN FOAM IN US
US foamer FXI has the capital to make strong investment and “opportunistically pursue acquisitions that can provide better solutions,” said John Cowles, new ceo of the foam operation. He did not give further details.
“One of the things we would like people to understand is that FXI right now is in a strong competitive position that enables us to make considerable investment in recent years such as in the R&D facility, in pour-line capability, IT and customer solutions,” Cowles said.
For FXI, “2011 was a very strong year in all measures … So while 2011 was a difficult environment, we performed well.” Cowles said business was strong across the board, in all markets, with automotive and furniture and bedding all going well. FXI had a very strong back half of the year and “we rode nicely with that overall environment.” FXI’s new R&D facility, at Aston, near its HQ at Media, Pennsylvania, will be ready in Q1 2012. That will help FXI “continue to drive through innovation and development,” said Cowles.
“We’re going to continue to see a very competitive market, and will need to be a very strong company to compete,” he noted, adding, “I think we will grow faster than the economy.” FXI was formed from the bankrupt Foamex operation: “I would say it was always a strong company, just with too much debt. Bankruptcy released the debt, and “what remains is a healthy company,” in an economy that is beginning to recover, Cowles said.
The key now is to satisfy customer needs “with products that are specialities not commodities, because when you get into commodities that’s the one that’s going to has the toughest time rebounding,” Cowles said.
“If you’re providing a solution that enables you to have greater value across the board, you’ll be able to withstand the downturns and meet the competition stronger.”
FLEXIBLE FUTURE STRATEGIES
During 2011 Recticel has been restructuring in flexible foam, closing three plants in Spain and one in the UK (Carobel), said Ward Dupont, who has just retired as general manager of Recticel’s flexible foam business.
It also recently announced the closure of a Dutch site, and one for its Eurofoam joint venture with Greiner Group, in Germany (see news p5).
“These events indicate the reality of the foam sector in Western Europe, at least for us.
We have too many plants, and a lot of business has moved to Eastern Europe, leaving overcapacity in the West,” said Dupont.
“Such closures are painful socially and increasingly expensive financially,” he added.
Dupont’s successor Rik De Vos sees Recticel’s dependency on a portfolio made up partially of commodity and partially of differentiated products as one of his challenges.
Recticel “will continue to invest further in its corporate innovations department to develop the next generation of new products which will allow us to step away more and more from the commodity end of our activities,” he added.
Certainly in Western Europe, “more and more it is just not feasible to continue to make more commodity products,” he added. Recticel also needs to benchmark its footprint versus the competition — in Western and Eastern Europe and from other continents, De Vos said.
Recticel is developing this new business model, of moving its technical foams business into new geographic territories, developing business in China, North Africa, Latin America.
Recticel has a converting operation in China, in Shanghai, and started up a new unit in India in 2011.
It has set up a sales office in Morocco to handle its fast-growing business.
The China unit is using material imported from Belgium or bought locally. The group is still evaluating options for further expansion here, and examining whether to establish a foaming operation in China.
“We cannot compete on the commodity end by expanding geographically, and hence have chosen to try for geographic expansion on differentiated products, where our technology platforms can give an opportunity to grow,” De Vos emphasised, noting: “That’s probably not everywhere in the world. Recticel is looking at markets such as China and India, which have a strong industrial base, sufficiently developed to offer opportunities for a technical foam range.
“China fits that picture, India fits, but I am not sure Brazil is yet the same,” said De Vos.