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June 16, 2005 12:00 AM

Flexible foam industry is “self-destructive”

Utech Staff
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    By David Reed, UT EditorPrague-The Dow Chemical Co. is aware of the squeeze being put on foam makers, claimed Marco Levi, director of sales for thermosets in Europe, with powerful raw material makers on one side, and major retailers on the other. But petrochemical manufacturers are also under pressure, he told delegates at the 9-10 June General Assembly of Europur, the European Association of Flexible Polyurethane Foam Blocks Manufacturers. Even Dow, one of the leading chemical firms with sales over $40 000 million, has a market capitalisation of just over $50 million, far below that of major retailers and oil companies.As a result, there has been low investment in recent years, which is one reason for the current supply difficulties, Levi suggested. Dow has also faced major increases in raw material costs, such as natural gas, which has risen from $2-3 per million BTU (British Thermal Units) to the $6-7 range, he reported."TDI (toluene diisocyanate) is not a sustainable business for us," Levi said firmly, hastily adding that "Dow will stay the course." And to do this, it aims to improve costs. The oil-price connection is hurting: "every $100/tonne increase in toluene price is equivalent to $65/tonne for TDI," he explained.In any case, "the flexible foam industry is on a self-destructive course … increasing capacity even when returns are low," he warned the more than 170 delegates present, before giving a few tips as to how the flexible foam industry should respond.His own company was already pursuing a wide range of options to support the PU sector, he continued, including:• Restructuring to cut costs;• Decreasing logistics costs; and• Margin management: balancing prices and volumes.In addition, Levi continued, Dow is engaged in research and development work to support the flexible foams market, helping it "to realise large gains from the use of PU chemicals by increasing yield, quality and foam performance."More specific actions include Dow's introduction of the Voranol Voractiv materials: polyols with some amine/catalytic function built into the structure; these allow users to reduce the amount of amine catalysts added in processing as well as cutting emissions from the final products, he explained. The firm has also developed PU dispersion technology in recent years, cutting solvent use in many applications and, since 2001, Dow has been actively developing a process for making polyols from natural resources. A pilot facility is in operation to support the firm's own development and some customer trials, and this is now ready for "the next step up," Levi said.This could help customers get away from the petrochemical pressures, he suggested. Dow is also involved in a joint venture in the People's Republic of China, developing a feasibility study of a process for making olefins from coal.While the current concern is the spiralling rise in the price of oil and derivatives, Dow is also worried that "new crackers yield only 2 percent of propylene, so supply will tighten, by 2010," Levi said firmly. Propylene is the main precursor of polyether polyols, and "every $100/tonne increase in the cost of propylene leads to a $70/tonne increase for polyols," Levi pointed out.But "the TDI business is cyclical, so prices will rise in the next weeks, months, years … " he warned."

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