By Mike McNulty, Rubber & Plastics News Staff
Akron, Ohio -- A number of urethane manufacturers and suppliers are treading on shaky ground thanks primarily to the global recession.
When the downward slide ends, one manufacturing executive said, a sizable number of urethane companies will have been downsized, merged with other companies, sold or forced to close.
The global meltdown in the polyurethane industry began in November and caught almost everybody by surprise, according to Walt Smith, chairman and ceo of Malcom, Iowa-based ITWC Inc. and Thombert Inc. of Newton, Iowa.
Bruce DeMent II, president and ceo of Alsip, Illinois-headquartered Kastalon Inc., agrees. "It hadn't been good prior to that but it fell off a cliff in November," he said. "The only time it was more dramatic was 9/11."
He doesn't think the industry will come out of the downturn anytime soon because "it's pretty rocky … it seems like all market segments are down. Everybody is feeling it. The Midwest is in the worst shape and the East Coast and West Coast, while doing a little better, are not doing great either."
Smith, who believes the market will show recovery by November or December, has seen one positive sign lately that gives him some hope that the economy is stabilising. Attendees at the recent Polyurethane Manufacturing Association meeting indicated business was bad, he said, but many noted "that they think we've bottomed out and they're seeing some improvement."
He said this is not the time to panic, overact to the slowdown or stray from a proven path for manufacturers or suppliers. His belief is that when an economic storm hits, remain true to sound business practices, continue to look for new technologies to solidify a company's offerings, hunker down, remain lean, conserve cash and stay the course.
The long-time veteran of the industry as both a processor and chemical producer said most successful polyurethane product manufacturers got where they are by being entrepreneurs and innovators. They need to continue to follow that path, he said.
Dow Polyurethanes' Doug Warner believes consumer confidence is a big key to recovery. "The markets that polyurethane products serve -- from appliance, automotive, furniture, bedding to construction -- tend to be leading indicators of consumer confidence," the global business director for Dow Polyols said.
Because consumer confidence is low, "it's obviously having a negative impact on the polyurethane industry as demand for our products has drastically decreased. That said, because our industry is a leading economic indicator, we will also be one of the first industries to benefit once a recovery begins."
So when consumer confidence rebounds, he figures, the urethane industry will see a big spike in demand as firms will no longer delay purchases.
Of late, Midland, Michigan-based Dow Polyurethanes has seen some glimmers of hope on the horizon.
"We are seeing stabilisation of demand -- that's the first good sign -- and stabilisation of pricing," Warner said. "We still have some macroeconomic issues facing the world, be it credit or oil, or political issues, but the bottom line is that the world will emerge from this. It's just a matter of when."
The industry "experienced this in the 2002-2003 time frame when sales year-over-year were flat to maybe even slightly down; then in 2003-2004 we saw double or almost triple the historical annual growth in one year due to a higher level of consumer confidence and positive economic conditions," he said.
• See more on this story at www.rubbernews.com.
A longer version will also appear in the June/July issue of Urethanes Technology International.
PIC: Bruce DeMent II, president and ceo of Kastalon