Engineering Thermoplastics Supply-Side Rationalisation

Large scale changes are taking place in the production and supply of engineering thermoplastics in Europe. Changes that will impact the way suppliers and customers do business in the future. Three specifics issues are reviewed in the presentation.

1. Global Competitive Environment

In 2005 the top ten global chemical companies (excluding any oil interests) were: Dow Chemical, BASF, Shell, Exxon Mobile, Total, DuPont, China Petroleum & Chemical, Bayer, BP and SABIC.

Major suppliers such as these are becoming increasing selective when choosing to work with existing and potential new customers. As such, smaller companies will experience great difficulty accessing them unless they comply with business service standards now defined.

2. Restructuring & Rationalisation

Total acrylonitrile butadiene styrene (ABS) resins sales in Europe are now concentrated across three large and two small native producers and a few major importers from Asia. Only ten years earlier nine European producers existed.

ABS sales in 2005 amounted to around 740 kmt of which approximately 80% was supplied from European assets with remainder imported by Asian producers.

A consequence of the producer rationalisation is that the main “European” marketing emphasis has shifted away from full-service, broad product portfolio supply of compounded products to sales of a few standard grades in natural.

Most major producers now promote, almost exclusively, self-colouring of natural grade ABS resins with colour masterbatches.

The single exception is Lustran Polymers - a business unit of Lanxess.  Lustran Polymers recently launched a new global marketing initiative – “The Colorful Difference” to promote their expertise in producing ABS pre-coloured compounds.

3. Demand-Side Implications

On the demand-side, processors are increasingly adapting to the limited supply of pre-coloured ABS by switching to self-colouring technology.  Many have expressed a positive endorsement of self-colouring ABS sweetened by the compelling economics delivered from a successful implementation strategy.

Others are unhappy about the increased burden they now shoulder for managing colour quality – once considered the responsibility of the resin producer - in addition to all their other concerns about remaining competitive.

OEMs continue to challenge the demand-side driven by the need to incorporate differentiation into new product lines. Applications requiring specific materials, customised to in-house preference, will become increasingly difficult to source on a historic cost basis.

Specialist compounders will likely increase their share in the overall resin spend at the OEMs effectively replacing the positions once occupied by the major producers.

All processors need to develop plans to handle the extra responsibilities moving in their direction. The skills required to colour – without absorbing increased costs – will become very important for all processors in the future.