A year ago, resin company executives were faced with rising raw material and crude oil prices and political instability. Still they remained upbeat, predicting a turn in the economy by the end of the year. Unfortunately, one year later, the market seems to be at a standstill, leaving suppliers more cautious about 2004.
What also remains the same for resin suppliers is their customers' desire for improved products, but not higher prices, To be competitive, resins manufacturers are finding it imperative to offer a roster of compliant, flexible and cost-effective products and more tech support-all while dealing with their own escalating production and manufacturing costs.
Review and Forecast
For the most part, the resins market in 2003 was lackluster, with some segments stronger than others and some suppliers faring better than others. Companies Coatings World spoke with are cautiously predicting an improved market in 2004.
"Basically, our business was flat last year, " said Cindy Fruth, market manager, polyols powders business, Johnson Polymer. "We are starting to see some markets rebounding. We are anticipating moderate growth in 2004."
"From a volume standpoint, 2004 looks like it will be an improvement over 2003," said Chuck Mateer, marketing manager, SMA and Ricon resins at Sartomer. "Activity, both commercial and developmental, is heating up."
Richard Sabatine, vice president-coatings, Bayer Polymers LLC, said that the market, which began to weaken in the second half of 2002, "continued to be sluggish over most of 2003. However, demand started to improve in the fourth quarter of 2003 and has continued even stronger in the first months of 2004." Encouraged by early numbers in 2004, Sabatine added, "Overall we expect a good year in 2004."
"From a sales perspective, we've had a strong year," commented Christopher Baile, business manager, Nacan Products Ltd., which sells resins for architectural paint, a bright spot for the coatings industry in 2003. "While there were some weather-related issues, for the most it was a good year. In 2004, we are expecting continued growth. We're hoping that any sales that were lost last year due to the weather are regained this year," Baile said.
VOC regulations remain a top priority and coatings formulators are much more savvy in their approach to achieve compliance.
According to Fruth, paint companies are being proactive in their effort to be ready for near- and longer-term VOC requirements, but they want to get there without sacrificing performance. "Our customers are saying 'we want 250 grams per liter today, 100 grams per liter in two years-and we don't want our customers to recognize they have a different product'," Fruth said.
While paint companies are heading in the same direction toward reduced VOCs, what route they take to compliance varies. Some are sticking with what they know, others are more open to new technologies.
"It is very market specific," Fruth said. "There's not one solution; customers are taking different approaches. We are working on customer needs by looking across the entire supplier chain. Can we provide them with lower cost technology or how can we take cost out; it depends on the chemistry they are looking at."
The effort to comply with VOC regulations without sacrificing quality has created a heavier workload for paint chemists who are already under tremendous pressure. Consolidation has taken its toll on R&D departments throughout the paint industry and resins suppliers have been picking up the slack.
"The days of large R&D department that can screen new products are gone," said Mateer of Sartomer. "We are spending more time evaluating new materials before they go to market. Customers are seeking solutions, not just products."
"Customers are running leaner," added Fruth. "They are saying we'd love to work on it, but we don't have the people. They are looking for more support. In some cases, we are giving them finished formulations."
Baile said that Nacan's technical group is now mobile, enabling its own chemists to be placed in customer labs to assist them with formulation work ranging from short-term projects such as reducing costs without sacrificing quality to longer-term projects such as readying formulations for future VOC requirements.
In addition to low VOCs, requests also center on improved durability and chemical and stain resistance. The problem is, customers want these improved properties without additional cost.
"That's something we are struggling with," Fruth said. "When you go to lower VOC, it requires different technology, and that means more expensive technology."
According to Sabatine of Bayer Polymers, it's about value. "Customers are looking for products or technologies that bring value, for example, lower raw material costs or lower total formulation cost; lower film builds or reduction in overall coatings layers; increased productivity or reduced application costs." Secondly, customers are seeking products to solve existing problems or meet a specific performance requirement. "A third consideration," Sabatine added, "would be ecological benefits, VOC reduction, waste elimination and ability to recycle. These are the areas where Bayer is focusing our new product and technology developments."
Resins suppliers are offering targeted technologies for paint customers seeking both value and performance in areas such as low VOCs and increased chemical and stain resistance.
Launched at ICE 2003 in Philadelphia, Sartomer's Krasol HLBH-P 3000 is a hydroxyl-terminated polyolefin with a molecular weight of 3000 that is used in polyurethane systems. "This resin brings extreme hydrolysis resistance (water, steam, acid, base), good adhesion, low Tg and improved weathering to coatings applications due to its saturated backbone," said Mateer.
Air Products launched two new resins in November, Hybridur 870 and 878. 870 is an NMP-free, cost effective, waterborne, urethane-acrylic hybrid dispersion for one-component high performance coatings. Featuring fast dry capability, weatherability, hardness and toughness balance, chemical resistance, and adherence to multiple substrates, Hybridur 878 is an NMP-free, cost effective, waterborne, urethane-acrylic hybrid dispersion with performance attributes similar to Hybridur 870. Hybridur 878, which is low odor, delivers higher hardness in applications including wood flooring and plastic and metal business machine coatings, according to Air Products.
Ruetgers Chemicals AG, Duisburg, Germany, has launched a pair of resins under the Novares banner. Novares XC 52 is a low viscous unpolar liquid resin for the modification of 1K PUR-systems and as carrier for the production of pigment pastes as well as substitute for plasticizers/phthalates. Novares LA 100, a liquid resin developed to meet the latest market demand for low VOC or solvent-free coatings, sealants and adhesives, has a low viscosity that enables companies to reduce or avoid solvent or plasticizers in formulations based on epoxy, polyurethanes and polysulphides.
This month, Johnson Polymer will introduce an acrylic emulsion, Joncryl 1917, that exhibits better water resistance and block resistance for hardboard primer applications. Fruth added that her company continues to build off its self-crosslinking emulsion platform and will launch new products in this area. In addition, with the continued focus on meeting VOC regulations, Johnson Polymer is planning "quite a few introductions of emulsions and polyols throughout the remainder of 2004," Fruth said.
Eliokem's newest products also include Pliotec PA90 resin, a waterborne acrylic latex designed specifically for high performance concrete sealers, stains, and pigmented masonry and garage floor coatings, and Pliotec CR78 resin, a specialty acrylic copolymer latex used for the formulation of tough coatings for industrial facilities that require chemical resistance, as well as broader applications such as garage floors, swimming pool decks and other areas susceptible to moisture.
Nacan's newest products include Vinacryl 8961, a self-crosslinkable, all acrylic polymer designed for low VOC, low odor interior coatings in a wide range of PVCs from semi-gloss to flat. The product delivers excellent stain and block resistance, as well as good wet adhesion, gloss and water resistance. Nacan also offers Vinamul 4302, a vinyl-acrylic, low VOC latex designed for low odor, interior coatings. APE-free, it requires no coalescing solvents to form a continuous film at low temperatures, according to Nacan.
Akzo Nobel Resins' Setalux 37-6770 (styrene-acrylic) and 37-6779 (all-acrylic) are self-crosslinking emulsions based on patented technology that offers the benefits of quick dry, good block resistance, early blush resistance and chemical resistance. Both can be used in low VOC formulations, with Setalux 37-6770 suited for general industrial and industrial maintenance applications and Setalux 37-6779 designed for primers and stain sealers for deck coatings and other specialty architectural applications. Setalux 17-2450 is a hydroxy-functional acrylic polyol for two-component vehicle refinish applications. Designed for fast curing clearcoat or single-state paint applications, when combined with appropriate aliphatic polyisocyanates, Setalux 17-2450 provides fast cure with a longer pot-life for excellent application and appearance properties and the excellent attributes of DOI. It also has excellent early hardness development and is buffable in a couple of hours, according to the company.
The Business Side
Boardroom decisions are also shaping the resins market. Companies are expanding their operations geographically and physically in an effort to remain competitive.
Soluol, Inc., the privately-held manufacturer of water-based and solvent-based polyurethane resins and coatings, has acquired Noveon's solvent-based polyurethane resin products. The acquired products-which are used in paint and coatings as well as graphic arts and textiles-will be integrated into the existing Soluol product lines.
Warren Simmons, Soluol president and CEO, called the acquisition a "natural fit" for the company as it reinforces the organization's commitment to urethane chemistry and allows Soluol additional opportunities to expand this business. "This acquisition provides us with an opportunity to further enhance our full range of water and solvent urethane capabilities to our customers," Simmons added.
BASF Coatings is planning to expand its existing resin factory at its headquarters in Münster, including installation of an additional production line for cathodic electrodeposition (CED) paint resin. The factory, which has been making resins since 1978, embarked on a continuous production cycle more than a decade ago. "This investment will increase the competitiveness of our coatings business and is a boost to the Münster site as a whole", said facility manager Gerd Kissau.
BASF's Münster expansion plans came only a few months after BASF unveiled plans to retrofit an existing manufacturing plant in Wyandotte, MI to produce Luwipal low-formaldehyde amino resins for the North American coatings market. Manufacturing was slated to begin in the second quarter, according to company officials.
A major concern in the paint market has been the ability to tap into growth markets, and it is imperative that resin suppliers can deliver manufacturing and support where their customers are operating, including emerging markets such as China.
To tap into the hot Chinese coatings market Degussa's coatings and colorants business unit announced plans in December to construct a manufacturing facility for producing coating polyesters at the Shanghai site of Degussa Chemicals (Shanghai) Co. More recently, Degussa's coatings and colorants business unit reorganized its resins business line to more closely align with strategic market needs. The new polyesters business line includes coating and adhesive polyesters Dynapol and Dynacoll, and is headed by Thomas Wildt, former head of strategic projects for the coatings and colorants business unit. Degussa's performance resins business line, headed by Christian Kather, former head of the colorants business in Europe, includes its Vestoplast amorphous polyalphaolefins, Vestowax synthetic waxes and specialty resins.
Bayer has also been expanding into the Asia-Pacific region. Last April, a new plant with an annual capacity of 11,500 tons was brought on line in Caojing, China to produce Bayer's Desmodur N line of aliphatic polyisocyanates. Additionally, this year, Bayer plans to expand its NAFTA capacities for low viscosity aliphatic polyisocyanates and Polyaspartics. "These expansions will allow us to meet the increasing demand for VOC compliant systems," said Sabatine.
Sartomer is another company that has expanded its geographic reach. In March, it opened a new office in São Paulo, Brazil to serve formulators throughout Latin America.
Cost Pressures Continue
Resins suppliers are shouldering more product development and formulation aspects of the paint business at a time when they are under tremendous pressure.
"Cost is our nemesis. Sales have been strong, but in raw material costs, we are seeing record increases in our feedstocks. These are increases that have to be passed on," said Baile of Nacan, which, like other resin suppliers, recently put through a price increase.
"Prices remain under pressure," agreed Mateer of Sartomer. "Our key raw materials continue to trend upward and show little sign of moderating."
Johnson Polymer also instituted a price increase in January, and can't rule out another. "We will continue to monitor it," Fruth said, adding that escalating feedstock prices and rising fuel costs could warrant another price hike later in the year.
According to Baile, the business climate has changed. "In the old days, increases were margin increases," Baile said. "But we are trying to maintain profit levels now. Crude-oil-based material has gone up 40%. Increases like that you can't absorb."
Paint companies are running leaner, and resins suppliers are shouldering more responsibility at a time when their own production costs are escalating.
By Christine Esposito
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