Resins Update 2006

By Kerry Pianoforte | April 5, 2006

As raw material prices continue to escalate resins suppliers face another tough year.

As has been the case for the last few years, the resins market continues to feel the impact of rising raw material costs and supply shortages. The biggest challenge facing resin suppliers today is trying to successfully pass on some of these costs to their customers.

Passing On Price Increases

Due to significant increases in transportation, energy, and raw material costs, resin suppliers are forced to pass price increases on to their customers.

"All producers have been impacted, but typically with the commodity type products it is more difficult to pass on price increases," said Heidi Alderman, polymers business director, BASF.

It is harder to pass these increases on in the architectural coatings market because large paint producers tend to have multiple qualified sources for their various resin requirements, Alderman explained. "They tend to be very effective in leveraging their buying power. In more specialized markets where individual resins have more unique performance characteristics, it is easier to pass on price increases because the resins are more difficult to replace," she added.

"The resin industry has been able to pass on price increases, however margins have not been completely recovered," Alderman continued "Particularly in the architectural coatings industry where the Big Box retailers rarely allow their suppliers to increase prices, it has been necessary for the resin producers to absorb some of the increased costs, because their customers simply cannot pass them on."

"Over the last few years, changes in global demand have significantly altered the landscape of raw material supply," said Deborah Hensley, manager of marketing, resins and polymers, Noveon Performance Coatings. "Volatility in capacity, availability and supply has been the biggest challenge recently facing the resins business."

For the past two years, obtaining quality raw materials on a timely basis has been a major challenge. "Because the price of raw materials has escalated rapidly, cost has become a major issue as well," said Paul Elias, business director of specialty products, Sartomer Company. "Though we are currently experiencing some easing of the cost pressure, we are still uncertain about the continuity of supply."

According to Jeff Rodrigues, market manager-industrial coatings, Americas, Cytec Industries, Inc., volatility in raw material costs, and the tight global supply of feedstocks versus demand are the biggest challenges facing the resins market right now. He said the reasons for this trend include the increased demand for oil skyrocketing in India and China, instability in many major oil-producing countries, and too little regulation in futures for both oil and gas.

"We're continually looking for new ways to mitigate the impact of these challenges on our customers," said Rodrigues. "As such, we're taking steps to control our costs, improve efficiencies and optimize supply chain planning."

Another important issue for resin manufacturers is the departure of customers to Asia and other lower cost countries like China, India and Brazil.

"To combat these challenges, Alberdingk Boley is focusing on niche businesses that are more likely to stay in the U.S.," said Paul Seffrood, vice president sales and marketing, Alberdingk Boley. "Particularly in the areas of aftermarket wood flooring, concrete and industrial applications where the parts are likely to continue to be made in the U.S. due to their inherit profitability.

Meeting Customers' Needs

Resin suppliers and their customers must work together closely to deliver value-added products. Such synergistic relationships are key to success during these challenging times.

Noveon takes a holistic approach to meet customers' demands, considering the entire supply chair for opportunities for improvement. "We also look to our parent company, Lubrizol, for innovative solutions from outside our core industry," said Hensley. "We combine this with thorough and diligent contingency planning to ensure both our short-term ability to supply and the longer term sustainability of our business."

Sartomer Company also takes an individualized approach with its customers. "During the product shortages over the past two years, we took the time to visit customers and explain the market situation," said Elias. "We think they appreciated our sensitivity."

According to Elias, Sartomer practices a philosophy of treating its suppliers the same way it treats its customers. "The business relationship is key to the continued, uninterrupted supply of materials, whether the market is loose or tight. We operate in the true partnership spirit," said Elias. "In addition, our technical group continually develops and commercializes new products, maintaining our position as a leader in bringing new products to the resins market."

Alberdingk Boley has been balancing customer demands with the rising costs associated with manufacturing resins by focusing on one customer at a time and making sure they are a good fit for the company.

Environmental Compliance

Listening to the needs of their customers, resins suppliers know that in addition to cost, environmental compliance is a major concern. Customers need reasonably-priced high performance resins that are compliant with the latest environmental regulations and resin suppliers are meeting these challenges.

Resin manufacturers are always looking for ways to differentiate themselves beyond the traditional technologies. In addition to the more traditional acrylic emulsion platforms, Noveon is placing more emphasis on unique technologies such as its Sancure polyurethane dispersion and Vycar vinyl chloride emulsions. "These technologies offer different cost/performance profiles that may provide innovative approaches to the performance/value challenges our customers are facing," said Hensley.

"Customers want improved product performance, particularly in the way paint is formulated and in the way ingredients interact," said Lyne Dant, global marketing director architectural coatings, Rohm and Haas. "Customers are also looking for ways to lower their formulation costs. Rohm and Haas is constantly looking at ways to capitalize on our innovative product offeringsways that will help our customers manage their costs with minimal adverse impact. We have, however, had to implement occasional price increases to achieve a level of profitability that will support reinvestment for future growth."

A big challenge for the paint companies is dealing with pending regulations. "With more regulating agencies looking at SCAQMD regulations, e.g. OTC and LADCO, the challenge for the resin manufacturers is how to develop latexes that will deliver paints with the same performance at 50 g/l VOC versus higher VOC paints," said Kent Clow, architectural technical advisor, BASF.

According to Clow, since the mid 1990's, BASF has used the pending SCAQMD regulations as the primary limitation for any latex development work. As a result, BASF has developed several new latexes that are capable of delivering the required performance for paints at 50 g/l VOC or less. BASF is currently offering Acronal Optive 130, the second-generation latex developed for 50 g/l VOC or less non-flats and Acronal Optive 230 for 50 g/l VOC flats.

According to Clow, to eliminate inventory headaches, most paint manufacturers want to develop one product that can be sold nationwide while also complying with the VOC regulations for specific markets. "Paint manufacturers want latexes to meet those VOC requirements without sacrificing any performance," said Clow. "There are anticipated deficiencies associated with using a lower film forming latex, including gloss development, hardness, block resistance, scrub resistance, stain removal, outdoor durability, colorant acceptance, freeze/thaw stability, open time and wet edge, adhesion and low temperature cure. Acronal Optive 130 has proven to overcome these deficiencies, with the exception of freeze thaw resistance."

"Through formulation changes, BASF has been able to demonstrate reduced formulating costs due to enhanced titanium dioxide performance and reduced solvent content to meet the SCAQMD regulations," said Clow. "These reduced formulations costs help to offset some of the raw material increases."

Alberdingk Boley has been working on developing solvent-free systems. "We are focusing on zero-VOC PU dispersions and solventless 2K PU systems," said Seffrood.

Cytec has also been working closely with its customers to develop innovative products that meet performance issues and are cost efficient.

"We're introducing new and innovative energy curable technologies, and announcing as few price increases as possible," said Rodrigues. "By migrating more to energy curable technologies, customers can help reduce the total costs of their coating systems. Typically, UV/EB technologies require less energy, and can enable faster prototyping and manufacturing throughput, and can offer better end-of line/end use properties."

According to Rodrigues, energy curable technologies can help companies produce more products cost-effectively, while also avoiding the risks and costs of environmental compliance.

"We're always developing innovative products and energy curable solutions for the application needs customers have now, and the ones they'll have in the future," said Rodrigues. "What's also important is offering expert applications assistance, global manufacturing for supplying the same products anywhere in the world, and reliable technical support."

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