Resin Market Update

Ask anyone in the coatings business what keeps them awake at night, and you'll likely hear rising raw material costs and availability. Resin suppliers, especially, are in the thick of it, working hard to balance customer demands with their own rising costs and supply issues.

"The biggest concern right now facing resin manufacturers is raw materials," said Cliff Tishler, VP sales and market development, Soluol. "Nearly all raw materials have increased significantly, some as much as 90% during the past 18 months. To make matters worse, some raw materials are on allocation and not available in the quantities needed."

Wagner Silvestre, global business director, urethane chemicals, Crompton Corp., echoed that concern. "The issue is not only raw material price increases, but raw material availability," he said, noting the high price and tight supply of MDI.

"The most obvious concern is related to managing the raw material cost environment," added Curtis D. Junge, epoxy additives North American market manager, Air Products. "In the past six to nine months, raw material increases have impacted all sections of the value chain."

Deborah Hensley, global business manager for resins at Noveon, Inc., pointed to the triple-threat facing the resins market: "unprecedented supply and demand imbalance, limited raw material availability and high costs."

According to Hensley, the propylene chain poses the most challenges because higher value end-uses are competing for supply. "While this potentially is a positive in that it could drive some innovation, it certainly makes things tight for the specialty chemicals sector. It requires us to be extra-diligent in our communications with our suppliers and customers to anticipate supply needs and set expectations," she added.

While always important, keeping communications lines open with customers has become even more imperative. As the marketplace continues to evolve, coatings manufacturers are demanding more from their resin technology, including higher performance, multi-functionality and environmental compliance, as well as more from their suppliers in terms of shorter lead times and new ways to lower total costs.

"Our customers are looking at ways to decrease applied cost and increase coating durability or extend the coatings lifetime," said Scott Borst, business team leader, building and coatings, Wacker Chemical Corp.

"Coating customers are looking for innovation, product performance, environmental compliance, added value, delivery and technical support," said Wim Vanderghinste, market manager-industrial coatings, at Cytec Surface Specialties. According to Vanderghinste, Cytec is meeting customer needs by providing a "broader and deeper portfolio of advanced and environmentally-friendly technologies, delivered cost-competitively" and backed by strong tech support.

Just-in-time manufacturing and tight management of inventory is another critical issue.

"Coatings customers are demanding shorter lead times and more inventory on hand. They want to minimize their inventory levels and be able to react to their customers more quickly," said Tishler. "We continue to work on improving our manufacturing processes to shorten the time from the reactor to the container."

Technology Trends
On the applications side, coatings customers have a long wish list, and for many manufacturers, a main area of concern remains VOCs. Suppliers are developing a number of solutions for coatings manufacturers facing tougher compliance mandates, especially in architectural and wood coating applications.

"Reducing VOC levels is an area of focus and something that, in part, is driving our product development," said Hensley. Noveon has developed several new resin technologies that enable paint manufacturers to produce low- or zero-VOC formulations, including Sancure 20041. A waterborne polyure-thane dispersion, it minimizes VOCs while providing durability and protection in coatings for clear wood finishes in residential or commercial floor applications. Based on patented Noveon technology, Sancure 20041 is made without the use of N-methyl pyrrolidone (NMP).

Noveon's Carboset line also offers lower and zero-VOC options. Carboset 505 resin is a solvent-free, water-based acrylic polymer that produces virtually zero-VOC stains when blended with solvent-free pigment dispersions, while Carboset 7722 and 7733 acrylic copolymer emulsions can be used to formulate low-VOC interior and exterior trim paint.

For coatings manufacturers working with coatings for industrial use, as well as for plastics, finding the right chemistry is a must. Formulators need to weigh all their options when they look to lower VOCs in applications where performance can't be compromised.

"The industry solution is not solely water-borne technology," said Borst of Wacker Chemical Corp., which has developed a high-performance product line focused on reducing VOC and increasing the durability of two-component technologies. Wacker's SILRES HP 2000 is formulated to increase UV protection for protective and industrial coatings and is well-suited as a cross- linker in epoxy coatings, and as a two component system is ideal for either spray or roller application. Its improved resistance to cracking, color fade and high gloss retention protect the appearance and durability of coatings for chemical transport systems, oil drilling platforms and secondary containment structures, according to Wacker.

Sartomer is offering CN2301, a new hyper-branched polyester acrylate oligomer designed for low viscosity and high acrylate functionality. Sartomer contends that its low shrinkage makes it perfect for scratch-resistant plastics coatings that require excellent adhesion.

Customers are also demanding multi-functional products, "such as a product that meets FDA compliance and also delivers improvement in some performance area, such as improved blush resistance or improved chemical resistance," said Junge of Air Products.

What's Ahead
Unable to absorb skyrocketing costs, resin suppliers have been issuing price increases since last year, and little relief is forecast for the immediate future, especially as oil prices continue to hit record highs. Still, leading resin suppliers are digging in, working on new technologies and looking for new ways to deliver value.

"We have recently increased prices, however, we have also focused on the value our materials and services are providing to customers. Reduction of internal production costs is also critical to our customers for meeting their profitability goals," said Borst of Wacker.

Noveon is working on polymers that provide paint suppliers with more flexibility, such as one-component systems that provide two-component performance, and polymers that can be used in a variety of end uses, which helps paint formulators reduce inventory.

Cytec is focusing efforts on the "next generation" of UV curable waterborne resins for wood and plastic substrates, new UV/EB applications such as coil coatings and automotive refinish and low VOC/high-solids resins for architectural coating applications.

According to Silvestre, suppliers need to work even more closely with their customers. "Companies are always looking for better specifications to replace solvent-based products," he said. "In beginning it was easier. Now, environmental issues are more complex. We are working in partnership with our customers, making fine adjustments to their products." Along with its current roster of water-based urethane solutions, Crompton is working on mixes with acrylics and grades with lower hardness, according to Silvestre.

Overall, 2005 will be a tough year as paint companies and their suppliers try to maintain profitability.

"Over the next year, we'll see resins producers and coatings producers continuing to work hard keeping up with the raw materials situation. This will likely continue through all of next year," said Hensley of Noveon. "The good news is that demand has remained strong and in the long run, high material costs may actually make the industry healthier as reinvestment economics are attained throughout the supply chain."

Furthermore, Hensley pointed to another positive. "One interesting dynamic we've observed is that coatings producers are passing along price increases to mass market retailers-the same mass market retailers that used to wield all the power and keep prices down," she said. "Today's market dictates that producers can't always afford to supply them if the mass market retailers don't agree to shoulder some of the burden for some of these cost increases."