Continuing Upturn Promises To Boost Volumes And Prices

Following a mild recovery in demand last year, polyurethanes will post further modest gains in volume in 2003. Suppliers, now suffering from low margins, will raise prices.

Growth this year will be higher than last year, spurred particularly by gains in China, says Tony Hankins, global vp. for Huntsman Polyurethanes, West Deptford, NJ. “Assuming [there’s] no major international conflict or upheaval — which is a big assumption — Gobi International predicts very modest growth in polyurethanes over the next couple of years,” notes David Mendoza, managing director of the London-based consultant. It expects global consumption this year to rise 2.1% from 2002’s level of 8.387 million tonnes. Phil Sarnacke, consultant with Omnitech International, Midland, MI, foresees a slow first half, and reckons worldwide volume growth will reach 3 to 4% at best.

“We expect to see approximately a 3% increase in the flexible foam area,” notes Hankins. Global MDI demand will be stronger, in the range of 8 to 10%, with the Americas posting 7 to 8%, Europe 6 to 7%, and Asia more than 12%, he adds. Larry Berkowski, director of urethane chemicals for BASF, Mt. Olive, NJ, expects TDI consumption to rise at about the same rate as GDP, and MDI demand to be at about twice the GDP.

Margins remain inadequate, suppliers complain. “2002 was a year of recovery, with improvements made in volume and price, but suppliers still face raw-material price pressures,” says Berkowski. “The increased cost to produce polyols and tightening TDI supply…are contributing to an overall increase in the price for PUR materials,” notes David Fischer, Dow’s global vp. for PUR. “We expect prices to continue to increase throughout 2003, as current margins do not reward further capacity investment,” adds Hankins. Sarnacke foresees price hikes of close to 10%.

Processors face higher costs elsewhere, too, notes Sarnacke, due to blowing agent switches and proposed flammability rules.

In the automotive sector, the U.S. market will be flat or up slightly in 2003 compared to 2002, says Hankins, while Europe and Japan will show slow growth. North American car builds are projected to fall, argues Sarnacke, trimming PUR demand.

In the U.S., construction demand will exceed GDP, Hankins reckons. Sarnacke feels the market will remain slow through the first half.

Sarnacke reckons PUR consumption for furniture will rise 2 to 3% in Nafta, remain flat in Europe, and be stronger in Asia — leading to overall growth of 3 to 4%. U.S. demand won’t rebound until the second quarter, while bedding may improve in the first quarter, says Hankins.

The U.S. appliance market was good in 2002, says Berkowski, with PUR volume up around 5% industry-wide, thanks to the strength of the residential construction sector. The market should post better than historical averages this year, according to Hankins, as it continues to be buoyed by robust housing starts and refinancing activity.

Sustainability is a real issue for PUR, says Sarnacke. Dow certainly agrees. “The marketplace must change, and Dow will lead by example,” declares Fischer. “No big-ticket item is being developed now [at Dow] that does not have a sustainability element.” The company, for instance, is using some polyols made from soy. He expects 7 to 8% of sales in 2003 to come from sustainable-development-related products, and would like to see them account for at least one-third of sales by 2010.

Dow last year installed at Meyrin, Switzerland, a demonstration PUR recycling unit that uses a process developed by Mobius Technologies, Grass Valley, CA. This reflects growing interest in recycling scrap to make new PUR foam, says Martin Dawson, chief operating officer of Mobius (Oct 02 MP, 50; MPI, 70). The first commercial unit in Europe to use its process should be installed at a plant of Recticel, Brussels, by the end of the first half, he adds.