Health of chemical industry buffets European foam market

Valued at €4.70 billion last year, the European polymer foams market is forecast to grow at an annual rate of 5.2%, reaching €6.71 billion by 2011. Currently, the market is passing through a difficult phase, says research analyst Hariharan Ramasubramanian at Frost & Sullivan (London) and has to overcome challenges that stand in the way of continued growth.

Ramasubramanian says prime among these problems are the skyrocketing crude oil and derivatives prices. This added cost has affected most manufacturers of organic chemicals, including polymer foam suppliers. He points to suppliers of polyurethane precursor materials methylene di isocyanate (MDI) and toluene di isocyanate (TDI) like Dow (Horgen, Switzerland), which upped prices of these raw materials three times in 2004. Similarly BASF (Ludwigshafen, Germany), another supplier to the PUR foam sector, raised prices of its polyol products twice, once in 2004 and again this year.

"While suppliers can look forward to top line growth brought about by these price increases, they will also have to contend with diminishing margins as a result of spiraling energy prices," says Ramasubramanian. "This is likely to remain a significant challenge for [polymer foam] suppliers in the short to medium term."

He says producers of foams used in the commodity segments are finding it hard to impossible to pass on price increases to their customers. Western European producers of foam, especially expandable polystyrene (EPS) will find their customer base in Eastern Europe eroded because transportation costs make their foam output less competitive than regional suppliers, he speculates.-Robert Colvin; [email protected]