Issue Date: June 22, 2009
A Mature Plastic
Ask people who market acrylonitrile-butadiene-styrene resin, and they’ll say it’s a great plastic that hasn’t been getting its due. Even before the recession, the ABS business wasn’t very profitable. Now the industry is bracing for several more troubled years.
Its name gives the impression that ABS is a copolymer of styrene, acrylonitrile, and butadiene, but the truth is more subtle than that. ABS is an acrylonitrile-styrene copolymer grafted onto polybutadiene.
Combining polybutadiene and the copolymer yields a plastic that is impact resistant, has a glossy appearance, and can be readily blended with colors and polymers such as polycarbonate and nylon. It lends itself to applications that need to be attractive and durable, such as appliances, car interiors, computer housings, and Lego building blocks. “I can spend three hours convincing you why ABS is better than every other polymer,” says John Case, Dow Chemical’s business manager for styrenics and copolymers in Europe and India.
ABS inhabits a gray area between commodity plastic and higher value engineering polymer. For example, when plastic molders want to make an ABS part cheaper, they often opt for high-impact polystyrene. When they want an upgrade, they’ll go for a polycarbonate/ABS blend.
And ABS is a commodity whose heady days of nabbing new applications have mostly passed. Herman Savenije, styrenics strategic product manager at BASF, still sees opportunities for innovation. For instance, BASF has a new ABS/poly(methyl methacrylate) blend that offers a shiny “piano finish” that may be “very fashionable for household products.” But as a whole, Savenije admits, “if we discuss ABS, we are talking about a commodity and a mature business.”
ABS’s durable goods applications make it very much an engineering polymer, Dow’s Case points out. As a result, demand for ABS is sensitive to economic performance. Commodity plastics such as polystyrene and polyethylene are less sensitive to the economy because they have significant uses in sectors such as food packaging that are less vulnerable to economic ups and downs. “People continue to eat, but they are more hesitant with respect to buying a new car,” he says. “ABS has been harder hit than many other thermoplastics.”
Savenije expects North American demand for ABS this year to be off 15–20% versus 2008. He forecasts a more modest 10% decrease in Europe, where he has noticed some pickup in demand in the second quarter.
The longer-term trend in ABS has been a shift of the industry’s focus to Asia, where small appliances are typically made nowadays, says Peter Chandler, a consultant with London-based Tecnon OrbiChem. In North America, he says, the ABS industry concentrates on cars and large appliances. “Pretty much everything else comes in as finished-product imports,” he notes.
The ABS industry has suffered from chronic overcapacity for as much as a decade, Chandler says. “There is more capacity available than there is demand—by a long way.” Supply and demand were finally climbing into balance before the recession hit last year, he says, delivering the industry a major setback.
The ABS industry needs consolidation to help dig itself out of the hole it’s in, Savenije says. “Given the stepwise correction in overall demand for ABS and low expectations for recovery and future growth, producers will reevaluate their positions and possibly shut down old or noncompetitive plants,” he suggests.
But consolidation is nothing new for the ABS industry. In recent years, nearly every major ABS producer has either exited the business wholly or in part or is contemplating a way out.
In 2007, BASF announced that it was in talks to divest most of its global styrenics business, which in addition to ABS includes styrene, polystyrene, and other styrenic polymers. Those talks broke down last year, and the company opted instead to reorganize the business into new subsidiaries. “BASF is considering all strategic options,” Savenije says.
Also in 2007, Lanxess sold 51% of its Lustran ABS business to Ineos for $48 million. In the previous year, the unit made only $22 million in before-tax profits on $1.2 billion in sales. Ineos has an option to buy the rest of the business, now called Ineos ABS, later this year.
And when General Electric sold GE Plastics to Saudi Basic Industries Corp. in 2007, its ABS business went as well. SABIC plans to close an ABS plant in Grangemouth, Scotland, by the end of next month.
Dow exited the ABS business in North America in 2008, except for a plant in Midland, Mich., that serves the automotive industry. It converted its other plants to polystyrene production and transferred them to its Americas Styrenics joint venture with Chevron Phillips Chemical.
The move reflected what the North American ABS industry has become, Case says. “We exited the business in ABS because the dynamics in North America were different than other regional dynamics,” he says.
Globally, Case adds, the industry faces a few more tough years. “There is excess capacity today,” he says. “That probably won’t change until 2012.”
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