Issue Date: May 7, 2012
Polycarbonate Shifts To China
The world’s main producers of polycarbonate resin are building up their capabilities in China. Facing almost no competition from Chinese companies, they are methodically investing in plants and R&D facilities. They are also placing in China senior executives who are prepared to do business in the fast-paced Chinese style.
At a press conference at the plastics trade show Chinaplas in Shanghai last month, Michael Koenig, head of polycarbonates at Bayer MaterialScience, highlighted the importance of the Chinese market. Asia accounts for 60% of world demand for polycarbonate, which the consulting firm IHS Chemical estimates at 3.7 million metric tons this year. China by itself represents half of Asian demand, Koenig said.
“The main growth driver has shifted to Asia-Pacific, especially China,” he said. Koenig is based in Shanghai, where Bayer’s global polycarbonate business headquarters has been since last year. Bayer invented polycarbonate resins 40 years ago, Koenig noted, and the firm remains one of the world’s largest producers of the material.
Polycarbonate has characteristics between high-end engineering plastics and commodity polymers. It has high impact resistance, a trait that makes it suitable for use in cars. Polycarbonate can also be highly transparent, making it ideal for use in eyewear. The traditional method for making polycarbonate is by reacting bisphenol A with phosgene, a poisonous gas, but several companies have developed nonphosgene processes.
China is becoming a center of polycarbonate innovation, Koenig noted. “We are supporting developments in China with our R&D center in Shanghai,” he said. To compete effectively in the polycarbonate business, it’s more important for a firm to have significant technical support capabilities than to offer the cheapest resin, he argued.
Buyers of polycarbonate resins in China are for the most part technology-savvy multinational companies, said Stephen Moore, director of plastics and chemicals at the market research firm Intercedent Asia. For example, car manufacturers in China, he said, are generally major international companies such as General Motors that have set up local joint ventures.
There are no significant Chinese producers of polycarbonate, Moore added. The polycarbonate business is controlled by a handful of international producers including Bayer and Saudi Basic Industries Corp. (SABIC), which acquired GE Plastics in 2007, along with several firms in Japan that have developed both phosgene and nonphosgene processes, Moore said. It’s difficult to estimate the value of the polycarbonate market, he noted, because it consists of general-purpose resin, which sells for about $3.80 per kg, and specialty grades that have been colored or compounded, which sell for various prices.
The Chinese auto industry has a lot of room for polycarbonate innovation to reduce vehicle weight, noted Rainer Rettig, head of Bayer’s polycarbonate business in Asia. Reducing the weight of Chinese cars by 10% could save the country 78,000 barrels of oil per day, Rettig said. With that goal in mind, he said, car manufacturers are developing windshields, windows, and headlight covers out of polycarbonate instead of glass.
Like Bayer, SABIC is boosting its Chinese polycarbonate infrastructure in several ways. The company announced last month that it will invest $100 million in an R&D center in Shanghai staffed with 200 scientists. The center will support SABIC’s engineering plastics business, a main element of which is polycarbonate. With China’s Sinopec, SABIC is now building a $1.7 billion polycarbonate facility in Tianjin that uses a nonphosgene process. SABIC is also setting up a compounding facility in Chongqing.
“We want to participate in our customers’ product development efforts,” said Khaled Al-Mana, a SABIC executive vice president with responsibility for polymers. “We don’t want to just ship material to them.”
Like its competitors, the Japanese producer Teijin is expanding its polycarbonate support capabilities in China. The company is drawn to China because the plastics market in Japan is stagnant, said Tadashi Tanaka, Teijin’s general manager of global plastic sales. By contrast, Teijin’s Chinese polycarbonate sales are growing on average 8% annually.
Teijin has been producing polycarbonate in China since 2005 at a plant in Jiaxing, Zhejiang province, using a phosgene-based route. It also operates a polycarbonate technical support center in Shanghai. The company is considering further expansion of the Jiaxing plant, but it has not decided whether it will implement a phosgene or a nonphosgene process. Tanaka noted that both pros and cons are attached to the nonphosgene route. For example, the process may calm regulators who are worried about the dangers of phosgene, but it consumes more energy.
Teijin initially boosted its local presence to follow its Japanese customers to the country, but the firm is now developing Chinese customers. As its base of Chinese customers grows, Teijin is learning to adapt to local requirements, observed Kazuhiro Ogawa, the Shanghai-based general manager of Teijin Chemicals in China. Compared with the company’s more deliberative Japanese customers, Chinese buyers are quick to act. “They make decisions very fast, and then we have to respond, supply, and support them more rapidly as well,” he said.
As is the case for its competitors, Teijin is learning to do business the Chinese way.
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