Issue Date: April 30, 2012
Plastics Revival In North America
It’s no surprise that buoyancy in the manufacturing sector today is good news for the major engineering polymers: polycarbonate, nylon, and acrylonitrile-butadiene-styrene (ABS). Used in everything from smartphones to automobiles, these polymers are enjoying a robust demand outlook.
What is surprising is that the demand is coming not only from Asia, but also from North America. For the past decade Asia has dominated the engineering polymers industry, and indeed, Asia will account for a large share of future growth. But the North American manufacturing sector, particularly the automotive industry, is recovering quite nicely from the recession, and it will require more engineering polymers as well.
Moreover, production of goods such as televisions, which migrated from North America to Asia, appears to be starting to return, rekindling hopes that a repatriation trend is at work in manufacturing. Meanwhile, polymer makers continue to seek new business through the replacement of traditional materials such as metal and glass.
At the World Petrochemical Conference, held in Houston last month by the consulting group IHS Chemical, Adrian Beale, the firm’s director of global engineering plastics, said the outlook for the industry he covers is strong. He forecasts that ABS demand, 7.4 million metric tons in 2012, will grow 5% annually over the next five years. He expects polycarbonate will also grow at a 5% clip from a base of 3.7 million metric tons. Nylon 6,6 demand will be 1.1 million metric tons in 2012 and expand at a 4% rate.
Demand for these engineering plastics grows on the backs of the major sectors they serve. Automakers use nylon under the hood because of its heat and chemical resistance. ABS is primarily used in appliance housings because of its impact resistance and aesthetics. The clarity and toughness of polycarbonate make it a workhorse in electronics, construction, and auto headlamp lenses.
To expand the pie, producers of engineering polymers must do what they have always done: replace traditional materials like metal and glass. But the easy replacements were made years ago, and new applications are increasingly challenging.
The need to boost automotive fuel efficiency presents an opportunity for nylon and polycarbonate makers, Beale said in his talk. According to an auto industry rule of thumb, he pointed out, a 10% reduction in weight reduces fuel consumption by 7 to 8%.
Beale believes the fuel-efficiency trend will continue as the U.S. rolls out corporate average fuel economy standards, known as CAFE, that rise from less than 30 mpg in 2010 to more than 54 mpg in 2025. Polymers have more room for gain, Beale pointed out: 61% of the average car is still made of iron and steel.
At NPE 2012, a large plastics trade show held earlier this month in Orlando, plastics producers showed off efforts to make inroads with the auto industry. BASF displayed the nylon wheel rim used in the recently unveiled Smart Forvision concept car. The demands of driving make substituting nylon for steel tricky. BASF is using glass-fiber-filled nylon in the wheel. “If the car is running though chuckholes or whatever, the wheel is not going to crack or break,” said Lawrence A. Berkowski, BASF senior vice president of engineering plastics in North America.
Berkowski acknowledged that more work needs to be done before plastic can, literally, be rolled out in a production vehicle. Other BASF metal replacement initiatives, such as seat backs and oil pans, are further along.
These components are more technically demanding than previous generations of nylon auto parts, Berkowski pointed out. “We are now finding ourselves in much more structural applications,” he said. “These are not covers or fascia that see some heat or some chemicals and therefore need an engineering plastic. These are parts that take load or impact.”
Polycarbonate also has a tough challenge ahead in its bid to replace additional glass in the automotive market. According to Beale, replacing glass in car windows may be a way for the polycarbonate industry to recover some of the volumes it lost in the optical media market. In 2006, CDs and DVDs were the largest consumers of the engineering polymer. Thanks to MP3 players and flash drives, they will be one of the smallest markets by 2016.
Polycarbonate began to replace glass in automotive headlamp lenses in the 1980s and now dominates the application. Polycarbonate makers hope to duplicate this success in windows. The market is nascent, Beale said, but it is already the fastest-growing sector of the polycarbonate industry. If polycarbonate were to replace all the glass in every new car in the world, demand for the polymer would increase by more than 50%.
But there’s a catch. Polycarbonate doesn’t have nearly the weather and abrasion resistance of glass. And as Beale pointed out, there are regulatory hurdles. “In the U.S., it is currently illegal to make a windshield from any other product than glass,” he said.
For the past 10 years, SABIC Innovative Plastics has been working on a plasma technology for applying a scratch-resistant coating to polycarbonate, according to Gregory A. Adams, the firm’s vice president of automotive and polycarbonate strategy. SABIC also has been addressing challenges such as rear-window defroster systems. The technology, he said, is “ready now for market adoption.” The initial focus will be on panoramic roof systems as well as side and rear windows.
In addition to the weight savings, polycarbonate allows designers to create more exotic shapes than can be created with glass. Glass automotive headlamps were little more than bulbs mounted near a car’s grille, Adams noted. “Today, a headlamp is a styling feature on the front of a car.”
Asia has dominated the demand for engineering polymers ever since consumer product makers started shifting manufacturing to the region. According to Beale, two-thirds of global demand for ABS comes from Northeast Asia. China alone accounts for 56% of total demand.
But thanks in part to the auto industry, this trend may be abating, if not reversing. According to the market research firm WardsAuto Group, North American car and truck production increased from 12.2 million in 2010 to 13.5 million in 2011. In the first quarter of 2012, production rose 18% to more than 4 million units. In 2000, the industry’s best year, production was 17.7 million.
North America’s manufacturing revival extends beyond the car industry. Timothy J. O’Brien, vice president of engineering resins for the Americas and Europe at SABIC, said he has seen some appliance and electronics customers move production back to North America, mainly Mexico. For example, LG Display recently began production at a new liquid-crystal-display line in Reynosa, Mexico.
To O’Brien, the return of manufacturing to North America is all about moving the supply chain closer to the end market. Because of a herd mentality, a lot of products that don’t have a high labor input moved to Asia when they shouldn’t have, he said. The long supply chain ties up inventories and is vulnerable to disruptions, such as port strikes and quality-control recalls.
Manufacturers, O’Brien said, are wising up to the complications of manufacturing overseas. “Big brand-name customers are saying ‘I’ve been burned too many times by this global logistics chain,’ ” he said. To a purchasing manager, a part may appear cheaper to produce in China, he noted, but a chief financial officer may have a different opinion. “Many parts are coming back on the basis of the total cost not being as attractive as it once was,” he explained.
Thomas Hazenstab, business director for specialty materials at Styrolution, a new styrenic polymers joint venture between BASF and Ineos, agrees that a more realistic view of the supply chain is fostering a North American manufacturing rebound. He said manufacturers see the need to produce locally to help ensure quality control for increasingly complex components in new markets such as alternative energy. Local production also helps them respond quickly to short product life cycles that can make inventories obsolete as soon as new models hit store shelves.
To serve expanding demand from customers in North and South America, Styrolution is considering expanding capacity at a North American facility such as its plant in Altamira, Mexico.
For nearly a decade, North America has mostly been a place where engineering polymer firms closed capacity. Now, Hazenstab says, “there will be expansion.” He has little doubt that the improved North American outlook is due to a resurgence in manufacturing. “It is being repatriated,” Hazenstab says. “It is coming back.”
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