Superabsorbent Polymers Market Benefits From New Demand Growth

24 May 1999 00:00  [Source: ICB Americas]

By Dan Scheraga

Participants in the global superabsorbent polymers industry are looking toward a bright future and are ramping up their nameplates accordingly. Although competition remains fierce, the market has potential for expansion, and for the time being, feedstock prices remain low enough to warrant producer optimism.

Annual US consumption of acrylic acid-based superabsorbent polymers is 284,000 metric tons, according to Berkeley Heights, N.J.-based consultancy Eldib Engineering & Research Inc. This number accounts for between a third and one half of global consumption. Main uses are in healthcare products, such as baby diapers, adult incontinence goods and feminine hygiene. Annual growth is estimated between 5 and 10 percent.

There are, however, some pockets of accelerated growth. For example, adult incontinence products accounted for only 7 percent of US consumption of superabsorbent polymers, but that application is expected to outpace 12 percent annual growth over the next five to 10 years, doubling its market share, according to Eldib. The value of this segment is anticipated to rise from $60 million to $115 million between 1999 and 2006. The firm attributes the market growth to improving social attitudes about adult incontinence products.

There are also geographic areas of heightened potential. In superabsorbents' primary market of baby diapers, the US and Western European markets are quite mature with penetration of 96 percent and 80 percent, respectively. However, the economically developing regions of the world are ripe for superabsorbents expansion, with market penetration of only 25 percent in Latin America and 6 percent in Asia-Pacific.

Of these two, Latin America has the greatest potential, especially for nearby North American producers, says Eldib president Andrew Eldib. As an indication of rising Latin American demand for superabsorbents, he cites a 15 percent increase in diaper production in the South American economic capital of Brazil between 1997 and 1998. US producers of diapers have been aggressively moving into Latin America, he says, and with virtually nonexistent indigenous superabsorbents production, the potential for US producers to capitalize either through increased exports or the construction of new capacity there is singificant.

Despite Latin America's promise, superabsorbents expansion in the region is limited so far. BASF AG has expressed interest in building a superabsorbents plant in Brazil, but the company declines to provide details.

A main reason for the reluctance of producers to build capacity in Latin America is the scarcity of feedstock acrylic acid in the region, says Gary Castagna, president of Amcol International Corporation's Chemdal subsidiary, Chemdal. "Latin America has no acrylic acid production of its own, which discourages makers of superabsorbent polymers from building new plants there. Most prefer to ship product to the region from their facilities in North America."

Feedstock is much more readily available in Asia, however, and producers have shown much greater interest there. Most recently, Dow Chemical Company forged plans to build a pair of new facilities, each with 30,000 metric tons of capacity for the company's Drytech line of products (CMR, 5/3/99, pg. 3).

The company has not yet selected geographic regions for the two plants or decided whether they will be built at existing Dow complexes or as greenfield projects, but the company expects to finish evaluating potential sites by the end of the third quarter. The first plant may come on stream as early as late 2000. Startup of the second plant will depend on how quickly product demand grows.

Dow plans to support its expanded superabsorbents business with feedstock from a new 80,000-tons-per-year acrylic acid unit at its Bohlen, Germany, site. That plant is under construction, with operations scheduled to begin before the end of 1999. Dow's commitment to the superabsorbents business is also evidenced by a 10,000-ton debottlenecking the company plans to complete at its Midland, Mich., complex this year.

Dow also intends to add strength in superabsorbents with a solid commitment to R&D. "Driven by marketplace needs, Dow continues to develop new improved superabsorbents in concert with out customers," says Ian Davenport, business director of superabsorbent polymers of Dow Chemical Company. "We are very positive about our future investments and are growing at least in line with the industry."

The announcement of Dow's intentions to build superabsorbents capacity closely follows a similar action by Chemdal, which leads the US market. (BASF, Dow and Hüls' Stockhausen unit are the other major players.) Late last year, Chemdal began engineering on a 20,000-tons-per-year superabsorbents plant to be erected in Thailand's Rayong Province. Startup is slated for the second half of this year at a cost of $15 million to $18 million.

Mr. Castagna cites Asia's rich growth projections as impetus for the investment. Also, to support growth on the home front, Chemdal has a debottlenecking underway at its Aberdeen, Miss., site which will raise the company's nameplate to 180,000 tons by the end of 1999. These projects represent a continuation of Chemdal's aggressive growth plan in the superabsorbents area. Early last year, the company boosted its profile with the acquisition of the superabsorbent polymers business of Allied Colloids prior to that firm's acquisition by Ciba.

With the current profitability of the superabsorbents market, now would seem like an opportune time for producers to expand. Although prices of superabsorbents have been suppressed somewhat by fierce competition in the arena, producers' margins are being stoked by the relative cheapness of feedstock glacial acrylic acid, which presently sells for around 50 cents per pound.

However, Mr. Eldib cautions, the price of acrylic acid is directly tied to the frequently volatile price of crude oil, so there's no telling how much longer superabsorbents makers will come by their feedstock so inexpensively.

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