Lanxess expands butyl rubber business in Asia

Paving Asia's rubber road

26 March 2008 15:29  [Source: ICB]

LANXESS is cementing its butyl rubber position in the Asian tire market with a new worldscale plant in Singapore

Doris De Guzman/New York

GERMAN SPECIALTY chemical group LANXESS is continuing its rubber expansion course in Asia, with a €400m ($613m) butyl rubber plant to be built in Singapore, the company's single largest investment to date.

The 100,000 tonne/year facility on Jurong Island will produce regular butyl, and bromobutyl rubbers, and is expected to come on stream by 2011.

LANXESS chairman Axel Heitmann expects Asia's booming automotive tire market to absorb more than 50% of the global butyl rubber output in the next few years.

"We expect there to be an increase in demand for halobutyl due to increased demand for radial tires and a constantly growing automobile market in Asia," said Heitmann at LANXESS' press conference in Singapore last month. "The demand for more and better cars throughout Asia means increased demand for more and better tires - bigger tires, and tires with new and high-tech designs."

Most of the rubber sales from the plant are expected to come from China, added Heitmann. China's demand growth for the product is estimated at 6.3%/year, and India's at 8.7%/year, although from a smaller base, said Ron Commander, LANXESS' head of the butyl rubber business.

He added that he expects the global butyl rubber market, now at 900,000 tonnes/year, will grow at 3%/year in the next 15 years.

"Asia-Pacific is now the most important region for the business," said Commander. "In 2004, we sold 31% of our product in the region, and this increased to 40% last year. Market growth in China and India will support a new 100,000 tonne/year butyl plant every four years," he added.

SETTING UP SHOP

LANXESS' Asian butyl rubber customers might be centered in China and India, but the company chose Singapore among its top plant locations because of nearby raw material sourcing, logistical benefits, and the availability of a skilled workforce.

"Singapore also guarantees maximum intellectual property protection for our innovative processes," Commander noted.

LANXESS has already secured its isobutene feedstock from Shell Chemicals' petrochemical complex in Jurong Island. LANXESS is currently negotiating isoprene supply from Asian manufacturers, and adds that all raw materials needed will be available in 2010.

Another important feature for the new butyl rubber plant, said Heitmann, is its state-of-the art environmental protection technology, which, he added, will account for 10-15% of the total investment.

"This plant will open a new chapter in environmental standards within butyl rubber production," said Heitmann. "In the new facility, we will recover energy through waste heat recovery, which will save carbon dioxide, and we will reduce waste water by 50% in comparison with our existing plants through internal recycling streams."

The company has not yet picked the plant's contractor but an announcement will be made in the next few weeks, said Commander. When asked about energy supply, Heitmann noted LANXESS' ongoing dialogue with Singapore officials for competitive pricing and reliability.

"The Singapore government has a number of plans to look at and address this issue," added Heitmann.

"HELLO" BUTYL

Regular butyl rubber is produced from the polymerization of 92% isobutene and 8% isoprene, which can then be made into halobutyl rubber by reacting it with either chlorine or bromine.

Very few companies have the technology to produce halobutyl rubbers, according to LANXESS. The major use for halobutyl rubber is inner liners for tires, which keeps the air in and any moisture in that air from getting to the tire's steel cords.

Halobutyl rubber accounted for 67% of the global butyl rubber market in 2006, according to LANXESS.

"Our research indicates that there will be an accelerated increase in demand from 2010 onwards, due to an increase in radial tires, especially in China and India," said Commander.

Commander said LANXESS customers also prefer bromobutyl, compared to chlorobutyl rubber. "Chlorobutyl still has a market but the growth is really in bromobutyl rubber because it is simply more reactive."

Pharmaceutical stoppers, the second major use for halobutyl, is also a growing business for bromobutyl. Halobutyl rubber in pharmaceutical stoppers is used to keep air and moisture out of the medicine.

The main use of regular butyl rubber is for inner tubes, which accounted for 29% of the total global demand in 2006. "Inner tubes are still in use in parts of the world where the road infrastructure is not highly developed, such as in India and China," said Commander. "Also, one of the specialty uses for regular butyl rubber is chewing gum, which is growing in Asia."

LANXESS said it is the lone supplier of regulatory-approved butyl rubber for chewing gum, which is only produced from its plant in Sarnia, Canada. The new Singapore plant could also produce it, said Commander.

Other potential applications the company is looking into include tire treads, footwear and seals. "Butyl rubber is far from being a commodity," said Commander. "Continuous innovation and development is required to address changing market requirements."

LANXESS plans to increase research and development (R&D) expenditures this year from last year's €90m level. LANXESS said it increased its R&D in butyl rubber by 60% last year. "This spending will continue to focus on optimizing existing products, processes and technologies," said Heitmann.

The global butyl rubber market is tight, and the two major producers,ExxonMobil Chemicals and LANXESS, have been increasing capacities for the past few years.

STRETCHING SUPPLY

LANXESS completed a 42% capacity increase to its 90,000 tonne/year Sarnia facility, in Canada, last year, and plans to add another 11% this year to bring the total to 150,000 tonnes/year by 2009.

At its Zwindrecht, Belgium, plant, LANXESS also increased its capacity by 10% in 2006 to a total of 130,000 tonnes/year.

LANXESS declined to comment on its global butyl rubber market share but industry sources say it and ExxonMobil hold 75% of the global production capacity for butyl and halobutyl rubbers. LANXESS' butyl rubber business has annual sales of over €500m.

ExxonMobil is also expanding halobutyl manufacturing, at its 145,000 tonne/year Baytown, Texas, US plant. The 60% capacity increase is expected to be completed by the second quarter.

ExxonMobil's total global capacity as of 2006 was reported at 254,000 tonnes/year, which included 105,000 tonnes of capacity from Japan Butyl Company, its 50:50 joint venture (JV) with Japan Synthetic Rubber

ExxonMobil is also mulling another butyl rubber project in the Middle East through a JV with SABIC. Start-up is expected in 2011.

The butyl rubber market in the Middle East, Europe and Africa is expected to have a compound annual growth rate of 1.9% over the next 15 years, according to LANXESS. In the Americas, overall market growth is estimated at less than 1%/year.

"General-purpose tire production is moving away from the US to Mexico and Latin America, as well as to China," said Commander. "The nontire butyl rubber market in the US, which is still the largest in the world, will continue to grow. Butyl rubber will also grow in Central and Eastern Europe, as several tire companies are following the auto manufacturers and building new manufacturing facilities in these areas."

Last month, Russian butyl rubber manufacturer Nizhnekamskneftekhim reportedly planned to increase its annual total butyl rubber output from 120,000 tonnes this year, to 200,000 tonnes in 2012. The project will make the company the third-largest butyl rubber producer worldwide.

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