INSIGHT: Capturing growth on the technology edge

02 November 2009 16:09  [Source: ICIS news]

By John Richardson

SINGAPORE (ICIS news)--One of the easiest stock phrases a chemicals company executive can use is “we plan to differentiate” in the face of falling behind on the cost curve.

A few years ago one of the roots to differentiation was converting polyethylene (PE) plants so they could also produce ethyl vinyl acetate (EVA) resin.

This was a response to the looming next big wave of Middle East capacity, which is mainly in standard PE and polypropylene (PP) grades.

But the end-result has been what Stephen Moore, Director of Singapore-based plastics consultancy Intercedent Asia, described as “very cut-throat competition” in lower-end applications.

EVA demand growth, though, was reported by polymer traders to be exceptionally strong from 2005 up until the second half of last year with supply constantly tight.

“This was probably to do with the boom in exports of low-end manufactured goods to the West,” said a Singapore-based polymer trader.

“Asian consumption is picking up, but it’s going to take a good few years to replace weaker exports to the US and Europe.

“This is probably why I haven’t heard of any new capacity additions being planned.”

The two key applications by volume for EVA were foam and hot-melt adhesives for use in glue guns, Moore added.

“The Asian market has traditionally been dominated by foam, mainly for use in Crocs and lower-cost versions of moulded shoes used for local markets.

“Taiwanese suppliers such as Formosa, USI Far East and Asia Polymer are very dependent on this market.

“It’s not uncommon for footwear makers to blend low-density polyethylene (LDPE), sometimes scrap material, with EVA to lower costs - although foam flexibility suffers.”

As for film grades, used in a variety of food packaging applications, Moore sees very little growth potential in the long term because of pressure from metallocene-grade linear low density polyethylene (LLDPE).

“Metallocene grades have lower heat seal temperatures than conventional LLDPE,” he said.

“In many cases they can provide the necessary sealing properties without even having to use EVA, which has traditionally been used as a sealant layer in developed markets.

In Southeast Asia, use of EVA as a sealant has actually never really taken off.”

Another EVA application is in greenhouse film on account of its good thermal properties. Even here, though, LDPE is commonly used because of its lower cost.

So is the copolymer destined for a slow and painful contraction, as is the case with polystyrene (PS)?

Not if you have the technology edge to produce the high-purity grades of EVA used for encapsulating photovoltaic or solar cell modules (groups of cells). EVA and polyvinyl butyral (PVB) sheets are used to protect and weather-seal the modules.

The global flexible and thin-film photovoltaic market is expected to enjoy a compound average growth rate of more than 35% up until 2019, according to a study released in September by the UK-based market research and consulting company, IntertechPira.

Current key major suppliers DuPont and Mitsui Chemicals subsidiary Mitsui Chemicals Fabro Inc are in a very strong position to take advantage of the boom, said Moore.

Mitsui Chemicals Fabro is to expand its EVA-based solar film capacity to 20,000 tonnes from 9,000 tonnes in two phases this year.

“Newcomers would face a hurdle as solar module-makers have to secure international certification for their product,” Moore added.

“Any change of materials means the vendors have to go through the entire certification process again.”

Integrated supply chains from resin to film gave DuPont and Mitsui an advantage, Moore said.

“Photovoltaic grades also typically have a vinyl acetate co-monomer content of 33% and a melt index of 30. These grades are challenging to manufacture.”

DuPont has a disruptive technology which could undermine the use of EVA in solar cells, however.

“New ionomer-based encapsulation sheets add strength, clarity, moisture resistance and dielectric property advantages versus EVA and [polyvinyl butyral] PVB,” claims DuPont in promotional material.

These new sheets are made from the polymer ethylene methyl methacrylate (EMMA).

As a senior US chemicals industry executive once said: “You cannot always eat lunch without being willing to cannibalise yourself.”

Read John Richardson’s Asian Chemical Connections blog
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By: John Richardson
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