INSIGHT: R&D provides momentum for better times ahead

14 December 2010 14:47  [Source: ICIS news]

By Andy Brice

LONDON (ICIS)--These remain turbulent times for the chemical industry, and belt tightening continues with aplomb.

However, for all the doom-mongering since late 2008, the majority of players have steadfastly refused to slash their research and development (R&D) budgets. Instead, their focus on innovation and populating their product pipeline remains paramount.

They agree that the best time to invest is at the bottom of the cycle, providing momentum for the better times many hope are just around the corner.

That was the message echoed by Marijn Dekkers, the recently-appointed CEO of German major Bayer, last week at its Perspective on Innovation conference.

Bayer said it was planning to maintain its R&D spend for 2011 at a similar level to 2010, which was up 13% year on year at €3.1bn ($4.1bn).

“We want to be an innovation and technology leader in the areas in which we do business,” said Dekkers. “That is what our business model is based on. Without any doubt, innovation is part of Bayer’s DNA.”

Although the MaterialScience business accounts for a relatively meagre 7% (€230m) of the company's total R&D budget (HealthCare and CropScience receiving 67% and 25%, respectively), the segment’s pipeline remains strong.

Some 20% of sales at MaterialScience are generated by products launched since 2005, said Dekkers, indicating that it is proving a shrewd investment.

The two-day conference had started with an explanation of where some of the money was going.

Among the highlights were advances in polyurethane (PU) foam used for insulation.

Within the next five years, Bayer expects its new nanofoams to be commercially available and to make a major impact on the insulation market. These could potentially double the insulating properties of PU, according to Hans-Wilhelm Engels, senior vice president of Innovation and Specialties, and would offer huge energy savings in applications ranging from buildings to refrigerators.

Engels said that foams used in refrigerators tend to have a K factor – the measurement of insulation properties – of around 22, with the cell size around 150 micrometres. However, the new technology could mean cell sizes may be improved to a range of 100-500 nanometres, slashing the K factor to 8.

Another ongoing project is looking at using waste product carbon dioxide (CO2) as a raw material in the manufacture of polymers, in turn helping to reduce the use of finite fossil fuels. With oil becoming scarce, the use of CO2 could be vital in the future, said the head of the catalysis programme, Christoph Gurtler.

Researchers from Bayer MaterialScience and Bayer Technology Services have been working with RWE Power and RWTH Aachen University on an €18m CO2-Reaction using Regenerative Energies and Catalytic Technologies (CO2RRECT) initiative to chemically bond the greenhouse gas and use it as a building block.

Just to prove companies can gain significant help with their innovative endeavours, Bayer is getting some assistance in the form of €11m in grants over three years from the German Federal Ministry of Education and Research.

Joachim Simon, vice president of the Automotive & Transportation Advanced Resins Division, concluded the series of seminars by highlighting the importance of developing new materials and technologies that improve the efficiency of cars.

Surprisingly, said Simon, despite the economic doldrums, automotive production rates are at record levels in Europe at the moment – largely because of increased consumption in Asia.

With higher demand and future growth forecasts, reducing CO2 emissions and improving cars’ efficiency is more important than ever. One possible solution, he said, is the development of the electric car. Weight reduction is also a key focus.

The automotive sector is responsible for 18% of Bayer MaterialScience sales, based on 2009’s €7.5bn total.

The business has touted the benefits of its Makrolon polycarbonate (PC) glazing for many years, as it is 50% lighter than glass, but Simon also showcased a prototype unveiled at October’s K 2010 event - a one-piece tailgate with integrated rear window and lighting.

Every single component had been merged into this single injection-moulded car part made of PC, increasing design flexibility and significantly reducing weight.

Since the conference, Bayer has announced plans to relocate its PC headquarters from Leverkusen in Germany to Shanghai in China, because of the growing importance of the Asian market and to tap into its increased consumption.

Bayer says it will also invest €1bn to expand its facilities in Shanghai. The region currently accounts for around 60% of the global PC market.

There is pressure to develop new outlets for PC, with demand in the traditionally robust CD and DVD sector easing because of increased internet use and digital downloads. However, automotive uptake for the tough thermoplastic is tipped to continue showing steady growth as economies recover.

Tough economic times clearly make for tough decisions at board level throughout the chemical industry. R&D, however, remains a core element of most players’ strategies. For Bayer, it is central to its plans to emerge from the financial gloom as a company that is bigger, stronger and better positioned for the future.

($1 = €0.75)

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By: Andy Brice
+44 20 8652 3214

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