ACC CPI: building on insulation demand

21 September 2012 10:52  [Source: ICB]

Polyurethane consumption is tipped to expand as key regions focus on more efficient construction methods

Keeping out the cold could be a major factor in expanding the global market for polyurethanes (PUs) over the next five years - with many more homes expected to start benefiting from insulation technology.

Brijesh Ramani, lead analyst at UK-based GBI Research, is the author of a recent study on the global PU industry. He estimates the global PU market at around 15m tonnes, and expects it to grow substantially in the next few years. "By 2016, it will be 18m or 19m tonnes," he says.

Production has steadily moved towards Asia, he says, with China becoming a dominant global player. And it is China's current economic strategy that will create most of the growth in PU demand. "In its 12th Five-Year plan, China says it will take PU production from around 7m tonnes/year to nearly 10m tonnes/year by 2015," says Ramani.


PU adhesive plays a key role in wallpaper developed by Bayer MaterialScience to help buildings resist earthquake damage

Construction is a major factor behind this - and improved insulation for housing is a key driver (construction accounts for about 40% of PU consumption in China). China is determined to improve energy efficiency and has allocated the equivalent of around $11bn (€8.8bn) to support this.

"PU will be important here because of its use in insulation," says Ramani. However, he points out that construction is not the only factor behind the growth in PU, as China produces many other products from the material - including mattresses, shoe soles, refrigerator liners and furniture: the list goes on. "China is into everything," he says.

The use of building insulation is not typical of Asia-Pacific, though. In general, the region is hotter than others, so has less need to insulate homes. But China is cooler than other countries in the region, says Ramani, and is advancing plans to increase insulation.

If it appears that China is the only beneficiary in this, it should be noted that much of the extra PU capacity in the country will be built and owned by foreign investors. Chemical company BASF, for instance, is building a systems house in Tianjin - due to open this year - as well as planning a 400,000 tonnes/year methyl di-p-phenylene isocyanate (MDI) facility and system house in Chongqing, due for completion in 2014.

Meanwhile, German polymers producer Bayer MaterialScience will open a PU systems house in Qingdao this year.

But it is not just Asia-Pacific that is seeing a PU boom on the back of construction. The mature markets of North America and Western Europe are also seeing growth, although for slightly different reasons. "In the emerging markets, a lot of the growth is simply down to increased construction activity," says Steve Burns, vice president of supplier Huntsman Polyurethanes, Americas. "In the mature markets, it is down to building codes and standards - which demand that buildings make more efficient use of energy."

Just as China has decided to push energy efficiency, so new building standards and regulations in North America and Western Europe are heading the same way.

PU is the most efficient insulating material, Burns says, with the highest R-rating - which means insulating materials can be made thinner if they are made from PU.

"These regulations really play into our hands," says Burns. "By using insulation, you won't need to generate some of that energy in the first place. The best kilowatt is the one that you never use."

The US energy efficiency regulations are quite new, so it will take a while before they affect the PU industry, he says. "Codes are a lengthy process. It takes time for regulatory bodies to agree, so you won't see the effects immediately. But we are now feeling the effects of some legislation that was introduced five years ago," says Burns.

A good example here has nothing to do with insulation, but has given a modest boost to the North American PU industry. Many wood products, such as particle board, are made by gluing pieces of wood together into panels, which are then used for internal structures such as kitchen cabinets. Back in 2007, the California Air Resources Board (CARB) adopted stringent regulations concerning formaldehyde emissions, with its Airborne Toxic Control Measure (ATCM).

This has been taken up nationwide and sets very high standards for indoor air quality, says Burns, which cannot be met by many products using traditional urea formaldehyde adhesives. "Producers are having to meet these new low-emission standards and this has pushed them towards MDI-based adhesives."

Similar measures are in place in other regions, including Germany and Japan, and he says China is considering similar standards.

The construction market is the largest consumer of PU, just ahead of the automotive industry. But, says Burns, the two markets are very different in nature: while automotive is dominated by global forces, the construction market is far more localised. Local building regulations can vary widely, so standards differ from region to region. Different US states, or separate countries within the EU, may have widely differing standards.

In terms of sourcing, automotive players are beginning to demand 'global materials'. Nothing of this kind is likely to happen in construction, but the emerging breed of 'global cars', whether made in Detroit or New Delhi, will use near-identical grades of material.

"It's something you need to do if you want to supply these companies," says Burns.

While most attention is focused on the main, largest economic areas, there is plenty going on in one of the smallest PU markets: the Middle East. Although it accounts for only 1% of global consumption, a number of construction initiatives - such as a Saudi riyal (SR) 40bn ($11.7bn) increase in housing spending - will help the PU market there to develop rapidly over the next five years.

Ramani does not expect the Middle East's share of the world market to change, believing it will stay at around 1% of consumption. In the same period, he expects Asia's share to grow from 55% to 60%, North America's to decline from 21% to 18%, and Europe's to dip from 18% to 16%. But in volume terms, it is equivalent to around 20% growth.

Although insulation is not an important factor in this region, Ramani says air conditioning systems will help to boost consumption of PU.

The region is on the verge of producing its own raw materials: to date, it has imported these for processing in local systems houses. But Saudi Arabia's chemical giant SABIC is to build a facility to make toluene di-isocyanate (TDI) and MDI under licence from Japan's Mitsui. The plant is expected to begin production in 2016.

"This could be used to supply raw materials to Qatar in the lead-up to the 2022 World Cup," says Ramani. He expects PU consumption to increase as new hotels - and their contents, such as bedding - are built ahead of the tournament. A similar effect is likely to be seen in Brazil, ahead of it hosting the 2014 World Cup and 2016 Olympics, he adds.

"Construction will be the major growth driver in Brazil," he says. At the same time, the country recently became the world's fourth largest car producer - so PU demand is likely to accelerate further.

Despite this, Ramani does not believe that raw material production will increase in Brazil and Latin America. Instead, he says, the US could further increase its supply of PU raw materials into Brazil.

"The US has the capacity, but the construction market there has not been doing well for the past two or three years," he says. "It could increase production, and find healthy demand from markets like Brazil."

Polyurethane (PU) is making important inroads into the construction market. The shift towards more energy-efficient housing is exemplified in the concept of the "passive house" - a highly energy-efficient building that uses only about 15% of the energy of a conventional house.

Since the concept was born in 1991, many such structures have been built. Last year, Belgian construction company Bostoen, and Isopa - the trade association for isocyanate producers in Europe - began a project to build a "polyurethanes passive house".

The house, in Brussels, uses PU materials wherever possible - including an 18cm insulation layer that keeps the house warm in winter and cool in summer.

Other examples include: PU insulation boards to cover pipes on the ground floor; spray foam to insulate each floor; and block foam panels between the roof rafters.

The house is due for completion next year, although it has already been opened for special events, such as EU Sustainable Energy Week in June.

Quite separate from insulation, researchers at Bayer MaterialScience have used PU as the secret ingredient in a new type of wallpaper - which helps houses to resist earthquake damage.

Its EQ-Top is a glass-fibre fabric combined with a PU-based adhesive that helps to strengthen the walls of a building - reducing the amount of falling masonry during an earthquake, which can help to save lives (see photo, left).

The adhesive is based on the company's Dispercoll U polyurethane dispersion - which also forms part of the glass-fibre fabric.

For more information on global polyurethane markets, go to GBI Research

Author: Lou Reade

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