By John Richardson
SAVING money through energy efficiency, along with innovation, will be two of the keys to success in the New Normal because demand-growth patterns will be very different than during the Supercycle. The suspension, which guaranteed success for everybody, has gone.
We are therefore going to see some creative destruction amongst chemicals and polymers companies.
Success stories might include ExxonMobil, as we detail below….
This meant opportunities for what the blog’s ICIS colleague, Nigel Davis, wrote at that time would be “materials and innovation – the backbone for the chemicals industry”.
Wind the clock forward two years, to December 2011, and ExxonMobil said in its annual energy review that demographics, including slowing population growth in the OECD countries, would help shape growth over the following 20 years.
They pointed out, very presciently, that China would also see “a steep drop in its working age group”.
Wind the clock even further forward, to the opening ceremony for ExxonMobil’s latest Singapore petrochemicals complex on 8 January of this year, and the energy and petrochemicals giant’s thinking takes further shape.
“Asia remains at the bottom of the cycle. We’ll be in a challenging environment for a while and the extent to which the shale phenomenon [in the US] will add to that challenge,” said Stephen Pryor, president of ExxonMobil Chemical, during the opening ceremony.
“The reality is the US from a chemical standpoint is a very mature market. We have some demand growth domestically in the US but it’s a percent or two, it’s not strong demand growth,” he added, and then pointed out that polyethylene (PE) had hardly grown in the US in a decade.
All of this, first of all, points to why ExxonMobil is dedicated to doing more with less.
For example, it can crack 50 different refinery streams in its Singapore crackers. These streams often have low value in other markets, as they comprise what’s left over once their refinery has stripped out higher-value gasoline, naphtha, kerosene and diesel from each barrel of oil.
ExxonMobil’s mixed-feed cracker technology could thus give it a permanent competitive edge. It is at least as good as – or perhaps even better in the longer term – than shale gas. The US shale advantage might one day go away, but energy conservation is here to stay.
Moving downstream, there are also ExxonMobil’s metallocene-grade PE technologies, which it has put to use in its new Singapore complex. This where the materials innovation, which we mentioned above, comes into play
Its Enable medium-density PE films (MDPE) allow down gauging – i.e. converters need less resin to produce the same volume of finished plastic films.
ExxonMobil also claims that its Enable brand has excellent toughness, high stiffness and “shrink characteristics similar to fractional melt index low density PE (LDPE)”. This enables converters to eliminate LDPE from many of their film formulations.
But what happens even further downstream, at the retail end of the business, is also becoming ever-more important, according to a polyolefins industry source.
“You have to often work with the companies that design consumer products, after of course reviewing surveys of consumer behaviour, if you want to get it right,” he said.
He used the example of stand-up pouches that can be made from MDPE, which, again, allows down gauging. The polymer can replace blends of standard-grade linear-low density PE (LLDPE) and high-density PE (HDPE) that are used to make, say, traditional plastic milk cartons.
“There is always an eventual push-back from customers because, even though a pouch might meet all the technical requirements – such as puncture resistance and passing drop tests – it can still feel too floppy when you hold it in your hand,” he added.
“Thus, polymer producers have to work with the designers to ensure that further down gauging can take place, where you have to balance the “look and feel” of the material with its functionality,” the source said.
“For instance, you might decide to build a thicker layer of plastic into a bottle into, say, the middle of the bottle – if that’s the place where most people pick up and hold a bottle.”
Stand still in innovation and you could well be finished, therefore. Does ExxonMobil measure up in this respect?