A Velozzi plug-in hybrid
Source of picture: www.zerauto.nl.blog
By John Richardson
Doom-mongers are claiming the end is nigh with the world heading for a double-dip recession.
This is happening at the same as the optimists are talking of the world entering a new sunny upland of sustained exceptionally strong emerging-market growth, which will more-than compensate for lingering problems in the West.
At ground level in the chemicals industry the view is equally divided with specific commodity polymer markets showing significant stress, such as a polyolefins in China where the reasons behind price corrections point to problems with the sustainable-boom story.
You can contrast this with strong year-on-year and, more significantly, sequential improvements in financial results, and bullish statements about the medium and long-term outlook from companies such as Dow Chemical.
The truth might be between the two extremes with the confusing picture in the West reflecting a shift in the sources of demand-growth now that economies can no longer be driven by the credit-fuelled consumerism of most of the last decade.
Innovation seems to be the key for chemicals companies to prosper in this changed environment.
As for the emerging world, short-term bubbles aside, it is becoming harder to argue why the rise of China etc will not continue, leading to far greater consumption of both commodity and higher-value chemicals and polymers.
Patrick Thomas, CEO of Bayer Material Science (BMS), in an interview last week, described the nuanced nature of the moderate recovery in the US when he said: "There are two parts to the stimulus programme - the first paying-down debt in the financial system and getting the financial system working again through quantitative easing etc; the second investment in energy efficiency.
"While fiscal stimulus might have to be withdrawn from the financial system, energy-efficiency initiatives continue, which include better-insulating 400,000 government buildings. This is an opportunity for our methyl di-p-phenylene isocyanate (MDI)-based polyurethanes (PU) going into rigid-foam applications for insulation."
He accepted that the collapse in home starts - and negative equity that's preventing people from moving house - were significant problems for toluene diisocyanate (TDI)-based PU used for flexible foams in mattresses, furniture and chairs etc.
"We have seen somewhat of a recovery, though, thanks to people who are not moving home upgrading their existing properties.
"This has helped boost the sales of, for example, composite wood panels - using BMS PU adhesives - which are used to help build home extensions.
"On the polycarbonate (PC) side, we have benefited from an increase in sales in office automation machines.
"These machines, which are replacing people, combine functions such as photocopying, faxing and emailing into one unit - and the casing for these units is made from BMS acrylontrile butadiene styrene (ABS)/PC composite."
But he added that "people who are unemployed staying unemployed" would obviously hinder the recovery.
BMS is also working with Velozzi, the US, California-based new technology car company, which is developing a plug-in hybrid SUV-sized vehicle.
"In the US, people like to drive their giant SUVs and so one challenge is to make big all-electric cars with energy efficiency boosted by increasing use of light-weight plastics. The fuel-efficiency theory, through the use of these light-weight plastics, also applies to gasoline and diesel vehicles.
"The Velozzi car will use our PC glazing material and our open-cell carbon fibres with a PU skin which is moulded into body-work components."
As for China, he repeated the well-known, but still startling, statistic that China produced more cars in 2009 than the US.
"In the future, most of the new cars China produces will stay there as domestic growth accelerates - and these autos are of great value.
"I was picked up from Shanghai airport in a really good family car recently, that didn't rattle or anything, costing just 8,000 Euros."
China's auto manufacturers face far fewer regulations than their European counterparts, who have to comply with a plethora of rules governing, for example, the geometry of vehicles and minimum amounts of illumination, he added.
Lack of red tape is encouraging greater substitution of natural materials by plastics in China.
"The Chinese industry is also much more open to replacing steel and glass with plastics and composites made from plastics because there isn't the legacy issue of existing capacity you get in the US and Europe.
"In the West, a bigger amount of auto components are steel and glass-based as the attitude is "we have the production so we might as well make use of it' ".
But he qualified this by saying that higher EU emissions standards were encouraging greater use of PC glazing.
In China, too, he sees a big opportunity for use for rigid PU foams in insulation, where office buildings tend to heat the outdoors in winter and cool it down in summer as employees either shiver or sweat inside.
As with the other chemicals majors focusing on innovation, Thomas talked of the big global trends driving future growth. These include ageing populations, food and water.
BMS has developed PU-based lubricious coatings for use in catheters and other medical products.
"Globally, 50% of all the food produced is wasted and so there is a huge opportunity for rigid foams used in insulation for refrigeration in food transportation, storage in shops and finally in refrigerators in homes," he added.
"Thirty per cent of water in old cities leaks because of faulty piping. We have a PU material which you can spray inside a ruptured ceramic or metal pipe without having to dig the pipe up. This forms a whole new pipe within the old one."
It seems clear that the growth story is not straightforward - and not one that can be told only by looking at key economic indicators and relating these back to chemicals.
New sources of value for the chemicals industry will continue to develop, requiring a great deal of R&D investment, talent - and failures as well as successes.
BMS spent Euro207m on R&D in 2009, not including joint development activities with customers. This was from sales of Euro7,520m.
"Forty per cent of our products didn't exist five years ago. Some of this involves minor modifications along with new products," said Thomas.
In the final analysis, and in a nutshell: Anybody without overwhelming feedstock-cost advantages - or support from non-profit motivated state ownership - has little choice but to go down this route.