January 2010 Archives

THERE'S NO question that innovation is the key driving force for the chemical industry and its customers - and particularly in times of crisis.

While there's always the need to cut costs in a downturn, slashing research and development is truly detrimental to a company's long-term future and success.

"Innovation, especially in the midst of crisis, is of utmost importance. By cutting for even one year, you can create severe damage which is incomparable to the short-term benefit from savings," said Dr. Werner Breuers, the head of R&D at German specialty chemicals firm LANXESS, in an interview in New York.

Plus, during times of crisis, it is typically the new and innovative products that are the least impacted. "It is much easier to differentiate new and innovative products in a crisis. In the one-and-a-half years since the crisis began, these have been much less impacted," Dr. Breuers said.

Everyone talks a good innovation game, but you have to walk the walk. In 2009, even while LANXESS cut costs significantly, it actually raised R&D spending by 10% to around €110m and plans to boost that figure by another 10% in 2010.

US-based Dow Chemical also took great pride in maintaining record levels of R&D spending of about $1.6bn in 2009, even while cutting capital expenditures by 50%.

Spending money does not guarantee success. There are plenty of other factors at play, including collaborating with customers and universities, as well as fostering a culture where creativity and communication can lead to quick decisions.

In a speech to the German American Chamber of Commerce's New Year's Reception and Luncheon on January 20 in New York, Dr. Breuers cited a quote from Jeff Bezos, founder of Amazon.com:

"There is no bad time to innovate. You should be doing it when times are good and when times are tough... It's such a deep-seated belief, I'm not sure we have a choice.

Photo credit: LANXESS

CONSTRUCTION CHEMICAL producers have been painfully aware of the impact the recession has had on this market since late 2008. Startling drops in orders of 30% or more hit earnings hard and pushed some into losses. Producers have been seeking signs of improvement and, although the picture is mixed, there seem to be some signs of recovery. Economic growth is returning, strongly in Asia, and should trigger a substantial uptick in demand. Here, price is of paramount importance, so companies hoping to sell high value-added products may struggle to gain traction. Yet all countries are under pressure to reduce carbon emissions and many developing nations are likely to improve building regulations and insist on adequate insulation and energy conservation. Market growth here is likely to be startling. By 2020 construction in developing nations is projected to more than double, to sales of $7 trillion (€4.83 trillion). Mature markets should post a still-impressive 35% gain to $4.2 trillion. This week we highlight many of the green construction materials the chemical industry is providing to improve energy efficiency. Persuading a conservative construction sector to try something new is no easy task, but initiatives such as the Bayer MaterialScience EcoCommercial program (see pages S1-S8) and BASF's demonstration house are great ways of selling innovative concepts.

Here is a Bayer promotional video about the EcoCommercial Building program: 

Sure - love makes the world go 'round as they say, but really it's energy. And with an increasing population as well as industrialization, the world undoubtedly needs more of it.

Clearly there is no one answer to the billion-dollar energy question. Encouragingly, we are exploring a multitude of new methods to produce and transport energy - and many of them cleaner and greener.

Some are high tech and futuristic, like the international consortium constructing the world's largest nuclear fusion reactor in southern France at a cost of $10bn.

But other sources have been around for millennia, and just need to be better exploited.

The US is tapping into vast quantities of onshore natural gas reserves in shale formations through use of new technologies. The country now has an estimated 100 years worth of supply versus the traditional eight years.

And Brazil is making greater use of its fields of sugarcane. It already is supplying its growing domestic market with sugarcane ethanol for flex-fuel vehicles. New tax policies will make flex-fuel cars the standard versus gasoline-only cars.

The next step will be to use a by-product in the sugar production process called bagasse to generate electricity on a greater scale.

Even though the world's largest hydrocarbon discoveries in recent years have been made off the coast of Brazil, it is still developing alternatives.

A good diversity of energy sources is key. Relying too heavily on one source - whatever it is - has its pitfalls.

Photo credit: sodahead.com