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Bayer Sees Polyurethane Volumes Returning to Pre-Crisis Levels

https://www.chemnet.com   Jun 18,2010
June 14 (Bloomberg) -- Bayer AG, the world’s biggest maker of foam-like materials used in construction and upholstery, expects to crank out plastics at volumes close to pre-crisis levels as customers in Asia race to meet demand.


“I am optimistic we may this year already reach the volume levels of 2008” for polyurethanes, said Peter Vanacker, who heads the Leverkusen, Germany-based company’s polyurethane business, in an interview at the headquarters. Much of the growth stems from China, he said on June 11.


“Five years from now, China will overtake the U.S. as the largest market for polyurethanes,” said Vanacker.


The worst chemicals industry slump in 35 years drove earnings at the MaterialScience division down 59 percent in 2009. The unit is aiming for sales growth of about 20 percent and expects operating profit to double this year.


Alongside polyurethanes, of which Bayer controls more than 25 percent of the global market with an annual production capacity of around 4 million metric tons, the German company claims the top spot in polycarbonates. These are tough lightweight plastics used to make products from bulletproof windows to CDs. Production capacity is running about 90 percent, said Patrick Thomas, the head of Bayer MaterialScience AG.


In polyurethanes, Bayer competes with Germany’s BASF SE, the world’s largest chemical maker, as well as and Dow Chemical Co. and Huntsman Corp. Bayer’s shares have lost 15 percent this year, making them the second-worst performer in the 18-member Bloomberg Europe Chemicals Index, which has fallen 0.9 percent.


Tight Demand


Demand is so tight that one client in South-East Asia recently offered to pay more for some polycarbonates in exchange for supply guarantees, said Thomas. The 147-year-old company also makes drugs and crop treatments.


Consumer appetite from Asia for portable electronic devices such as netbooks and tablet computers, made with Bayer’s materials, more than offsets a slowdown in Europe, said Thomas. Demand for Apple Inc.’s iPad tablet is higher than estimated and sales may reach 13 million units next year, Macquarie Group Ltd. analyst Phil Cusick said on June 1.


Demand for Bayer’s plastics products fell 5 percent to 10 percent in European and U.S. markets in the first quarter compared with the fourth quarter 2008, before the economic crisis took hold, while Asian sales jumped 30 percent, said. Thomas “The demand pattern has totally shifted toward Asia.”


“Global demand for polyurethane is growing at a rate of about 5 percent a year,” said Vanacker. “In 2009, world demand dropped at two percent or three percent, while this year we’ll see growth of well above 5 percent.”


Bayer held its budget for research and development for its MaterialScience business steady at 340 million euros ($417 million) from 2006 to 2009, while sales dropped to 7.5 billion euros from 10.2 billion euros in that time.


Though the portion spent in China stands at 10 percent to 15 percent, this will “escalate in the future,” Thomas said.


Bayer is developing plastic foams for train tracks, allowing trains to run at higher speeds with fewer vibrations and noise. It is also developing a polyurethane roof to replace current steel roofs “with a well-known carmaker” to save on weight, said Vanacker, declining to disclose the customer’s name.

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