TICONA PHOTO
	"Cars are hot and greasy, and that means crystalline plastics. When the automotive business slows down, these materials get hit hard."

The biggest event to hit the engineering polymers industry in recent years--Solvay's pending takeover of BP's engineering polymers business--demonstrates the push some companies are making into new markets and higher value polymers. Thedeal between the two firms will send Solvay's polypropylene business to BP while Solvay obtains BP's engineering polymers business. The two companies will also establish polyethylene joint ventures in the U.S. and Europe.

The swap deal will expand Solvay's engineering polymers business by 50% to roughly $850 million per year. It will give Solvay--whose specialty polymers business already includes polyvinylidene chloride and compounded materials--BP's sulfone polymers, Amodel polyphthalamide, and liquid-crystal polymer (LCP) businesses, among others.

"The deal that they pulled off was kind of ingenious in that they both got what they wanted and got rid of what they did not want," says Louis Kattas, director of performance materials with BRG Townsend. He notes, however, that Solvay still does not have a big-volume polymer like polycarbonate or nylon. "The one thing that business does not have is a core engineering plastic. It's all icing and no cake." This, he says, may be a detriment to Solvay if customers design its expensive polymers out of their products in favor of cheaper materials.

With no other big deals happening, most producers are grappling with the economy. Experts wonder aloud about the long-term effects that the slowing economy will have on the engineering polymers business. The key markets for engineering plastics are all the sectors that have been affected the most by the downturn: automobiles, electronic equipment, appliances, and almost every other kind of durable good. For example, Ford Motor Co. announced that car sales through July this year declined 11.3% from the banner year of 2000, when sales by the end of July had reached 2.6 million units worldwide.

Kattas points out that more than half of the nylon and 40% of the polyacetal sold as engineering polymers are supplied to the automotive industry. "Cars are hot and greasy, and that means crystalline plastics," he says. "When the automotive business slows down, these materials get hit hard."

	DUPONT PHOTO
	HOT WHEELS DuPont's Zytel high-temperature nylon is used on the engine cover of a motorcycle made by Italy's Piaggio. The ground effects and end caps of a Coachmen recreational vehicle are made of coextruded sheets of Bayer's acrylonitrile-butadiene-styrene and Centrex styrenic weatherable polymer.
	BAYER PHOTO

BUT THE DOWNTURN has hurt producers in every engineering polymers sector, not just cars. "It's been a year that engineering polymers producers would like to forget," says Austin Peppin, president of engineering polymers consulting firm Peppin & Associates.

Nylon has been especially hard-hit because erosion in nylon fibers, particularly for the construction-driven carpeting market, has spilled over into the engineering polymers segment, according to Ken Van der Wende, North American commercial director for engineering plastics at Dow Chemical. "With the global economy as we see it, particularly with automotive and construction, the nylon industry has suffered more than the thermoplastics industry and, certainly, more than the rest of the engineering plastics industry," he says.

The acrylonitrile-butadiene-styrene (ABS) industry has also been suffering, largely due to automotive and electronics markets. "Similar to other major polymers, starting in the fall of last year, business started to dampen," Van der Wende says. "That deterioration really accelerated early this year in North America and continued until midyear."

Polycarbonate may have fared a bit better than most engineering polymers, according to Achim Wittig, business manager of polycarbonate for Bayer Corp. He says the market was in short supply last year and the softening in demand has merely put it into balance. "Polycarbonate is in a better position than ABS, but it has softened, and we would like to see the market pick up," he says.

Most observers blame the bursting of the information technology "bubble" for the current economic slowdown. According to Peppin, the burst certainly deflated consumption of engineering polymers by the electronics industry. Demand for LCP, used mostly in electronics, is down about 45% this year in North America, he says.

"The market has gone through a rough time," acknowledges Paul Flynn, LCP business market manager for Eastman Chemical, noting that the slowdown has been across all sectors: telecommunications, consumer electronics, personal computers, and others. He doesn't expect the LCP market to come back until the third or fourth quarter of next year.

Peppin says the consensus among engineering plastics suppliers is that markets will rebound starting in the second quarter of 2002, but he notes that it has been a while since he has been able to extract an exact date from producers. "People have stopped trying to predict it," he says.

SOME PLASTICS MAKERS, noting an exceptional year in 2000, aren't as worried. "You could make the case that last year was an aberration," says Mike Brown, general manager of marketing for GE Plastics, who says this year is turning out to be a pretty average one for the automotive industry, whereas last year producers struggled to keep up with burgeoning demand. "Last year stretched everybody out," he notes.

Bayer's Wittig agrees that the contrast makes 2001 seem worse than it is. "Everybody compares automotive to last year and says it's horrible," he explains. "But if you come from the best year and drop to the fifth best, it is still a pretty good year."

Nevertheless, experts insist that engineering polymers markets, particularly on the specialty and high-temperature end of the spectrum, are heading for turmoil. "Plans to expand capacity have been shelved," says Hank Panning, who is completing a study on high-temperature plastics for market research firm Kline & Co. He says the global economic downturn has delayed a number of high-performance plastics units.

Other observers worry that the economic troubles may slow down development of new applications and new materials, which has been driving the industry in recent years. "Engineering polymer producers need to keep their eye on growing the top line," Peppin says. "This is the way to sustainable development. There is only so much cost cutting you can do before you kill the business."

But producers contend that the economic downturn might present its own set of opportunities for plastics. Engineers looking to cut down manufacturing costs may be more willing to redesign a part in plastic to save money or improve performance in order to gain an advantage in the marketplace.

"Companies are using this time to develop their new concepts and new models, and we'll see the benefits from that in 2003," says Fred Zaganiacz, business director for Bayer's extrusion business, which develops new ABS applications. Among these applications are the use of ABS and weatherable styrenic polymer parts as a replacement for glass-fiber composites.

Of course, over the years, engineering polymers suppliers have gradually added value to plastics as a matter of survival; a temporary change in market conditions, they say, will not reverse this trend.

"The global aspects of the business are increasing," BRG Townsend's Kattas says. "More and more, you need to know what customers want. You are not going to get away with 'whiz-bang' technology any more, and the price game is a losing game in the long term."

Jim Weigand, DuPont's vice president of sales and marketing for the Americas, agrees. "Plastics companies are bringing more value than they ever did before. We're always being challenged to do more than we did in the past," he says.

Even though the plastics revolution began a generation ago, it is still alive in 2001. The substitutions are not as simple as they might have been in the 1950s, but engineering polymers producers are still providing stunning examples of plastics replacing metal, glass, and other materials in many applications.

"Metal replacement is bigger for us now than it has ever been," Brown says. GE's sights are set on automotive exteriors, where its target is replacing metal body panels and other parts with plastic ones. Last fall, the company launched its Sollx resin, a polymer that is resistant to weathering and can be used on automotive exteriors without being painted.

"A TARGET of everyone is paint," Kattas says. "It is horrendous to build a paint line. Any way you can minimize the use of paint is a clear advantage for everybody."

Brown says Sollx will be used initially as a protective outer layer on other plastics because it is costly. But the company has generated enough interest in the polymer to warrant a scale-up of production at its Mount Vernon, Ind., plant.

In addition, GE has the Exatec joint venture with Bayer, which is developing coated polycarbonate sheet for use in automotive windows. GE's Noryl GTX resin, a polyphenylene ether-nylon alloy, is being used in fenders--albeit with painted surfaces--on Volkswagen's New Beetle and other vehicles. GE has also developed bumper energy absorbers that use corrugated lobes made from its Xenoy polycarbonate-polybutylene terephthalate alloy.

Peppin says GE's developments, given time, could be blockbuster applications for engineering polymers. The last major breakthrough in automotive, he says, was the nylon air intake manifold. "A lot of the new applications seem to be evolutionary at the moment," Peppin says.

Weigand agrees but explains that the effort to put plastics on car exteriors is a relatively new one. Replacement of materials in car interiors and under the hood--DuPont's areas of focus in engineering polymers--has been going on for more than 15 years. "We're on a continuing journey to increase the amount of engineering plastics on the inside of the car," he says.

And there is still more room for material replacement. Weigand suggests that the eventual conversion of automotive electrical systems from 14 V to 42 V to accommodate new electronics may lead to new opportunities in nylon, LCPs, and polybutylene terephthalate (PBT) as the numbers of sensors, solenoids, and motors under the hood increase. Likewise, companies like DuPont and Ticona cite fuel cells as a potential future growth driver for engineering polymers.

For nonautomotive applications, DuPont has designed a system, which it calls Caltrel, that uses thin-wall, 0.4-mm nylon tubing to dissipate heat. The company anticipates the first applications in refrigeration, heating, and air-conditioning equipment in 2002.

Recent DuPont estimates put the plastics content of the average European car at 130 to 140 kg; of that, about 22 kg is engineering plastics. DuPont and competitors, little by little, want to soak up the 1,000 kg of metals and the 40 to 50 kg of elastomers that are left.

But that's no simple task, Kattas notes. "A lot of the easy metal replacement, of course, happened years ago, so we are getting more complex and more demanding parts replacing metals," he says.

These demanding applications require high performance under the influence of heat, chemicals, and other stresses. Because this is where engineering polymers can add value, the high-performance end of the field is becoming more crowded. "Many high-temperature polymers have been introduced in recent years to expand market shares of companies or to man the fort and fight off competitors," Panning says.

Panning cites examples such as BP's Amodel, the same resin whose plant in Augusta, Ga., was taken off-line in March because of an explosion there that killed three workers. Another example is DSM's Stanyl nylon 4,6--a nylon based on 1,4-diaminobutane and adipic acid that has a performance range between conventional nylons and LCPs.

DuPont's Zytel HTN high-performance polyamide is also in this category. "Everything needs higher temperature components," Weigand says. "Those are the applications everybody is looking at." Zytel HTN is being used for applications such as motorcycle engine covers.

The jury is still out on whether the marketplace will put one of the newest engineering polymers--Dow's Questra syndiotactic polystyrene (SPS)--into this category. When Questra was introduced in 1997, the company indicated that it may be able to compete with high-temperature nylons and LCPs, but competitors say they haven't seen customers using SPS in these kinds of applications.

Dow now seems to be focusing on Questra's advantages over PBT. The company completed a 36,000-metric-ton-per-year Questra plant in Schkopau, Germany, in the beginning of 2000, and unlike some detractors, Van der Wende doesn't think Dow built a plant that was too big. He says the market for SPS may someday exceed 500,000 metric tons. He thinks that, in the longer term, SPS will edge out PBT. "We have a product that performs in almost every respect better than PBT. It is better and lower cost than PBT," he says.

Dow says one driver for growth might be combinations of nylon and SPS. Such blends, Van der Wende maintains, solve some of the hydrophilicity problems sometimes associated with nylon.

Panning, however, notes the difficulty of introducing a new polymer, particularly into markets like automotive. "It takes months and sometimes years to get qualified with a new polymer; and it takes a lot of money, like introducing a new pharmaceutical," he says.

Competition is also heating up in older high-temperature engineering polymers such as LCPs, which Flynn forecasts will grow 13 to 15% per year over the next five years. Eastman recently completed a 3,000-metric-ton-per-year LCP plant in Kingsport, Tenn. Previously, the company had a toll manufacturer supply it with LCPs, which it then compounded. Ticona, the market leader, has also been expanding LCP capacity.

	GUARDED This energy-absorbent bumper is made from GE's Xenoy resin. GE PHOTO

EVEN AS IT SELLS its business to Solvay, BP is expanding capacity for sulfone polymers in Marietta, Ohio, and for sulfones in Augusta during the fourth quarter of this year.

BASF is expanding capacity for its Ultrason polysulfone ether in Ludwigshafen, Germany, from 3,000 to 5,000 metric tons per year. The products are used in oil circulation systems and headlamps for cars. According to Matthias Dietrich, BASF's business manager for Ultrason, the market for polysulfone is growing at 8% per year. Emerging applications for the plastic include liquid-crystal display substrates, dishes, and baby bottles.

The engineering polymers market is also growing more competitive as companies globalize their businesses. Part of the rationale behind the BP-Solvay deal, for example, is for Solvay to cross-fertilize its existing, mostly European, polymers business with the predominantly North American unit it is acquiring from BP.

Bayer and Rhodia are also relatively new entrants into the North American nylon market. Rhodia is promoting a high-flow nylon material, Technylstar, which the company says can reduce cycle times, and therefore cost, for nylon processors.

Bayer has no nylon production in North America. But according to Jim Walton, manager of the firm's North American nylon business, it established a "beachhead" on the continent through a swap arrangement with Honeywell, where Honeywell suppled Bayer with nylon 6 in North America and Bayer supplied feedstock caprolactam to Honeywell in Europe. Likewise, Dow entered the nylon business in 1998 through a supply arrangement with nylon 6,6 producer Solutia.

Bayer says the deal has worked out well so far. "We're very pleased with the progress, and we're confident that we'll see rapid growth in the future," Walton says. "Though the overall market is seeing a decrease of 15 to 20% in demand, we continue to see growth in our business."

ARRANGEMENTS LIKE THESE can exist in some engineering polymers because producers add much of their value, not in the production of base resin, but by compounding the plastic with additives and reinforcing materials. "The base polymer is really more of a commodity these days," Walton says. "It's not making the polymer, but what you do downstream where the value really gets added."

This is what's allowing two competitors, Bayer and DuPont, to build an 80,000-metric-ton PBT plant together in Uentrop, Germany. The plant, which will be one of the world's largest, will be completed in 2003. Ticona and DSM are studying a similar joint venture in Europe, a region that many experts say is catching up with North America in the use and production of PBT.

In each of these cases, the companies intend to make polymer together and market compounded plastics independently. "It is not like anybody has any secret to making PBT that they can't share with anybody else," Kattas says. "They take the best of both their technologies and beat the daylights out of each other in the marketplace with their compounded material." Observers say this is an excellent way for producers to reduce costs, suggesting that the industry will likely see more of this kind of cooperation in the future.

But such manufacturing initiatives aside, producers say the trends that have driven the engineering polymers business for years will remain largely unchanged. Most of these drivers involve slowly but steadily improving plastics to bring them where they have never been. "We're always looking at new developments," Weigand says. "How do you get leaner, quicker, faster, lighter, and at the same cost or better?"

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