RUBBER CURE-ALLS
High prices for energy and raw materials put rubber chemical makers in a bind

MARC S. REISCH, C&EN NORTHEAST NEWS BUREAU

Without rubber chemicals, rubber objects would simply be gooey masses. But even though these additives play a critical role in the manufacture of tires, conveyor belts, and other rubber articles, the firms that produce them say the business is ailing.

	RUBBERMAKING Dow Corning's Kenneth Gruszynski monitors processing conditions for thermoplastic elastomers. DOW CORNING PHOTO

Rubber chemicals are a "steady business and have provided reasonable returns until recently," says John N. Carbone, vice president of polymer additives for Noveon. "Normally, they are a good cash generator." But these are not normal times for makers of chemicals such as rubber-curing accelerators, textile and steel-belt adhesion promoters, and antioxidants.

High raw material costs, excessive energy prices, and overcapacity have conspired to place a lid on what chemical makers can charge their customers. And tire makers, the largest users of rubber chemicals, want to keep costs down because their major customers, auto manufacturers, are capping the prices they will pay.

Because of their size, the three major tire makers--Goodyear, Michelin, and Bridgestone--"carry a lot of weight when they negotiate prices," says Chris Exton, rubber chemicals vice president for Crompton Corp. As a result, prices have been declining since the mid-1990s.

To cope, "we've had to rationalize production and make hard choices about plants," Exton says. Not long ago, Crompton closed its Naugatuck, Conn., manufacturing site and moved rubber chemicals production to plants in Geismar, La.; Elmira, Ontario; Latina, Italy; and Altamira, Mexico. In some cases, Crompton shifted production to third-party custom manufacturers.

A spokesman for Flexsys, a rubber chemicals joint venture between Akzo Nobel and Solutia, admits that "profitability, already very poor, has been further squeezed by eroding rubber chemicals prices and rising raw material prices driven by the run-up of oil and gas prices."

Noveon's Carbone, though, takes a philosophical view of the business. "This is a tough time. Passing on a price increase is difficult. But this is a cyclical business," he says. Rubber chemicals' raw materials derived from oil--such as aniline, benzene, acetone, and toluene--are pricey now but are likely to moderate in the future.

Price is an especially sensitive issue these days among producers of rubber chemicals. In fact, Bayer, one of the big three global rubber chemicals makers along with Flexsys and Crompton, didn't want to talk about the rubber chemicals business because of government price-fixing investigations.

In October, Crompton, Flexsys, and Bayer acknowledged that they had received inquiries from U.S. and European authorities about the fixing of rubber chemicals prices (C&EN, Oct. 14, 2002, page 17). These big three, which together control roughly half the global market for rubber chemicals, said they are cooperating with the authorities.

THE RUBBER CHEMICALS business has been difficult for a long while, so it's no surprise that a number of makers have been looking for a way out. Flexsys' owners put the business up for sale a few years ago but withdrew the offer when no takers came along. More recently, Bayer had a deal to sell its Rhein Chemie subsidiary, a maker of specialty process promoters and waxes for the rubber industry. But after Advent International, a financial buyer, backed out, Bayer decided to keep the subsidiary.

Now, Goodyear is exploring the sale of its U.S. chemicals business. The unit makes synthetic rubber as well as Polystay antioxidants. Goodyear sold its specialty chemicals business, including the Wingstay phenolic antioxidants line, in December 2001 to private investment firm Littlejohn & Co.

Rubber chemicals are a sizable business, but they grow only at about the same annual rate as gross domestic production--now a little more than 1%. Industry sources estimate the size of the rubber chemicals market at $1.7 billion globally. About 20% of these process chemicals are sold to U.S. makers of tires, hoses, belts, window seals, engine mounts, and roofing materials.

The fastest growing markets are in China, where demand for rubber chemicals is growing at 8 to 10% a year, according to Crompton's Exton. Crompton has four plants in Asia to supply customers there. But at the same time, Chinese rubber chemicals producers are "putting big-time pressure" on European and U.S. makers, says Eugene M. Urban, vice president of Akrochem, a U.S. distributor of rubber chemicals.

Cheap labor and lower environmental standards give Asian producers an advantage, Urban says. And with the help of government subsidies, Chinese producers have built up capacity in excess of local demand and are exporting at very low prices. Asian rubber production may one day soak up output of Chinese rubber chemicals. But by then, many Western producers will have been driven out of business, and Western rubber makers will find themselves paying much higher prices, Urban believes.

To make Crompton's business less commodity oriented, Exton says his firm is trying to shift production to more specialized rubber chemicals. It's an undertaking that is more easily said than done. One new product is an ultra accelerant, Royal AC 150, that does not generate potentially harmful nitrosamines. Bayer and Flexsys have similar products in their lines, Exton says. U.S. rubber product makers have been slow to adopt any of the new accelerants.

Another new product, XPE1, is based on xanthate chemistry. It allows the use of carbon black filler in "green" tires, replacing more costly silica and organosilanes, Exton says. Crompton is now working with Continental Carbon to develop an all-carbon black "green" tire that helps improve fuel economy.

Rohm and Haas, though not a traditional rubber chemicals supplier, says it has developed proprietary chemistry to make rubber more useful. The company recently introduced a new line of waterborne adhesives used to bond rubber to metal for automotive seals, gaskets, and vibration-control components. Another new product, RoSlip, is a low-friction slip coating used on auto window channels and door seals.

But even Rohm and Haas doesn't expect its rubber-related business to boom in the current economy. Donald F. Branek, commercial manager of the rubber auxiliaries business, says lower auto production this year compared with last year "will affect us."

"This is a tough industry," Akrochem's Urban says. "No one is saying they are having fun."

SPECIALTY ELASTOMERS

Stretching The Envelope

"The general situation is just awful," says Britt Theismann, information and systems manager for the International Institute of Synthetic Rubber Producers (IISRP), of the thermoplastic elastomer business. Not long ago, TPE use in North America was growing at 7 to 10% a year. Last year, consumption grew less than 1% compared with 2001, to 524,000 metric tons.

	TUBE TYPE Thermoplastic elastomers are used in products ranging from tubing to rubber handle grips. BASF PHOTO

This year doesn't look much better. IISRP's survey shows that producers expect growth of slightly more than 1% for the broad TPE category, which includes everything from low-cost styrenic block copolymers to midpriced polyolefins and urethanes to high-cost copolyester-ether and polyamide elastomers.

TPEs grew at a rapid pace because they have the properties of thermoset rubbers but can be processed as easily as thermoplastics. Producers still hope to expand the business, but they are stretching the envelope and trying new approaches. "The replacement of rubber with a thermoplastic elastomer is not as important as it was before," says Margaret M. Mattix, global marketing manager for Advanced Elastomer Systems. "All the simple replacements have been done."

AES specializes in TPEs that contain vulcanized ethylene-propylene rubber compounded with a polyolefin. Many of its thermoplastic vulcanizates (TPVs) are used in automotive parts such as air ducts and weather seals. But new applications for these products include rubberlike grips that are applied over hard substrates like tool handles, cutlery, and kitchenware, Mattix says.

AES has come up with elastomers that bond to nylon- and polystyrene-based polymers, as well as new grades of TPVs that bond to metal and textile substrates. Awnings, sound-dampened metals, and inflatable boats can be fashioned with these latest TPVs.

The newest kid on the TPE block, Dow Corning, bought plastic compounder Multibase in May 2002 and is expanding the Multibase family of thermoplastic silicone vulcanizates. TPSiVs are vulcanized silicone rubber in a matrix of either polyamide or polyurethane, explains Fernando Cuccioli, global marketing manager.

They combine the high-temperature elastomeric performance of silicone rubber with the melt processibility and chemical resistance of engineering thermoplastics, Cuccioli says. Target markets for TPSiVs are industrial hoses, soft-touch handles, and gaskets. And they can be made, much like typical plastic parts, by extrusion, injection molding, and blow molding.

Urethane elastomer makers are trying to push the envelope, too. Stan Nerderman, director of marketing for Noveon, says his firm is working on more "breathable" grades of urethane elastomers for use in sports equipment and apparel. In addition, Noveon has developed a new product line that allows easy extrusion of hard thermoplastic urethanes for hose, tube, wire, and cable.

BASF has something similar. According to Stephane Mori, development specialist, "A harder thermoplastic urethane permits a thinner wall for tubing, which requires less material." This new family of urethanes can save a tubing maker money, Mori says.

One new TPE competitor falls below the radar, however. According to IISRP's Theismann, plastomers--metallocene-based polyolefins--are sometimes substitutes for TPEs and thermoset rubber. But it's still difficult to gauge their impact. Theismann says plastomer producers such as ExxonMobil Chemical and Dow Chemical don't provide data and thus aren't counted in his TPE survey.

Growth in the TPE category may have slowed, but competition for market share and new opportunities continues. Producers say they'll continue to push the envelope in hopes of sparking new demand.

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