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Reinforced thermosets' high performance in difficult operating conditions to fuel demand according to a recent Frost & Sullivan study.
(Published on July 2006 – JEC Magazine #26)
BY HARIHARAN RAMASUBRAMANIAN SENIOR RESEARCH ANALYST FROST & SULLIVAN
Ongoing product development is driving an increased uptake of reinforced thermosets in highperformance applications (particularly in tough operating conditions) in the automotive, aerospace and wind energy markets where niche applications are emerging. Despite market maturity, niche applications, which are still in the early developmental phase, will boost lucrative opportunities for suppliers in the European reinforced thermosets market.
New niches are emerging and companies that are able to identify those niches and offer product improvements in existing applications will gain over the long term. Further, with most applications entering a mature phase in the product life cycle, continued product development will offer great potential in niche applications.
Accordingly, revenues are projected to increase from €1.15 billion in 2004 to reach €1.41 billion by 2011. Unsaturated polyester (UP) resins, which accounted for 73.9% of total market revenues in 2004, are finding usage in corrosion-resistant and high-performance applications. Epoxy resins, which command a price premium due to their superior performance characteristics, will also continue to offer exciting growth potential due to augmented demand in aerospace and automotive applications. Revenues are also likely to witness a surge, as Germany, the biggest market for reinforced thermosets in Europe, continues to exhibit tremendous scope for market expansion.
At present, the trend of merger and acquisition activities to reduce costs and generate economies of scale is leading to a highly consolidated market, dominated by a limited number of participants with strong market presence. As rising input costs continue to impact profit margins, suppliers will need to embrace mergers and acquisitions to reduce costs and avail the economies of scale associated with such a strategy.
Analysing the pros and cons of an acquisition and identifying suitable targets for acquisition that will provide the best synergy will be the major challenge for the big market participants. However, in the long term, companies will emerge stronger from mergers (such as the formation of Hexion Specialty Chemicals that brought together four major market participants) and this trend will favourably affect the bargaining power of suppliers.
In addition to mergers and acquisitions, the market is also likely to witness intensifying competition from companies in the Far East and Eastern Europe, which provide low-cost options. Hence, suppliers should focus on upgrading their technologies if they are to compete successfully with such companies.
Companies would do well to focus on pruning their operating costs by improving operating efficiencies. Backward integra-tion into the production of raw materials is one such strategy that will help achieve this, while also ensuring a steady supply of raw materials. With backward integration taking place across the supply chain to reduce costs and gain higher profit margins, companies will be able to allocate greater resources towards research and development.
Intense competition is also emerging from alternatives such as metals and engineering thermoplastics. Thus, product development and low-cost production will become crucial to retain competitiveness over alternative technologies.
For instance, innovations such as the Polygiene technology developed by Perstorp Compounds that terminates harmful viruses such as the SARS virus, will gain eager acceptance in public-use applications such as mass transit. Investing in such innovations will allow suppliers in the reinforced thermosets market to retain their established customer base.
Given the existing emission and recycling regulations, especially in the electronics and automotive segments, responding suitably to such restrictions will be vital to avoid losing key markets to more favourable alternatives.
Companies that do not adequately respond to the needs of the market and its regulatory demands will quickly lose ground in this rapidly consolidating market. As a result, developing products that comply with regulations should be a high priority for suppliers. Consequentially, it will become necessary to devise commercially viable methods of improving the recycling of products to ensure regulatory compliance.