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Resource Management Key to Viability for Synthetic Latex Polymer Producers

Published on 2005-04-28. Author : SpecialChem

LITTLE FALLS, N.J. -- With crude oil and natural gas prices at record levels, resource and raw materials management is key to remaining competitive for producers of synthetic latex polymers (SLPs). A recently published study from Kline & Company examines the manufacturing economics of this industry, which has shown steady, moderate growth despite increases in production costs.

SYNTHETIC LATEX POLYMERS MANUFACTURING ANALYSIS, Volume III: United States 2005 indicates that manufacturing costs for SLPs have increased by approximately 20% since 1999. In response, latex polymer manufacturers have tried to insulate themselves, particularly from rising monomer costs. These raw materials account for at least 67% of the total manufacturing cost for SLPs and can range as high as 82%, as with all-acrylic latexes.

"With the cost of SLP monomers sourced from petrochemical stocks at record levels, resource management is critical for any SLP producer," says Gillian Morris, industry manager of Kline's Chemicals and Materials Practice. "When costs are up, companies that are backwardly integrated into key monomers have a big advantage over companies that must purchase theirs from outside sources."

Despite some attempts to pass on increased costs to consumers, SLP production costs have outpaced price hikes significantly. Pricing pressures are extremely high in many of the largest end-use applications for SLPs -- particularly in paper applications and paints and coatings.

This is partly due to the leverage that big-box retailers like Home Depot and Wal-Mart have with their suppliers of goods that are manufactured with SLPs, Morris says. But because synthetic latex polymers are inexpensive and have low toxicity, it is unlikely the market will face competition from alternatives in the near future.

In North America, the industry shift from solvent-based systems to water- based systems, which began in the early 1980s, is mostly complete, leaving little room for further penetration into new growth areas. "It's a mature market, so demand will continue to grow at moderate rates," says Morris. The business is also in a period of consolidation, with seven industry mergers occurring from 2000 to 2004, three of which involved Dow Chemical.

For Dow and its competitors, remaining competitive and ensuring growth will require strong emphasis on resource management. "It's important for these companies to focus on keeping their manufacturing costs down, but also to know from a strategic standpoint what their competitors' manufacturing costs might be," says Morris.

For long-term growth and cost management, SLP manufacturers are likely to look to other regions such as Asia or South America, either through joint ventures, acquisitions, or new plant construction. Kline's SYNTHETIC LATEX POLYMERS MANUFACTURING ANALYSIS covers the United States, China, Brazil, and Western Europe in a series of regional volumes that provide detailed technology and production cost structure assessments for four major latex polymer categories.
A companion series of regional market-focused analyses examines current and forecast demand by major product and end-use industry, including information on grades, prices, applications, captive production/consumption, major customers, distribution channels, supplier sales, and technical and market trends.

Established in 1959, Kline & Company, Inc. is an international business consulting and market research firm that offers a broad range of services to the chemicals and polymers, petroleum and energy, and consumer products industries.

Source: Kline & Company, Inc.

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