Polyurethanes. Mark F. Sonnenschein

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FIGURE 1.9 Analysis of (a) patented polyurethane topics during 2013–2019 and (b) open literature topics during 2013–2019 by prevalence. The patents analysis is for patents in English, whereas the open literature analysis reflects activity in all languages.

      This book also covers markets and commercial aspects of the polyurethane industry. The market and commercial activities overlap but they are not synonymous. The overlap in how the words “marketing” and “commercial” are used reflects their conflation in meaning. Polyurethane market concepts are broader, more strategic, and more theoretical than commercial concepts. Marketing encompasses the equilibrium and nonequilibrium driving forces that make one material attractive to a consumer and unacceptable to another. They take into consideration regional preferences and regional access to feedstocks, and the underlying cultural and societal influences that make a product useful, or desirable, or possess value. They also include the advantages a particular competitor in a market may possess from all facets, including intellectual (i.e. patents).

The commercial aspects of an industrial product include those that are important to specific customers or groups of customers, such as the advantages or value a product may have versus a competitive material or a competitive company in specific cases. Probably the most prominent commercial aspect, especially for commoditized products, is price and price movement. Without doubt, thorough and confident knowledge of pricing in commerce is essential and can distinguish a profitable enterprise from one that fails. A commercial move to raise prices when there is excess capacity or failure to raise prices when there are shortages or feedstock prices are rising are common commercial failures, and the ability to shrewdly navigate price movements is the hallmark of well‐run companies.

In recent years, the polyurethane industry has been subject to significant macroeconomic forces. The overriding force has been the expansion of polyurethane feedstock manufacturing capacity globally and especially in China. In particular, this capacity growth has injected chemical production during a period of global economic growth but uncertain economics in the future. Figure 1.10 shows the extent of isocyanate overproduction. The demand/capacity ratio can have a very material impact on price expectations and influence decisions on additional capacity expansions. It is not always the case that manufacturers flee a market in response to temporary price declines resulting from overexpansion. In the past manufacturers with a strong financial base have decided to wait out the failure of financially weaker producers. The closure of these weak assets will reduce production volumes, called “tightening the market.” It is also the case that in the past manufacturers with a particularly strong financial position and a strong commitment to the market will increase production in the face of overcapacity to further drive down prices, and drive weak manufacturers into untenable production economics. The anticipated response is for weak producers to shutter poorly performing manufacturing assets or to sell their business to one of their competitors. Following these closings, production can regain a capacity/demand balance and prices can rise. This kind of “game” is not seen very often now in the chemical industry. In part this is because of the relatively small number of global manufacturers and their similar financial strengths, maturity, and experience. Additionally, regulation of monopolistic behavior has become more stringent, and the potential gain by this kind of predatory practice may not be worth the potential reputational risk. In that same spirit, many manufacturers see the benefit of strong and rational competition in the marketplace. Rational and mature competition can provide ballast to minimize market fluctuations and provide a stimulus to improve business performance. Lastly, it has recently been dramatically demonstrated that temporary occurrences, such as plant disruptions, can have significant effects on supply. From the middle of 2016 until the middle of 2018 commodity isocyanates nearly doubled in price as a confluence of planned and unplanned plant shutdowns during a time of vigorous economic growth put significant constraint on supply, allowing unaffected producers to greatly increase market share and profitability during this period. Upon resolution of these temporary issues, prices fell to historical trend levels.