Despite a challenging economy and declining production, the polyurethane industry continued to evolve over the past two years while addressing growing concerns over energy conservation, according to the 2008 End-Use Market Survey on the Polyurethanes Industry in the United States, Canada and Mexico. Research conducted by IAL Consultants on behalf of the Center for the Polyurethanes Industry (CPI) of the American Chemistry Council, shows that overall production of polyurethane in NAFTA declined by 6.7% per year during the past two years. The figure reflects a 7.7% annual decline in U.S. markets and 10.8% decline in Canada, while Mexico has shown positive growth for the third consecutive survey. The production of polyurethane in Mexico increased at an average annual rate of 9.6% over the past two years, partly due to increased domestic demand (Figure 1).
“With the dip in automotive output, decreased consumer spending, high levels of imported furniture and a drop-off of activity in new housing starts, we were prepared to see a decline in polyurethane production in the U.S. and Canada,” said Neeva-Gayle Candelori, Director of CPI.
“Overall, our research shows that the industry continues to change,” said IAL Associate Director Angela Austin. “While some markets are mature, new ones have opened up. Renewable chemicals and energy efficiency continue to be important topics. Change is essential for evolution and it would be worrying if there were no signs of market evolution.”
Changing MarketsSigns of growth in the polyurethane industry included continued increases in spray polyurethane foam demand for residential and industrial applications, as well as use of the material by the U.S. Army to insulate tents and other structures at bases in the Middle East. Polyurethane also is being used for effective wound dressings, pharmaceutical delivery media, reliable drug delivery, comfortable mobility aids and hygienic hospital environments. The demand for low-VOC and high-performance coatings related to product substitutions made the decline in the production of coatings, adhesives, sealants and TPU less severe.
Though there was a sharp decrease in binder production as a result of the decline in OSB (oriented strand board) demand by the U.S. housing sector, the desire for safe and clean recreational areas has helped increase use of polyurethane binders in sports tracks and playgrounds in the past two years. New applications to improve quality of life are contributing to market evolution as well, such as new comfort levels in golf cart seating for the growing number of elderly.
Manufacturers looking to comply with new regulations and secure certification are also finding ways to create opportunities for growth. The survey shows a boost to the rigid polyurethane foam market for thicker panels needed to meet new ASHRAE (American Society of Heating, Refrigerating and Air-Conditioning Engineers) standards. CARB (California Air Resources Board) regulation and the CertiPUR program also helped to secure business in the bedding industry for flexible polyurethane foam.
Differences by RegionThe United States, representing 81% of the total polyurethane production in NAFTA, had a market breakdown similar to NAFTA overall. Imports of upholstered furniture continued to increase in the United States. Though statistics from the U.S. Department of Trade and Commerce did indicate a slight drop in overall imports during the past two years, these were a reflection of the current state of the housing market and declining consumer demand.
In Mexico, production of rigid polyurethane foam dominated the market as new companies invested in the country and the appliance industry continued to grow. In 2008, the Mexican appliance industry produced 9 million refrigerators and freezers compared to 11.3 million in the United States.
Mexican furniture and automotive markets also grew during 2008, driven by export and domestic demand. With 2.1 million units in 2008, automotive production exceeded Canada’s. Flexible molded foam end-use production increased due to the manufacture of automotive components and flexible slabstock production increased, as well. Though families currently prefer to buy new upholstered furniture over new mattresses, the bedding market has potential for further development. Despite a deficit of 5 million homes in Mexico, home ownership has increased.
Canada’s dependence on the United States resulted in a greater production decline than experienced in the U.S. The country was the third market in the NAFTA region and accounted for 8.9% of total production. Flexible foam slabstock accounted for 16% of total production, compared to 21% in 2006 and the fall in U.S. housing starts led to 54% of OSB production being idled.
As an environmentally conscious country, the population continued to buy products marketed as “eco-friendly”, such as rigid polyurethane foam and flexible polyurethane foam. Rigid polyurethane foam accounted for 39% of production in 2008 compared to 28% in 2006, another sign of interest in greater energy efficiency.
In the energy sector, components made from polyurethane cast elastomers, technical insulation coatings and sealants received increased capital expenditure for maintenance and development, mainly as a response to the high oil prices of 2007 and the first half of 2008.
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Once again, rigid polyurethane foam products accounted for the largest share of the 6.5 billion pounds of polyurethane produced in NAFTA in 2008. The figure reflects the relative strength in demand for rigid polyurethane foam as an insulation material. The past two years have witnessed stable demand from the construction industry.
New housing starts have declined, but expenditures on remodeling and repairs increased. This development is largely responsible for the growing demand for spray polyurethane foam as internal wall insulation and the slower than expected decline in CASE products like elastomers used in thermal breaks in insulated windows, solar panels, wooden floor and turbine blade coatings, adhesives and sealants, and the steady demand for one component spray foams. The versatility of spray polyurethane foam also has contributed to its use in army tents and structures in the Middle East where it has contributed to fuel savings.
As part of its industry-wide survey, IAL looked in depth at the factors affecting the declining demand for flexible polyurethane foam in the automotive, furniture and bedding industries:
Furniture/BeddingUnited States production of flexible slabstock foam fell sharply from 2006 - 2008. Flexible foam stock production dropped by nearly 25% in 2008 compared to 2007. The main impetus behind this decline is the decrease in furniture production due to lack of consumer demand and imports. Imports of upholstered furniture continued to rise until the end of 2007. The rate of imports is not expected to change in the near future as U.S. government incentives to first-time homebuyers will likely go towards imported goods.
The bedding sector continued to use large volumes of flexible polyurethane foam during 2008. Mattresses manufactured in the United States used more foam per unit for deeper mattresses with softer toppers; more hybrid mattresses were produced, as well. Since the end of 2008, factors such as the reduced cost of lower density foams, thinner mattresses, and customers requiring faster delivery times for mattresses than other furniture delivery (2 -5 days), have helped protect the industry from imports.
While the automotive industry has experienced significant downsizing, it has also seen an increased demand for more economical vehicles. Production fell by 3.1 million since 2006, but there are now roughly 8 million flexible fuel vehicles on U.S. roads and more are expected in the future. Polyurethane foam used in automotive seating has trended toward becoming thinner, while density is increasing, offering more cabin space above the seat and allowing the required amortization of vibration. The decline in molded seat foam is related to the general downtown in automotive production.
“It’s both a challenging and exciting time for the polyurethanes industry,” says Candelori. “By responding to consumer needs and legislation, and improving safety, there are many opportunities for the industry to find new ways to improve people’s quality of life.”
Says Austin, “We remain hopeful that while total production volumes have been low, research and development continue and that the polyurethanes industry will have a raft of new products and applications by the next survey.”
Conducted every two years, the CPI End-Use Market Survey addresses the North American polyurethanes industry. Angela Austin of IAL Consultants presented the major findings of the survey to a group of influential scientists, engineers, manufacturers and business leaders from around the world at the closing session of the Polyurethanes 2009 Technical Conference in National Harbor, Maryland.
IAL Consultants interviewed more than 200 organizations and companies in North America, including end-users, formulators and producers, to complete the survey. The End-Use Market Survey is available for purchase at www.americanchemistry.com/polyurethane. New for this year, CPI is also offering an interactive downloadable database where users can access survey data. For further information or to purchase the survey, contact Neeva-Gayle Candelori, CPI at 703/741.5103.