The North American polyurethane industry seems to be in good shape, but it is not all smooth sailing

Global Coatings Network News:

Global Coatings Network News:

The senior partner of Arsenal Capital Partners said bluntly, "The total amount of chemicals exported to China is US$50.

The senior partner of Arsenal Capital Partners said bluntly, "The total amount of chemicals exported to China is US$50.

John Televantos is a senior partner of Arsenal Capital Partners and has many years of experience in the North American polyurethane (PU) and chemical industries.

Between 2014 and 2016, the North American Free Trade Area's demand for polyurethane increased by approximately 4.

The polyurethane production growth rate during the same period was 2.

It is undeniable that this growth is driven by some consumer trends.

Partial solution

The chemical industry has indeed created some end applications.

Downstream innovation

In the past 20 years, distributors have increasingly assumed more responsibilities for innovation, which has enabled our industry to continue to develop.
Compared with chemical manufacturers far away, distributors react faster and are closer to the end customer.

They know the end customer better than upstream chemical companies.
Chemical companies continue to innovate in terms of increasing output, expanding scale, safety, and environmental compliance, thereby achieving a larger-scale stable quality supply.

They know the end customer better than upstream chemical companies.
Chemical companies continue to innovate in terms of increasing output, expanding scale, safety, and environmental compliance, thereby achieving a larger-scale stable quality supply.

Another trend in our industry is constant integration.
Currently, Arsenal are also contributing their strength to this.

Another trend in our industry is constant integration.
Currently, Arsenal are also contributing their strength to this.

Take the area of ​​polyurethane functional foam in North America as an example.
In the past few years, the number of large companies has shrunk from 92 to the current five.
The economies of scale created by the polyurethane manufacturing industry increase investment in business, provide funding and promote development for greater innovation success.

Take the area of ​​polyurethane functional foam in North America as an example.
In the past few years, the number of large companies has shrunk from 92 to the current five.
The economies of scale created by the polyurethane manufacturing industry increase investment in business, provide funding and promote development for greater innovation success.

One of the most attractive high-growth areas is specialty foam and bedding.

One of the most attractive high-growth areas is specialty foam and bedding.

Rapid growth

Rapid growth

The market is growing rapidly, and this is driven by direct-to-consumer marketing of "bed-in-a-box" mattresses.
These products are easy to transport and all supply chain steps have been eliminated.

The market is growing rapidly, and this is driven by direct-to-consumer marketing of "bed-in-a-box" mattresses.
These products are easy to transport and all supply chain steps have been eliminated.

This technological change is in line with macro demographic changes.
These changes have changed buying behavior and are increasing the replacement rate of mattresses and other bedding components.
In some recent research, I found that in 2017, consumers reported that their mattresses were used for an average of 10.
3 years.
Now, the average replacement time is 8.
9 years.
This replacement rate is promoting the continuous enhancement of development momentum, while also bringing higher innovation capabilities and better products.

This technological change is in line with macro demographic changes.
These changes have changed buying behavior and are increasing the replacement rate of mattresses and other bedding components.
In some recent research, I found that in 2017, consumers reported that their mattresses were used for an average of 10.
3 years.
Now, the average replacement time is 8.
9 years.
This replacement rate is promoting the continuous enhancement of development momentum, while also bringing higher innovation capabilities and better products.

You may have heard that, recently, direct-to-consumer marketing company Tuft& Needle has agreed to merge with SertaSimmons, which may allow people to refocus on direct-to-consumer channels.

You may have heard that, recently, direct-to-consumer marketing company Tuft& Needle has agreed to merge with SertaSimmons, which may allow people to refocus on direct-to-consumer channels.

The bedding industry is also paying more attention to performance.
For a mattress, this means 5 inches from the top.
This is the part of the mattress that provides support and comfort.
This has also promoted greater demand for polyurethane foam.

The bedding industry is also paying more attention to performance.
For a mattress, this means 5 inches from the top.
This is the part of the mattress that provides support and comfort.
This has also promoted greater demand for polyurethane foam.

Content is more important than form

Content is more important than form

On the other hand, the selling point of furniture is >Moreover, the development of new technologies is relatively slow.

On the other hand, the selling point of furniture is >Moreover, the development of new technologies is relatively slow.

Therefore, in the field of bedding, the annual growth rate of the entire industry exceeds 5%, while the annual growth rate of traditional mattresses is only 2%.

Therefore, in the field of bedding, the annual growth rate of the entire industry exceeds 5%, while the annual growth rate of traditional mattresses is only 2%.

Direct-to-consumer business is driving overall growth.
This growth rate has exceeded 100%.
As the scale expands, the growth rate will decline, but its share of total sales growth is actually rising.
Given its convenience, low cost and superior quality, the direct-to-consumer experience will surpass traditional channels for a long time.

Direct-to-consumer business is driving overall growth.
This growth rate has exceeded 100%.
As the scale expands, the growth rate will decline, but its share of total sales growth is actually rising.
Given its convenience, low cost and superior quality, the direct-to-consumer experience will surpass traditional channels for a long time.

Further innovations in the durability and comfort of polyurethane foam do not apply to traditional furniture.
We believe that furniture has not become the driving force of revolutionary changes like bedding.

Further innovations in the durability and comfort of polyurethane foam do not apply to traditional furniture.
We believe that furniture has not become the driving force of revolutionary changes like bedding.

In the automotive sector, the dependence on polyurethane innovation is still very large.
Cars are becoming lighter and lighter, so the importance of sound insulation and damping is key.
This makes the polyurethane content of each car continue to increase.

In the automotive sector, the dependence on polyurethane innovation is still very large.
Cars are becoming lighter and lighter, so the importance of sound insulation and damping is key.
This makes the polyurethane content of each car continue to increase.

The acoustic field of the North American transportation market is valued at more than US$2 billion annually and is growing.
Although the total car weight is reduced, the foam content of each car is actually increasing because polyurethane foam provides performance, comfort, vibration reduction, noise reduction, and fuel efficiency.

The acoustic field of the North American transportation market is valued at more than US$2 billion annually and is growing.
Although the total car weight is reduced, the foam content of each car is actually increasing because polyurethane foam provides performance, comfort, vibration reduction, noise reduction, and fuel efficiency.

Comfort and performance

Comfort and performance

In terms of car seats, major changes are still going on, but not all are bubble innovations.
Specifically, consumers still need greater support and temperature regulation solutions, and this problem can be solved through a combination of technologies.

In terms of car seats, major changes are still going on, but not all are bubble innovations.
Specifically, consumers still need greater support and temperature regulation solutions, and this problem can be solved through a combination of technologies.

In the automotive industry, lightweighting has led to increased demand for adhesives and sealants, which are used to solve many problems in automotive design.
Polyurethane sealants are increasingly used to reduce noise, vibration and harshness, and are also used to bond different materials.

In the automotive industry, lightweighting has led to increased demand for adhesives and sealants, which are used to solve many problems in automotive design.
Polyurethane sealants are increasingly used to reduce noise, vibration and harshness, and are also used to bond different materials.

Adhesives are mainly used in car floors, dashboards, roofs, doors, and even breaks.
The introduction of lighter and thinner materials and different materials (such as composite materials and metals) requires more noise and vibration damping, and higher requirements for the application of adhesives.
Foam and other barriers are replacing traditional methods such as fibers.

Adhesives are mainly used in car floors, dashboards, roofs, doors, and even breaks.
The introduction of lighter and thinner materials and different materials (such as composite materials and metals) requires more noise and vibration damping, and higher requirements for the application of adhesives.
Foam and other barriers are replacing traditional methods such as fibers.

In addition, structural adhesives are making it possible to reduce weight and bond different materials.
Since structural adhesives have strength and rigidity at high temperatures, they are used.
Structural adhesives also increase static and dynamic stiffness, thereby improving safety, crash resistance and performance.

In addition, structural adhesives are making it possible to reduce weight and bond different materials.
Since structural adhesives have strength and rigidity at high temperatures, they are used.
Structural adhesives also increase static and dynamic stiffness, thereby improving safety, crash resistance and performance.

Cases of CASE (CASE is the abbreviation of polyurethane, and the application fields are aircraft, ship, vehicle coating, etc.
)

Floors, runways, playgrounds and protective coatings are CASE applications of polyurethane.
A large number of niche applications have helped the polyurethane sub-industry to continuously improve its innovation capabilities.

Floors, runways, playgrounds and protective coatings are CASE applications of polyurethane.
A large number of niche applications have helped the polyurethane sub-industry to continuously improve its innovation capabilities.

CASE products account for about 30% of polyurethane consumption in Europe, but only 20% in North America.
As we continue to invent and innovate, and continue to learn from European users, we can achieve tremendous growth here.
In the European CASE market, chemical suppliers such as Dow Chemical, BASF, Covestro and Huntsman have participated in the acquisition of a number of system product factories.
These acquisitions stimulated further development and investment in technology.

CASE products account for about 30% of polyurethane consumption in Europe, but only 20% in North America.
As we continue to invent and innovate, and continue to learn from European users, we can achieve tremendous growth here.
In the European CASE market, chemical suppliers such as Dow Chemical, BASF, Covestro and Huntsman have participated in the acquisition of a number of system product factories.
These acquisitions stimulated further development and investment in technology.

The specific driving factor in the CASE market is the continued preference for environmentally sustainable products.
In addition, more and more supervision has also increased its application opportunities in some applications.

The specific driving factor in the CASE market is the continued preference for environmentally sustainable products.
In addition, more and more supervision has also increased its application opportunities in some applications.

Innovative thermal insulation materials

Innovative thermal insulation materials

Spray foam insulation materials have a high market share in the North American market.
It currently occupies more than 40% of the market share in the United States, and is gradually replacing traditional thermal insulation materials in buildings.

Spray foam insulation materials have a high market share in the North American market.
It currently occupies more than 40% of the market share in the United States, and is gradually replacing traditional thermal insulation materials in buildings.

The industry drivers that created this rapidly growing business for us include: new residential construction; residential renovations; and the replacement of other thermal insulation materials such as fiberglass and cellulose.

The industry drivers that created this rapidly growing business for us include: new residential construction; residential renovations; and the replacement of other thermal insulation materials such as fiberglass and cellulose.

In addition, this material has great advantages in terms of cost performance, especially water-foamed polyurethane spray foam.
This material is more cost-effective than almost any other material, which means it will continue to grow in the insulation market.

In addition, this material has great advantages in terms of cost performance, especially water-foamed polyurethane spray foam.
This material is more cost-effective than almost any other material, which means it will continue to grow in the insulation market.

The biggest challenge facing our industry is the shortage of toluene diisocyanate.

The biggest challenge facing our industry is the shortage of toluene diisocyanate.

Misfortune

Misfortune

Due to a series of unfortunate accidents in our industry, and because of the large scale of the newly built factory, production has been disrupted.
This has had a great impact on supply and pricing.
The shortage, which was originally expected to last for 2-3 months, has now lasted for 18 months.
To some extent, these shortages have inhibited growth in certain areas.

Due to a series of unfortunate accidents in our industry, and because of the large scale of the newly built factory, production has been disrupted.
This has had a great impact on supply and pricing.
The shortage, which was originally expected to last for 2-3 months, has now lasted for 18 months.
To some extent, these shortages have inhibited growth in certain areas.

Major operational problems, as well as the delayed start-up of Sadara and BASF's German plants have exacerbated the capacity shortage.
However, we believe that the new capacity will be put into production, and unless there are other unforeseen accidents, it will gradually correct itself.

Major operational problems, as well as the delayed start-up of Sadara and BASF's German plants have exacerbated the capacity shortage.
However, we believe that the new capacity will be put into production, and unless there are other unforeseen accidents, it will gradually correct itself.

Diphenylmethane diisocyanate (MDI) has a trend similar to toluene diisocyanate (TDI).
With the commissioning of new production capacity in 2019, the growth in demand for MDI polyurethane will far exceed that of TDI polyurethane.
The demand for new capacity continues to increase.
Suppliers understand this, and because we have the material, they are building larger, better, and more efficient factories to help our industry grow globally.

Diphenylmethane diisocyanate (MDI) has a trend similar to toluene diisocyanate (TDI).
With the commissioning of new production capacity in 2019, the growth in demand for MDI polyurethane will far exceed that of TDI polyurethane.
The demand for new capacity continues to increase.
Suppliers understand this, and because we have the material, they are building larger, better, and more efficient factories to help our industry grow globally.

trade war

trade war

Let me briefly talk about trade rules.
The chemical industry in China and the United States is on the front line between the two countries.
China is the third largest chemical exporter after Canada and Mexico.
The total amount of chemicals exported to China is US$50.
1 billion, and the total amount of chemicals imported from China is US$80.
2 billion.
It is very important to understand this.

Let me briefly talk about trade rules.
The chemical industry in China and the United States is on the front line between the two countries.
China is the third largest chemical exporter after Canada and Mexico.
The total amount of chemicals exported to China is US$50.
1 billion, and the total amount of chemicals imported from China is US$80.
2 billion.
It is very important to understand this.

In June of this year, the United States readjusted its tariffs and announced a 25% tariff on polyurethane, polyvinyl chloride and lubricants.
For now, it is not clear what the result will be, but there are several possible scenarios that will obviously change the shipping route.

In June of this year, the United States readjusted its tariffs and announced a 25% tariff on polyurethane, polyvinyl chloride and lubricants.
For now, it is not clear what the result will be, but there are several possible scenarios that will obviously change the shipping route.

The regulation of the market is very effective, and the market will eventually find a way around the obstacles, although this will increase costs.
But in one case, because the supply will not be in the right place, it will increase costs and force regions to postpone or abandon millions of dollars of investment in chemical plants.
The main risk of imposing tariffs may also lead to a wider trade war.

The regulation of the market is very effective, and the market will eventually find a way around the obstacles, although this will increase costs.
But in one case, because the supply will not be in the right place, it will increase costs and force regions to postpone or abandon millions of dollars of investment in chemical plants.
The main risk of imposing tariffs may also lead to a wider trade war.

However, the North American polyurethane foam industry has the advantages of low raw material costs, a long history of innovation, and large scale.
These advantages are expected to help us achieve growth in the coming decades.