Specialty Polymers- Coatings, Adhesives, Sealants, Elastomers and More
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Adhesives and Sealants
Adhesives and Sealants Industry recently published an editorial perspective about growth in the industry coming from transportation and electronics. They also believe that the future of transportation will hinge on applications of adhesives to join and seal dissimilar materials. A lot of these new opportunities will be due to the rapidly changing automotive sector.
There are two things that the automobile industry is currently doing:
Increasing range through lightweight materials
Increasing the electronics in a vehicle with sensors and cameras to monitor the performance
The first types of adhesives that ASI believes will benefit from the changing automotive sector is acrylics and pressure sensitive adhesives.
The viscosity of acrylic adhesives has set the trend, as they enable seamless dispensing and maintain a non-sag characteristic. Acrylic adhesives are used in the transportation sector for floor panel bonding, composite cab assembly, frame assembly, roof bonding, and exterior panel bonding. In addition, acrylic adhesives are used with a range of accelerators that can have an influence on viscosity, mix ratio, application method, and color change.
Acrylics are essentially the workhorse of the adhesives industry. Non-sag means that adhesive when it is applied doesn’t move off the intended target area, especially in a vertical application. Most acrylic paints also have non-sag characteristics. Acrylics are versatile because they have good affinity for different substrates, there is a wide domain expertise of technical support, and they are some of the most cost efficient options for any OEM manufacturer. Supposedly PSAs also have a role here, but the application of those PSAs, but I think they would have to have applications further up the supply chain since many of them are hot-melts. I can see how having peel and stick options could speed up assembly in a manufacturing operation.
The one area acrylics cannot perform though is in structural applications, but this is where the 2-part epoxy resins adhesives really shine. With increased desire for lightweight vehicles for better gas mileage there is a bigger push for utilizing new grades of lightweight steel, aluminum, and composites. For instance the Tesla Model S and X both use aluminum frames while the BMW i3 utilizes carbon fiber composite. I’ve written about composites before and these materials also use epoxy resins. Further, with self driving potential of these advanced automobiles becoming there are more cameras and sensors need to be sealed properly within the body of the automobile to protect them from water and vibrations. These sensors need to be constantly working unlike the thermometer in our 2006 Subaru Forester Turbo.
This means the current automotive adhesive and sealant suppliers probably have a lot of on going R&D projects to meet the future demand of the automobile companies. ASI magazine warns that these traditional suppliers might want to stay vigilant:
Stakeholders are vying to bolster their value chain proposition and envisage aerospace adhesives solutions as a lucrative portfolio. Demand for torsional stiffness, elasticity, environmental and temperature resistance, minimal surface preparation, and adhesion to different materials has become more noticeable in past several years. In particular, fire-retardant adhesives have witnessed profound traction, prompting leading companies to bolster innovation in bonding technology and keeping up with the demand for flame, smoke, and toxicity needs.
While the aerospace sector has slowed down to lack of flights in the last 12 months the high performance adhesives used in aerospace may actually find a good home in the modern automotive sector. Aside from the factory floor the other areas that I think should see demand would be repair shops. Getting into an accident with a modern automobile could be expensive due to the adhesives and sealants needed to do repair work and possibly the careful attention needed to repair an aluminum frame. David Noland for Green Car Reports back in 2015 reported that:
Aluminum structure and body panels make far greater use of rivets and bonding agents, which are time-consuming and expensive ($100 per tube for the sealant recommended by Tesla).
$100 per tube of sealant to a repair shop sounds steep to me. I think this is going to be a high margin business for adhesive manufacturers with a high barrier to to getting displaced by competition if you have a good track record. Aerospace adhesives might find a home, but I think the price point is going to have to be competitive with the current automotive adhesive and sealant suppliers. Paying for extra performance at an already high price point is typically a non-starter.
Meanwhile, another industry that might be taking off sooner than we think is the internet of things category. Henkel and Quad Industries announced that they are expanding their strategic partnership in supporting prototyping printed electronics. The strategic partnership already yielded a remote monitoring system for Covid-19 patients. Flexible and printable electronics that are self adhering to people or industrial equipment may become common place if they can provide extraordinary value compared to their cost. Industry early adopters will show the potential benefits with the risk of losses on the adoption of a new technology, but adhesives and sealants will be playing a a key role in their deployment.
Coatings
Digitization is also rolling through the coatings world with PPG launching a digital styling program that will enable visualization of colors in various simulations of real world lighting with different geometries and visual angles. Anthony Locicero for Coatings World reported that:
In addition to speed shape, the digital styling program will offer automotive original equipment manufacturers (OEMs) complete access to PPG’s expansive library of digital color files.
It is also fully compatible with industry-standard color-rendering software, enabling OEM design teams to collaborate with PPG directly, remotely and in real-time on the color design process.
The program’s launch is the first step in digitizing the entire color styling process for PPG customers.
To me this seems mostly like a play to build a moat around their business. Want to keep your competition from coming in at a lower price point to your customers and ruining all of the work you did to maintain that relationship? Build them a digital modeling system that works only off of your color library that makes it easier to understand how a car is going to look when its coated with your material.
I think if PPG wants to truly revolutionize their business they would open up their software to utilizing their competitors library, but maintaining a premium on the license for their software. Maybe the software is discounted while the customer buys PPG products and the customer gets charged full price when/if they decide to switch to a different coatings supplier. This would put PPG more towards a hybrid company that deals in both software and physical products. Kind of like how Dominos innovated with pizza delivery—it is both a pizza and a technology company.
I could even see these types of programs expanded out to the residential and architectural coatings businesses or possibly have plug-ins or software that work in conjunction with Revit and BIM systems from Autodesk. Thinking about repainting your house, but you can decide on which paint to use? Imagine using an app with some sort of AR feature that will show you what your house might look like with the different colors at different times of the day.
Speaking of PPG here is the current update on the Tikkurila acquisition saga. PPG appears to have won over AkzoNobel. Joyce Gannon reported for the Pittsburg Post Gazette (the other PPG) that:
It’s one of four significant acquisitions that the Pittsburgh company has announced since Nov. 30 and that, together with earlier acquisitions in 2020, could add $1 billion to PPG’s net sales if the deals close by the second quarter.
In Friday’s call to discuss fourth-quarter and full-year 2020 results, Mr. McGarry said PPG expects to add more companies to its portfolio this year.
“Our acquisition pipeline remains robust and active,” he said. “I’m feeling confident we will have further announcements in the back half of the year.”
Sherwin Williams needs to watch their back because I don’t think they will stay the world’s largest coatings company for much longer if PPG continues to add companies at this rate. Sherwin Williams became the world’s largest coatings producer when they acquired Valspar back in 2016. With the current global consolidation of the coatings market I think these companies also need to be cognizant of the fact that there could be eventual antitrust concerns once the world breaks up Google, Facebook, Amazon, and Apple.
I honestly do not intend to be always writing about PPG. They are not sponsoring me and I’m not getting paid anything to write about them, but they consistently in the news. Who will PPG buy next? Also, I am totally up for sponsorship.
Elastomers and Rubber
DSM partnered with Sympatex Technologies to launch a mass-balanced biobased Arnitel®, a thermoplastic polyester. DSM says that up to 25% of Arnitel can be biobased and in a their press release:
Sympatex uses Arnitel® to manufacture its waterproof, windproof, and breathable membranes for sports applications. The transition to bio-based feedstock will maintain the unique functional properties of Arnitel® and will enable Sympatex to easily shift to a more sustainable solution with a lower carbon footprint without having to requalify materials.
What is interesting here to me is that Arnitel could be a competitive product to W.L. Gore’s Goretex, which is essentially stretched out Teflon. If DSM can get the biobased content on Arnitel higher and Sympatex can get competitive performance compared to Goretex at a lower or similar price point then I think DSM And Sypatex have a home run here. It will all come down to how their customers (North Face, Patagonia, etc) market these new materials.
Force Majeures
The extreme weather in Texas is causing a lot of pain, suffering, and even death. I hope that the state gets the support they need from their neighbors and the federal government. If this situation has shown us anything it is that investments into infrastructure are always a good idea, but until then there are some force majeures occurring.
S&P Global Platts reported that Occidental Petroleum’s chemical division OxyChem has declared force majeure on all polyvinyl chloride products.
The company shut down all of its Texas plants. In Ingleside near Corpus Christi, that includes a 544,000 mt/year cracker, a 248,000 mt/year chlor-alkali facility and a 680,000 mt/year ethylene dichloride unit; and 627,000 mt/year of caustic soda.
Shell also shut its refining and chemical operations at its Norco, Louisiana, complex, which includes two crackers with a cumulative capacity of 1.52 million mt/year of ethylene.
There are reports of more refineries and crackers shutting down all over the state.
Lion Elastomers has also closed two sites in Texas due to the extreme cold weather. The sites are located on Port Neches and Orange, Texas. The reason the sites are closed are not necessarily because everything is frozen over, but rather it is due to rationing of natural gas. According to the Lion Elastomers press release:
The major obstacle at this time remains the state of Texas’ curtailment on natural gas, the impact of which is not allowing enough natural gas to either facility for even basic preparations for restart. The impact on current and future orders is still being assessed and will be communicated to you through the sales team as soon as possible.
It’s not clear which elastomers Lion makes at the Port Neches and Orange sites, but my guess is that the natural gas is used to power on-site generators that supply power and/or heat to generate steam to send to reactors. The lack of elastomers could have negative impacts on some construction and automotive customers for roofing products, tires, gaskets, and hoses since a lot of our supply chains have moved towards not holding inventory.
Airgas has also sent out force majeure letters to customers. A source at Columbia University for example sent me an image of the Airgas letter declaring a force majeure on dry ice (solid carbon dioxide). They are citing extreme weather here, but this could prove problematic for research and production facilities if there is a lack of liquid nitrogen, dry ice, or just normal deliveries of compressed gases that Airgas typically supplies.
Our chemical industry in North America is all connected in the end. Force majeures in one part of the country can have rippling effects across the whole continent. Weatherizing these facilities should be priority once we get into spring.
Stay safe this weekend,
Tony
The views here are my own and do not represent those of my employer nor should they be considered investment advice.
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Great post, Tony! I usually fear consolidation in any industry; the great exception being Bell Labs owned by AT&T for over 60 years. Once AT&T sold it, it was all downhill from there.