As plastics producers struggle with a slowing economy, rising raw material prices, and increasing competition, the one bright spot in this industry continues to be that of high performance polymers (HPP). This category has evolved rapidly over the past few years and currently stands as a US$6.1 bln industry, projected to grow at a CAGR of 6.1% over the next five years. A global market study by Principia Partners provides a baseline for this industry that spans across 9 different high performance polymer families serving 8 different end-markets and presents an in-depth and critical analysis of the industry. High performance polymers continue to exhibit a growth rate that surpasses growth in GDP. New companies entering the high performance polymers industry, new polymer introductions and inter-material competition with metals make the field interesting for suppliers.
The 8 end-markets that consume different kinds of high performance polymers for various applications are:
-Aerospace and defense, an end-market valued at US$290 mln for high performance polymers that has ever-increasing requirements around flammability, smoke and toxicity, and is projected to grow at a CAGR of 7.1% to 2012
-Automotive, an end-market that consumed US$1.3 bln worth of HPPs in 2007, is forecasted to grow at 5.7% over the next 5 years with continued metal replacement and to address increasing temperature performance requirements in engine compartments
-Computers and peripherals accounted for US$180 mln of HPP consumption, projected to grow at 8.3%, where key issues include miniaturization and related heat management, and also increasing use of multi-function products that combine printers, copiers, and fax machines in a single device.
-Consumer, where HPPs are used in a wide range of applications such as appliances, cookware, sporting goods, and other household items, is estimated to be valued at US$420 mln and growing at 5.2%. This area's growth has been dampened by the economic slowdown but new application development continues at a rapid pace
-Electrical and electronics, the largest end-market for HPPs valued at US$1.8 bln and forecasted to grow at 6.8%, where regulation along with increasing demand for electronic devices are some of the growth drivers for increased consumption of HPPs
-Industrial, that primarily includes chemical processing, oil & gas, food processing, power plants and water treatment is estimated at US$1.4 bln of HPP consumption growing at 5.6%
-Medical, valued at US$290 mln is projected to grow at 8.7% with HPPs being used in applications requiring strength and stiffness, sterilizability, and biocompatibility
The study also estimates other application areas, for example the use of HPPs in coatings for building and construction, and is valued at US$390 mln in 2007. Though majority of high performance polymers continue to be molded, other forms such as films, fibers, stock-shapes, and coatings are expanding the reach of high performance polymers. The high performance polymers value-chain, from polymerized resins to articles of usable forms, is estimated to exceed US$14 bln.
The analysis details global shifts in supply-demand balance as well as differences between points of specification and consumption. For example, while China is exhibiting high growth in demand for high performance polymers, most suppliers have been reluctant to add polymerization capacity in the region. Companies are cautiously entering the Chinese market with compounding operations and sales and marketing offices in the region before committing to resin production in China .
The growth in demand for high performance polymers is delineated as a function of the underlying market growth, new application development and specification, minus the attrition, for each polymer. While certain polymer categories, such as fluoropolymers are witnessing relatively lower growth due to a slowdown in application development, other categories such as LCPs are projected to be the fastest growing based on widespread use in electrical and electronics.
HPP have been among the fastest-growing product groups for many years, giving way to new applications driven by innovation and product development. Market interest is particularly high in these materials because they offer suppliers high margins. The market is characterised by material volumes considerably lower than commodity and even many engineering polymers. However, higher pricing means that the market is still substantial in terms of revenue. According to Frost & Sullivan, in Europe the market was worth €1.6 bln in 2007, and will grow at a rate of 7% through 2014. Polymers at the top end of the performance scale, such as PEEK, will show growth rates that are much higher than this average, while the comparatively higher-volume fluoropolymers will grow at a lower annual rate. Important factors driving demand include product development and innovation, increasing performance requirements, new applications and the effect of regulatory controls. Regulations such as RoHS, WEEE, and the impetus in areas such as emission control act in favour of high-performance plastics, as they can provide fire resistance without the addition of harmful chemicals such as halogenated flame retardants. However, HPPs also present unique challenges to overcome if the real benefits from these market drivers are to be realized, such as:
Timing Capacity Additions: Building capacities requires considerable investment, as the production processes are generally much more complicated than for engineering plastics. Since companies are reluctant to invest in capital expansion, the market has often been limited by a lack of production capacity. This can result in potential end-users resorting to competing product types because of a lack of availability. Producers of products that have no parallel, shy from augmenting capacities as they do not want to see prices going down because of excess capacity.
Managing Geographical Presence: For a material mainly imported as it has no production capacity in a particular region, there is a definite competitive advantage for any supplier electing to set up a production facility. However, worries of demand dwindling after a ponit of time have kept several players away. The key to competitiveness becomes efficient management of distribution. Since a high level of technical competence is required, using distributors or compounders is not preferred in this industry. Geographical expansion is important if companies are to take advantage of the changing dynamics in manufacturing, including offshore production in countries with cheaper labour costs.
Competitive Structure: In this market, several manufacturers account for majority of the market share, in particular for PPS, PEEK, LCP and polysulphone. For the comparatively well-established high-performance polyamides and fluoroplastics, market share is spread across a wider supplier base. The early movers will continue to hold the advantage over the rest as they have developed their strengths across the supply chain, and have established brand names.
Driven by innovation and application development, high-performance polymers will continue to grow through 2014, with many product types growing at double-digit or near double-digit rates. Newer players are entering these markets and current suppliers are mulling expansions to expand into newer product lines, increasing competition in the market. Increased availability of these polymers will also generate economies of scale over the long term, bringing prices down and further accelerating growth. Conditions are favourable for using high-performance polymers in many key end-user segments, such as automotive and electronics. But increasing levels of competition will also mean that suppliers will have to be strong in key areas such as innovation and market strategy, be keenly aware of competition, and closely monitor market requirements and the regulatory environment. High performance plastics rely more than any other plastics, on innovation and investment in R&D for their future growth. Innovation can be motivated by the need to reduce production costs, and make products more cost-competitive without compromising on product performance and quality. Innovation will also be key to penetrating newer application sectors like medical and industrial applications to expand beyond the conventional application areas.