High-performance polymers: market report: in a newly published study on high-performance polymers, analyst firm Frost & Sullivan makes an upbeat assessment of the market, forecasting high growth rates in the medium to long term

Plastics Engineering, Feb, 2008 by Hariharan Ramasubramanian

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High-performance polymers occupy the top position in the performance pyramid (Chart 1); they are characterised by their superlative mechanical, chemical, and thermal properties. These also 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 at a time when the rest of the industry is facing rising raw-material costs and dwindling profits.

Market Description

Many niche polymers constitute the high-performance market. Some of them are well known, having been in use for decades. These include product groups such as fluoropolymers and high-performance polyamides. There also are many emerging materials that have grown in importance over the past decade: examples include polyketones and polyphenylene sulphide. The list of high-performance polymers analysed in the Frost & Sullivan study includes fluoropolymers, high-performance polyamides, liquid crystal polyesters, polyphenylene sulphides, polyketones, and polysulphones.

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The high-performance 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. In Europe the high-performance-polymers market was worth 1.6 billion [euro] in 2007, and will grow at a rate of 7.0% 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 for high-performance polymers include product development and innovation, increasing performance requirements, new applications, and the effect of regulatory controls.

Product development--we are seeing new grades and even new chemistry being introduced. This will help expand the presence of high-performance materials across various end-user markets; a recent example is DSM's introduction of PA4T, which will add to the company's PA46 high-performance polyamide product line.

Increasing performance requirements placed on materials in key applications, such as automotive and electronics, demand the use of high-performance plastics, while expansion into new applications will create incrementally growing demand for these materials. A good example of this is PEEK, which is now being offered for varied applications, including coating for cookware and medical products.

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, high-performance polymers also present unique challenges to overcome if the real benefits from these market drivers are to be realised. Important issues include timing capacity additions, managing geographical presence, and competitive structure. Each is discussed below.

Timing Capacity Additions

Often in the high-performance-plastics industry, the market has been limited by a lack of production capacity. In the past, significant jumps in demand have immediately followed extra capacity becoming available. This not only represents demand for the product, but also shows that companies have been very successful in offloading additional material.

Suppliers have adopted a cautious and safety-first approach toward capacity increases, and it's common to see them increase production every other year, mostly in small increments. This can result in potential end-users resorting to competing product types because of a lack of availability. As an example, Chart 2 shows the various capacity additions made by Victrex to its global PEEK production over the past 20 years.

For product types where there is no competition, suppliers are free to time their capacity additions. These companies certainly do not want to see prices going down because of excess capacity. However, the situation changes as more players enter the market, and this is being seen among producers of materials such as PPS, and during the medium to long term will also be the case for PEEK.

Building capacities in the market for high-performance polymers requires considerable investment, as the production processes are generally much more complicated than for engineering plastics. This explains the reluctance of companies to invest in capital expansion. But they should be concerned about losing potential opportunities because of their unwilling ness to expand. Timing the market efficiently with respect to capital expenditure can make or break companies and even product types in the high-performance-plastics market.

Managing Geographical Presence

Many high-performance polymers are not produced in Europe. For example, there are no European LCP production units; much of the material is imported from either the U.S. or Japan. In such cases, there is a definite competitive advantage for any supplier electing to set up a production facility in Europe. However, suppliers have shied away from this worrying about dwindling Europe demand for a plastic that is highly dependent on the electronic industry for its growth. In this case, the key to competitiveness becomes efficiently managing distribution to allow for the absence of local production. Therefore, companies will have to develop very strong sales networks in countries where they do not have a physical presence.