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Foam market faces rising costs, stricter environmental regulation

By Liz White, UT staffSupplier of polymer foams in Europe will struggle “to maintain margins and produce environmental-friendly products,” says a new study by market research group Frost & Sullivan. The European polymer foams market-valued at Euro 4700 million in 2004, is forecast to grow at a compound annual growth rate (CAGR) of 5.2 per cent to reach Euro 6710 million in 2011, according to F&S. This market is at present in “a difficult phase and has to overcome numerous challenges that stand in the way of continued growth,” the group adds. “Skyrocketing prices of crude oil and its derivatives,” are the first challenge, said F&S, pointing out that suppliers such as Dow had to increase prices for methylene diphenyl diisocyanate (MDI) and toluene diisocyanate (TDI) three times in 2004. Similarly, BASF-another major supplier to the polyurethane foam industry-raised prices of its Pluracol polyol products twice, in 2004 and early 2005.Suppliers can anticipate top line growth following these price increases, but will also have to contend with”diminishing margins as a result of spiralling energy prices,” Frost & Sullivan warned. F&S analyst Hariharan Ramasubramanian added, “This is likely to remain a significant challenge for suppliers to the polymer foams market in the short to medium term.” But the sectors extremely cost conscious end users, particularly in commodity segments such as comfort foam and packaging, are unwilling to absorb these price increases. Another factor is that many companies-British Vita being a prime example-are relocating manufacturing to eastern European countries offering cheaper labour. As well as this shift, manufacturers are also looking for high value products needing major technical expertise, to make in western Europe-for example, in sports and leisure and aerospace, F&S adds. Targeting new application areas will call for enhanced product development and suppliers will have to allocate considerable resources to this end if they are to stay competitive. Product development is likely to be a major driving force for polymer foams to break new ground in high-end applications.”With environmental regulations becoming stricter, companies will also need to look into improving the public perception of polymer foams,” F&S cautions, adding that the public still perceives polymer foams as harmful to the environment. Companies need to create a better public perception of foams by emphasising their benefits. in insulation to conserve energy and prevent the release of more greenhouse gases into the atmosphere. “These energy savings far outweigh the greenhouse gas emissions resulting from foam production,” point out the report, which all major foam types, including polyurethanes, expandable polystyrene, poly vinylchloride , polyolefins and phenolic foams.”

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