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April 07, 2008 02:00 AM

Sabic leader offers insights on plastics

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    Keynote speaker Brian Gladden offered some thought-provoking insights into global trends at the recent Plastics News Executive Forum. The president and chief executive officer of Sabic Innovative Plastics LP touched on globalization, future growth, feedstock and energy costs, sustainability and human capital issues, while also suggesting some keys for succeeding in the North American market.

    The long-time GE Plastics veteran noted how business has migrated around the world.

    ``Our business makes 100 percent of its resins in the U.S. and Western Europe,'' he said, noting that's where the growth markets were a little more than a decade ago. ``Today, over 50 percent of our resin is shipped to a customer on a different continent from where it was produced, and over 25 percent of our business is done in China.'' Plastics specifiers have driven this largely by aggressively shifting their operations to the lowest-cost manufacturing regions. But even those regions are moving targets.

    Gladden said in 2009, China's labor costs will be 35 percent higher than in 2006. The result: today's growth markets won't be tomorrow's growth markets. He particularly cited India, Vietnam and Russia as places that are seeing dramatic plastics demand growth. Those projections are propelling Sabic Innovative Plastics investments in all three of those countries. The company has global compounding capacity in China and India, and Gladden estimated that, ``We probably see twice the growth rate in India now than we do in China,'' while acknowledging that India is growing from a much smaller industrial manufacturing base.

    Another area of expected plastics growth is the Middle East. In petrochemical-rich Saudi Arabia, for example, the government is strongly supporting development of value-added plastics processing. Gladden noted his firm plans to build a new customer application center in Riyadh as a resource for processors in that region. Saudi Arabia is home to Sabic's parent, Saudi Basic Industries Corp.

    Meantime, Asia's increasing dominance in the human capital arena is well-known, but the numbers still are staggering. In 2010, Gladden projected more than 80 percent of new college graduates with science and engineering degrees will be in the Asia-Pacific region. With 20 percent annual attrition rates among the labor force in China, he said Sabic needs to recruit and train 300 new employees a year there, just to stand still.

    Additionally, the company has more than 400 research scientists in China and India, 65 percent with Ph.D.s. And more than half the new products Sabic introduced in 2007 came from these regions. With 290 technologists in India alone, he said ``they do most of our real, pure process chemistry and [research and development] work there.''

    Gladden also addressed what he called ``tough facts'' about the soaring cost of feedstocks, oil and other commodities. The price of oil in the past five years has jumped 200 percent. Benezene and polypropylene have jumped more than 100 percent.

    In light of such numbers, Gladden claims his firm's Lexan polycarbonate resin is quite a bargain, having increased by only 30 percent in the same time frame. He mentioned Sabic spends more than $500 million a year on energy just to run its plants, and that its feedstock costs today are $1.5 billion a year more than in 2003. So there's plenty of pain to go around.

    On top of that, the industry is facing tremendous challenges with sustainability and rising pressure by environmentalists and politicians who want to ban plastics.

    In the face of this, Gladden suggests four keys to winning the game in the United States:

    1) Innovating - Constantly creating new, better products and processes, and finding ways to lower the cost of finished products without compromising the quality, e.g. via coinjection and other such processes.

    2) Playing global - Identifying and tapping into new growth markets in the developing world.

    3) Finding value-added niches - Becoming world-class in select areas such as servicing the demanding health-care market, or zeroing in on a specialty such as large-part molding.

    4) Driving productivity - Regularly reviewing and investing to improve your cost position (Gladden says Sabic has spent $150 million in just the past two years to do precisely that), and again exploiting available and promising technologies such as two-component injection molding and in-mold compounding.

    After delivering his message to Executive Forum attendees, Gladden didn't have time to stick around. He had to fly immediately to meet customers in one of those fast-growing markets - Brazil. Oh, how the world has changed.

    Robert Grace is Plastics News editor and associate publisher.

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