Charlie Crew's voyage through the plastics market is now in its fourth decade. He joined GE Plastics in 1977 and still was with the General Electric Co. unit when it was bought by Saudi Basic Industries Corp. in 2007. A year later, Crew was named president and CEO of the renamed Sabic Innovative Plastics LP. The Pittsfield-based firm ranks as one of the world's leading producers of polycarbonate, ABS and other engineering plastics.
Crew, 58, recently spent some time with Plastics News at his company's headquarters in advance of NPE2009 to assess his firm's position, as well as that of the greater industry.
Q: With all your experience, how tough has the market been in the last year? How does it compare?
Crew: There's no comparison. There's nothing we've ever seen that's been like this. Everything kind of went and it went fast. This time last year we were trying to keep up with production, and at the same time this year we're idling plants. It's hard to run a plastics or chemicals business at very low rates. Compounding is easier, but resin plants are hard to take down and bring back on. That's a huge challenge we've never faced. But we're managing through it and our guys have done a very good job.
Q: Sabic IP worldwide will cut back output by 20 percent by the end of 2009. Do you think that will be enough?
Crew: A better way to look at it is we're adjusting production to meet demand. The fact is, you're as good as your customer demand. You have to look at automotive demand, at consumer electronics demand, at infrastructure and construction demand, because in engineering thermoplastics, it's all about durable goods. We don't have a lot of packaging business. If the likes of Procter & Gamble say they're only down 5 percent year over year, that's OK if you're in polyethylene, but if you're in engineering thermoplastics, it has no meaning. It's more meaningful if Ford, GM, Volkswagen and Toyota and Dell and Apple, and the appliance makers like GE say it.
How many new homes are constructed? That's really the metric in the engineering thermoplastics [ETP] business. And as you know, durable items are down fairly significantly.
Medical is relatively small from an ETP perspective, but it's an enormous opportunity. There are concerns about safety and durability. And that market obviously continues to get better with demographics and more stringent on regulations.
Defense is another market that you would say is obviously growing, as is transportation in general, when you take it beyond auto and aerospace. When you look at mass transit in places like India and China, infrastructure dollars will go to transportation. Traditionally, we think of transportation as automotive. We have to transport people, and carbon footprints in transportation are a big deal. What's going to happen is the [Environmental Protection Agency] is going to go after cars and buses because [of concern] about our mobile carbon footprint.
Transportation is still a big industry. The world's still going to build 57 million vehicles this year, even if the U.S. may just build 10 million. China's going to build more vehicles and India's going to build more and South America is building more. So we're seeing a drop in automotive, but in transportation, there's still a big opportunity for ETPs.
I think there are other markets that will kind of emerge in overall ETP uses. Packaging will as well. It's becoming less disposable and more reused. When people get to that, they'll need more durability and reusability.
So I would say what we're going through is that when the tide goes out, you see rocks in the water. We all have rocks in the water. None of our businesses are as pristine as we'd like to think we are. When something like this happens, we see things that we quite honestly didn't see. So I think that helps business on a going-forward basis.
But this market is as tough as I've ever seen it. Order rates are astonishing, but they're reflective of what customers are selling and what they're replenishing. It's been impacted by inventory building, and there's a bleed-out of that that's hopefully coming to fruition. Orders were better in April than in March and so forth.
Q: Do you think the market has turned the corner?
Crew: It's hard to say if we don't know what's in inventory, what are pipeline adjustments and what is true demand. I would say optimistically that we've turned the corner, but I'm not sure what the trajectory is. Is it an L shape? A U shape? It's certainly not a V shape. So what we're faced with is that it's getting better, but it's still not where it needs to be. Now it's a question of how long will it take to get where it needs to be and have we made the appropriate adjustments. Because one of the challenges we have in this scenario is that you can cost out so much and can scale back capacity for so long and then those are one-time events hard to repeat. Once you get cost out, it's hard to get the same cost out.
What we've got to balance and what I think our industry needs to balance is to take some cost out and then some rationalization will occur. The question is where the investment will be and where the growth opportunities are and how do you position yourself to capitalize on them.
So we're balancing cost out which we have to do and also working on new technologies, investing in products and applications with customers and things we feel we can provide the industry and our customer base.
Q: We noticed that at NPE2009, one of your highlights was to focus on polyolefins.
Crew: That's more of an overall Sabic focus. If you look at Sabic, we take [natural] gas feed from [Saudi Arabia] and make a number of things including polymers, primarily polyethylene and some polypropylene. We've just put on a lot of capacity and have recognized that even though traditional markets for the kingdom are in Asia and Europe, we're looking at a more global footprint. We already do some here, but we're looking at the Americas for opportunities to expand into a broader area.
Q: So the polyolefin material that Sabic promoted at NPE is coming out of Saudi Arabia. Do you anticipate application development work in polyolefins being done in North America?
Crew: The material will be coming from Saudi Arabia, but I don't think development will be done here. To be honest, the model we have is too expensive for polyolefins. We're going to do some things with compounded products, like the arrangement we've worked out with RheTech Inc. [of Whitmore Lake, Mich.] in long-glass-fiber [polypropylene].
Our Stamax [long-glass-fiber PP] material is a very important product to fill out structural applications in the auto business. Sabic Europe is doing very well in this product, but we didn't establish it in the North American market. Customers are looking for global supply. A lot of European companies produce cars here and in Mexico, and we'll be able to satisfy them now.
Q: Regarding sustainability, when you talk about upcycling bottles into Valox iq resin and about using natural fibers in LNP grades, you're taking a slightly different approach with the same ultimate aim. Can you discuss that?
Crew: From a Sabic IP perspective, for a long time, we've asked how we use the opportunity of recycling. If you go back in time, [GE Plastics] had a display at NPE a few years ago where the roof of one of the more prominent McDonald's locations in the world was made of reclaimed computer housings from Dell. That showed the industry that we could recycle Noryl and use it in that application.
So the fact is that GE Plastics at that time was looking at the whole aspect of the importance of recyclability and making sure those [computer] servers didn't come through the solid waste stream. That was a big effort there, and it was before its time, to be honest.
The question is, what's the channel of collection and reclamation. We've been working with Canon [Inc.] and the consumer electronics guys to work on the value chain of reclaiming. There's a lot more pressure on not only consumer electronics but also the auto industry and other leaders. There used to be just a big push in Europe, but in some ways it's more prominent now in the Americas than it's ever been.
The intent is to get OEMs to determine ways we can help in that process and, again, engineering thermoplastics is a good place to start, because as we recycle material, the property performance doesn't fall off too greatly and you can actually re-use these materials.
Q: How high can your recycled-content loading be?
Crew: That depends on the performance of the ultimate application, but when we look at it, it's a way for us to be the solution to a problem. We're not making PET, but we can be a solution to guys in the packaging market that need to bring [products] back. And where will they put it? They can't put it into other PET containers, necessarily. The properties degrade and you don't get clarity, so in our case, we can break it down and build it back up.
What's really required is infrastructure. It makes a world of sense to use ETP material instead of another ounce of oil or naphtha. For years, people have taken Lexan [polycarbonate] 5-gallon water bottles and made crates of them to transport water bottles. Customers take it back, blend it up, put some carbon black in it and some other fillers and then injection mold pallets for deliveries.
But [sustainability] has never really been an industry focus. Now we're working with [the American Chemistry Council], and it's a plastic industry issue and an opportunity, and not just for Sabic IP. Everybody has their own angle on it from where they sit and what their product portfolio is and who their customers are. The goal of ACC is to bring this forward and be proactive with it.
Q: With the shift in technology from CDs to DVDs to downloads, where do you see the polycarbonate market going? Does PC need a new gee whiz application?
Crew: Look at automotive glazing. Look at all the benefits polycarbonate can provide the auto industry from a weight perspective. The push they're faced with is how to get fuel economy. There are just so many electric vehicles that they can make and that people will buy. [Electric cars] are expensive relative to conventional gas-powered engines, so fuel economy is really what they're after. And, there, glazing provides a lot of solutions. We've been working on it for 10 years with Exatec [LLC in Wixom, Mich.].
It's a huge investment we've made. These things take time, especially in automotive, where we're replacing traditional materials like glass.
We know a Lexan [PC] panel is more expensive than a piece of glass, but you can do so much more with Lexan as we've demonstrated on concept vehicles. So a plastic fender made out of GTX is more expensive than stainless steel, but you get design features and functionality.
Q: The distribution deal with Ashland is the first for the company in the Americas, correct? How do you expect the deal to benefit Sabic IP?
Crew: [Ashland] can get to customers because they have a broad multiresin portfolio. They can get to customers that we have trouble getting to. Their value offering is different than ours. [GE Plastics] had a separate business until 2000 called Polymerland. It was a distribution business that we ran separately, and it handled a broad line card nylons, acetals, things like that. Over time, we refocused that business and our direct sales business and combined them. It's hard to be in applications development and process development and at the same time be a strong distributor.
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