Even in a severe recession, there are financial and business opportunities for the polyurethanes industry, speakers said at the Poly- urethanes 2009 Technical Conference.
The American Chemistry Council's Center for the Polyurethanes Industry sponsored the conference, which was held Oct. 5-7 in National Harbor.
The financial picture is the grimmest in living memory, with the global gross domestic product falling for the first time since the 1930s, said Martha Moore, the senior director for policy and economics at the Arlington, Va.-based ACC.
The national unemployment rate hovers near 10 percent, auto and home sales are down significantly, and consumer spending has fallen below 70 percent of the GDP for the first time in decades, Moore said.
“People have been using their houses as ATMs, and that has really come crashing down on them,” she said, adding that personal debt in the U.S. now averages 23.8 percent of income. “The way we used credit really changed, and it really got us into a lot of trouble.”
It probably will be 2012 before there is anything resembling a return to normal, Moore said.
She quoted projections that the GDP, after contracting 2.7 percent in 2009, will increase 2.3 percent in 2010 and 2.8 percent in 2011.
Unemployment, meanwhile, will peak at 9.8 percent in 2010, and then fall to 8.5 percent in 2011, Moore said.
Government orders
Not all is bleak for PU manufacturers, according to Moore.
“Downturns create opportunities to innovate in our products, our operations, our businesses and our business philosophies,” Moore said.
On the upside, a lot of the $787 billion in economic stimulus money Congress approved earlier this year is still in the pipeline, with only about $150 billion spent by August, she said.
Some $44 billion of the money is earmarked for stimuli in energy innovation. “This will affect polyurethanes in a positive way, although the outlay has been staggered,” she said.
Government acquisition is one area in which PU manufacturers can prosper, said Kate Lewis, deputy manager of the U.S. Department of Agriculture's BioPreferred program.
BioPreferred is the way in which the federal government promotes the growth of bio-based product industries by maximizing its purchases of those products. “The program is designed … as a way of promoting energy security and creating jobs,” Lewis said.
For polyurethane manufacturers, many of which are expanding their use of soy-based and other bio-based materials, this is a major opportunity, she said.
BioPreferred lists more than 3,400 products in 33 product categories for priority purchasing, including in such areas as construction, food service, custodial services and vehicle maintenance, Lewis said. More than 800 firms, from small entrepreneurial shops to giant corporations, provide products to the program.
Each year, the U.S. government spends $500 billion on supplies and services. The BioPreferred program — which mandates that procurement officials buy bio-based products as long as they are competitive in price and performance with traditional products — stands to garner a major portion of that, Lewis said.
“For every 1 million pounds of bio-based polyol products purchased, nearly 700,000 pounds of crude oil are saved,” she said.
So far, the departments of Commerce, Justice and Defense, and the Transportation Security Administration, have been the most proactive government agencies in following BioPreferred guidelines, Lewis said. By next year, USDA hopes to have a BioPreferred labeling program in place, with an eye-catching logo to mark those products certified as BioPreferred, she said.
Green construction
Although the construction market has taken a heavy hit, PU products — particularly insulation — have a promising future there, according to Nigel Maynard, senior editor of Builder magazine, based in Washington.
“The average American is uncomfortable in his or her own home,” Maynard said. “The solution is green building.”
Houses and other buildings constructed from green materials comprise one of the few growth markets in the construction industry, he said. From $8 billion in 2006, that market should grow to an estimated $20 billion to $40 billion in 2010.
“Forty to 50 percent of the houses built in 2010 are expected to be green,” Maynard said.
PU foam insulation is widely regarded as best-in-class by architects and builders, offering more protection in per-inch thickness from cold and drafts than the more commonly used fiberglass, cotton or composites like recycled newspaper and borax, according to Maynard.
More and more homeowners are retrofitting their houses — especially their attics — with insulation, he said.
“The average American spends $1,900 a year on energy. Fifty percent of that goes for heating and cooling, and half of that gets lost through the attic,” Maynard said.
Unfortunately, one thing that will prevent the rapid rise of PU foam insulation sales is cost.
Maynard said he retrofitted his attic recently with composites spray for about $1,400. If he had used polyurethane foam, the cost would have been $8,000.
“Fiberglass has 85 percent of the insulation market. It will take a while to challenge that,” Maynard said.
The Obama White House is offering financial incentives that will benefit the PU industry among others, said ACC's outside counsel, Richard Gold of Washington law firm Holland & Knight LLP.
Much of that money comes from the federal stimulus package, Gold said. Most of it will be paid out over the next three to four years, and companies interested in learning how to apply for grants can find that information online.
State and local governments will be getting large grants from the stimulus package. Gold said $3.1 billion alone has been earmarked for state energy programs. “I have yet to see a local government that isn't looking for, as an example, LED lighting,” he said.
In another windfall, the Energy Department's Weatherization Assistance Program for homeowners has received $1.5 billion for the coming year, Gold said.
Copyright 2009 Crain Communications Inc. All Rights Reserved.