Officials with DuPont Co. don't need to be convinced the economic recovery is for real. They've already acted on that belief in the last nine months, restarting nylon resin plants in Tennessee and Virginia.
“The comeback has continued on into 2011,” said Rick Bond, DuPont's global marketing and product director for performance polymers, in a recent interview in Cleveland. “We're back to pre-recession levels, and it's been dramatic. We thought it would take four to five years to get back to our 2008 levels, but there's been continued growth.”
That resurgence prompted Wilmington, Del.-based DuPont to restart its Zytel HTN-brand nylon plant in Chattanooga, Tenn., late last year. The firm then followed up that move by restarting a Zytel-brand nylon plant in Richmond, Va., earlier this month.
Each plant had been down for more than a year, as demand waned during the recession. The restarts allowed DuPont to call numerous workers back, said Bond, who joined DuPont in 2006 after a 27-year career with Dow Chemical Co. and the now-defunct DuPont Dow Elastomers joint venture.
The comeback in DuPont's market-leading nylon business — and in its performance products unit overall — can be tied to a big rebound in U.S. automotive production, and the need for more heat-resistant materials in cars with higher fuel efficiency, Bond explained.
“If you look at why we're so bullish, it's the trend for more fuel-efficient engines driving demand for our products,” he said. “We're working with the needs of a system, not a resin. Automotive companies really appreciate that science-based approach.
“And when you look at plastics, the big thing is getting the right plastic in the right application. If you can use less plastic, that's a great thing to do, if it improves sustainability and makes that piece more productive. In design, we encourage that.”
As an example, Bond cited DuPont's nylon 6/6 and 6/10 resins being used in radiator intakes, where they offer reduced weight.
“The megatrends are for reducing dependence on fossil fuels and taking weight out,” he said. “Power boosters in under-hood applications need heat resistance, and as heat resistance goes up, Zytel Plus [specialty nylon] has been very successful.”
On a global scale, demand growth for engineering resins in Asia continues to outpace that of North America and Europe. As a result, DuPont recently has expanded nylon resin production at its Singapore location. The firm also opened a customer innovation center in South Korea this month and will open one in India in August.
But Bond said North America and Europe will remain important for the firm, not only as large consumption centers but as “the places where decisions are made.”
“Those decisions drive consumption around the world,” he said. “And North America still is on pace to make 12 million cars this year. And plastic penetration in auto is growing twice as fast as build rates are — and a lot of that is higher-temperature uses.”
Feedstock availability is an issue DuPont and other resin makers are grappling with.
“Benzene and butadiene are still very tight,” Bond said. “Cracking light feeds [from natural gas] instead of heavy ones produces less butadiene.
“These [feedstock] materials now are traded globally,” he added. “And a lot of raw materials have multiple applications, not just for your product. But we've been pretty fortunate. We've got contracts in place to supply long term.”
And, in a sense, higher feedstock costs — when caused by higher oil and gas costs — can create an opportunity for DuPont, according to Bond, since the firm then would be able to promote its materials that are based on organic materials or that have recycled content.
“Price escalation makes renewable-sourced materials closer in price to standard materials and more affordable,” he said. Biomaterials like DuPont's Sorona-brand bioresin “need equal or better price to be cost-effective.”
The strong showing of DuPont's performance materials unit — including nylon and specialty plastics — in 2010 extended into the first quarter of 2011. The unit's first-quarter sales grew 11 percent to $1.7 billion, while pretax operating income for the quarter grew 25 percent to almost $300 million. The unit ranked No. 3 among DuPont's six segments in both of those categories in the first quarter.
In 2010, the unit's sales grew 31 percent to $6.3 billion, and pretax profit more than tripled, finishing just under $1 billion.
Overall, Bond agrees with a recent projection, made by Chemical Market Associates Inc. in Houston, that global nylon resin demand should average 8 percent annual growth through 2014. He added that he believes industry operating rates for nylon resin are above 90 percent, and that such high rates “represent a challenge for the industry — we need reinvestment to support growth.”