SBC producer Kraton Performance Polymers Inc. continues to expand synthetic polyisoprene rubber capacity, and to grow its footprint in Asia — building a lab in Shanghai and progressing with an SBC joint venture in Taiwan.
Houston-based Kraton, which claims the top spot in global production of styrenic block copolymers by sales revenue, recently celebrated the 50th anniversary of its plant in Belpre, where this summer it spent $27 million to install isoprene rubber capacity.
The firm's strategy is to grow the market for its materials, not just gain market share, President and CEO Kevin Fogarty said in an interview at Belpre.
“We focus on developing applications that don't exist today,” Fogarty said.
Cariflex isoprene rubber (IR) and latex (IRL) are among Kraton's latest and fastest-growing products, and are gaining popularity in medical and personal-care applications with their hypoallergenic nature, high tensile strength and comfort, according to the company. The products' purity also benefits niche markets like electronic coatings. Kraton uses an anionic solution polymerization process to make the materials.
The new Cariflex IR capacity at Belpre replaces capacity from a Netherlands plant that Kraton closed in 2009. Kraton said it also intends to move a pilot line out of Houston, most likely to Belpre.
In Cariflex IRL, Kraton has expanded production in Paulinia, Brazil, boosting worldwide capacity for that product by 30 percent. The company is planning another Cariflex IRL expansion, set to double production at its facility in Japan, by 2013.
The Belpre plant, which opened in 1961 with 129 employees, has expanded and modernized over the years. During the past five years alone, Kraton has spent more than $125 million at the site, in addition to its Cariflex investment. The company also said a $40 million upgrade is already under way there.
Belpre is reportedly the largest styrenic thermoplastic elastomer production facility in the world. The campus covers more than 300 acres, with a workforce of about 600 and a yearly payroll of more than $200 million.
The plant consists of four polymer processing lines, four finishing/packaging operations and a polymer compounding unit. It boasts 417 million pounds annually of both unhydrogenated SBC and hydrogenated SBC, including 70 polymer grades.
Kraton spent $24 million for research and development in 2010 — representing 13 percent of the firm's sales. Technology Vice President Lothar Freund said he hopes to raise that percentage to 20 percent in the future.
In 2010, the ratio of innovation revenue to R&D spending reached a record high, more than doubling the level in 2005, Freund said. The company also devised innovation objectives, such as creating new markets for SBCs and developing technology platforms based on market needs.
The global R&D team totals more than 100 employees, with innovation centers in Paulinia, Houston, Amsterdam, Shanghai and Tsukuba, Japan.
In Asia, where innovation revenues make up a higher percentage than in other regions, Kraton has been expanding in Shanghai and is building a lab there.
The long-term vision for R&D in China, Freund said, is to have the same size and capacities as Kraton's R&D centers in Houston and Amsterdam, with the exception of polymer development.
Big HSBC expansion
Kraton finally has announced a framework agreement for a long-anticipated hydrogenated SBC plant in Asia. The joint venture with Tapei, Taiwan-based Formosa Petrochemical Corp. will construct a 66 million-pound-capacity plant in Mailiao, Taiwan, expected to be operating by the second half of 2013. Fogarty said it is the biggest capacity expansion for Kraton in “quite some time.”
“It was a long process to decide where and how best to build the plant,” Fogarty said. He said the venture meets the criteria for feedstock proximity, an expandable location and access to the engineering capabilities to ensure success of the construction.
He said the partnership with Formosa may include capacity expansion for hydrogenated and unhydrogenated SBCs. He said the plan is for each of Kraton's SBC plants, in Belpre, France and Taiwan, to make unique products.
The Taiwan plant will be able to serve mainland China, Fogarty said. The cross-strait Economic Cooperation Framework Agreement that took effect last August now exempts many chemical and plastic products from tariffs. In the plant's first five years, less than half of the HSBC made there will be sold into China, he said.
Building up Asia
Based on global sales, Kraton said it holds more than 50 percent of the HSBC market share and about 33 percent for USBC. However, Fogarty said the firm's 21 percent share of Asia revenue within that global business is less than the average for the industry.
“We are underweight in Asia,” he said.
But growth potential lies in innovation, and much of Kraton's innovation sales — from new products introduced in the last five years — are generated in China, higher than the global percentage, Freund said.
“A great deal of that is coming from medical applications,” Freund added.
The company sees rising demand for state-of-the-art products and applications from technology-focused customers in Asia, where the innovation cycle is faster, compared with mature markets, and leaders embrace the first-mover advantage.
Global medical-supply makers include China as an important part of their supply chain, and local producers are showing more interest in the latest technologies. One example is the looming trend to replace widely used glass IV bottles with IV bags made of polypropylene modified with Kraton's SBC — not the PVC IV bags commonly used in developed countries including the U.S.
Also, Cariflex IR can be used in IV bag stoppers, said Richard Brennan, vice president of Cariflex IR products. He is finding interest from Chinese OEMs. “It's still at an early stage, but I'm confident to see rapid growth in two to three years,” Brennan said.
Besides medical, Kraton expects to see growth in PVC replacement for wire and cable as well as slush molding for auto components. As in North America and Europe, Fogarty noted, the key for developing markets in Asia is to find the points of differentiation that don't exist today.