Chemical Feedstock and Raw materials.pdfVIP

Chemical Feedstock Raw Materials: Whats Next? a Chemical Buyers Perspective Robert L. Culp, Director of Strategic Sourcing, OMNOVA Solutions Inc., Fairlawn, OH Introduction This paper focuses on the production of ethylene and how it affects the supply and cost of key raw materials used to make products for the PSA industry. The actual presentation at PCTC’s TECH 33 conference will include a raw material cost forecast, as well as a summary of macro- trends impacting the chemical industry. As a chemical buyer for an organization that produces synthetic lattices and polymers, I have found the past few years very challenging. Prior to the global recession, we saw strong global product demand coupled with high crude oil prices driving up the costs of virtually every chemical to unprecedented levels. Shortages of certain chemicals were not uncommon. By the first quarter of 2009, the global recession brought chemicals down to price levels that had not been seen in many years and supply was not an issue as product demand had fallen dramatically. In response to the downturn, companies took aggressive actions. During 2009, high cost capacity was idled and other assets reconfigured to match existing cost and demand parameters. Plans to install new capacity were cancelled or delayed. Since the first half of last year, the prices for most chemicals have been on a steady climb back up the cost curve. As we enter the last month of the first quarter of 2010, we have shortages of a few key monomers, depending on the supplier, and more price increase announcements in the face of modestly improved polymer demand and strong customer push back to any price increases. One underlying explanation for the short-term and long-term trends which we are experiencing in the chemical industry can be found by looking at ethylene production operating rates and feedstock selection. Why Ethylene So, why is so much of my attention drawn to the production of ethylene?