Manufacturers Focus on High Performance Plastics and Specialty Chemicals

Specialty chemicals are designed to have specific properties that can be applied to particular needs. These chemicals can generally be categorized in a handful of segments, including: cleansers (for both household and industrial use), construction chemicals (such as adhesives), chemicals for electronics (chemicals used in the production of integrated circuit boards), pesticides (for agricultural, residential and commercial use) and specialty polymers (such as high-performance plastics). The specialty chemicals market is difficult to serve. It typically requires a significant investment in research and development to enter this sector, while input costs can be high thanks to fluctuating crude oil prices. Once a manufacturer has developed a specialty chemical to the point that it is ready for commercial use, a significant marketing effort may be required to create demand for the new product. Meanwhile, more competitors have entered this specialty market, attracted by the potential to earn higher profit margins than they might earn on basic chemicals.

The end customer for specialty chemicals is changing as well. Some buyers of specialty chemicals have engineered ways to alter their manufacturing methods so that they rely less and less on costly specialty items, and more on basic chemical feed stocks.

These trends have encouraged specialty chemicals firms to focus on niche areas and certain growing markets. An excellent example is chemical giant Solvay’s purchase of France-based Rhodia. Rhodia serves a wide variety of markets with excellent potential growth, as it makes specialty chemicals for use in water treatment and cosmetics, among other sectors. Any sector that serves the rapidly growing middle classes in emerging nations looks particularly appealing to firms considering acquisitions.

Firms that manufacture performance plastics (sometimes called “high performance” plastics) often follow the same sort of long-term strategy as those that make specialty chemicals. Performance plastics are those that maintain their strength and other desired properties during events such as changes in temperature, electrical stress and chemical exposure. They are carefully engineered to serve particular niche markets.

Plastics offer unique advantages over many metals such as aluminum, steel or titanium. For example, plastics are less expensive, will not rust and are very light in weight. Many plastics are also relatively easy to recycle. When a manufacturer is able to engineer a plastic so that it has a high strength-to-weight ratio, along with heat tolerance or tolerance to other stresses, then demand for that plastic may be very high. As a result, many industries are switching from metals to plastics for many components. These industries include automobiles, medical technology, construction, electronic products and aerospace, among others.

For example, the aerospace industry relies on high performance plastics for aircraft windows and windshields. Airplanes also include many plastic cabin components—often engineered to have very high strength, low weight and fire resistance. The electronics industry relies heavily on performance plastics also, for everything from components in computer printers to fluid handling systems in the ultra-clean plants that fabricate semiconductors.

Performance plastics are also proving themselves as a partial solution to today’s need to conserve fuels and electricity. The automotive industry is relying to a large extent on highly engineered plastics in order to save weight, which helps to conserve fuel. Likewise, the construction industry is learning new ways to use advanced plastics for insulation, windows, adhesives and many other functions within buildings.

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