Putting a high-end finish on foam
Thai Covestro plant comes up with polyurethane solutions for Asean market. By Jesus Alcocer
Lothar Duda and his team are adapting global polyurethane technologies to Thailand’s sweltering heat and rising income levels at their Bang Pu site.
Mr Duda is the head of polyurethane commercial operations in Southeast Asia for Covestro AG, the world’s leading producer of high-value polymers by sales volume. The US$13.1 billion market cap company, which debuted on the Frankfurt Stock Exchange in October 2015, was formerly known as Bayer MaterialScience until it was spun off by its namesake two years ago.
The Leverkusen-headquartered company has been working with polyurethane since it was discovered by Otto Bayer in 1937. Today it sells more than $11 billion worth of polymers produced in more than 30 sites in Asia, Europe and the Americas.
The company expects to expand annually by 4% until 2021, according to its June presentation in London. This growth will be largely driven by an increased concern for sustainable solutions and underlying global GDP growth.
Worldwide, the company’s largest sectors are sports, leisure, health and beauty (28% of revenue), and automotive (20%). In Thailand, the largest sector is appliances, followed by furniture and automotive. The country’s construction sector is bound to take on a greater importance for Covestro as construction firms move to polyurethanebased panels as they did in Vietnam, said Mr Duda.
Covestro has leveraged its size and considerable asset base to remain the market leader across its portfolio. Its global asset base has also allowed it to offer the lowest prices on every sector except MDI (diphenylmethane diisocyanate), a material used to provide thermal insulation for buildings and refrigeration chains, for which some European and Chinese manufacturers have better cost positions.
Although original equipment manufacturers (OEMs) and upstream firms are increasingly pushing for cheaper solutions, the polymer business is not primarily based on price, he said.
“Polyurethane is different from other standard plastics that are melted and reshaped. It is typically a high-end solution in which market players compete fiercely to differentiate and customise their products to their client’s needs,” said Mr Duda.
Although Covestro does not release numbers for its Thai or Asean business, he said the great majority of the Bang Pu products are destined for domestic consumption or export to Asean, especially to Vietnam, Malaysia or Indonesia.
The overarching challenge for the region is logistics, said Mr Duda. Underdeveloped infrastructure and the hard geography of islands make it a challenge to build efficient supply chains for clients in Southeast Asia, which is partly why we chose the central location of Thailand for our headquarters in the region, he said.
“While Thailand is not expanding as rapidly as the Philippines and Vietnam, it is the largest production hub for automotive and appliance industries in the region, so the location makes sense,” said Mr Duda.
The Bang Pu team works on more than manufacturing.
“A lot of the research and development that goes into our local and regional solutions is done right here,” he said.
While the backbone of Covestro’s technology is developed i n Europe, China or Japan, the Thai operation is in charge of adapting this technology to local requirements.
“Looking at the appliance industry, there is a very strong drive towards energy efficiency in mature markets. Five-star, A+++ energy labels that use high-end foams are being sold in Europe. The Thai consumer, in contrast, may not care as much about optimal energy performance, but may be more concerned with cost optimisation,” said Mr Duda.
The value of polyurethanes is their ability to be shaped into personalised solutions, which is why it’s hard to talk about the Asean region in general terms, he said.
“For example, a lot of Vietnamese builders use panels with Covestro material instead of conventional roof tiles, a trend that has yet to catch on in neighbouring countries,” said Mr Duda.
Most of Covestro’s research in the region focuses on the automotive and soft furniture sector, its two largest markets in Thailand.
Polyurethanes take centre stage in the automotive industry. Seats, steering wheels, headliners, and a host of other components incorporate the material. In Thailand, Covestro works on high-end applications for Japanese and European carmakers.
“The big trend in the auto industry is fuel efficiency, which is supported by lighter vehicles. Our challenge is to produce cheaper and lighter components that maintain a premium feel and performance,” he said.
A lot of fuel goes into heating up or cooling down a car. In coming years, thermal isolation may become an increasing concern in sweltering climates like Thailand. Covestro is also developing materials to improve heat exchange.
“Polyurethane components can help on thermal isolation. We ensure the vast majority of a car’s energy is used to propel the vehicle, not keep it cool,” said Mr Duda.
The market is heading towards autonomous and electric vehicles (EVs), he said.
“So far we have seen few changes from an interior design perspective, but that is going to change. With autonomous driving, passengers will focus less on the road and more on the car. Perhaps they will want different seat configurations, more luxurious finishes, or more sophisticated entertainment options, and we will have a role in all of these components,” said Mr Duda.
Covestro will also benefit from EVs’ reduced motor noise.
“With less motor noise, outside sounds will become more disturbing. We are working with a Japanese OEM to design car pieces that dampen noise and enhance sound absorption,” he said.
Equipment manufacturers in Thailand are increasingly requesting plastic components with lower emissions, even if it is not required by government regulations, said Mr Duda.
“In terms of soft furniture such as mattresses and pillows, we are working with several local and multinational producers. While we usually do business with parts manufacturers, we collaborate along the whole supply chain, including downstream providers like IKEA,” he said.
Increasing awareness of the importance of comfortable sleep is pushing consumers to choose foam-full mattresses, translating into larger sales for the firm. The rise of furnished condominiums and hotels as well as prefabricated houses also bode well for our furniture business, said Mr Duda.
Covestro’s team is also working on bringing products to the most disadvantaged sectors of society. The company’s inclusive business initiative, formerly known as SunRise, provides affordable housing, solar dryers, and cold supply chains to rural communities.
“We are not only providing products but also helping these people build businesses by increasing farmers’ overall yield and return on investment. The Thai operation started more than five years ago in collaboration with Silpakorn University and has provided more than 500 solar dryers, which help farmers preserve food and inventory, to communities,” he said.
“The effects are already visible, as you can go to the supermarket and pick up goods produced with these dryers.”
Mr Duda said while some of the trends he underlined are not moving as fast as he wished, he believes the expansion of the middle class and increasing regional demand for high-quality products will allow Covestro to keep its growth momentum.