COLOGNE, Germany (April 26)—Lanxess A.G., citing the lack of profits in its rubber chemicals business, is increasing the selling prices of rubber chemicals at the expense of market share.
Lanxess is not prepared to sell rubber chemicals at a loss, even if this means losing market share, board member Ulrich Koemm said at the release of the firm's annual earnings.
Koemm described the rubber chemical business as "close to a disaster" in terms of profitability in 2003 and through most of 2004. In the middle of 2004, Koemm said, Lanxess completely changed the strategic focus of the business and declined to sell products at unsustainable prices.
As a result, he said, Lanxess has dropped from being top supplier of chemicals to some tire manufacturers to fourth position. But the profitability of the business has improved "quarter by quarter."
He added that other suppliers had followed Lanxess' lead and increased their prices to the market.
Koemm said factories for making rubber chemicals are not, on the whole, capital intensive, and therefore this low cost had led to a structural oversupply situation where the various suppliers to the business would add capacity as soon as demand started to approach the limits of supply.
Because the plants are relatively low cost, Koemm said, Lanxess can afford to leave some capacity idle if it cannot get the right price for its products. "We are looking for value," he said.