The ISP Elastomers L.P. emulsion SBR operation in Port Neches, Texas, has come a long way since the firm purchased it in 2003.
When ISP Elastomers parent International Specialty Products Inc. bought the plant during Ameripol Synpol Corp.´s Chapter 11 bankruptcy proceedings, the factory had long been neglected. So the first order of business was to get the operation up and running, said Sunil Kumar, president and CEO of the parent firm.
Second was to install improvements, and ISP has invested $75 million in upgrades to bring in new equipment and get the factory in proper shape, he said.
And third-where ISP Elastomers is now-is getting the SBR plant working more efficiently through such means as Six Sigma and tighter process controls.
Knew what to expect
Although the Port Neches operation was in poor shape, ISP-being a chemical firm with more than $1 billion in global manufacturing assets-was the perfect company to turn things around, Kumar said. A financial company that was looking for a good investment never would have considered the SBR factory.
"As a manufacturer, we knew what we needed to do," he said. In addition, ISP has a plant just 60 miles away with good management and technical people, so help was always nearby.
To gauge how far ISP Elastomers-an exhibitor during the International Tire Exhibition and Conference-has come, the firm now has a latex capacity of about 480 million pounds a year, up from about 220 million pounds a year when ISP acquired the plant.
"Our customer base was very pleased to see the investment we´ve made," said Tim Gorman, director of sales, noting that all of the firm´s customers returned to the fold.
ISP actually has the capability to finish 700 million pounds of SBR annually, but would have to put in more reactor capacity, officials said.
Kumar wouldn´t divulge current ISP Elastomers sales, but said the company will show sharp growth in 2006 after some improvement in 2005, when the operation was shut down for six weeks following Hurricane Rita.
But even during the hurricane ordeal, at least one positive surfaced. "We found out how good the work force is," Kumar said. "Many stayed at the plant during the hurricane. We were one of the first sites to come back."
ISP, in return, continued to pay the wages of the 350 workers-100 more than when Ameripol closed the facility-during the shutdown. "It was the right thing to do," he said. "It goes a long way toward feeling good about the company you work for."
Now Kumar will put Port Neches against any SBR facility worldwide. "This is a globally competitive plant," he said. "I´m very confident we will be the low-cost producer in the world."
Look at the market
SBR accounts for roughly 48 percent of the global market of 20 billion pounds a year for all synthetic rubbers, with emulsion accounting for 85 percent of SBR business. Kumar said SBR should continue to grow at a rate of 3-4 percent a year, with the bulk of the demand hike coming from Asia. "We´re still bullish on the industry," he said.
About 80 percent of ISP Elastomers´ sales come in the U.S., and with 400 million pounds of SBR still imported into the country each year, the firm will try to take away some of that business-but only if the price is right.
"There are customers we don´t want, who want to buy at the lowest prices," Kumar said. "There are other suppliers better to handle that business."
Most customers, however, value the service, quality and reliability ISP can offer.
As a corporation, Kumar said ISP is one of the most profitable chemical companies in the industry. The firm sells to big companies that are interested in their own profits, but ISP still gets a price where it can make money.
"We expect to do that with elastomers the same as we do with other chemical products," he said.
In recent months, though, skyrocketing butadiene and styrene costs have caused profits for ISP Elastomers to come in at "an unacceptable level," according to Kumar. Customers have shared in some of the increased costs, and prices of finished products in Asia and Europe are starting to reflect higher material costs, and that should happen in the U.S. as well.
Kumar related how in early September he bought a set of four new tires for his sport-utility vehicle. He paid $158 each before mounting and balance, a full $25 more per tire than seven months earlier when he bought the same size tires for another SUV.
"We´re happy to see our customers are getting price increases," he said, "and we need to do the same."
Tire manufacturers account for 70 percent of ISP Elastomers´ business, and the exec expects that ratio to remain fairly constant. "It´s a very good business and we have an excellent relationship with our tire industry customers, and we want to continue to build on it," Kumar said.
The rest of the material goes to mechanical rubber goods, such as hose and belting, along with some specialty products-including hot polymerized SBR-for applications such as adhesives and sealants.
Mel Martin, ISP Elastomers senior vice president and general manager, said the company has had good success in exporting these specialty products because ISP boasts the largest such portfolio in the industry.
Kumar said there are no plans to build a factory from scratch, though ISP would consider a deal similar to the one in Port Neches. Another possibility would be to add SBR production at other ISP global facilities, though "any discussion on that is in the early stages."
The parent firm also is consolidating its two tech centers in Shanghai, China, into one expanded operation that will have the capability to serve elastomer customers, he said. Dedicated sales forces in Europe, Asia and Latin America also will help to build business in those areas.