SCHKOPAU, Germany-Styron L.L.C. said it will add a 50,000-metric-tons-per-year production line for solution styrene-butadiene rubber at its Schkopau plant, the first major investment by the company's new owners.
Construction on the $125 million project will begin in May, and the operation will start up in the fourth quarter of 2012, the firm said. The new capacity will be built next to two existing production lines and have the capability to make all existing clear and oil-extended Styron grades.
The need for greener high performance tires in Europe, as well as other countries, spawned the expansion, Styron said. The firm pointed to mandatory performance labeling of tires, including a maximum rolling resistance, that will take effect in 2012, as well as carbon dioxide emissions targets, as reasons for the project.
Styron said consumer demand is expected to drive growth for low rolling resistance tires.
“As a new company, this is a very important announcement,” said Marco Levi, Styron vice president for emulsion polymers. “It's the first investment by Bain Capital Partners since purchasing the business from Dow. It's important for our customers and for our employees.”
Boston-based Bain Capital purchased the Styron Division of Dow Chemical Co. in June 2010 in a deal valued at $1.63 billion.
“It's a big amount,” Levi said of the $125 million capital outlay on the SSBR project. “Bain has acquired this company to grow the company, and this is the first step.”
Styron said it has global leadership positions in its two flagship products: latex and polystyrene.
Levi said its SSBR business is No. 1 in Europe among independent producers, has a strong presence in Asia and is looking to build its position in the market globally to meet rising demand brought on by labeling laws and the growth of high performance tires.
Currently, 70 percent of Styron's SSBR business is in Europe, with the rest in Asia.
There were several reasons for locating the new SSBR line in Schkopau, where it has its other two lines for the product, according to Levi.
Besides being able to more easily foster growth with customers, the logistics of having all its rubber production at one site will greatly speed up the project. If the firm had to select a site and then go through all the steps necessary to start up a plant from scratch, he said it would take much longer for the line to get up and running.
“In Germany, we have the resources, the land and the competencies,” the Styron executive said. “We can execute and implement the best of our technology.”
The third SSBR line will give the materials manufacturer total annual capacity for the product of about 150,000 to 160,000 tons when fully operational, he said.
Dow set up its first SSBR line in Schkopau in 2002, when it also introduced its first generation of the material, which can be used in a variety of applications but for which Styron's main focus is supplying tire manufacturers.
Levi said the firm's second-generation SSBR material was launched two years ago, with the second production line added in March 2009. Except for downtime, he said the two existing lines are running at full capacity.
Styron plans to unveil the third generation in 2011, with improvements in rolling resistance and wet grip for the tires, as well as advancements in the processability of the rubber.
As SSBR demand grows globally—the company projects annual growth of about 10 percent—acquisitions and partnerships are other possible ways for Styron to expand its global capabilities in the market, Levi said.
“The clear driver is customer need,” he said. “It depends on how you want to go to market.”