Video: ExxonMobil exec says innovation is key to growth

BEACHWOOD, Ohio—An ExxonMobil official painted a bright future for the rubber industry as long as the key players along the entire value chain focus on innovation and the factors driving rising demand.

In the coming years, global rubber demand, currently estimated at about 26 million metric tons a year, is forecast to grow on average nearly 4 percent each year, well above the increase in GDP, according to Kurt Aerts, ExxonMobil Chemical's vice president of specialty elastomers and butyl.

"This is a great time to be part of the rubber industry," Aerts said during his keynote address at the recent spring technical meeting of the ACS Rubber Division in Beachwood. "We are all playing a remarkable role in creating better lives for millions of people, and making products that enable the progress of humanity, just as we've done for the last hundred years or so."

Of course, understanding the needs of customers and where innovation comes into play are key elements to being successful in the industry, he said. In many industries, there will be periods of relative stability with continuous improvement, but then something comes along to disrupt the rules of success.

One such time in the rubber sector came during World War II, when the U.S. government launched a major effort to develop a synthetic rubber alternative to counter the shortages of natural rubber during this period. From there, innovation hasn't stopped, Aerts said, citing first the introduction of oil extended rubber and, more recently, the use of silica in tires.

"Rubber is now one of the most widely used products in our day-to-day lives," he said. "Thanks to continued innovation, synthetic rubber—a war-born material—has become indispensable in the progress of modern civilization."

Growth drivers

Two of the main factors to drive the expected rise in the use of rubber are population growth and the rising ranks of middle class citizens in developing countries around the globe, Aerts said. From now until 2040, population worldwide is projected to reach 9 billion, up from 7 billion.

"But more important to our business are the megatrends of middle class growth, urbanization and sustainability," Aerts said. "Middle glass growth is key to drive consumption of chemicals, when people lift themselves out of poverty and seek the modern comforts we consider essential in the developed world."

He cited a study by the Brookings Institution that claimed the number of people earning enough to be considered middle class will more than double by 2030 to 5 billion, with most of the new members in China or India.

Another factor driving petrochemical demand, he said, is sustainability. "Now more than ever, the world is looking for affordable, sustainable and safe products," Aerts said.

Role of innovation

But despite the expected upswing in demand, succeeding in the rubber industry is not easy, the ExxonMobil official said. "The profitability of rubber producers depends on a host of global and regional variables, including industry supply-demand, cost of feedstocks, and the cost of natural rubber."

That means innovation along the value chain is essential. "With the other stakeholders in the value chain, it means working closer together to develop products that create additional value and advanced sustainability," Aerts said.

The history of the chemical industry, he said, has been defined by the search of "abundant and advantaged feedstock." ExxonMobil long has realized the value of a diversified and integrated portfolio, with its chemical facilities highly integrated with its refineries, along with having access to attractive upstream feedstocks.

"As we continue to invest in new capacity, we understand the supply and demand balances for each of these value chains, and that producing raw materials consistently on a global basis is important," Aerts said. "That's why we continue to assess a balanced portfolio of growth opportunities around the world."

He used the evolution of EPDM as an example. The elastomer has been produced using a conventional four-step process since the 1960s. A new technology using metallocene catalysts was introduced during the 1990s. This resulted in 20 percent lower investment in equipment cost and savings of up to 50 percent less energy use. Customers also realize savings through getting deliveries in pallets and bags, as opposed to the rubber in bales from the traditional process.

So EPDM made through the metallocene process has grown significantly over the past 15 years and now accounts for about one-third of global EPDM production, according to the ExxonMobil Chemical VP. But it still can't manage the balance of properties as well as conventional materials.

"Therefore, providing a portfolio of both metallocene and conventional products is important to meet the solutions our customers require," Aerts said.

ExxonMobil also has had a relentless focus on reducing the energy and environmental footprints in its own operations, he said. He said the firm's global energy management system has helped it generate energy efficiency improvements of more than 10 percent in its global operations. The global giant also has invested more than $1 billion over the last decade in its facilities to incorporate co-generation projects.

Customer solutions

Customers of rubber materials also are working to bring more sustainable solutions to society. He gave two examples that have had a positive impact in the automotive industry.

The first dealt with material selection for tire inner liners used to hold air in the tire. He claimed those made with 100 percent halobutyl content significantly reduced air loss in tires when compared with bladders produced with traditional blends.

He said the industry as a whole has a great opportunity to reduce air loss in tires. He said research showed 70 percent of vehicles in the U.S. and 80 percent in Europe are running on under-inflated tires, while 40 percent of tire owners in China aren't even aware of their tire pressure.

"If we could shift the global tire fleet to the current best available solution, annual fuel consumption could be reduced by 1 billion gallons," Aerts said.

The use of thermoplastic vulcanizates in automotive weatherstripping also has helped to reduce weight and cost, "while at the same time providing tangible benefits in reducing waste and increasing recycling of scrap," he said. "From desired flexibility to weight reduction, the wide range of TPV compounds has provided design engineers with a broad range of tools to provide many of the enhancements we've seen in today's vehicles."

For innovation to be successful, he said companies must understand long-term megatrends; identify opportunities across the entire value chain, looking at markets and not just direct customers; and combine expertise through collaboration. "Successful innovation boils down to being able to connect the dots in this manner, with a willingness to learn and fail fast. Not doing this well and ceasing to innovate usually puts companies at peril."