CLEVELAND—Maintaining product supply has been a challenge for some Chinese companies, as government environmental regulations regarding air and water quality have become stricter since about 2008, said Liu Xiaofeng, manager at Dalian Richon Chem Co. Ltd.
This can be a problem for global rubber companies, as China's rubber chemical producers hold about 75 percent of the world's rubber chemical capacity, he said.
But R.D. Abbott Co. Inc.'s recent partnership with Dalian Richon will provide supply assurance for its rubber accelerators in North America, according to Gregory Hrenya, executive director of R.D. Abbott's performance polymers business unit.
"We can go now and offer the supply assurance of rubber chemicals to major tire companies or any technical rubber goods user," Hrenya said in an interview at the ACS Rubber Division's International Elastomer Conference in Cleveland.
As pollution levels rise, many companies with existing process technology are cut back in their operating rates, which causes part of the shortage, Hrenya said.
"The other side is the overall level of high air pollution that sometimes exists," he said. "When that happens, it doesn't really matter whether you're compliant or not, they're going to come into a region and close the plants. Everybody has the potential of going through short-term shutdowns when there's too much pollution."
When that happens, many rubber chemical producers that aren't compliant end up closed down or shuttered significantly, running at about 50-60 percent operating rates, Hrenya said.
The shutdowns can benefit the overall market, as smaller companies and producers without good technology exit, Xiaofeng said.
Dalian Richon won't be subject to nearly as many of those shutdowns, thanks to a new 108,000-sq.-ft. production facility that opened in Rongcheng, China, last June, he said. It replaces the company's previous facility from 1997, which ran a capacity of 35,000 metric tons.
The new facility, with a capacity of 60,000 tons, is located in a government-controlled chemical park, and is fully compliant with all regulatory issues, Hrenya said.
"They're one of the few companies that are fully compliant now to all of the regulations because of all of the enhanced process technology they've got," he said.
With up-to-date processes in place, the only shutdowns Dalian Richon will be subjected to are the general shutdowns in regions with too much overall pollution, Hrenya said, which makes them more viable as companies consolidate to deal with shortages and restrictions.
Last year, Dalian Richon was part of a full shutdown for 40 days, but normally the facility runs from 80-90 percent capacity, Xiaofeng said.
"Richon is going to be one of the winners on the side of the overall consolidation," Hrenya said. "That's why we thought they'd be a great partner and we agreed upon an exclusive arrangement in North America to build the brand."
Opening the U.S. market
Discussion of the agreement started about two years ago, leading to the 2017 arrangement. As Hrenya researched sources in Asia for rubber chemicals, Dalian Richon stood out as a company with the right process technology, a new plant coming on stream, and a firm that hadn't been previously in the U.S.
"This is all new volume coming into the U.S. that hasn't been here in the past in a time of market consolidation and developing market tightness," Hrenya said.
The company's main markets include other Asian countries such as South Korea, Japan and Thailand. Dalian Richon has had a share of its business in Mexico, as the third biggest rubber chemicals company in the country, Xiaofeng said. Some distributor companies wanted to use their own label on Richon products, but the chemical supplier didn't have any interest in that.
"We know America is a big market, but we also know it is a very competitive market," Xiaofeng said. "We only want to sell Richon brand on the market."
After meeting with R.D. Abbott, they decided it was time to make the move to the U.S. market. R.D. Abbott opens the North American region for Dalian Richon with logistics and warehousing, as well as technical support, Hrenya said.
"We wanted to change the sales model that was being used in the rubber chemicals industry in North America," he said. "Historically, the majority of resellers here are selling private label."
With a sales group, the weakness of the model is a potential lack of a transparent line of sight for the user to whose product is being used, which can cause occasional issues, Hrenya said.
"We wanted to find what we felt was one of the absolute top companies, and in return, we wanted to go out there and build that brand with them," Hrenya said. "We're now building the Richon brand just like we are building any other brand we represent. We respect the company, we believe in their capabilities, we think they're long-term viable and they're respecting the environment, so it makes good sense to us."