Ergon positioned to serve evolving market

CLEVELAND—The rubber processing oils market has seen a number of changes during the years, including a shift in the focus of big refineries that aren't likely to supply RPOs anymore and changes in materials brought on by regulations.

But all of those factors still have left a competitive market, and one in which officials of Ergon Inc. believe they are in a good position to fulfill the needs of customers in the tire and rubber product markets, both in North America and worldwide.

"The landscape will continue to change, and we are dedicated to the market," said Mary Ann Abney, Ergon's global technical marketing manager for process oils. "Customers can really come to us if they have questions about what's happening. We know process oils and we know refining, so we can always aid them in whatever they need as we walk them through their applications."

Jackson, Miss.-based Ergon's process oils are marketed under the HyPrene brand and used for such applications as tire oils, plasticizers, extenders, adhesives, defoamers and rubber compounding. It produces RPOs at two of its refineries, with naphthenic products coming out of the Vicksburg, Miss., location and paraffinic ones from the Newell, W.Va., site.

Abney and Nick White, Ergon's vice president of business development, discussed the firm's RPO offerings during the ACS Rubber Division's International Elastomer Conference, held recently in Cleveland, where Abney also gave a presentation offering insights into the market.

White said rubber process oils generally are among the less-expensive fillers used in rubber formulations, so compounders like to use as much as possible in their offerings. But he added that the landscape of the RPO market has changed significantly over time. Two decades ago, RPOs largely were dominated by aromatic, or DAE, oils. They were used with SBR and BR, provided excellent solvency and were cheap because they were byproducts from the refineries.

"It was kind of a match made in heaven," White said. "A cheap product for the rubber industry and an outlet for oil refineries to get rid of a byproduct."

The only downside—to put it mildly—was the aromatic oils were found to be carcinogenic. The European Union started talks in 2003 that led to a regulation taking effect in 2010 limiting the amount of polycyclic aromatic hydrocarbons used in the oils, he said.

While that was a big change actually initiated by the rubber industry, White said there have been ongoing evolutions on the refining side that many in the rubber industry may not be aware of that are just as impactful to rubber process oils. One trend is for refineries to continue focusing on producing oils that match properties that are suitable to lubrication applications.

"What we have now are a lot of large refineries—big multinational oil companies—that don't really sell their oils to RPOs or adhesives anymore," he said.

So industries like tire and rubber that need oils to have acceptable solvency and viscosity properties will need to look to specialty refineries for these type RPOs, according to White. "It's a great business for (specialty refineries) to focus on," he said. "It's not only the rubber industry that values these properties, but a number of other industries such as urethane and metalworking fluids."

These changes have been going on for some time, but at a different rate around the world, the Ergon VP said. A lot of the transition already has happened in North America, is just now occurring in Europe and really hasn't started in Asia, as refining chemistries evolve there.

Filling the gap

Abney said market suppliers are able to fill the needs ignored by the larger refineries, but long term there could be a gap in the solvency and viscosity requirements in the market. "I would say Ergon is continuing to focus on filling the market needs of our customers, so we'd invite them to talk to us about what long-term demand looks like," she said. "We're monitoring the situation closely. Overall the gap in solvency and viscosity on the market could be filled by both traditional naphthenics and non-traditional viscosity and solvency solutions."

To put it simply, Ergon's message to customers is that its success is based on its ability to meet the needs of its customers. "We're in the market not only with RPOs, but we're in greases and metal working fluids and industrial oils," Abney said. "We focus on niche markets that need that special chemistry or specialty chemical solutions."

The officials said Ergon has strategically invested over the years to become more deeply involved in the rubber process oil market. White said a couple of its refinery capacity expansions in Vicksburg were based strictly around the 2010 PAH regulations mandating use of non-carcinogenic oils.

"We saw the opportunity that Ergon was going to have with our clean naphthenic oils to replace a lot of those aromatic, or DAE, oils," he said. "If we would plan a capacity expansion around it, it's an important part of our business."

Ergon also made two acquisitions that have benefited its RPO business. First it bought Process Oil Inc. in 2015—the family owned company founded by White's grandfather in the late 1970's—followed by the purchase of Resinall Corp. in 2018.

White said the POI acquisition made sense because Ergon had become its main supplier and his firm was one of Ergon's largest customers. "I transitioned over from running POI to heading up a business development project within Ergon focused strictly on rubber process oils globally," he said.

It also added some chemistries other than paraffinic and naphthenic into Ergon's portfolio. "POI was a marketing company that was focused 70 percent into the rubber industry," White said. "Grandfather worked in carbon black. The chemistries that POI actually markets and sells go beyond what Ergon makes. A lot of the work is in vegetable oils and Group 2 oils that are traditionally used in lubricating applications, but have some benefits in EPDM and clear polymers."

Even after the purchases, both Process Oils Inc. and Resinall continue to market under their own names, rather than the Ergon moniker.

Shifting demands

Oils are based on American Petroleum Institute classifications, and the makeup of market availability has changed over the years because of shifting market needs, according to Abney. Group 2 and 3 oils are driven by automotive engine oils, and also focus heavily on lubricating oils.

Other applications, including RPOs, that need something technically different typically have been supplied by Group 1, or naphthenic refineries, though White said some elastomers such as EPDM and butyl actually can use a more saturated, Group 2 oil. At one time Group 1 oils accounted for 70 percent of the market, but that has slid to 45 percent and will continue to drop, he added.

"It's not fast, it happens over time," White said. "There will always be Group 1 products. There is a demand for it and they're great products. But it's just adapting our side of the business—rubber process oils—to the mega trends of the refining industry."

Abney said it's really about what's driving the refiner's business, and that's why the large refineries don't look to service markets such as RPOs. "What we're seeing is that most of the RPO today is being supplied by people who have made a conscious decision to participate in this market," she said.

Geography also will play a role in where customers will source their RPO needs from, according to White. That's because while the U.S. market mostly has adapted to the new PAH regulations, that still is an ongoing process in Europe and China. "Regional customers will sometimes have to go outside of their regions to find the chemistry solutions they need for the long term," he said.

Ergon derives the majority of its business in North America, but the officials said it has a global terminal network to show that it is serious about being a global supplier to the industry. "With my new role, when we talk about these trends and evolutions in the refining market, we kind of see the writing on the wall that Ergon's products will be more in demand globally and we want to position ourselves to be able to meet that need," White said.

The RPO market remains a competitive sector, and Abney said customers range all the way from quality performance buyers to those that are extremely focused on price, adding that Ergon serves all ends of the business.

"Even if we can't support them now, we're willing to be a resource to them if they need education on the refining landscape and what's happening on that side of the market," she said, "because as important as RPOs are to the rubber industry, the refining industry is really optimizing more around its core business and not so much around rubber's core business."

Ergon continues to invest in both its refineries serving the RPO business, which will give it a sustainable business long term, Abney said. "We've invested heavily in the security of our raw materials," she said. "We've done that through major technical investments in our raw material program. For a company of our size, we really have a state-of-the art raw material evaluation program, where we've brought all of that analysis internal and invested in personnel and technical expertise to support that."