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Shortages in the Specialty Chemical Industry

Shortages in the Specialty Chemical Industry. Chris Kawaja, Principal. Shortages. PART 1: Why? US vs. other countries 2008 and plans for new plants We use by-products A bit about peak oil PART 2: What to do? Strategy Sales Procurement. Oil Consumption by Country.

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Shortages in the Specialty Chemical Industry

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  1. Shortages in the Specialty Chemical Industry Chris Kawaja, Principal

  2. Shortages • PART 1: Why? • US vs. other countries • 2008 and plans for new plants • We use by-products • A bit about peak oil • PART 2: What to do? • Strategy • Sales • Procurement

  3. Oil Consumption by Country • 1960 US %, 2010 US %, Growth/newness

  4. 2008 – Forget the new plant • Conditions awful • Is there going to be an economy? Global meltdown • Cash first, investments later • Is oil $40, $120, or something else? How can I plan for that? • Long planning horizon • Acrylic plant: 2-4 years • Ethylene plant: 4 years • Polymer plant: 1.5 years • Compounding of issues – won’t build unless I can get material and make money

  5. Controversial, but certainly price is going UP (Source: propertyinvesting.net)

  6. Spotlight: ButadieneYou are using by-products • Butadiene is building block of products like SBR latex, SBS rubber, etc. • A by-product of steam cracking process used to produce ethylene. Quantity is related to type of feed (light vs. heavy) • 2003: New Olefin cracking process gets rolled out. • Higher oil prices means more valuable to recapture most valuable feedstocks, NOT Butadiene.

  7. Shortages • Part ONE: Why? • US vs. other countries • 2008 and plans for new plants • We use by-products • A bit about peak oil • Part TWO: What to do? • Strategy • Sales • Procurement

  8. How does this impact you? • New strategy questions • Should and can I grow my business? • How do I deal with potential supply shocks? • Customer and product line priority – you may have to choose • Do I need to be in a certain region to grow?

  9. How does this impact you? • New sales questions • Can we support this new business? • Why are customers going to pick us over a foreign vendor? • Customer forecasting and lead times • Should I qualify multiple products of different chemistries? • How much should I educate my customer about this? • How do I maintain a good relationship when all we talk about is price?

  10. How does this impact you? • New procurement questions • Not only price • Negotiation  Synergy • Contracts for price • Appropriate inventory • What is so critical that it will shut down my plant, or my most critical customers • How do I get ahead of the information curve • Inventory • How many vendors per item? Premium for additional vendors

  11. In Summary • Prices: UP • Availability: DOWN • Outlook: NEGATIVE • This is way more important than you think • Bad or good? Depends on how you manage • BUT – you MUST rethink how you go about your business – your jobs are getting more complicated and you must change to win • What will you do differently tomorrow?

  12. Ona Polymers • Manufacturer of acrylics and styrene acrylic polymers based in Garland, TX • “Supplier of last resort” in 2010 • Found out early, acted fast, paid more • Strategic customer selection • Educated customers on what and why • Plant had capacity • Global sourcing capability using Premlinx

  13. Contacts to help you • ONA • Chris Kawaja, ckawaja@onapolymers.com • Todd Wilson, twilson@onapolymers.com, 916-770-7683 • Other resources • Moiz (Mo-eez) Sherwani, msherwani@premlinx.com 610-421-4222 • ICIS Pricing and News www.icispricing.com

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