Chemical and Material Shortage Alert – October 2014

The purpose of this blog is to identify chemical and material shortages reported on the Internet.  The sources of the information reported here are primarily news releases issued on the Internet.  The issue period of the news releases is October 2014.

Section I below lists those chemicals and materials that were on the previous Chemical and Material Shortage Alert list and continue to have news releases indicating they are in short supply. Click here to read the September 2014 Chemical and Material Shortage Alert list.

Section II lists the new chemicals and materials (not on the September alert).  Also provided is some explanation for the shortage and geographical information.  This blog attempts to list only actual shortage situations – those shortages that are being experienced during the period covered by the news releases.   Chemicals and materials identified in news releases as only being in danger of being in short supply status are not listed.

Section I.   Chemicals and materials that continue from September to be reported as in short supply are: bricks (United Kingdom); zinc (global)

Section II.   Shortages Reported in October not found on the Previous Month’s List

Cement: Minnesota; production not keeping up with demand

Solar Panels: global; production not keeping up with demand

Water: Brazil (San Paulo); draught

Ferro-silicon: Brazil; production not keeping up with demand

Reasons for Section II shortages can be broadly categorized as: 

1.  Mining not keeping up with demand: none

2.  Production not keeping up with demand: cement; solar panels; ferro-silicon

3.  Government regulations: none

4.  Sources no longer available:  none

5.  Insufficient imports:  none

6.  Supply not keeping up with demand:  none

2013 Approximate Sales and CAGRs for 10 Food Additives

An intensive Internet search was conducted to find information providing 2013 sales data and compound annual growth rates (CAGRs) for food additives.  Several market reports were found providing such data.

The chart below shows the sales and CAGR data that were found for 10 food additives, identified in the chart.  The data should be considered to be approximate estimates.  For some data, different sales and CAGR estimates were found, suggesting difficulties in exactly determining the actual data.

The CAGRs are expected annual sales growth rates for the next five years.  Again, the CAGRs should only be considered to be approximate, with many factors potentially altering the growth rates.

The data is presented by marketing research companies in information on the Internet while promoting in-depth reports on the food additive industry that the marketing companies are selling.   Because of the efforts made by these marketing research companies in preparing these reports, which cost several thousand dollars, it is likely that the estimated sales and CAGR data are as accurate as can be found on the Internet, or elsewhere.

It seems to me that knowing the relative sales and sales growth magnitudes of these 10 food additives could be useful in company decision-making.  Also, knowing that the total sales for all 10 food additives in 2013 were approximately $43 billion, if the estimates for the sales data are reasonably close, should be useful.

Electronics Segments at Japanese Chemical Companies

Several Japanese public chemical companies have separate business segments representing what these companies consider to be their businesses associated with “electronics”.  Companies that report “electronics” segments in their annual reports include:  Asahi Glass; Asahi Kasei; Nagase; Mitsubishi; Sanyo; Shin Etsu: Showa Denko; Sumitomo; and Tokyo Ohka Kogyo. 

From the annual reports of these companies, the following are some of the products and services that the companies lump into their electronics segments:

abrasives
battery materials
CMP slurries
color filters
digital camera filters
display device materials
electrolytes for aluminum electrolytic capacitors
encapsulation materials
flexible display materials
glass-related materials and processing
hard disk media
high-grade chemical management services
high-purity chemicals
large-scale integration (LSI)
light emitting diode (LED) materials
liquid crystal display (LCD) materials
magnetic sensors
optical products
organic lighting materials
organic photovoltaic models and materials
photo mask materials
photo resist materials
polycarbonate sheets and films
quartz products
rare earth magnetic alloys
recording media
resins
semiconductor materials
solar cell materials
surface treatment materials
touch panel materials

Also from the annual reports and the financial data on the electronic segments, for all the companies, the average compound annual growth rate (CAGR), over the last three years,  for electronic segment sales was a negative one percent.  The total electronics segment profit, for all companies, as a percentage of total electronics segment income was thirteen percent (658 billion yen total electronics segment income/5,156 billion yen total electronics segment sales).

Perhaps one of the strongest sectors in the Japanese chemical industry is the sector that supports Japan’s electronics industry, an industry generally recognized as a world leader.  And, therefore, probably the chemical company segments (for example the segments discussed above) supporting Japan’s electronics industry are also world class.    A good example of this is the recent 2014 Noble Prize in Physics awarded to two Japanese researchers (and also to an American researcher) for inventing efficient blue light-emitting diodes (LEDs), which has enabled bright and energy-saving white light sources. 

The above financial results for the chemical companies’ electronics segments are not impressive, and are in-line with a less than robust Japanese economy.  However, the segment's technical capabilities are probably equal to the best in the world, and best in Asia.  With Asian future economic growth, and its demand for electronics, if Japan’s chemical companies offering chemical support can tap into supporting this demand, these companies’ futures should be bright.

Chemical and Material Shortage Alert – September 2014

The purpose of this blog is to identify chemical and material shortages reported on the Internet.  The sources of the information reported here are primarily news releases issued on the Internet.  The issue period of the news releases is September 2014.

Section I below lists those chemicals and materials that were on the previous Chemical and Material Shortage Alert list and continue to have news releases indicating they are in short supply. Click here to read the August 2014 Chemical and Material Shortage Alert list.

Section II lists the new chemicals and materials (not on the August alert).  Also provided is some explanation for the shortage and geographical information.  This blog attempts to list only actual shortage situations – those shortages that are being experienced during the period covered by the news releases.   Chemicals and materials identified in news releases as only being in danger of being in short supply status are not listed.

Section I.   Chemicals and materials that continue from August to be reported as in short supply are: iron ore (India); bricks (United Kingdom)

Section II.   Shortages Reported in September not found on the Previous Month’s List

Zinc:  global; mining not keeping up with demand.

Reasons for Section II shortages can be broadly categorized as: 

1.  Mining not keeping up with demand: zinc

2.  Production not keeping up with demand: none

3.  Government regulations: none

4.  Sources no longer available:  none

5.  Insufficient imports:  none

6.  Supply not keeping up with demand:  none

Census Bureau Data on the Textile Industry

Some recent articles suggest a re-emergence of textile manufacturing in the United States.  Two such articles are a New York Times article (click here) and a USA Today article (click here).  Data collected by the US Census Bureau and found at its website can also provide some insights into United States textile manufacturing activity.

Census Bureau data is provided on textile product shipment values per year from 1992 to 2013 for three textile industry sectors: textiles mills; textile products; and apparels.  Click here to find this data.

The Textile Mills and Apparel sectors had shipment declines from 1992 to their low-point shipment values during the 2007-2011 recession.  Textile Mills had a 3.8% compound annual growth rate (CAGR) decrease from 1992 to 2009, the year of the lowest shipments since 1992.  Since 2009, the Textile Mills sector has had a slight rebound of 1.9% CAGR. 

The Apparel Sector also had a dramatic decrease in shipments from 1992 to 2011 of 7.5% CAGR.  And, like the Textile Mills sector, Apparels has had a slight shipments increase of 1.5% CAGR from 2011.

The Textile Products sector shows a different pattern for annual shipments.  This sector actually increased in shipments from 1992 to 2005 by 2.5% CAGR.  Then, likely because of the recession in the 2006 to 2010 period, there was an annual decrease in shipments. But, since the low point in 2010, the shipments in this sector have increased at a 4.5% CAGR, which is higher than the 1992 to 2005 period.  This 4.5% could well be viewed as a re-emergence of textile manufacturing, but manufacturing in what the Census Bureau classifies as Textile Products.  Click here (search in 2012 on textile products) for some insights into what the Census Bureau considers as Textile Products.

As indicated in the articles referred to above, this re-emergence of textile manufacturing in the United States seems to have to do with the application of technology, for example, advances in processing equipment.  And the application of such technology might be best applied to obtain highest margins in areas where special products are made, such as might be found in the Census Bureau’s Textile Products sector; versus more routine textile mills and apparel manufacturing processes.  So, perhaps the application of technology is why a higher CAGR over recent years is seen for the Textile Products sector.

Difficulties in Polyol Use Estimates

Data can be found on the Internet that are estimates of current and future use (consumption) for both petro- and bio-based polyols.  Often these estimates are found in reports being sold by marketing research companies.  For example, the following data was found:

2012 total global use of polyols (total of petro- and bio-based) – 7.5 million metric tons (MT)

Range of the total global polyols used that are bio-based – 5% to 15%

Compound annual growth rate (CAGR) for total polyols use, 2012 to 2018 – 5.5% to 7.5%

CAGR for bio-based polyol use, 2012 to 2018 – 9.5% to 10.5%

These 2012 and future use estimates are important for company planning purposes and hopefully they are reasonably accurate.  However, even if reasonably accurate, just a small change in the estimates can result in large differences about future polyol use.

Assume that the estimate that a 2012 global total of 7.5 million MT is correct for the use amount of polyols (both petro- and bio-based).  Supposedly, from 5% to 15% of this total is bio-based.  What percentage is used in the 5% to 15% range can make a big difference in the computation of future petro- and bio-based polyol estimated use.  The difference between 10% (percentage of bio-based in the total polyol use) and 15% results in a difference of 547,270 MT of petro-based estimated use in 2018 and 844,500 MT of bio-based estimated use in 2018.  These results are based on a CAGR of 6.5% for total polyol growth use and a CAGR of 10% for bio-based growth use.

Changing the assumed 2012 polyol total global use (7.5 million MT) and the CAGRs for either (or both) the total and bio-based polyols for 2018 will also change the results significantly.

The purpose of this blog is to try to demonstrate, in the above paragraphs, that even small changes in the percentage that is bio-based and the CAGR percentages can make a large difference in results relevant for planning purposes.  A prudent approach, it seems to me, would be to compute expected results for each of the variables, while holding the other variables fixed.   The results should demonstrate how large a range of 2018 use amounts for both petro- and bio-based polyols are (as well as how uncertain they are), even as the estimated ranges for the bio-based percentage of the total and the CAGRs are relatively small.  

Bio-based Chemical Companies Financial Performances

The financial performance of six companies (Amyris; Bioamber; Gevo; Kior; Metabolix; and Solazyme) that focus on developing chemical products and fuels from renewable raw materials were analyzed using their annual reports.   Here are some conclusions:

Over the last three years (2011 to 2013), only Solazyme has consistently been able to price their products high enough to cover the cost of products sold.  The other five companies more often than not had negative gross profits (cost of sales exceeded revenues from the products sold).  This suggests an inability of these five companies to compete in the market with low-enough pricing, but at prices high enough to cover the costs of the products sold.

The total research and development (R&D) expenses ($679,024,935) reported by the six companies over the last three years are twice the total revenues reported by these companies ($339,280,858).  In addition, the capital expenses (e.g., expenses for equipment and construction) of $512,916,197 are one and a half times the revenues.

These large R&D and capital expenses, compared to revenues, account for a significant part of the total net losses ($1,726,733,148) reported by the companies over the last three years.  These high R&D and capital expenses will more likely than not result in some success at generating new, useful, and profitable products.  However, unfortunately, some of these companies will likely not survive, and a difficulty is in predicting which products and companies will.  The six companies’ financial results over the last three years do not give much help with this difficulty. .  For example, although Solazyme and Bioamber revenues have had compound annual growth rates of 41% and 68%, respectively, from 2011 to 2013, both companies have also had huge net losses for each year.