Brominated Flame Retardants Face Uncertain Year Ahead

Despite the environmental concerns surrounding halogens, 2000 was an exceptional year for the brominated flame-retardant industry, as all major suppliers posted sound financial results. However, 2001 does not look as bright, and companies are expected to find it much more difficult to replicate the growth rates seen last year.

According to the Bromine Science and Environmental Forum (BSEF), the brominated flame-retardant industry had an estimated global value of $860 million. The total market demand by region is shown in the figure attached. The demand for all types of flame retardants is forecast to grow more than 4 percent a year to 2003 in the United States alone.

Major Market Participants Have an Impressive Year 2000
Albemarle Corporation, Great Lakes Chemical Corporation, and Dead Sea Bromine Group are the three major brominated flame-retardant producers, and they all have announced significant sales growth over 2000.

Dead Sea Bromine, the world's largest supplier of elemental bromine, has seen outstanding sales growth, driven by a booming market for PCs, electronics, and communications devices, for which brominated flame retardants are still the first choice.

Similarly, Great Lakes Chemical, the world's largest manufacturer of brominated flame retardants, saw polymer additives sales grow by 9 percent, which it credited to increased shipments of flame retardants. As a matter of fact, sales were so strong that the company employed major price hikes during 2000, citing higher raw material costs, increased demand for their products, and the resulting need to expand production lines.

Finally, Albemarle's polymer chemicals sector had a great year with sales up 12 percent, and operating earnings up 42 percent, primarily due to the strength of its flame retardant business. The division posted flame-retardant growth of 15 percent over 2000. Albemarle is the second largest global brominated flame-retardant producer behind Great Lakes Chemicals.

Price Hikes Help Maintain Good Performance
Price increases were the main reason behind the good financial results of the industry. These increases may indicate that the brominated flame-retardant market is getting stronger. However, there was some over-capacity in the past, and prices were much depressed at the beginning of the year. This is now starting to change. As global market demand continues to grow at higher than anticipated levels, the need for pricing that will support capacity re-investment has become more urgent.

For example, Great Lakes announced price increases virtually every other month throughout 2000. The price hikes included brominated flame retardant chemicals, phosphorus-based flame-retardant chemicals, phosphate ester retardants, and antimony trioxides.

Albemarle kicked off 2000 with 5 percent price increase in several brominated flame-retardant products in January. In October, the company ordered additional increases for more than a dozen products.

The Dead Sea Bromine Group announced price rises in February and October, citing raw material and energy costs increases as the main reasons.

It is worthwhile to note that both Great Lakes and Albemarle say the price hikes on brominated flame retardants was for the purpose of increasing production capacity, though higher raw material and energy costs were also important factors.

The Year Ahead
Despite the impressive results shown in 2000, the brominated flame-retardant market began to have some difficulties at the end of the year. The slowing economy, higher energy costs and severe weather-related problems negatively impacted sales in the fourth quarter.

While Albemarle Corporation posted flame-retardant growth of 15 percent over 2000, volumes grew a modest 5 to 6 percent in the fourth quarter. Similarly, Great Lakes Chemical's polymer additives division had a poor fourth quarter, with sales dropping 8 percent from the previous year.

Most of the factors behind these problems are expected to continue for much of the first half of 2001. However, industry experts concur with the general economic belief that the second half of 2001 will be stronger than the first half.

Overall, the direction of market still looks unclear for 2001. The strength of end-user markets is still undetermined, after seeing some signs of a sales softening in late December. In addition, concerns regarding oil and energy pricing will underline the importance of low cost production. Although some companies, such as Great Lakes Chemical, have already announced further price increases, it seems difficult for any price hikes to be successful given weakening demand and the fact that companies are striving to achieve the levels of growth seen last year.

An upcoming Frost & Sullivan report on the European flame-retardant chemical markets will present a deeper analysis on the past, present, and future of brominated products, as well as many other types of flame retardants.

Frost & Sullivan is an international marketing consulting company that monitors a comprehensive spectrum of chemicals markets for trends, market measurements and strategies.

Source: Frost & Sullivan

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