By Liz White, ERJ staff
Middlebury, Connecticut-Crompton Corp. announced 20 Aug that it is reducing capacity of Flexzone, an antiozonant used to prevent cracking in tyres, by the end of the year-â€œin order,â€ it said, â€œto improve the overall profitability of its rubber chemicals business.â€
Citing a dramatic decline in prices for the antidegradant, coupled with similarly dramatic rises in raw material prices for the product, as well as high energy costs, the US-based rubber chemical maker said simply that the product is unprofitable.
Crompton will reduce production of Flexzone by 20 000 tonnes and aims also to reduce production of Flexzone intermediate 4-APDA by 13 000 tonnes at its Geismar, Louisiana facility by the end of the year. The producer gave no indication of what percent of its capacity this represents.
Prices for all Flexzone grades have â€œdeclined dramatically over the last five years,â€ said the firm-which has recently been fined $57 million in a rubber chemicals price-fixing case by US and Canadian authorities.
Throughout the period of low prices, Crompton said, it has â€œcontinued to invest in the Flexzone product line and aggressively implemented cost-saving programmes,â€ to help compensate. During 2004, the situation was exacerbated by dramatic raw material and energy cost increases, Crompton added. In particular, the price of benzene, the key raw material for Flexzone, tripled and pricing for another important raw material, MIBK, also increased substantially, the firm said.
â€œThe combination of these cost issues has resulted in unsustainable losses for Crompton,â€ the firm said.
"It does not make sense for us to produce and market unprofitable products," said Robert Wood, chairman, president and chief executive officer, in a company statement. "We are committed to obtaining fair value for our products. Reducing capacity of these two products is one of a number of actions we are taking to improve the profitability of our rubber chemicals business."
Crompton said it is evaluating other uses for the Geismar line.
Flexzone capacity is being cut by closing certain Asia Pacific facilities by the end of 2004 and reducing capacity in other regions. But the firm stressed that it will continue to have manufacturing plants for the material in the Americas, Europe and Asia Pacific.
The company expects less than 50 employees worldwide to be affected.