Dusseldorf, Germany – In the run-up to the K2019 trade fair in Dusseldorf, Kraton Corp. informed investors that its full-year earnings would come in well below previous expectations due to a mid-year decline in trading conditions, particularly in Asia.
The market is now experiencing a more broad-based global economic slowdown which is unlikely to reverse by the yearend, said Houston, Texas-based Kraton, which majors particularly in styrenic copolymer elastomers.
However, the business situation depends on which market region and product-type you are looking at, according to Holger Jung, Kraton senior vice president & polymer segment president.
“HSBC [hydrogenated styrene block copolymers material is actually going pretty well in the US,” Jung reported in an interview at the K2019 polymer trade fair in Duseldorf.
However, he added, the Asian market overall is a challenge for Kraton, sales having “stabilised on a lower level” following a significant drop about a year ago.
While Kraton has cited the impact of tariffs on the Chinese market as a factor in the business decline, Jung explained that the challenge is not really tariffs per se but, rather, Chinese consumer confidence.
“There is not a lot of tariff applied, for example, on our HSBC product in fact, but the customer demand in China is down,” the vice president explained.
“So, the tariffs are indirectly impacting the market and in addition the customer demand in Japan, Korea and Taiwan is down because they deliver to Chinese customers, Jung adding that this has led to “a kind of a ripple effect,” pulling confidence down across Asian markets.
“Basically, we lost about 15-20% of HSBC sales compared to what we were usually selling,” said Jung, while adding that the situation is now stabilising.
And there is a positive perspective to the current market trends in terms of technology and innovation, according to Alberto Fornaro, director of market development at Kraton.
“Like every company we need the bread and butter but we like more the jam,” he said. “That is not simply about [higher] margins, but the fact that we are offering unique products that really fulfil the needs of the market and makes [Kraton’s products] more necessary.
“So, yes there are tariffs, but those grades that only Kraton can deliver are, to some extent, protected. That is why it is important for us in to focus on innovation, as that is the way to become more robust in the case of a general economic downturn.”
Fornaro pointed, for instance, to Kraton’s recent start-up of a new plant in Taiwan, from where a lot of products will go into speciality markets in Asia: “That gives you an indication that tariffs don’t play an important role there and that it is just [about] consumer confidence.”