As portions of the TPE market space mature, some TPEs approach commodity status in which there is little price or quality differentiation between compounders for comparable grades. A commodity trap emerges and escaping it becomes a key strategic objective. Globalization is affecting TPE market structure, acquisitions and pricing. Experience in Asian markets has taught compounders that price/quality can be tailored to different levels as market segments dictate. Globalization has started to shape markets and industry structure in both directions (west to east and east to west). Price/quality levels segregate into tiers (global/glocal/ local/bottom end). Improved compound technology creates a cascade effect as early entrants are replaced with cost effective alternatives. Bioplastics growth will be affected by petroleum pricing and political pressures and will help bring bio-TPEs into the marketplace. TPE growth and the dynamics of maturity To characterize the marketplace for the formulation of strategy, it is helpful to identify for TPEs: • maturity phase and how it affects regional positions • commoditization/specialization relationships • technology proliferation position • pricing/competitive intensity • shifts in distribution channels • reverse globalization status. • supplier shifts in a maturing globalized marketplace. Some measures of TPE maturity are: • global competition • customers’ perspective of commodity vs specialty position • drive by TPE suppliers to seek specialty applications • growth pace • intensity of price pressure • industry structure and geographic shifts • imbalance in the supply/demand relationship • overcapacity in the supply chain (raw materials to compounder) • shifts between commoditization and specialization. Reverse globalization As TPE technology proliferates and shifts, mostly west to east, western TPE customers become familiar with Asian compounders, their technologies, pricing strategies, and willingness to tailor price/quality levels. When these practices strike a resonant note, Asian compounders can be invited to set up operations in western customers’ home base. Table 1 illustrates this phenomenon of reverse globalization and the associated flow of investment and technology in the TPE industry. Global market shifts The past several years have been remarkable for the number of global shifts in the TPE industry, driven by the desire to: • follow customers into a new regional marketplace • exploit technical advantages over a broader global footprint • seek the benefits of scale • expand the offering and seek the market synergies of combining offerings (for example, engineering plastics suppliers acquiring TPE compounders) • seek the benefits of wealthy regional markets (NAFTA and Europe for example). The driving forces for acquisitions and divestments include: • Geographic coverage expansion: In the TPE marketplace where global presence has become a requirement, extending the global footprint is a major acquisition driver. • Product line extension: by engineering thermoplastic (ETP) producers into TPE production to seek marketing synergy. • TPE product line extension: by acquiring specialists in a desired target sector (for example medical TPEs). • Distribution channel shift: To benefit from new or different distribution channels. • Exit strategy decision by private family ownership of compounders, usually via sale to major global companies, particularly resin suppliers seeking to move downstream to more specialized market niches. TPE future view TPEs are evolving toward increased inter-TPE competition. A perspective on future trends in TPE properties, processing and applications is summarized below. TPE type Future view SEBS (TPE-S) • Continue to be the high volume, versatile “workhorse” TPE • Commoditization and over-capacity forces drive toward specialties • Broadened property range via crosslinking and skillful compounding • Impact of SEBS overcapacity → strong downward price pressures • Continued growth in medical applications • Entry into films (medical applications) • Further penetration into SEBS compounds by POEs and OBCs • Further penetration by Asian compounders into NAFTA/Europe • Continued growth in: - medical applications - films (medical applications); - foams - transparent applications - higher value specialty applications via low molecular weight resins - conductive grades based on graphenes (greater use in consumer electronics and sensors) SBS Continued strength in footwear and as component in SEBS compounds Source: TPE magazine