Fluoropolymer Domain Consultant

July 2023
Scuttlebutt #2: Fluoropolymer Domain Consultant
FKM Grades– We have seen technically there are a few grades like copolymer tar polymer -used for their elasticity and sealant properties. Will be good if you explain end-use applications
There are typically 3-4 grades. Auto industry usage is the highest at 60-70%. Usage is now shifting (new requirements from Market) to something called LT grade, or Low Temperature grade. Do understand that FKM and other FKM like material is needed for stability in both hot and cold temperature. Applications are more stringent e.g. Turbo Engines, in extremely Cold Terrains where ICE forms. Products like Tubes and Gaskets shouldn’t lose elasticity.

Copolymer, and Tar Polymer Peroxide (Bisphenol) mix provides LT grades.

I have read somewhere that there is an Ethanol Blending use-case as well?
In Indian Market (and elsewhere) – the higher Ethanol Blending requirements need that Gaskets or Tubes (made of NBR, EBDM rubber) that carry the fuel (blended Ethanol) shouldn’t lose their elasticity properties at extreme temperatures. They should be able to restore back to normal shape (not swell or get brittle, and therefore develop leakages). Normal Gaskets and Tubes which were adequate in handling pure fuel are now not able to handle that well with higher Ethanol content (which is like Alcohol and will have volatile vapours). OEMs need LT grade enabled Gaskets and Tubes for higher Ethanol blends.

Do we have anyone in India making this?
We all know GFCL is the only Indian player in Fluoropolymers as of now. If I was GFCL, I would be developing this.

Good that you mentioned GFCL. In their recent EC filing they mention a new product FFKM. FFKM has higher elasticity and sealant properties (than FKM) required for extreme temperature and pressure conditions. Can you give some idea about its pricing?

Higher grade of FKM needed for even higher sealant properties at extreme conditions. e.g. the last launch failure in US was traced down to having FKM as the Sealant property enabler, it should have been FFKM grade.

FFKM is needed for Nuclear Power Plants, Semiconductor Plants.
Currently probably only 2 suppliers in the world - Dupont & Solvay. On the pricing front some grades could even be 10x value addition over FKM.

Another key advantage for anyone making very specialised FP grades is that client becomes very sticky and the supplier too can negotiate for pickup of larger basket/full range off take to secure supplies.

Given India Semiconductor space, eventually there should be a big India market itself?
Just look at Foxconn plans.
They have (probably been asked) left the Vedanta association, and announced 4-5 semiconductor plants on their own (probably tie-ups with other groups will follow).

Each plant @60000 Cr – that’s like 2.5L Cr investment coming up.
The requirement here is for Ultra-Pure grades. Price is not an issue.

Delayed Execution and Volume Softness?
Across chemical segment and even in case of GFCL we have significant delays in capacity coming on stream and ramp up of capacity. In certain spaces like AgChem/API/Dye Stuff etc. we have seen significant Chinese dumping too. In Fluorine space we have seen all three players Navin/SRF/GFCL announcing significant capacity expansions but the market seems soft. Can you please help us understand the situation better?

One needs to take everything on a case by case basis. In some cases it is demand softness, in some cases it is Chinese dumping and in some cases it is approval process and in some cases it is also supply chain related procurement issues.

There were clear shortages of specialised Extruders/Reactors etc. coming from Europe.

In some cases perhaps due to demand-supply de-stocking issues. This is evident NOT only in FP chemicals but pretty much across the board. Post covid there was pent-up demand worldwide; products were not available off-the-shelf; every supplier stocked up for 6 months, and then upped for another 6 months; same thing was done by Customers/OEMs. And then the Front-end asks to wait for 2-3 months, Customers, OEMs, finally effects the whole supply chain.

The de-stocking had to happen. 1st Quarter Indian economy was doing well, so the effect was not felt, then there started China dumping. Second factor was the induced slowdown in Western economies. They might deny it but Germany, China are effectively in recession.

Coming back to FP Markets, demand has NOT gone down in any segment. If anywhere it is down, it is marginal at 5-8%. Prices have held firm on an average. The industrial sector should rebound by next quarter. It will not be the euphoric sales times, but it will be back to normal. Normal growth path should resume in 3-4 quarters.

How do you see pricing situation in Fluoropolymers and Refrigerant Gases?
In some cases like you know commodity grade PTFE maybe there is oversupply, but in most higher grades its more related to destocking as we have seen prices starting to rebound back. In refrigerant gases too the usual summer demand was moderate and in US the Chinese were effectively able to circumvent the sanctions through blending and routing via Turkey. These issues have been brought to the notice of the Agencies. There seems to be some kind of rebound in refrigerant gases, how sustainable it will be, needs to be reassessed.

End-Industry Usage of FP
For our tracking purposes, give us an idea of rough composition of end-user industry sales.
(Edit Notes: These are very rough estimates and will update with more clarification)

CPI – Chemicals and Processing Industries contribution is about 30-40%. This is expected to remain that way till the time current Oil & Gas pricing holds. In such a scenario PTFE Sales should be pretty steady.

Gen Engineering/Manufacturing contribution is ~7-10%
India Automotive is doing very well but globally there are issues
Industrial Sector should rebound from next qtr to normal levels

Sunrise Sectors are 3 – EV, 5G, Semiconductors

Globally Aviation sector demand is high with Boeing, Airbus, Bombardier. India Aviation requirements are NOT of the same order as HAL use of FPs is still evolving.

FKM – decent demand
PFA – Not as much
Peroxide – EV Battery applications – high demand

So we have seen de-stocking and demand-softness, we have seen capex delays. At the same time there are shortages world over for these new age FP products. If say the capex had actually come on stream by now do you think the utilisation would have scaled up?
Again one needs to look at this on a case by case and grade by grade basis. Specific grades of PFA/FKM etc are in high demand and so is PVDF for solar backfilms and battery applications. I don’t see much issue here. Do understand that Capacity ramp up in specialised grades needs approvals too. Purely based on demand scenario and grade it takes around a year or two for various grades to ramp up. The pricing is fairly stable and once you know the capacities you can get a rough idea of sales.

We see a lot of discussion on PEM Membrane and Nafion from Chemours? Chemours also keeps talking about the demand in its calls. In Indian context Is this a long shot, or?
PEM is clearly a longer gestation product in India context. As of now, no makes it and it could take around six months to a year before it is available. Green Hydrogen – this could be the next sunrise sector. Many countries have on their own announced Net Zero deadlines by 2030 or 2035. But growth path/evolution of downstream products is not clear at the moment.

For anyone making PEM it could be a windfall, or can even be dull for 3 years. It must be acknowledged that there is support from the highest levels in Government who are actively engaged in technology transfers. How and the pace at which end-use applications emerge, will be key.

We had heard of the Quotas for refrigerant gases capacity in future to be frozen based on Dec 2023 existing capacities? While the Chinese have hugely ramped up, existing Indian players do not seem to be in any unseemly hurry specifically for R32.
For one, if you look at Dongyue or other large Chinese players their game for last couple of years was clearly to take advantage of Quotas and shut out Competition. In case of Indian players it is different for different players. I think all three players Navin/GFCL/SRF have announced enhanced capacities. However for some Indian players like GFCL that is NOT necessarily their primary game and capacity augmentation would more likely be for Captive use and some amount of SPOT sales on the market to take advantage of demand-supply. R22, R125, R401 – Capacities are fungible, so they can take advantage of market demand fluctuations.

Dec 2023 Quotas – Is that negotiable?
Well if someone violates agreements, then yes future capacities may get opened up for existing players.

Japan and China + 1
Japan seems to be one of those countries which is most impacted by Chinese geopolitics. Do you see Japanese import of chemicals in general and FP in particular rising from India?

Japan is indeed most troubled by Chinese expansionist policies – I will not be surprised to see more Japanese interest in Indian suppliers of scale especially in high-technology and/or highly specialised areas for modern industries like Fluoropolymers.

How does Japanese Industry work? How do the Companies operate?
Bulk of the Imports/Exports are through Star Trading houses.

Japanese are Specialists. Manufacturers, e.g. focus only on manufacturing. RM Sourcing is left to the Star Trading houses who are specialists at the Global Supply Chain job. Each Trading House services a set of non-clashing customers. They maintain qualified Sourcing Team of their own (assisted technically by Customer Team) which identifies and qualifies suppliers for evaluation. On factory visits for evaluation, the Star Trading Sourcing Team is also accompanied by Technical persons from the Customer. This extends the other way too – in most cases the STAR trading house partner is asked to get the Customers too.

If that is the case why are we not seeing more and more companies getting Japanese approval? Since GFCL is the only FP manufacturer from India, how do you see GFCL cracking the Japanese markets?
To the best of my knowledge, GFCL is probably the only company to have cracked Japanese market at some scale. There are very stringent norms on every aspect including supplies, labour, sustainability, ESG, Net Zero, and Technical parameters. Do understand that cracking Japanese players is a long-term process. From what I know GFCL is known to have been working with the Japanese for last few years, and has successfully crossed these barriers. Exim data published by GOI shows significant FP exports to Japan. Bulk of it is through Star Trading houses like Morimura, Hayakawa, Mitsui, and a few others.

Once approved, how sticky is the relationship with Japanese Customers?
Well the relationship with Japanese customers is NOT very different from getting into a long courtship/wedding. Unless the supplier goofs up repeatedly, they will stick with them; come and visit them to understand the causes of goof-ups when they occur.

They treat it as a mistake that happened. They will come and AUDIT the Supplier for the Corrective Actions taken. And certify whether the corrective actions taken are okay before they can move forward.


Kudos!! for the way, you described the details. A lot to learn from you!
Thank you so much!

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Thanks. Great insights