Market Topics

Metalworkings Thirst


Theyre not yet singing How Dry I Am, but metalworking fluid mavens are warning of bottlenecks in a number of key chemicals. Red flags include volume allocations on amines, shortages of petroleum sulfonates, and – most painfully – explosive prices on many petroleum-based components, including chlorinated paraffins, sulfur additives, and olefins and polymers derived from natural gas.

The floodgates seem to be wide open when it comes to pricing, remarked Skip Wolford of Spartan Chemical Co. in Maumee, Ohio. In the last year to 18 months weve seen dramatic increases on some materials. Passing such costs on to end-user customers is not easy, he added. You have to be very flexible, and the concept of value-added is very important. You can try to prove the need for the increase and validate it to the customer, but if its a price-sensitive buyer, theyll just go elsewhere. Our commitment to quality and consistency remains unchanged.

For this reason, Spartan Chemical stays away from what he calls the bulk cutting oil business, focusing instead on specialty products. Were rolling out a new semi-synthetic coolant, for example, thats very effective and has a high degree of cleanliness so it leaves very little residue on the workpiece, way covers and switches.

Wolford lists base stocks, chlorinated paraffins and sulfonates among the materials hes keeping a close eye on. While none of these have run out, he stressed, thats because we stay very proactive with our suppliers and are in a solid position to provide for our customers needs, even if we have had to wait longer for deliveries.

Kirk Schlup of Chemtura, the Middlebury, Conn., based leader in natural sodium sulfonates, confirmed that there were kinks in the supply of these corrosion-inhibiting emulsifiers. When Chemtura was created from the merger of Crompton and Great Lake Chemical earlier this year, Schlup said, we did have some integration issues from the merger, some short-term interruptions. Things were in balance, but there was very little inventory and no shock absorbers existed in the system. So when the flow slowed from Chemturas sources in Europe, there was no way to cushion the blow.

Were very close to resolving that now, Schlup stated in mid-November, and were beginning to rebuild sulfonate inventory. He believes there is adequate supply overall for metalworking needs – thanks in part to substitution of other materials by blenders – and well soon be able to reduce ordering times back to somewhat normal levels, back to four weeks lead time, instead of the six to eight weeks seen recently.

Costly Chemicals

Joe Clayton of Sea-Land Chemical, Westlake, Ohio, which distributes chemicals to more than 100 metalworking fluid blenders, pointed out that amines are very short since the two biggest producers (Huntsman Chemical and Dow Chemical) have invoked force majeure and imposed allocations on their customers. Amines are used as a neutralized acid, to buffer the pH in metalworking compounds, to prevent bug growth and inhibit corrosion, he explained. Regular amines are both tight and costly, Clayton added, but our business in AMP 95 has been way up. This multifunctional product used to be more expensive than other amines, but its maker, Dows Angus Chemical unit, recently expanded its Sterlington, La., plant, and he says the product is getting a closer look as other amine prices have climbed.

From Lombard, Ill., Todd Ressa of chemical supplier Ideas Inc. raised another concern: In our petroleum world, its become tough to get anything related to rubber, that is, polyisobutene. Its very tight and short. Because it is clean and doesnt generate smoke, PIB is a favored viscosity modifier in soluble oils. But global PIB demand has been booming since May, Ressa said, and stocks have shortened further since the U.S. Gulf Coast was hit by hurricanes Katrina and Rita.

When it comes to chlorinated paraffins, raw material costs have been going up at an incredible rate for us, observed Curtis Lege of Dover Chemical Corp., Dover, Ohio, which dominates the U.S. market for this extreme pressure agent. On the one side, chlorine is very sensitive to natural gas prices; it is generated by electrolysis of saltwater, which is highly energy-intensive.

Meanwhile, paraffin and olefin are available, but only if you can afford to buy them. The petrochemical streams used for chlorinated paraffin can easily be converted to fuel production, where demand and margins are very strong. So were competing for that material too. We are all being squeezed between the petrochemical producers and the end users.

The roots of todays problems lie further back than hurricane season, however. Metalworking has been declining in the U.S. for some time, Lege said, and it no longer can support a great number of additive suppliers. This led additive suppliers to consolidate over the past decade. Dover itself is a prime example; it earlier absorbed competitors Mayco and Keil Chemical, and this year bought another, Pioneer Chemical.

The same consolidation was seen in other metalworking fluid components, such as sulfonates, defoamers, amines and biocides. The surviving additive companies tend to be healthier now, Lege feels, and their capacities are more closely aligned to real demand. The winners were able to cut costs, capture some scale-related savings and reduce overhead. But their resilience is being pounded now by raw material price increases, Lege said, and so these costs must be passed quickly to blenders.

Demand continues steady for chlorinated paraffins, he added. Chlorinated paraffins serve a role thats very difficult to replace economically. There are a number of alternatives that may be effective for performance, but generally they are not cost effective. And even as our costs go up, so do the costs for the alternatives as well, because so many are petroleum based.

Even Dover is pursuing alternatives, Lege noted. We are looking at raw materials that may reduce costs and novel approaches to chlorination, using feedstocks that are not petrochemical based – natural esters, for instance – and where prices are not going up as rapidly.

A Calmer View

In Mantua, N.J., Joe Gentile of Hangsterfers Laboratories takes a much calmer view of the current turmoil. His company so far has been untouched by shortages, he remarked, and even price fluctuations are not a cause for panic at this family-owned metalworking fluid blender. This is because weve been with some of our suppliers for 30 or 40 years, and we have longstanding relationships with them, he told LubesnGreases, That allows us to get a great overview to plan properly for the future. We know what materials are expected to be in stable supply, and we know which ones to avoid long term.

Its strategic planning allows the company to confidently introduce new products such as its PC Series cutting oil, a very high flash-point hybrid fluid based on polar technology. Made with both vegetable and synthetic components, so its not as dependent on mineral oils, the new fluid is designed for hard-to-machine metals where high corrosion resistance is a must, such as aerospace materials, titanium and refractory alloys.

An emphasis on consistent, known ingredients, not the pursuit of cheap spot deliveries, helps Hangsterfers stay above the fray, Gentile indicated. Of course wed prefer stable prices over constant fluctuations, but our own negotiations help to produce that for us. We dont jump ship from our suppliers for the sake of a cheaper substitute, because we depend on getting consistent quality.

Delivery, at a Price

Petroleum costs alone are not to blame for todays price volatility, emphasized Ressa at Ideas. Shipping costs are also way up, while freight services are strained. Its the wait more than the allocation thats so nerve-wracking, he said. Well ask for a load of amines and be told itll be two weeks. A month later, were still waiting. Ive got seven containers stalled at the border. Shipments from Europe and China now are taking every bit of four months, where before it was 60 days.

Such upheavals – and bolting crude oil and natural gas costs – have Ideas passing price increases along more quickly to customers than ever before. It used to be wed try to give notice of price changes about six weeks out, or around 40 days notice. Now, its about two weeks. I cant afford to hold material at the lower prices any more, given the replacement costs.

Chemturas Schlup says that more reactive pricing is the rule at Chemtura and others big chemical companies now, too. We cannot be the shock absorbers in the price equation anymore. When we get hit with a price increase or an energy cost increase, its got to come right through. Its a matter of remaining healthy, of being able to be in this business long term. To do that, suppliers must maintain their margins, so they can reinvest, do the research and development thats needed, and have long-term viability.

Clayton feels the same price sensitivity – but added that its nothing new at Sea-Land. As distributors, were working on very thin margins already. We have to pass along increases, we cant absorb them. But other suppliers tried to, and theyre now playing catchup.