Weak demand for bromine-based flame retardants is generating new merger and acquisition activity. Trouble for brominated producers comes on two fronts, according to the recent study by the Freedonia Group, Global Flame Retardants Market. The first is the widespread regulatory and consumer backlash that bromine and other halogen-heavy flame retardant compounds have generated, due to their perceived environmental risks. The second is limited growth in the electronics market -- the leading outlet for brominated retardants -- as electronic products and components become increasingly miniaturized. To solve their woes, Albemarle and Chemtura, two of the global leaders of the brominated flame retardant industry, have opted to pursue acquisitions and divestitures to mitigate the damage.
Albemarle doubles down on bromine, JM Huber expands halogen-free portfolio
JM Huber’s Huber Engineered Materials made the first acquisition with purchase of Albemarle’s mineral flame retardants business. At first glance, Albemarle’s decision to divest both its Martinswerk subsidiary and its stake in MAGNIFIN Magnesiaprodukte seems counterintuitive. Mineral flame retardants are currently fairing far better than the bromine-derived products that are now Albemarle’s only connection to the flame retardant industry.
However, bromine is a core part of Albemarle’s business, one in which the firm possesses decades of expertise. Divesting other types of flame retardants signals a determination on Albemarle’s part to focus primarily on bromine, with the intent of turning sales around. Furthermore, the sale freed up capital that the company could then invest in its fast growing lithium business, booming along with demand for lithium ion batteries.
Chemtura and LANXESS diversify through combination
The second acquisition was Chemtura’s purchase by German chemical firm LANXESS, which was approved by Chemtura’s stockholders on February 1st of this year. Like Albemarle, Chemtura is heavily reliant on bromine derivatives, which account for about 35% of sales. Unlike Albemarle, however, Chemtura has chosen diversification away from bromine. By becoming part of LANXESS, the new company will become a global market leader in a wide variety of additives, which will soften the impact of bromine’s decline.
Israel Chemicals maintains current flame retardant strategy
Unlike the other two firms, Israel Chemicals, the third major producer of brominated flame retardants, is already a diversified company. In fact, brominated flame retardants were less than 10% of its total sales in 2015, according to the Freedonia study -- a smaller share than Albemarle and Chemtura. As a result, the global phaseout of more hazardous formulations of bromine compounds is expected to have a smaller impact on Israel Chemicals’ bottom line. This will leave the company free to pursue a niche strategy of focusing on more environmentally friendly brominated flame retardant chemistries.
To Learn More:
For more information on the global flame retardant industry, including these key players’ market shares, see the new comprehensive Freedonia Industry Study Global Flame Retardants Market, published in February 2017.
About the Author:
Zoe Biller is an Industry Analyst at the Freedonia Group where she develops and writes reports on the global chemicals, capital goods and polymers & materials markets.