IAL Consultants CP House, Uxbridge Road Ealing, London W5 5TL UK Tel: Fax:

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1 IAL Consultants CP House, Uxbridge Road Ealing, London W5 5TL UK Tel: Fax: PRESS RELEASE SEPTEMBER 2014 POLYURETHANE CHEMICALS AND PRODUCTS IN EUROPE, MIDDLE EAST & AFRICA (EMEA), 2014 IAL Consultants is pleased to announce the recent publication of the 10th edition of its report on the markets for Polyurethane Chemicals and Products in Europe, Middle East and Africa. This new study updates and expands upon the information included in our previous study published in The information contained within this report is based upon an extensive programme of interviews throughout the industry. The report contains both PU product production and raw material consumption figures with 2013 as the base year and market forecasts provided to For the first time, the data will also be available separately in a database format for subscribers, enabling the manipulation and output of data. The report is presented in eight volumes. The titles of all eight volumes are: Volume 1 Raw Materials Volume 2 Flexible Foam Volume 3 Rigid Foam Volume 4 Coatings Volume 5 Adhesives & Sealants Volume 6 Elastomers Volume 7 Binders Volume 8 End-Use Markets Total production of polyurethane products is reported to have been 5,756,350 tonnes in 2013 compared with almost 5.5 million tonnes in 2011 and 5.1 million tonnes in By 2018, this figure is forecast to be 6,630,335 tonnes, equivalent to an average growth of 2.9% p.a. over the next five years, despite continuing concerns surrounding the global economy. Of the three regions considered, the polyurethane industry remains the largest in Western Europe, but growth rates are strongest in Eastern Europe and the Middle East/Africa region.

2 Total EMEA Production of All PU Products & Growth Rates by Region, (Tonnes) Country 2013 (Tonnes) 2018 (Tonnes) (% Growth p.a.) Western Europe 3,347,360 3,680, Eastern Europe 1,434,330 1,726, Middle East & Africa 974,660 1,223, Total EMEA 5,756,350 6,630, Source: IAL Consultants Total = 5,756,350 tonnes Raw Materials MDI and TDI are essentially marketed as commodity aromatic chemicals, with EMEA consumption of approximately 1.69 million tonnes and 627,000 tonnes, respectively, in Future growth is likely to follow GDP growth rates in Western Europe, but to be slightly higher in Eastern Europe and the Middle East/Africa. Across the EMEA region, demand in 2013 was buoyant due to an upswing in the automotive and furniture/bedding industries and renewed construction activity. Several new raw material facilities are currently under construction, including BASF s 300,000 tpa TDI plant at Ludwigshafen, and Bayer s new TDI and MDI facilities at Dormagen and Brunsbüttel, respectively (300,000 tpa TDI, 220,000 tpa MDI). To serve the ever-expanding Middle Eastern markets, Dow and Saudi Aramco have established a joint venture to produce MDI, TDI, propylene oxide and polyols. This is expected to be up and running in Jubail Industrial City, Saudi Arabia in In addition, TDI production will commence in Russia in 2016, with the inauguration of Promsintez new plant this is predicted to have a capacity of 60,000-70,000 tpa. It is likely that new polyol capacity will be required in EMEA over the forecast period in line with the world-scale isocyanate plants being built in the region.

3 Total = 5,756,350 tonnes Flexible and Rigid Foams Total production of flexible polyurethane foam in 2013 in the EMEA region was estimated to have been over 2 million tonnes, of which 1.6 million tonnes was slabstock and almost 450,000 tonnes was moulded foam. The production of flexible slabstock remains dominated by standard polyether foams, but the production of high resilience (HR) and combustion modified (CM) foam continues to grow. The West European market for flexible slabstock foam has remained sluggish over the last couple of years. The shift of production from Western to Eastern Europe has had an impact on Western European manufacturers. The Western European manufacturers have also suffered from the delayed effect of the recession, economic difficulties within the eurozone and credit issues. Eastern European products have started to have a significant impact on the market in Europe overall. IKEA, for example, has set up joint ventures to manufacture flexible foam in Poland with Dendro and Correct (Com40), and in Romania with Aramis. The demand for moulded PU foam is closely linked to the performance of the automotive industry, a sector which has suffered greatly in the last few years due to the economic downturn. Vehicle output in the EMEA region was fairly stable in 2013, with some variations at a country level. In terms of passenger car production, sharp rises were noted in Morocco, Romania and Turkey, while manufacturing in countries such as Iran and Egypt continued to struggle in the wake of political and social unrest. The total EMEA production of rigid polyurethane foam has increased from 1.62 million tonnes in 2011 to an estimated 1.85 million tonnes in 2013, of which the bulk is used for thermal insulation in the construction and refrigeration industries in the form of panels, boards and in-situ foam. Demand for polyurethane (and polyisocyanurate) insulation in Europe is being driven by the recast of the Energy Performance of Buildings Directive, which requires new and retrofitted buildings to achieve nearly zero energy demand from 2020 onwards (2018 in the case of public buildings). In Eastern Europe and Russia, the continued renovation of district heating pipe work remains a large market for rigid PU foam. The refrigeration

4 market is mature, and is mainly driven by the need to create more energy efficient products. Appliances with outstanding A+++ classifications are now emerging in certain Western European countries. CASE Applications Total EMEA production of polyurethane coatings was over 814,000 tonnes in The market in Western Europe is fairly mature, but considerable growth is still forecast for the Eastern Europe and Middle Eastern regions thanks to the breadth of potential applications for polyurethane-based coatings. At present, the market is witnessing a shift towards lower VOC and high-solids coatings. Although the share of water-based technologies is expected to increase, their growth is limited due to cost factors. In particular, PUDs are thriving in the market for polyurethane coatings due to their numerous product benefits, including environmental advantages, ease of application and high-quality exterior look. Polyurethane adhesives are available for a diverse range of applications, and total production of PU adhesives and sealants was around 367,000 tonnes in Again Eastern Europe, the Middle East and Africa are offering the best opportunities for growth in this market. Formulations based on PU dispersions are replacing traditional adhesives in many applications, particularly in the automotive industry. The majority of polyurethane sealants are used in auto direct glazing and construction. The extremely high performance enables the use of synthetic polyurethane elastomers in a range of different sectors such as automotive, construction, mining, aerospace, electronics, medical devices, sports products and fibres. Most demand comes from the automotive and footwear industries. Total EMEA production was almost 451,000 tonnes in 2013, but this segment accounts for the lowest annual growth rates going forward. The footwear industry, which is an important segment for PU elastomers, is facing a long-term decline due to relocation of shoemaking to low cost areas of Asia. On the other hand, there are opportunities for growing use of PU elastomers in the automotive and medical sectors, as substitution for other materials. Binders PU binders represent a comparatively small market, characterised by little regional production outside Western Europe. However, selected countries in Eastern Europe (particularly Russia) are demonstrating rapid growth in line with growing wood panel production. The binders segment is forecast to enjoy the highest CAGR over the forecasting period. *** The data in this eight-volume report includes raw material consumption by product type, by region, by country and by major end-use industry. The Raw Materials volume contains comprehensive supply and demand data for all of the major

5 polyurethane raw material types. The Major End-Use Markets volume contains an overview of the major markets for PU products and a summary of trends and drivers. The report is available for the following prices: Price Volume 1 Raw Materials Only available with full report Volume 2 Flexible Foam 3,000 Volume 3 Rigid Foam 3,000 Volume 4 Coatings 2,000 Volume 5 Adhesives & Sealants 2,000 Volume 6 Elastomers 2,000 Volume 7 Binders 1,000 Volume 8 Major End-Use Markets 4,000 THE COMPLETE REPORT 14,500 THE COMPLETE REPORT ONLINE DATABASE PACKAGE PRICE ON APPLICATION IAL S Online PU Database The PU EMEA report is also available as part of IAL s Global online database system called Enterprise, which will from now on form a key part of its services to the PU industry and its affiliates. IAL will provide subscribers with a comprehensive and fast tool that enables them to analyse all data available efficiently and to every desirable level of detail. The PDF reports remain a complementary, qualitative offering to the database, and will from 2014 on be updated on a biannual basis. Database updates following the latest industry feedback and showing up-to-date forecasts are planned to be published biannually, with live updates throughout the year. Historic, current and 5-year forecast data will be available in an online pivot table format. Users can create data tables to their own designs and needs and compare data across different regions and countries. For more details, please contact: Mrs Cathy Galbraith IAL Consultants CP House, Uxbridge Road Ealing London W5 5TL Telephone: +44 (0) Fax: +44 (0) cgalbraith@brggroup.com Or visit our website: