This study examines the processes, regional production economics, markets and industry structure of the styrenic block copolymers - the dominant family of thermoplastic elastomers. These materials have many of the properties of vulcanized rubbers but can be molded and extruded on conventional thermoplastic processing equipment. This gives them productivity advantages versus vulcanized and silicone rubbers which are thermosets and are processed using slow and costly curing processes. Their manufacture from styrene and dienes, such as butadiene and isoprene, was reported by Shell Oil and Phillips Petroleum in the early 1960s. They are A-B-A block copolymers in which A is a rigid polymer and B is the rubbery segment. They exhibit two separate phases and two distinct glass transition temperatures (Tg). The polystyrene segment has a Tg above room temperature and the polybutadiene has a Tg below room temperature. The material has the properties of vulcanized rubber, and when heated above the Tg of polystyrene, it flows and can be processed like a thermoplastic. In 1965, Shell developed the first commercially acceptable thermoplastic elastomer based on styrene-butadiene block copolymerization. Prior work on polyurethane systems had been carried out by other companies but Shell established a versatile material with an attractive cost base that has been the cornerstone of TPE market development ever since. Growth was rapid in the early years as the new materials substituted for thermoset rubbers in molding/extrusion applications and for EVA in adhesives. By 1977 the demand worldwide had grown to around 140,000 tons. In the years between 1977 and 1983 the global growth rate of the materials was of the order of seven percent per year and global demand reached 210,000 tons. Since then the rate of growth has accelerated slightly to around eight percent per annum. The Asian cash crisis has dampened this growth - the region is responsible for large volumes of the key footwear sole production business - and as a result of the polarization of the footwear sector towards low labor cost areas, producers have moved towards higher value added areas such as adhesives and polymer modification. The figure on the next page shows the global SBC demand for 1998 on a regional basis. The SBC sector is characterized by few players in the main regions. Shell is dominant - being present in the U.S., European and Japanese markets. However, its future is uncertain, as it is a business that Shell wishes to dispose of. This may result in a new entrant situation but few new entrant opportunities exist outside of this in the established regions. Growth is expected to be more modest than has been seen in the past as the product matures and as intermaterial penetration opportunities become harder to find. Feedstock integration of the producers is incomplete, although European producers are better placed that the other regions in this regard. The U.S. producers tend to be congregated around the Gulf Coast raw material supplies with the exception of the major producer, Shell, which operates out of Ohio. The Japanese producers are small and have not enjoyed the expansion opportunities seen in the other regions due to the local market preferences and the emergence of large commodity style units in nearby Asian territories. It is these units that have enjoyed the benefit of the transfer of footwear manufacture to Asia and the further migration of this business to China. Overall, SBC's have been a success story, considering their relatively modest performance profile. They have exploited the trend to downgauging of product specifications that has seen more exotic and high-performing materials stagnate through the 1980s and 1990s and they continue to offer a superior cost/performance balance to the thermosets and can compete adequately with commodity thermoplastics on cost of materials and processing. | 
