Document qav7BaVwbKJ5j96XBRX9a4y2G

IfsMC INTERNAL CORRESPONDENCE Illl exhibit UC-812 CHsf.aJCAUS A?!D PLASTICS Mr. F. D. Dexter Mr. W. S. Young To (NomJ Dr. L. F. Jehle OivUfon Chemicals and Plastics location New York Cop/ fa . 270 PARK AVENUE, NEW YORK. NEW YORK 10017 Oaf* August 20, 1969 Originating StpK Anntoring tifitr daft `% Subitei The Asbestos Market in the Flooring Industry The Market . lhe total asbestos market in VA and asphalt floor tile is approximately 150,000 tons. The asphalt market has been dwindling steadily and the VA market is growing at approximately 5# per year. As a result, total asbestos sales have been relatively constant for the last few years. At present copolymer sales of 180 Mi lbs.; we estimate asbestos sales of 85,000 tons in VA tile after estimating proportion now going to Coalinga producers. The entire VA market is available to Coalinga producers. The asphalt tile market is not as clear cut. Asbestos contents range 20-24fj normally, but Coalinga fibers are used only in formulations which contain significant percentages of polystyrene. Loss of hot strength occurs with Coalinga if sufficient styrene is not pre sent . "e do not haver reliable information on present asphalt formulations at the major tile companies. Historically, Johns-Manville and Armstrong have not used styrene, Kentile was borderline and American Biltrite, GAF, Uvalde can use Coalinga asbestos. The Products Flooring manufacturers have become quite sophisticated in a competitive market charac terized by constant style innovations and new product introduction. Asbestos from Coalinga field has been available and used since early 1962 when JohnsManville converted their Western plants and introduced it to the market. No new asbestos technology has been added since UCC's 1964 entrance to the market with a pelletized floor ing grade. % The advantages of Coalinga asbestos are high fiber content, lighter color, and less batch to batch variation. Among the grades available, UCC excels slightly in each of these categories. Its disadvantages are high absorptivity and greater surface activity bringing about the most common complaints of excessive water sensitivity and higher cost stabilization. UCC products are no better or worse than others, but we have devoted much more PSD effort to solving them. v 2- As things stand today, the price and simple logistics of the situation has given Coalinga products all California and Texas producers; and they are dominant in.the South along the SP right of way. Canadian asbestos enjoys supremacy in the Chicago area and the East Coast. Coalinga asbestos usage in these areas is limited to the high Ti02 premium grades. On sun, a price vs. volume curve would best describe the market. The Customers From purchases of copolymer, the asbestos sales pattern in VA tile can be guesstimated, but no similar refinement exists for asphalt tile. Asbestos Potential VA Tile (Estimate) Customer American Biltrite Armstrong Flintkote GAF Kentile ' Johns-Manville Uvalde Others Uvalde - location Asbestos Source la Mirada' UCC la Mirada Calif. Minerals Trenton Trenton UCC Carey - Lancaster Carey Kankakee Carey Jackson Carey South Gate Calif. Minerals Chicago J-M Can. L. A. J-M Coal. New Orleans J-M Coal. Vails Gate J-M Coal. Joliet J-M Coal. Houston J-M Coal. Long Beach J-M Coal. Brooklyn Calif, Minerals Brooklyn Carey Can. Chicago UCC Chicago Calif. Minerals Torrance Calif. Minerals Chicago Carey All Houston J-M UCC -- -- . Stragari Total Quantity (tons) 1000 600 1000 3000 4800 8400 3000 1600 6000 2400 1200 6500* 1600* 1600 2400 1600? 11000 2500 ? 3700 3600 9000 2500 3500 2300 857BOO Coalinga Sales including UCC 30,200 UCC alone 7,000 * Recent changeover from Canadian source to Coalinga has been reported. Hie Outlook The industry should see growth in asphalt tile over the next five years as state and federal supported low cost housing projects profligate. This factor has not been present in the past and in 1970 we should at least see a halt in the decline of sales. Even with total housing going to 2MM, units in the early 70's VA tile will not bene fit as much as sheet vinyl and carpeting. We estimate 5$ growth for VA about right. The UCC ftasition To increase market share in a slow growth commodity market, there are not many options. 1. Cut Price 2. Develop product or service superiority. If we examine the latter approach--UCC enjoys a superior position in product form-- the pellet. In the flooring industry, use of SG-100 is limited to Eanbury Mixer operations. This eliminates Armstrong as a potential customer (est. 17,800 tons) in a strategy based on the pellet. Though it is not necessary to sell to everybody to achieve our own goals, we should be careful not to create a competitive imbalance for a valued UCC customer. The pellet advantagesjare reduction of dust hazard, and amenability to bulk handling. The first is probably the more saleable factor. The second does bring cost advantages for some price in capital investment. But the VA, asphalt tile plant is not a choice new investment territory, unless that investment is dictated by product marketing strategies. In fact, all new investment by the industry has been toward buying into competitive marketsvinyl sheet flooring plant, carpeting. To sell bulk handling, as a part and parcel of dust hazard reduction, is like selling air pollution control. From the manufacturers' point of view, it also carries the disadvantages of a single source of supply. In sum, the pellet form is a positive advantage to the user, but as a sole marketing strategy, it will not be a short term factor. . This leaves us with the rather unpredictable strategy of price reduction. In a way we are following that policy now. None of the Coalinga producers followed the recent price rise on Canadian asbestos. By so doing, there opened up a slightly larger market share to Coalinga. It is also worth noting the price rise was orderly, as far as we can tell, with each producer following suit. Though there may be and probably are concessionary price structures in contractual offerings. '~ In the asbestos industry price has been a laissez-faire battle ground. If we move to cut prices as we did in 1965, we can expect consternation and a move to follow. To reduce repercussions, we should try to make obvious to competitors the nature and limits of our intent. Unless we are both cautious and sophisticated in any price recession policy, we will attain only temporary advantage and create a long term problem in maintaining a diminishing market share. -4- 4 Selectioa may be a reasonable approach, Move prices against selected competitors or for selected customers; For example, one could avoid Johns-Manville. But this reduces the available Earket to slightly over 40,000 tons and we would have to get over half of it. I suspect this situation would lead to excessive price cutting and confusion as to our prupose. The same result would occur for similar moves for selected customers, along with the ancillary danger of creating a disorderly market situation. 'i In short, a simplistic, unilateral approach is not likely to be successful. Recommendations Combining the positive aspects of UCCs position as to raw material, product form, and capacity, it is suggested we review the possibility of marketing SG-100 to the asbestos producing industry. To this end we would approach all competitors and offer to supply SG-100 pellets at, say, 40 per ton, in bulk or bags, with a total quantity of 20-25000 tons available. All the advantages of the pellet form would then be generally available to all tile manufacturers including the captive group at prices consistent with today's schedules. We, in turn, would maintain our current business and withdraw from further active marketing. There are advantages for UCC and to the competitive producers, and if success ful it will maintain a stable market value. It is also consistent with UCC's position in the chemical industry. I suggest we discuss this suggestion carefully and if agreed upon, we move as rapidly as possible. NJS:jr N. J. Setter *