Nanotube Supply Glut Claims First Victim
Just three years after announcing a huge capacity increase to its multi-walled carbon nanotube (MWNT) production, Bayer Material Science has announced that it will completely close down its MWNT production to focus on its core business.
This is no surprise since there was a huge glut of product resulting in industry utilization rates that must have been in the single digits. This oversupplied market was the result of a MWNT capacity arms race that started in the mid-2000s. While this steep ramping up of production capacity reduced pricing from $700/kg in 2006 to below $100/kg in 2009—with some estimates putting the price at $50/kg as of last year—the problem seemed to be that no matter how cheap you made the stuff nobody was buying it because there were no applications for it. This resulted in stories, at once humorous and worrisome, of big chemical companies that had gotten themselves caught up in this arm race making desperate phone calls to laboratory researchers pitching application ideas for the material.
While some observers believed that this price cut would result in the applications being developed, most people recognized that this was a case of putting the cart before the horse, or “technology push” ahead of the preferable “market pull.”
This is not to say strategically it was wrong for a company like Bayer Material Science to build out capacity for a product that nobody seemed to want at that moment but may in the future. A company like Bayer can ramp up production with relatively little capital cost and manage to price everyone else out of the market. It was worth the risk.