Lori J. Ryerkerk
Chairman, Chief Executive Officer and President at Celanese
Yes. So let me talk a little bit about 66 in general, starting with what we're doing immediately around 66. So in the past, Celanese has not been backward integrated in 66. So we were just a purchaser of nylon Polymer, which was great when prices are low, not so great when prices are high. With DuPont, we've been able to add the backward integration. What we're doing differently is we've been able to secure a different raw material contract and instead of being forced to produce PA66 polymer we have options. We have flexibility. We have optionality. We can choose to produce backward integrated nylon polymer when it makes sense, we can make less and buy nylon polymers, from others, if that makes more sense, we can make less of it if we see the demand profile not supporting higher production rates, and we can make more of it if we see a sudden resurgence of demand. And so that flexibility, which is much more like we run our other businesses like GUR and Palm and even acetyl, gives us a degree of flexibility and ability to make value across a wide range of market conditions that DuPont really didn't have or really didn't exercise. And so we've already done that. We've gotten most of the Celanese nylon grade already certified to start with the DuPont polymer.
We've been using DuPont polymer out of inventory, raw home, compounding it to make the Celanese branded products and we've been flexing that to really start managing some of the inventories that had been built last year for both raw and for finished polymers in the DuPont product line. And so that's a degree of flexibility and a way of running the business, which is different. We've also talked about how we're pricing differently pushing price on more differentiated grade lowering prices in some case and more standard grades to really get our inventory in line with the demand profile. And therefore, the cost profile of our inventory in line with the demand profile. So that's kind of the immediate things we're doing. As we think about PA66 longer term, of course, we spent a lot of time studying this before we went into this deal. We know a lot of people are like, well, PA66 is under hood, that's going to decline. We don't see it that way. I mean if we look at electric vehicles as they're coming on the market, we find that the addressable content per vehicle is almost double compared to what we've traditionally have in IPE. And we think a lot of those new opportunities in electric vehicles also extends to PA66 as we see performance requirements increasing for electric vehicles. So longer battery life, higher heat management required.
These things are very suited to PA66. So if you think about parts, the PA66 is suited for an EV, things where you replace metal for lightweighting when you need the strength of a PA66, things like battery cell frames are in place. The brackets and the mounts for the electric motors and then things in the electrical system like high-voltage connectors, and it's the PA66, standard grades, but also the high temperature nylon grades, which are particularly applicable here and which we didn't have in our portfolio prior to the acquisition of M&M. And I would say for our legacy EM business, we're about halfway to capturing the addressable content for EVs. Obviously, the M&M business was not as focused there. And so not as far as long, but we are using our project pipeline to also drive these applications of PA66 into EVs now that we have those molecules available to us. And I think if you think about PA66 beyond electric vehicles, there are huge applications there in electrical and electronics which was an area that M&M was really underrepresented in historically.
So think about electrification and the need for not just electrification per vehicle, but for everything you think about people wanting to get out of natural gas for homes, but basically, the electrification of everything. All the outlets would say electrification, electricity demand is going to more than double in the next five years. So with that comes data management centers, power distribution centers. All of these things require polymer and specifically, all of them can benefit from the availability of PA66. And so we think there's going to be a strong pull-through for PA66 as the demand grows for building out our electrical infrastructure. And again, this is an area Celanese has been in for some years, and now we're able to apply that market knowledge and that end use knowledge to the PA66 profile and pull those volumes through using the project pipeline model.
