Degussa’s drive is to be specialties number one in China

23 June 2005 17:16  [Source: ICIS news]

LONDON (CI)--Having largely completed its divestment programme, Degussa’s strategy 2008 understandably focuses on growth. And unsurprisingly a corporate motto is “Make China happen”. Degussa turnover in China currently is only about Euro300m ($367m). That’s under 3% of the group total. The plan is to lift the figure to closer to Euro800m, and the China workforce to about 4,500 from 1,400 as production and research in the country develops.

 

Going for growth in China at this stage has its advantages. Degussa can focus more on higher growth areas and take a bet on the sort of businesses that will become important as China’s economy and industrial sophistication develops. The company revealed yesterday (Wednesday 22 June) for instance that it will establish a lithium-ion battery joint venture in Shanghai with the Japanese company ENAX. Through the venture Degussa acquires an exclusive global licence to make what it says are highly developed electrodes for lithium-ion batteries.

 

Utz-Hellmuth Felcht

The deal fulfils two strategic criteria for the group: Growth in Asia and in a newer market with real promise. Degussa chief executive Utz-Hellmuth Felcht has said that the company wants to generate a quarter of its sales in Asia in the long term. In the mid-term more than 20% of global chemicals sales will be made in China, and Degussa wants to become China’s number one specialty chemicals producer.

 

The global lithium-ion battery market is growing fast worldwide (a forecast is for a market of $4.1bn (Euro3.35bn) a year in 2015 from something like $1.2bn/year today). Degussa Enax (Anqiu) Power Lion Technologies will produce electrodes in Anqiu in the northern Chinese province of Shandong and sell them across Asia.  

 

A company like Degussa will also do well if it captures key technical niches in high growth markets. In this case, its Separion ceramic membrane gives it a stronger position in the early development stage of this promising market.

 

China growth will be captured in many different ways, but increasingly established western firms have to be cleverer in helping develop domestic Chinese markets and using them as a springboard for stronger regional growth.

 

Degussa says its strategic development “centres on profitable growth and a further improvement in profitability”. To do this, it will have to tap into new higher growth markets but be sure to make more money from them. The anticipated improvements resulting from the Degussa 2008 programme, the company says, “will pave the way for us to meet our ambitious long-term financial targets”.

By: Nigel Davis
+44 20 8652 3214

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