InterviewLanxess fights US slowdown

26 February 2008 09:39  [Source: ICIS news]

By Florence Tan

SINGAPORE (ICIS news)--Lanxess is focusing on premium products and growth in Asia, Latin America and Europe to combat a US slowdown and it will spend €1bn ($670m) in the next three years on expansions globally, a top company executive said on Tuesday.

“We have filled order books, our capacities are fully utilised and a number of products are sold out. So we are optimistic when we move into the year 2008,” Lanxess chairman Axel Heitmann said in an interview.

The German chemical major has selected Singapore as the site for its largest investment ever - a €400m butyl rubber project.

Its other recent investments include a €198m acquisition of Brazilian synthetic rubber maker Petroflex and €80m to move its rubber chemical complex and build a new ion-exchange membrane plant in India.

However, Heitmann said that there were some regional differences such as a slowdown in the construction industry in the US, which the company planned to fight with premium products and growth in other regions.

Raw material costs were set to remain high and volatile, but the company will continue to pass them onto the market at appropriate times, Heitmann said.

“Up to now we have managed to do this (passing on input costs) very well,” he added.

It was able to do so because of the company’s leading position in the various markets, he said, adding that its management structure also allowed for quick response to volatile markets.

For its butyl rubber project, the company has secured isobutene feedstock from Shell Chemicals and was looking for isoprene suppliers in Asia.

“We feel confident we can run this sophisticated facility at competitive costs," Heitmann said, when asked how the company will keep its competitiveness without feedstock integration. "This is a race, you have to win every day.”

The new plant was expected to raise sales from Asia after its start-up in early 2011, he added.

Asia’s share of its global sales was now around 18-19%, up from 14.5% when the company started three years ago, Heitmann said.

Butyl rubber demand growth in China and India was at 6-8% annually and the region will absorb more than 50% of the world’s output in the next few years, he added.

Some 400,000 tonnes/year of synthetic rubber capacity will be added after the Petroflex acquisition was completed, Heitmann said.

The investment will increase its sales in Latin America and allow it to export from the new manufacturing base, he added.

Global trends such as water scarcity, reducing carbon dioxide emissions and increasing safety provided opportunities and it was important for the chemical industry to act as a global player and run international competitive structures, Heitmann said.

“Therefore, to consolidate fragmented assets is an important feature,” he added.

($1 = €0.67)

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By: Florence Tan
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