INSIGHT: BMS gives details of Europe, US and China investments

11 January 2011 16:48  [Source: ICIS news]

By John Richardson

PERTH, Australia (ICIS)--Success in chemicals - whether you are into commodities or specialties - is largely about eking out maximum value from every single molecule in all the important markets.

The almost obsessive focus on China and other emerging markets might give the impression that “all the important markets” relegates the economically ailing West to the second or third division.

But any truly global chemicals company worth its salt needs to balance investment across each of the big consuming regions. 

And so, after all the fanfare of last month’s announcements by Bayer Material Science (BMS) of a further $1bn of capital spending in China, the company has also been keen to stress what it is doing in Germany and the US.

The chemicals major plans to invest a total of €3.5bn ($4.5bn) in these three countries over the next five years. This will involve commercialising a new technology, upgrading existing plants, building new production facilities and a lot more work on research and development (R&D). 

“Our further expansion plans in Germany include growing our coatings facility in Leverkusen that produces aliphatic isocyanate, hexamethylene di-isocyanate (HDI) and isophorone di-isocyanate (IPDI) coatings,” said the company’s chief executive officer, Patrick Thomas, in an interview.

“This investment should be sanctioned by the board in the next 12 months and completed in two years.”

Next he detailed an example of molecule-value stretching: plans to build a commercial-scale demonstration plant that will use the company’s oxygen depolarised-cathode technology for producing chlorine. Start-up is scheduled for later in 2011 or the beginning of 2012.

This will involve the conversion of BMS’s last remaining mercury cell chlor-alkali process unit in the world, which is located at Uerdingen in Germany, and result in big savings on electricity costs and reduced CO2 emissions.

In effect, hydrogen fuel cells are integrated in the chlorine cell as part of this new process, lowering electricity consumption (the main cost component in chlor-alkali production) by 50% compared with mercury or diaphragm cells.

Thirty per cent less electricity is required when facilities are converted from the membrane technologies.

The company will eventually convert all of its plants to this new breakthrough process, Thomas added.

And he said: “We have signed a memorandum of understanding (MOU) with China BlueStar (the mainly state-owned Chinese specialty chemicals giant).

“BlueStar, which is the technology supplier and builder of just about all the chlor-alkali units in China, plans to use our new technology across the country. The first step is to build a pilot unit in Caojing.”

BMS will also invest in Baytown, which is near Houston, Texas, and the site of company’s largest US production facility.

Polycarbonate, methyl di p-phenylene isocyanate (MDI) and toluene di-isocyanate (TDI) facilities will be upgraded at the site, involving debottlenecking and technical improvements to boost reliability.

Work will also be carried out on improving logistics, such as building a chlorine pipeline from feedstock supplier Oxyvinyl, which is 20km away. This will take chlorine transportation off roads and railways.

“These investments in both the US and Germany illustrate that they are still very important markets for us,” said Thomas.

In volume terms, the US and Germany remain as big as China for BMS - even if they are eclipsed in terms of percentage growth-rates.

So, of course, because growth is booming in China, the big investments in new plants are taking place in that country.

Thomas provided a great deal more detail about what BMS wants to build at its big production site in Caojing, Shanghai, compared with what was reported last month.

“Our plan for MDI is to reach 1m tonne/year of capacity between now and 2016,” he said

“This will involve a debottlenecking of our existing plant to 500,000 tonne/year from 350,000 tonne/year and building a new unit of 500,000 tonne/year.”

The new polycarbonate (PC) plant being evaluated for Caojing will be an “economic copy paste” of the existing 200,000 tonne/year facility at the same site.

So it will initially also be 200,000 tonne/year and then the company wants to debottleneck both the old and new plants by 50,000 tonne/year to get to a total capacity at the site of 500,000 tonne/year.

“Capital equipment for the new plant has already been pre-ordered and our target is to bring the new plant on-stream in 2013. The debottleneckings will then take place 12-18 months after that.”

Thomas stressed that the decision to move the BMS polycarbonate global headquarters to Shanghai from Germany would not mean any redundancies.

The company also wants to build a new coatings plant in Shanghai. Like the coatings investment in Germany, this new facility will produce solvent-free, water-based aliphatic coatings.

Capacity of this new plant would be 50,000 tonne/year with start-up scheduled for 2013-2014. 

The existing 30,000 tonne/.year plant at Caojing is to also be debottlenecked.

“All our projects at Caojing have reached the Memorandum of Cooperation (MOC) phase,” said Thomas

“The MOC phase is a step along from an MOU and means that the local Shanghai authorities will now move on to studying our proposals.

BMS is to begin environmental impact assessments and feasibility studies as part of a local approvals process that involves about 20 different steps.

“Once these steps have been completed, some aspects of our overall plan for Shanghai will need to be submitted to the central government’s National Development and Reform Commission (NDRC) for final approval.

“Other elements of the expansions can go ahead with only local government backing.”

Further product development work in China includes building a large-scale PC automobile-glass demonstration hall in Shanghai.

R&D development work in the auto and appliances industries mainly occurs in China, as does manufacturing.

But the electronics industry is slightly different.

“The know-how is in the US, Japan, South Korea and Taiwan with the manufacturing - because of the low labour costs - in China,” said Thomas.

This is why BMS opened a functional films research centre in Singapore in June last year as the city state is “an international hub for the development of technology, drawing on expertise for the whole region”.

The functional films centre focuses on research into coated high-tech films and nanotechnology for electronics.

Stand still in this business and you end up being overtaken, and, quite probably, kicked off the running track altogether.

The opportunities are huge, but as the BMS announcements indicate, so are the difficulties in making sure you both keep pace with competitors in China while not losing focus on all the important markets.

($1 = €0.77)

Read John Richardson and Malini Hariharan’s blog - Asian Chemical Connections
For more on Bayer Material Science visit ICIS company intelligence
To discuss issues facing the chemical industry, go to ICIS connect

By: John Richardson
+65 6780 4359

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