News focus: Emery boosts specialties

21 September 2012 11:05  [Source: ICB]

Emery Oleochemicals is pushing forward with expansion into specialty oleochemicals because capacity additions coming on stream in the next 2-3 years will result in oversupplied markets for commodity grades, its CEO says.

kongkrapan Itarajang Emery oleochemicals

 Emery oleochemicals

Kongkrapan Intarajang said around 2m tonnes/year of new capacity - mainly in Indonesia - will flood the market, causing downward pricing pressure, especially in Asia but also affecting Europe and, to a lesser extent, the US. Worldwide fatty acids and alcohols capacity has increased by 7.3m tonnes/year since 2005 and is expected to break 15m tonnes/year by the end of 2013 - an annual growth rate of 3-5%.

He said the situation could result in some companies merging or going out of business, adding: "In Asia and Europe there are still a lot more possibilities for consolidation and rationalisation; but less so in the US, where there are already only three key players."

This could create opportunities for Malaysia-headquartered Emery Oleochemicals: "Since we developed our current strategy in 2009 we have been looking out for selective acquisitions, though probably not in commodities. The Europe situation [overcapacity and macroeconomic problems] might create opportunities for us."

The company - 50% owned by Malaysia's Sime Darby Plantation and 50% by Thailand's PTT Global Chemical - is pursuing an aggressive organic growth strategy focused mainly on specialty grades of home and personal care surfactants and plastic additives based on renewable feedstocks.

It aims to switch from a 70/30 split commodity/specialty portfolio to reach 50/50 by 2015-2016. Several plants are planned or under construction, which will boost production of specialties and increase sales from around $1.2bn (€933m) in 2011 to $1.5bn in 2015. Worldwide, the company is balanced between the three regions, but by 2015 it anticipates more of a bias towards Asia.

Intarajang added that capital spending of $200m-300m has been set aside for investment in semi-specialty and specialty production projects over the next 2-3 years. This includes the existing announced investments.

In August, the group broke ground on a €20m ($25m) green polymer additives project and technical development centre at Loxstedt in Germany. This is scheduled for completion by the end of 2013.

Asked why the company is willing to invest in Europe when the region is experiencing such tough economic conditions, Intarajang said: "We will invest in Europe where it makes sense. Europe growth will be relatively slow and the mood is not great, but we are looking long-term.

"Maybe this year and next there will be a lot of competition and price pressure on commodities, but for products like these specialty additives there will be a good future in Europe in the long term."

Emery recently commissioned a sister plant at Telok Panglima Garang, Selangor, Malaysia.

Emery oleochemicals

Intarajang said Emery aims to broaden its portfolio of specialties in order to offer a more complete feedstock portfolio to customers.

At present it can offer around 40% of the ingredients needed for personal care products, but it aims to boost this to 70%.

"We have more projects in the last stage of planning and awaiting board approval this year: more will be in Asia, but there are also some in Europe and the US," said Intarajang.

"Our focus is on home and personal care plus green polymer additives. We will gradually move further downstream to offer a more complete product [portfolio].

"In Europe the focus is on specialty applications," he added. "This is a more mature market and the requirements for polymers are more technical. They need more R&D and product development support."


Commenting on its financial outlook, Intarajang said: "For 2012 we are expecting a similar result to 2011. Volumes have increased, but the market has not been so good, because of price pressure. We don't anticipate any significant growth in volumes or results until 2015 when all our projects come on line."

He added: "There has been a sequential slowdown in Europe, especially in basic oleochemicals, of around 10%-20% between Q2 and Q3. The summer is a slowdown period for markets but I can't deny that customer sentiment has changed. They are slower to purchase and make and some are buying in smaller batches. There is a 'wait and see' attitude."

By: Will Beacham
+44 20 8652 3214

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