Lanxess moves ahead with green mobility

28 September 2012 10:25  [Source: ICB]

The German company is engaged in a number of new projects that will help it boost the production of specialty rubber grades with better environmental performance

LANXESS, the world's largest supplier of synthetic rubber, has been transformed since it was spun off of Germany-based Bayer in 2005. It was a slow-growing business of around €7bn ($9bn) in sales that was focused on lower-margin commodities. Now it is faster-growing, with more premium products focused on "green mobility," innovation and global reach. The green mobility focus - creating tyre ingredients that reduce fuel consumption and improve recyclability - is the key driver for the company's growth strategy. This is a global approach, but with a special focus on emerging markets.

Werner Breuers, LANXESS management board member Copyright: LANXESS

According to Werner Breuers, management board member responsible for performance polymers and advanced intermediates: "We'd like to grow across the board but with a special focus on the BRIC [Brazil, Russia, India, China] countries. These have higher growth rates than western countries, particularly markets for green tyres, which are growing by about 10%/year." The Germany-based LANXESS generates around 25% of sales from the BRIC markets. The company is targeting 5-10% growth in its earnings before interest, tax, depreciation and amortisation (EBITDA) pre exceptionals in 2012.

The company is pushing ahead with an ambitious programme of new projects focused on advanced rubbers for green mobility. It will have two new rubber plants in Singapore, starting with the butyl rubber project in 2013. In September this year, ground breaking took place for a €200m neodymium-based performance rubber (NdPBR) plant at Jurong Island in Singapore. NdPBR is a new molecule that helps tyres to reduce energy consumption and rolling resistance without compromising braking distances. At the same time, NdPBR increases the durability of the tyre.

Mature markets are also a focus: "As a European producer, we have a very strong position. Here we'll especially benefit from the move towards more sustainable products such as green tyres. Our new, high-performance rubbers can supply this demand." From November, new-tyre labelling regulations come into force in Europe, indicating how environmentally friendly they are in terms of fuel consumption, wet grip performance and noise. "This will have a strong impact, because at the moment the majority of tyre users think of them as just something black and round, a necessity for driving. People don't realise their choice of tyre will influence fuel consumption and environmental performance."

CONSUMER TRANSPARENCY
Consumer behaviour is likely to alter quickly, and Breuers makes a comparison with the labelling of refrigerators in Europe: "People are now used to these labels, and will always look to buy one in the A or B category."

In 2008, LANXESS produced around 50% standard rubber and 50% high-performance rubber. By 2012, this has roughly switched to a 30/70 split.

"We are not talking about huge plant shutdowns, but converting plants piece by piece," says Breuers. For example, LANXESS is considering a switch from ESBR (emulsion styrene butadiene rubber) to SSBR (solution styrene butadiene rubber) at one of its plants in Brazil.

The shift to high-performance rubbers will not alter the company's feedstock requirements: "There is no change because the monomer remains the same: as one of the world's largest buyers of butadiene (BD), we have long-term contracts, so we are well covered for feedstock requirements."

Thinking long term, LANXESS is looking for renewable routes to BD, and is undertaking several projects globally.

"At the moment the main route is using starch or sugarcane, but we're also working with external scientists on using the waste of plants as the basis for chemicals."

LANXESS has a strong focus on research and development (R&D) and innovation, and it has increased spending year on year despite the economic crisis. R&D spending has doubled from below €100m, when LANXESS started in 2005, to €200m targeted in 2012, equal to about 2% of sales.

Competition is increasing from rubber producers in emerging economies, but Breuers says many producers lack the technologies to compete on advanced rubbers. "We have thousands of rubber formulations to use: each is tailor-made depending on its application," he adds.

By: Will Beacham
+44 20 8652 3214

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