News focus: AkzoNobel adjusts feedstocks - CEO

31 May 2013 09:33  [Source: ICB]

The company is using innovative methods to try and reduce the volatility, costs and footprint of its raw materials, says CEO

Dutch coatings and specialty chemicals group AkzoNobel is altering its feedstock purchasing strategy to try and reduce costs and cut carbon dioxide consumption.


 AkzoNobel is seeking to reduce its TiO2 needs for white paint

Copyright: Rex Features

The world's largest coatings company - heavily reliant on petrochemical feedstocks and inorganics such as titanium dioxide (TiO2) - is investing in innovation to allow it to alter what it uses to reflect market conditions and environmental footprint, CEO Ton Buchner said.

AkzoNobel is a large buyer of TiO2, which makes up around 7-8% of its entire feedstock slate. It also consumes large volumes of petrochemicals such as solvents and resins, which it uses for its coatings businesses.

"We're constantly spending innovation money on simplifying our raw material slate and reducing the requirement for expensive raw materials," Buchner said. "We're working very hard in our labs to reduce the amount of TiO2 required to create whiteness and opacity for decorative paint."

The company could see significant gains from this technology once it is commercialised. "The first generation is already out and we're working on second and third generations in the labs. This is happening across the industry - companies are looking for a reduction strategy on TiO2," Buchner added.

AkzoNobel is also buying different grades of TiO2 to optimise pricing and carbon footprint. "Our sustainability strategy is also important so we're looking at suppliers and saying that those with a lower CO2 footprint will be positively judged by AkzoNobel. We want CO2 reduction across the value chain and that includes our supplier base," the CEO said.

He added that the company is also working with suppliers to see how it can swap from one raw material to another on the basis of a sustainability judgement.

AkzoNobel is taking advantage of increasing supply of TiO2 from China. "Chinese TiO2 has required some small adaptations in our formulas but it works very well. There has been a lot of capacity coming on stream there, which has helped the industry coming out of the 2011 squeeze," said Buchner.

Referring to petrochemicals, he said: "We're trying to build in flexibility to be able to swap from one feedstock to another without altering the characteristics of our products. We have many technologies which would enable us to reduce our exposure to the propylene chain and it's a continuous effort."

Asked for his outlook for 2013 on feedstocks, Buchner said: "TiO2 is down from last year and we expect it to remain fairly constant for the rest of 2013: within a reasonable band it will be rather predictable. For oil we expected some upward pressure at the beginning of the year and that is certainly the case for some of its derivatives.

"Some of this is linked to shale gas and the changing feedstock slate such as propylene becoming more expensive. Overall we don't expect to see the spikes in 2013 that we saw in 2011."

Company executives should not plan for any improvement to European market conditions in the second half of 2013, Buchner said.

With little evidence that the current poor demand situation in Europe for key end-markets such as construction is getting any better, it would be prudent to assume that there will be no tailwind for the rest of the year, according to the CEO.

He said: "In the European markets I don't want people to assume there will be an uptick. There is a lot of wonderful talk that the second half will be better - that would be very nice if it happens but let's not prepare ourselves on the basis of it being better. Prepare ourselves on the basis of no tailwind."

AkzoNobel was hit hard during the first quarter of 2013, with revenues falling by 7% year on year to €3.46bn ($4.49bn), and earnings before interest, tax, depreciation and amortisation (EBITDA) diving by 9% to €375m from the same period last year.


Innovative feedstocks deal struck
AkzoNobel and French group Solvay have struck an innovative deal for the supply of renewable-based epichlorohydrin from 2013-2016.

Under the deal - one of the first of its kind in the chemicals sector - AkzoNobel will guarantee to buy volumes of glycerine-based ­epichlorohydrin indirectly via the epoxy resins it purchases from Solvay's customers.

AkzoNobel will use the increased supply of the bio-based product, known as Epicerol, to help meet targets for reducing the carbon footprint of its products. It has a target of a 20-35%/tonne reduction in the C02 used to produce finished product across its portfolio by 2020 with 2012 as the base.

For the full story, see the 10 June edition of ICIS Chemical Business

By: Will Beacham
+44 20 8652 3214

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