Market outlook: Celanese CEO Rohr aims to boost engineered materials business

Source: ECN

2016/06/16

Celanese operates a global business from its headquarters in Irving, Texas, US

Celanese

Celanese MetaLX polymers are used in automotive applications such as this door handle. The materials are meant to look, feel and even sound like metal.

Celanese

US-based Celanese has its sights on expanding its advanced engineered materials business. “Demand for design work and custom solutions for customers is growing dramatically. We have the chemistry and applications expertise to tailor-make polymers and materials with specific attributes,” Mark Rohr said in an interview with ICIS on the sidelines of the American Chemistry Council (ACC) annual meeting in Colorado Springs, Colorado, US.

Celanese has taken the number of product applications introduced from around 300/year to over 1,000/year in less than two years. The company aims to double this figure to 2,000 in the next few years, said Rohr.

NEW NYLON PLATFORM

In January, Celanese added a nylon platform to its portfolio of engineering plastics ranging from polyacetal (POM), polybutylene terephthalate (PBT), thermoplastic polyester (PET), polyphenylene sulfide (PPS) and ultra-high molecular weight polyethylene (UHMW-PE).

Nylon – as the largest thermoplastic used in the auto sector – was “critical to add” to expand customer connectivity, allowing for further conversations about other materials.

Celanese will use its proprietary compounding technologies to make products from nylon 6 and nylon 6,6 as well as blends with other materials. Nylon is currently a small portion of the engineered materials portfolio, but is poised to grow.

“We are looking to make acquisitions in the materials space, including nylon. We want to get as close to final customers as we can,” said Rohr.


SHIFT TOWARDS QUALITY

While the world is mired in a low demand growth environment for general industrial chemicals and materials, demand for differentiated materials to produce higher quality products is growing much faster, he said.

“There is a shift to producing better quality products – in appearance, lighter weight and temperature resistance. Everyone is constantly upgrading physical qualities, and there is much more attention to that kind of detail,” said Rohr.

“Growth for these products grows even as overall demand weakens, as you can’t make a ‘me-too’ product and be successful in a low-demand world,” he added.

This is exemplified in the global automotive market, where second-tier automakers in countries such as China and Brazil are under pressure to compete with top-tier producers, he said.

“These Tier 2 companies want to upgrade quality and capability – appearance and longevity,” said Rohr. Celanese has high hopes for its MetaLX line of products made from polymers that have the feel and appearance of metal and do not require painting. “It offers tremendous efficiency with its physical attributes. It lowers emissions, as you don’t need to paint it. It even sounds like metal – that was one of the requirements from a customer,” said Rohr. Celanese’s advanced engineered materials segment generated sales of $1.33bn in 2015.


PLANS FOR 2ND US METHANOL PLANT

Upstream, Celanese is continuing to work with partner Mitsui & Co on a potential second methanol project in the US and should have a clearer view on it by the end of the year.

“We’ve done the preliminary engineering, and more work is due at the end of the year, when we should have an updated business case,” said Rohr. Celanese’s first US methanol plant with joint venture partner Mitsui & Co in Clear Lake, Texas, came on line in October 2015.

“This would be a replica of that plant as that way we can minimise capital costs,” said Rohr.

The first plant, with capacity of 1.4m tonnes/year, is running full out, he said.

If everything proceeds as planned, the second methanol plant could start up in three to three-and-a-half years, said Rohr, putting the timeframe in the 2019-2020 range.

While there should be more clarity on the second project by the end of 2016, it will not necessarily be a binary decision as to whether a final investment decision is made, or the project is dropped, he said. Including the 25% share of its methanol joint venture in Saudi Arabia with SABIC and an affiliate of Duke Energy, Celanese produces around half the methanol it consumes for downstream products, said Rohr.

“We like being in the methanol market. It gives us a handle on the global economic environment as well,” said Rohr. On the slew of US methanol projects being planned, Rohr said, “A lot more have been announced than will happen. The methanol needs a home, and unlike many others, we have a big sink.”


The CHINA MARKET

Celanese does a good amount of business in China, on both the industrial chemical and the consumer sides. Products produced in China include acetic acid, acetic anhydride, vinyl acetate monomer (VAM), ethanol, POM, long fibre reinforced thermoplastics (LFRT), acetate filter tow and flake, UHMW-PE and vinyl acetate emulsions (VAE).

In 2015, Celanese generated $800m in sales in China, making it the third largest country in which it does business, behind the US and Germany. China is a bifurcated market, where the industrial side is struggling, but markets related to the consumer are doing well.

“It’s a bimodal scenario. If you’re selling basic chemicals, it’s not fun. But if you’re selling to the consumer, demand is quite good,” said Rohr.

Acetyls used in the paints and coatings market are an example of a market showing good consumer-driven demand in China, he noted.

The challenge for China is that it has dramatic overcapacity in certain products in a deflationary world driven in part by low oil prices, said Rohr.The market appears to be moving toward major capacity rationalisations.

“People are getting more public about their struggles, and that’s a change. Awareness is an important part of it. When you hear companies starting to talk about it, it is near the time when it happens,” said Rohr.

In its acetate filter tow business, which serves cigarette manufacturers, Celanese sees it flattening out after a period of decline.

“The China reset has run its course. We are at a point where we should see a flat year or two, with plus or minus 10% in terms of profitability,” Rohr said.

Rohr views Celanese not as a combination of commodity and specialties businesses, but a differentiated business across a global acetyls chain. He sees the company as a profit pool, where it can quickly pivot to emphasise parts of the business that will maximise profitability. “We never want to be a victim of the market,” he said.