Helm seeks growth via partnership

Germany’s Helm – a major sales and marketing force in several key chemical value chains – occupies an unusual middle ground in the value chain where it becomes the sales and marketing arm and even equity shareholder for the chemical producer partners it represents.

The company aims to grow market-leading positions in terms of volumes for its core product areas and geographies, buying from producers with take-or-pay contracts giving it exclusive sales and marketing rights for certain geographies. It will also show its commitment to major producer partners by buying minority equity stakes to help fund expansion projects.

According to chairman Hans-Christian Sievers: “In chemicals and fertilisers we have chosen to integrate ourselves backwards towards the producer. In chemicals we are possibly strong in 50 products but we aim to be a significant market player – we want to have producer status so our aim is to have annual volume equivalent to a modern worldscale plant.”

The group is growing its position especially in glycols, propylene and methanol.

METHANOL CLOSE TO 7M TONNES/YEAR

Helm started out in methanol more than 20 years ago in Trinidad and Tobago, where it has five plants with total nameplate capacity of 4.1m tonnes. Here it is a 25% shareholder in the asset. Through this shareholding Helm is also an indirect shareholder in the Oman Methanol Company, which has capacity of 1m tonnes. Helm also markets this product.

Earlier this year new US capacity started up by Natgasoline in Beamont, Texas, which added 1.8m tonnes/year to Helm’s potential output, bringing global nameplate capacity close to 7m tonnes/year.

Helm also has a stake in a 1.4m tonne/year methanol project at Lake Charles, Louisiana, US, which has been put on hold. Sievers says: “We will restart this project as soon as we gather the financing and equity. We first want to integrate Natgasoline and then a couple of years down the line we want to start the project at Lake Charles but there is no definite timeline for this.”

Helm typically partners with companies which have technology or access to gas and with start-ups which sometimes need a minority shareholder to facilitate financing.

“What they all have in common is that they need an offtaker which can guarantee for the first 10-15 years the marketing and sales of the product. Typically we sign a hard, guaranteed take-or-pay contract and based on that contract and our balance sheet (which is quite strong) those projects become feasible.”

In July Helm carved out its global methanol business into a new Swiss-based joint venture, Helm Proman Methanol, with subsidiaries in Singapore and Houston. The three joint venture partners are Helm (57%), Swiss-based Proman (38%) and the CEO of US-based Southern Chemical (5%). Explaining the move, Sievers says: “We have ambitious targets to grow methanol and both Southern and Helm do a lot of other products. We want to give a clear signal to the market that this is THE methanol company – number two worldwide after Methanex. Methanol is a global product so we wanted to have a uniform appearance on the market.”

Demand for methanol is growing – not in the US or northern hemisphere but especially in Asia, with China a becoming a major consumer, using more than 2m tonnes/year for methanol-to-olefins (MTO) production. Whenever the oil price is high, MTO becomes competitive against the classic route to chemicals from naphtha or ethane.

Thanks to shale gas, the US has moved from closing down its last methanol plant 10 years ago to now being a net exporter.

Asked about the impact of the US-China trade war (methanol exports from the US are under tariff), Sievers says: “The trade war will shift the streams of product flow. Instead of sending methanol from the US to China – which is under tariff – we take Trinidadian product for the Far East and leave American product there or in Europe. So yes it’s affecting our logistics but it’s not serious – there is no reduction in business at all.”

ETHYLENE GLYCOL START-UP

Helm is also growing in ethylene glycols, where it has a contract with Sasol at Lake Charles to market its entire 250,000 tonne/year EG production once Sasol’s new cracker starts up.

“I don’t have an official date but it will be around the turn of the year. Sasol is mainly going into ethane cracking for ethylene and polyethylene (PE), ethylene oxide (EO) and downstream products like ethanolamines. Glycol is a byproduct so they place that in our hands because we are the expert company for glycol marketing.”

Capacity of mono ethylene glycol (MEG), diethylene glycol (DEG) and triethylene glycol (TEG) is growing to 1m tonnes/year over the next two years – the equivalent of 2-2.5 worldscale plants.

PROPYLENE PLANS

From 1 January 2019 Helm is also going to grow significantly in propylene after signing a deal with Russia’s Rosneft to market its entire propylene production from German refineries PCK Schwedt, MiRO Karlsruhe and Bayern Oil Vohburg. Capacity is forecast to grow to close to 500,000 tonnes/year.

“We took this business away from a competitor, BP. This will make Helm one of the leaders in propylene marketing on the continent.”

ACETIC/VAM

Helm has a vinyl acetate monomer (VAM) and acetic acid joint venture with Saudi Arabia’s Sipchem in which it holds 10%, with Sipchem holding 90% in both plants, which started up eight years ago.

“They have the local contacts and access to raw materials. But they needed a strong, international marketing partner granting guaranteed access to the consumption of the markets. We are the exclusive marketing channel outside the Middle East.”

ACIDS AND LYES EXPANSION

Another area of expansion where there are gaps to fill is acids and lyes, a business where Helm has European and then global ambitions.

“We want to grow this business, especially hydrochloric acid. We are already a few hundred thousand tonnes and we want to partner with large producers and ideally sign contracts lifting entire production or whatever is available for marketing.”

Gaps in coverage in Europe are currently England, Benelux and Italy, where Sievers hopes to strike deals next year and beyond before going global.

ASIAN AMBITIONS

From its Hamburg offices Helm covers all of western Europe – over 60% of its business is in Europe. Now Sievers wants to grow in all areas but particularly in Asia, which should be moving towards 20% of global sales in the next three years, up from 14% in 2017.

“The big growth potential is in Asia and we are so far under-represented here. We will focus on our core products, partnering with producers, and building our distribution networks in the main countries in Asia,” he says.

The company already has bases in India, Thailand, Japan, Korea, Taiwan and a regional head office in Singapore. “We are especially [focused on] China – western companies are looking for more professional, reliable distributors in China, especially companies which work to western standards. US or European companies can’t afford to work with sub-standard Chinese distributors. If there is an accident the big names don’t want to be in the press.”

STAY FAMILY-OWNED

Sievers is just the fourth chairman in the company’s 118-year history and this stability – and lack of external interference – is valued at Helm. The business is family-owned, with Dieter Schnabel (60% holding) and son Stephan (40%) the joint owners.

“We will remain family-owned and not allow any other investors – banks or non-family investors – in or jeopardise our independence. We would sacrifice growth opportunities over independence because we understand the business and we think long term.”

Sievers says Helm is fast-acting, having a very close dialogue with the shareholders so that investment decisions can be taken very quickly (more or less overnight if necessary). While public companies have to go through different rounds of discussions, Helm has very few layers of management.

“We make mistakes but we have time to correct these and do better next time. With public companies you make one mistake and you are out,” he adds.

BUSINESS MODEL EXPLAINED

Helm’s expertise is in sales and marketing, not production. But the company will invest in production by building a minority shareholding to show its commitment to partners’ production assets. Helm buys and takes ownership of product from the producer, then adds margin and logistics costs to the final sale price.

“But we leave production to the professional producer – we don’t have the knowledge. We have the sales and marketing expertise, distribution and logistics – this is what we bring to the table.”

Helm is transparent with its producer partners, allowing them access to company finances to see profit margins, expenditure on logistics and netbacks.

The company also has a floating trading operation. “But trading will become more and more difficult and I don’t see a long-term future in that. You need to partner with producers and build long-term contracts. You need to add function, so that’s why we integrate towards production in chemicals, if necessary, even as an investor.”

Helm’s business is divided into four segments – chemicals, crop protection, pharma and fertilizers – each with a different strategy. The crop protection and pharma business has a staff of scientists with investment into the development of new generic drugs or pesticides.

“We develop, formulate, register and market the products. In crop protection there are even Helm-branded products,” says Sievers.

Helm has its own warehouses, cargo terminals, and logistics network using bulk vessels and trucks. It uses external distributors to serve smaller customers for the retail distribution business. Currently, lack of personnel for trucks and trains is causing a huge logistical bottleneck, made worse by the low levels in the Rhine.