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The waiting game
30 April 2010 21:18
AKZONOBEL AWAITS INDIA TAKEOFF
Rob Frohn, AkzoNobel's board member responsible for specialty chemicals, believes it is still too early to invest heavily in India. The country will also need fewer high-end products than the typical AkzoNobel portfolio. That could mean acquisitions or investment in alternative technologies.
He says: "India has yet to take off: typically at $3,000-5,000 (€2,240-3,740) per capita, you'll see a peak in consumption of paper, personal care and other sophisticated products including coatings.
In the eastern part of China we see an enormous increase in consumption of our chemicals and coatings."
For AkzoNobel in China, chemical demand growth is typically GDP to GDP+ so the firm is enjoying double-digit growth.
"We see domestic consumption really taking off in China. Rather than being manufactured for export, products are being consumed locally. China is one of the most profitable countries for us in terms of size and performance. Our footprint is now over $1bn with greater profits in 2009 than 2008, and that was a recession year."
AkzoNobel plans to expand into China's hinterland when the time is right. "For the moment, our operations are based on the eastern side of China but as time goes by, we'll try to move inland too. We are completing the Ningbo project this year and want to turn that into a commercial success. We've just opened our monochloroacetic acid unit [at Taixing] and we're running the plant flat-out."
"We see domestic consumption really taking off in China"
Rob Frohn, board member, AkzoNobel
The Taixing site - which now boasts a production capacity of 60,000 tonnes/year - is the largest of its kind in China. Last year, the company inaugurated a Powder Coatings Technology Center in Ningbo, while in December, the new chelates facility located at the €275m ($361m) Ningbo multisite became operational. The Ningbo site is due to be officially opened in November.
Frohn believes that India should be just as exciting but the truth is it has yet to take off. "As a board, we visited India in September 2009. The middle class in India is growing rapidly, with access to money so we need products catering to their needs: affordable housing, particularly for coatings but also for chemicals such as cement additives. We need to develop more products catering to this segment rather than the top segment which is our typical strategy elsewhere in the world."
He is optimistic about India, but realistic about its challenges. "I believe that developments will come but possibly not as fast as in the last 15 years in China. The organization, infrastructure and approach is quite different. The Chinese have put a lot of money into infrastructure, have been very active in supporting FDI, grants and development zones which we have benefited from. I don't see this [as] so well-developed in India as in China."
AkzoNobel's board met government officials who showed them the development plan for the next 10-15 years. "The plans are there, but let's see if they really can deliver on it. We need good transportation: roads, harbors and railways. If we don't have good distribution, we won't be able to distribute our goods."
In terms of production in India, the company operates in car refinishes, coatings from AkzoNobel and ICI heritage; plus peroxides for plastics production. Frohn says the company is trying to build up a position in areas such as personal care and paper chemicals.
"If you're looking for where in the world hydrogen and electrical vehicles will be prevalent, it's probably going to be China"
Patrick Thomas, CEO, Bayer MaterialScience
"Some of these are just plans in their early stages but our development people are visiting India to see who we can cooperate with, what raw materials are available and what kind of outlets are available."
AkzoNobel's India production will be focused mostly on domestic consumption rather than export.
"We're very interested in paper chemicals and surfactants as people at a certain level of demographics start to use more of these products: more paper, personal care, household and cleaning products. If India opens up and more plastic is produced, then that opens up for more of our products. In construction we make products for tile fixing, cement, insulation. We produce sealants for double windows. It depends on the emphasis of the Indian government."
The AkzoNobel board asked its managers in India to come up with a strategy that addresses the middle or even the low end of the market. "Of course our type of chemistry is not as cheap as the really low end, so it's not an immediate fix, but we believe we can come up with the right ideas and then we'll invest in local production for the local market."
Acquisitions are also a possibility: "There are many SME companies which could be a good platform to start. The difficulty is finding a reasonably priced company. Typically the high growth rate in the country gives very high multiples and price expectations. So that's holding us back."
The firm sees joint ventures as a vehicle to get started. "Our clear strategy is to take it all or get out. If there's a clear two- to three-step process to full ownership, that's our preferred way of operating."
VITAL STATISTICS
INDIA
GDP/capita 2009 $2,941***
Global ranking 128
Population below poverty line 25%*
CHINA
GDP/capita 2009 $6,567***
Global ranking 99
Population below poverty line 2.8%**
SOURCES: IMF, CIA; NOTES *2007 EST.; **2006 EST. *** PURCHASING POWER PARITY
BAYER MATERIALSCIENCE PLANTS AND PROJECTS IN CHINA AND INDIA
CHINA
Polycarbonate (PC) 200,000 tonnes/year on stream
location: Caojing
Coatings, adhesives, specialties 30,000 tonnes/year, coatings derivatives 73,000 tonnes/year
location: Caojing
Polyurethane (PU): methyl di-p-phenylene isocyanate (MDI) 350,000 tonnes/year on stream
location: Caojing
PU: toluene di-isocyanate (TDI) 250,000 tonnes/year under construction, on stream Q1 2011
location: Caojing
Thermoplastic PU production
location: Shenzhen
INDIA
Coatings, additives, specialties project €20m ($26.8m) investment
location: not announced
Thermoplastic PU production
location: Cuddalore
BaySystems houses PU
locations: in both countries
Color Competence and Development Center (PC)
locations: Guangzhou, China (live), Greater Noida, India (Q2 2010)
Sheet Companies (PC)
locations: in both countries
SOURCE: BAYER MATERIALSCIENCE
AKZONOBEL FACILITIES IN CHINA AND INDIA
CHINA
Decorative paints
locations: Langfang, Shanghai, Guangzhou
Car Refinishes
location: Suzhou
Marine and protective coatings
locations: Suzhou, Shanghai
Powder coatings
locations: Chengdu, Langfang, Ningbo, Suzhou
Wood finishes and adhesives
location: Beijing
Coatings
locations: Jiaxing, Tianjing, Dongguan
Pulp and paper chemicals
locations: Suzhou, Guangzhou
Functional chemicals
locations: Tianjin, Ningbo, Taixing, Shanghai
Industrial chemicals
location: Taixing
INDIA
Decorative paints
locations: Hyderbad, Mohali, Koparkhairne (Thane)
Car refinishes
location: Bangalore
Industrial coatings
location: Bangalore
Marine and protective coatings
location: Bangalore
Powder coatings
location: Bangalore
Functional chemicals
locations: Pune, Mahad
SOURCE: AKZONOBEL
Source: http://www.icis.com/Articles/2010/05...and-india.html
30 April 2010 21:18
AKZONOBEL AWAITS INDIA TAKEOFF
Rob Frohn, AkzoNobel's board member responsible for specialty chemicals, believes it is still too early to invest heavily in India. The country will also need fewer high-end products than the typical AkzoNobel portfolio. That could mean acquisitions or investment in alternative technologies.
He says: "India has yet to take off: typically at $3,000-5,000 (€2,240-3,740) per capita, you'll see a peak in consumption of paper, personal care and other sophisticated products including coatings.
In the eastern part of China we see an enormous increase in consumption of our chemicals and coatings."
For AkzoNobel in China, chemical demand growth is typically GDP to GDP+ so the firm is enjoying double-digit growth.
"We see domestic consumption really taking off in China. Rather than being manufactured for export, products are being consumed locally. China is one of the most profitable countries for us in terms of size and performance. Our footprint is now over $1bn with greater profits in 2009 than 2008, and that was a recession year."
AkzoNobel plans to expand into China's hinterland when the time is right. "For the moment, our operations are based on the eastern side of China but as time goes by, we'll try to move inland too. We are completing the Ningbo project this year and want to turn that into a commercial success. We've just opened our monochloroacetic acid unit [at Taixing] and we're running the plant flat-out."
"We see domestic consumption really taking off in China"
Rob Frohn, board member, AkzoNobel
The Taixing site - which now boasts a production capacity of 60,000 tonnes/year - is the largest of its kind in China. Last year, the company inaugurated a Powder Coatings Technology Center in Ningbo, while in December, the new chelates facility located at the €275m ($361m) Ningbo multisite became operational. The Ningbo site is due to be officially opened in November.
Frohn believes that India should be just as exciting but the truth is it has yet to take off. "As a board, we visited India in September 2009. The middle class in India is growing rapidly, with access to money so we need products catering to their needs: affordable housing, particularly for coatings but also for chemicals such as cement additives. We need to develop more products catering to this segment rather than the top segment which is our typical strategy elsewhere in the world."
He is optimistic about India, but realistic about its challenges. "I believe that developments will come but possibly not as fast as in the last 15 years in China. The organization, infrastructure and approach is quite different. The Chinese have put a lot of money into infrastructure, have been very active in supporting FDI, grants and development zones which we have benefited from. I don't see this [as] so well-developed in India as in China."
AkzoNobel's board met government officials who showed them the development plan for the next 10-15 years. "The plans are there, but let's see if they really can deliver on it. We need good transportation: roads, harbors and railways. If we don't have good distribution, we won't be able to distribute our goods."
In terms of production in India, the company operates in car refinishes, coatings from AkzoNobel and ICI heritage; plus peroxides for plastics production. Frohn says the company is trying to build up a position in areas such as personal care and paper chemicals.
"If you're looking for where in the world hydrogen and electrical vehicles will be prevalent, it's probably going to be China"
Patrick Thomas, CEO, Bayer MaterialScience
"Some of these are just plans in their early stages but our development people are visiting India to see who we can cooperate with, what raw materials are available and what kind of outlets are available."
AkzoNobel's India production will be focused mostly on domestic consumption rather than export.
"We're very interested in paper chemicals and surfactants as people at a certain level of demographics start to use more of these products: more paper, personal care, household and cleaning products. If India opens up and more plastic is produced, then that opens up for more of our products. In construction we make products for tile fixing, cement, insulation. We produce sealants for double windows. It depends on the emphasis of the Indian government."
The AkzoNobel board asked its managers in India to come up with a strategy that addresses the middle or even the low end of the market. "Of course our type of chemistry is not as cheap as the really low end, so it's not an immediate fix, but we believe we can come up with the right ideas and then we'll invest in local production for the local market."
Acquisitions are also a possibility: "There are many SME companies which could be a good platform to start. The difficulty is finding a reasonably priced company. Typically the high growth rate in the country gives very high multiples and price expectations. So that's holding us back."
The firm sees joint ventures as a vehicle to get started. "Our clear strategy is to take it all or get out. If there's a clear two- to three-step process to full ownership, that's our preferred way of operating."
VITAL STATISTICS
INDIA
GDP/capita 2009 $2,941***
Global ranking 128
Population below poverty line 25%*
CHINA
GDP/capita 2009 $6,567***
Global ranking 99
Population below poverty line 2.8%**
SOURCES: IMF, CIA; NOTES *2007 EST.; **2006 EST. *** PURCHASING POWER PARITY
BAYER MATERIALSCIENCE PLANTS AND PROJECTS IN CHINA AND INDIA
CHINA
Polycarbonate (PC) 200,000 tonnes/year on stream
location: Caojing
Coatings, adhesives, specialties 30,000 tonnes/year, coatings derivatives 73,000 tonnes/year
location: Caojing
Polyurethane (PU): methyl di-p-phenylene isocyanate (MDI) 350,000 tonnes/year on stream
location: Caojing
PU: toluene di-isocyanate (TDI) 250,000 tonnes/year under construction, on stream Q1 2011
location: Caojing
Thermoplastic PU production
location: Shenzhen
INDIA
Coatings, additives, specialties project €20m ($26.8m) investment
location: not announced
Thermoplastic PU production
location: Cuddalore
BaySystems houses PU
locations: in both countries
Color Competence and Development Center (PC)
locations: Guangzhou, China (live), Greater Noida, India (Q2 2010)
Sheet Companies (PC)
locations: in both countries
SOURCE: BAYER MATERIALSCIENCE
AKZONOBEL FACILITIES IN CHINA AND INDIA
CHINA
Decorative paints
locations: Langfang, Shanghai, Guangzhou
Car Refinishes
location: Suzhou
Marine and protective coatings
locations: Suzhou, Shanghai
Powder coatings
locations: Chengdu, Langfang, Ningbo, Suzhou
Wood finishes and adhesives
location: Beijing
Coatings
locations: Jiaxing, Tianjing, Dongguan
Pulp and paper chemicals
locations: Suzhou, Guangzhou
Functional chemicals
locations: Tianjin, Ningbo, Taixing, Shanghai
Industrial chemicals
location: Taixing
INDIA
Decorative paints
locations: Hyderbad, Mohali, Koparkhairne (Thane)
Car refinishes
location: Bangalore
Industrial coatings
location: Bangalore
Marine and protective coatings
location: Bangalore
Powder coatings
location: Bangalore
Functional chemicals
locations: Pune, Mahad
SOURCE: AKZONOBEL
Source: http://www.icis.com/Articles/2010/05...and-india.html
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