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Thursday, 9 February 2017

At the helm of innovation

In an interview, Maurizio Butti, CEO at SONGWON and Philippe Schlaepfer, EVP of Division Performance Chemicals at SONGWON with Chemical Today magazine discussed the global dynamics of various sectors where the Korea-based company plays a major role, including polymer stabilisers, PVC stabilisers, plasticisers, polyurethanes and others. The duo also spoke about the current trends across these diverse sectors.
By Shivani Mody
Dynamics of Korean chemical industry
Maurizio Butti: Korean petrochemical companies have been performing quite well recently, but now they have to contend with Korea’s leading export destination, China, decreasing its imports of petrochemical products. The Korean government is calling for restructuring in the nation’s steel and petrochemical industries, as issues of oversupply in the global market continue to put pressure on Korean companies. 
Even so, projects like S-OIL’s the new 400,000 tonne/yr. plant in Ulsan is still scheduled for completion in 2018, and this will provide us with growth opportunities for polymer stabilisers, mainly One Pack Systems.
Philippe Schlaepfer: In a move that positively impacts our PVC stabilisers business, we see a switch from lead to mixed metal stabilisers for PVC window profiles. In polyurethanes, the area of high-end TPU applications is growing fast in Korea, especially in areas such as flame retardant compounds for cable market, and blown films for the packaging market.
SONGWON’s business footprints in Asia Pacific region 
MB: In polymer stabilisers, we expect high growth in China and India in particular, and we are already preparing ourselves with new investments. The SONGWON activities in Panoli, India are on track and we will continue to invest there in the coming years. While in China, SONGWON recently set up a joint venture with a Chinese partner (QLF) both for a production of One Pack Systems and the commercialisation of SONGWON products.
In PVC stabilisers and in polyurethanes, Asia Pacific, and specifically China and SEA represent a high demand area for the coming years. We are focusing on various approaches to position ourselves here.
Our continued investment in fuel and lube additive production in Korea will sustain regional and global demand for more antioxidants.
North East Asia will provide us with the most opportunities for our speciality chemicals business in the area of electronic chemicals.
Industry trends in polymer stabilisers.
MB: Developments in polymer stabilisers are taking place against a background of increasing calls for plastics with high heat resistance (especially in automotive), low emissions and migration of additives, especially VOCs (automotive again), extended light stability, improved printability, and finally for improved and more accurate dosing of polymer stabilisers when added to polymers.
As far as future trends in polymer stabilisers are concerned, in automotive, demand for weight reduction and constant improvement of look and feel will require stabilisation packages that allow plastics to perform in new and more demanding applications. Across international markets, growth in polymer stabilisers is linked primarily to growth in polyolefins. We see growth potential in emerging markets in packaging-industrial and consumer construction, automotive (especially in China, where annual vehicle sales are expected to reach more than 30 million by 2020), and agriculture.
SONGWON is a global leading player in polymer stabilisers, with manufacturing sites in Korea and India for chemical synthesis, Germany, Abu Dhabi, Houston and Qingdao all for the production of “One Pack Systems” (pre-measured and blended additives packages in granular form which are added into the polymer stream during polymerisation (mainly Polyolefins).
PS: Besides polymer stabilisers, SONGWON has traditionally been a strong player in the PVC stabiliser industry, in particular in Korea. The global market size for these products was around 1.14 million tonnes in 2015 and is projected to reach 1.37 million tonnes by 2021 (an average annual growth rate, CAGR, of 3.1 percent). This growth is being driven in particular by construction industries in emerging nations, and the growing Asia-Pacific market in general.
Asia-Pacific is the largest market in the world for PVC stabilisers, with a 58 percent share, followed by Europe. A large share of Asian demand originates in China of course, which is now the world’s largest consumer of PVC.
Lead stabilisers still account for a large portion of the Asia-Pacific markets larger than in other regions. However, substitution by more advanced stabiliser packages is ongoing in the region, just as it is elsewhere, due to environmental and health concerns (in Europe, sales of lead stabilisers were voluntarily ended at the end of last year). Replacements include tin and mixed metal stabilisers, all of which SONGWON produces.
Construction in general and window profiles in particular, with lead-free stabilisers, will drive demand for PVC stabilisers in emerging markets.
Growing importance of PVC stabilisers for the packaging industry
PS: PVC continues to be used in various packaging applications, including industrial, medical, and even food. Demand for stabilisers in these segments has risen annually on average by 2.6 percent since 2005. We expect demand for stabilisers in this segment to increase by over three percent per year to around 131,000 tonnes in 2021. Asia-Pacific is likely to see the most dynamic increase, with a CAGR of over four percent until 2021. But restrictions in the food sector will impact growth in PVC films there.
MB: The global PVC plasticiser market is also going through something of a transformation process. Global plasticiser consumption amounted to about 7.5 million tonnes in 2015. The plasticisers industry in Asia-Pacific accounted for close to 60 percent of worldwide demand in 2012 and the market here continues to grow faster than the global average. Western Europe and North America market shares are 13.5 percent and 11.9 percent respectively. SONGWON expects total global demand for plasticisers to rise to around 8.6 million tonnes in 2020 (a CAGR of 3.1 percent).
A strong focus of attention today is on the admissibility of low molecular weight phthalate plasticisers used in products made from PVC since several of these plasticisers have been linked to health issues. The strong increase of demand for phthalate-free plasticisers will certainly result in a stimulation of the market. SONGWON is focusing on polymeric plasticisers, adipic acid-based plasticisers (DOA), and ester-based plasticisers (TOTM). 
Business dynamics of polyurethanes at SONGWON
PS: SONGWON is active on a number of fronts in this sector. The company is focusing on high-end thermoplastic polyurethane (TPU) applications and on solution Polyurethanes (S-PU) for ink binders and adhesives.
Building and construction, automotive, aerospace and telecommunication industries are driving the demand for high-end TPU’s used in wire and cable and films. SONGWON is well positioned to grow in this area; we are already the leading player in the Korean market for these high-end applications. To further capitalise on the growth opportunities in these special TPU niche segments, SONGWON will commission a new TPU production line in 2017, doubling its existing capacity.
In the area of S-PU SONGWON is mainly focusing on ink binders and adhesives, both areas with CAGR above 6 percent and major markets in Asia Pacific, e.g.  the consumption of inks in Asia Pacific is likely to increase to some 2.56 million tonnes by 2020, accounting for roughly 44 percent of the global market. SONGWON already has a leading market share in Korea for solution polyurethanes for ink binders (especially for inks for the packaging industry) and adhesives, and we are now focusing for future growth in emerging markets in South-East Asia.
Market trends for super absorbent polymers, SAPs.
PS: The principal market for SAPs is diapers of course. In 2014, global demand for SAPs was 2.30 million tonne. While demand in emerging markets is driven by increasing baby diaper consumption, it is the increasing consumption of adult diapers that is driving growth in more established markets. SONGWON is focusing on the adult diaper market, as well as on niches such as cable filler, and hot/cool packs. We see good growth potential for SAPs in emerging markets on the back of double-digit growth in diapers.
SONGWON’s focus on Fuel & Lube additives.
MB: SONGWON offers a wide range of phenolic antioxidants (AOs) for the fuel and lubricant market, where it sees a significant increase in demand following the introduction of new regulations in the US and elsewhere governing fuel efficiency and greenhouse gas emissions from diesel engines. SONGWON has an important advantage in the phenolic AO arena with its back-integration into key intermediates combined with world-scale production capabilities. It also offers best-in-class customer service and a strong geographical presence in Asia, one of the fastest growing markets for fuel and lube additives.
Moves to reduce emissions from vehicles and increase engine efficiencies will continue to be the main market driver for AOs in the industrialised world, while in the developing world, demand for modern lifestyles, defined by growing needs for increased and individual mobility, also plays an important part. We also see growing demand for increasingly sophisticated lubricant additive solutions.
Future demands for performance chemicals (PC) and industrial chemicals (IC)
PS: For all products, IC and PC, we always have to aim for high and consistent product quality, good cost performance, reliable supply, and a broad range of products to serve any specific industry. As far as industrial chemicals are concerned, we have to focus especially hard on cost competitiveness (compared to best-in-class), providing a global network with highly reliable supply/distribution network, and a global reach that includes good technical and commercial support; and we have to be committed to long-term supply reliability. When it comes to performance chemicals, there is an extra need to strive continuously to improve product purity (for electronic chemicals for example) and to have the ability to develop new, higher performance, products quickly in line with customer requirements.
Challenges in the performance chemicals and industrial chemicals.
MB: In polymer stabilisers, which are part of our industrial chemicals division, there is always the possibility that evolving regulatory requirements will present a challenge in terms of costs. At the same time, expected market growth requires continuous large investments into new capacity that might be challenging in view of historical return on investment for this industry.
PS: Challenges in other traditional SONGWON businesses such as PVC stabilisers, tin intermediates and polymers (polyurethane and SAP) are varied. While there is a continuous pressure on providing cost effective solutions, customers also strive for an ever better performance of products as for example in the PVC stabiliser industry and the polyurethane applications as described above. In many of these areas, we are increasingly challenged by strong competition coming from China. In our Speciality Chemicals business, we face mainly the challenge of delivering higher performing products at ever higher purities, especially for electronic applications. Continuous requests for new product developments in this area are very strong and demanding—and to be frank they are quite often impossible to achieve! At the same, we are also confronted with continuous requests for massive price reductions for well-established products.
Focus on R&D and innovation.
MB: In polymer stabilisers, we aim to consistently stay at the forefront of market requirements by maintaining close contact with our customers and listening to their current challenges and potential needs. At SONGWON, product development is a never-ending process and our actions are always driven by what our customers require. As an example, we are engaging in a continuous joint development program with our partner for hindered amine light stabilisers (HALS) SABO, for the development of new light stabiliser solutions for various applications such as the automotive industry. SABO is a privately held Italian chemical company. Another example of our recent R&D efforts is the launch of a new stabiliser, SONGXTEND® 1301 to protect polymeric flame retardants from degradation during processing at higher temperatures when incorporated into its substrate, XPS. For some time now vehicle manufacturers have been achieving weight reduction and cost saving targets through, among other things, the extensive use of polypropylene (PP)-based materials to replace engineering plastics and metals in automotive parts. In response to this trend, we developed our SONGXTEND® 2124 long-term thermal stabiliser (LTTS). It is an ideal solution for enabling glass fibre reinforced PP (GF-PP) to be used in demanding applications. GF-PP systems allow manufacturers to make their parts thin and light, and this obviously helps them to obtain further overall weight reduction.
PS: In the area of electronic chemicals we are heavily investing in R&D, developing required high-end speciality chemicals to meet the ever increasing performance and purity requirements of the industry.
Challenges faced by chemical manufacturers in general
MB: The ongoing trend of commoditization requires a continuous focus on improving manufacturing costs and flexibility: this means, for example, continuous optimisation of raw material costs. With chemical yields in many instances close to the theoretical 100 percent level, there needs to be a continuous focus on productivity improvement and cost reduction. Reduction of energy consumption and labour are the key focus in our continuous productivity efforts. New plant designs need to be optimised, minimising the capital spending while at the same time increasing capacity, automation and reliability. Flexibility in manufacturing becomes an ever more important factor in order to shorten time to market, enabling companies to benefit from new opportunities in the fast-changing global markets for chemicals. While focusing on all these efforts, chemical manufacturers have to strive as well for continuous high-quality products with an increasing demand in many industries for ever higher purity chemicals. In addition, there is a need for increasing customer intimacy, especially in the area of speciality chemicals to ensure excellent customer services, in terms of on-time delivery, packaging, information, and so on. On top of all the chemical industry needs to have a high focus in the area of environmental, health and safety (EHS), which is not negotiable. At SONGWON we continuously optimise and improve our measures in all areas of EHS with a target of zero accidents and incidents in all our manufacturing sites. 
Incorporating sustainability in the chemical industry
MB: SONGWON has been focusing on sustainability for many years. The company’s formalised philosophy of sustainability standards covers human rights, occupational health and safety, environment, fair trading, and information security.
Key Performance Indicators (KPIs), validated by Ernst and Young, are monitored and improved year by year by a dedicated function led by SONGWON’s Global Environmental Health and Safety Leader. Results are reported in the SONGWON annual financial and sustainability report. The KPIs include: achieving zero accidents; environmental awareness; raw materials used; direct energy consumptions; indirect energy consumptions; water is withdrawn, by source; biodiversity; total greenhouse emissions, NOx, SOx and particulate matter; total water discharged; discharged water quality; other wastes generated; significant spills; and non-compliance.
© Chemical Today Magazine

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