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COVESTRO: Innovations from China exported to global facilities

Today is the day we stop saying ‘the former Bayer MaterialScience’,” Covestro (Leverkusen / Germany; www.covestro.com) chief executive Patrick Thomas said during the company’s recent press conference at “Chinaplas”, held in Shanghai / China in late April. The company made its debut under its new name at the mega plastics fair in the People’s Republic, which is where the headquarters of one of its main business pillars, Polycarbonates, is located.



Under its former name, Covestro took the – at the time – revolutionary decision in 2011 to relocate its global PC headquarters to Shanghai. Since then a lot has happened in the country, which remains the biggest driver of growth for Covestro, Thomas said. One of the recent changes has been the appointment of Michelle Jou as head of the Polycarbonates business unit. In addition, Covestro is just bringing on stream 100,000 t/y of the planned 200,000 t/y PC capacity addition at its Caojing plant near Shanghai, Thomas said, adding that the remainder is due to follow in six months to a year from now. According to Plasteurope.com's Polyglobe capacity database (www.polyglobe.net), the company originally had plans to add yet another 100,000 t/y at an unspecified date.



The CEO emphasised that now is a “lucky” time to be bringing this additional output on stream, pointing out that the market has been extremely tight as a result of several maintenance turnarounds and the closure of Teijin Chemicals 230,000 t/y PC line in Singapore in late 2015. Thomas pointed out that global PC output is expected to grow at 2.9% over the course of the next five years, while demand growth is pegged at about 4-5%, adding that a gap between the two still exists.



He also addressed the PU market – Covestro’s other main business area, saying that TDI prices now appear to have bottomed out and are heading up, promising good returns. MDI is set to follow this trend. In polyurethanes, too, the chief executive said, consumption growth exceeds demand, yielding a good outlook for or this particular business, too.



In his presentation, Thomas gave a more “Asian spin” on the company’s Q1 results, which were released during the fair. Volume growth in China came to 13.3% in the first quarter, he said, adding that the growth was largely due to the early resumption of business activities following the lunar new year celebrations in February. The increase means that Covestro is growing at double the rate of China’s GDP, which rose by 6.5% in Q1. The good performance follows a rather weak third quarter in the country in 2015, which Thomas said was the result of destocking, and impacted all players active in China. Looking ahead to the second quarter, Thomas said the company’s guidance is equal to that of 2015.



In terms of end markets, he identified a strong domestic automotive industry, as well as a return to previous levels for the E&E segment, too. The one business field for Covestro that is suffering in China is the furniture industry – which Thomas blamed on the bubble in the country’s residential housing market. The key to understanding China’s growth dynamics, the CEO said, is that it would be wrong to assume that China’s economy is still capable of growing at levels of 7.5%. “If China sees growth of 4-5%, I am happy. That is what we based our assumptions and investments on,” he added.



On a more macro-economic level, Thomas indicated that there are a number of ways in which Covestro’s business activities stand to benefit from the latest Five-Year Plan. Polyurethane, for instance, has a promising future because of its insulation properties and will help meet energy savings demand. Apart from that, Covestro’s researchers in China have developed a new PU material for use in windmills, which are to be installed across China.



And far from finding application in China alone, most of the innovations developed by Covestro’s 2,500 employees in China are exported to other regions. Whether that be a new TDI production technology, or a “hospital in a box”, designed specifically with the logistics of China in mind. “All materials developed here in China find use elsewhere in the world,” Thomas said, shattering the image some may still have of China as the “copy kingdom”.


Source: www.plasteurope.com

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