BASF remain pessimistic about economy

BASF remain pessimistic and say that slump will continue for the chmicals industry. Sales volumes in some segments had fallen by as much as 30-40% and small to medium sized companies were still having difficulties securing loans.

These comments support the view of those active in the industry that the 'green shoots of recovery' are not being seen yet.

Pöyry Complete Negotiations Regarding Restructuring of Forest Industry Business in Finland

The consulting and engineering group, Pöyry has announced that statutory employee negotiations, started in April in the Forest Industry business group's units based in Finland have been concluded. Due to the reorganisation the business group will permanently lay off about 100 people in Finland at this stage. The remaining staff in Pöyry Industry Oy, Finland, may be laid off temporarily until further notice. In addition, temporary lay-offs may lead to permanent lay-offs, affecting a maximum of 150 people. Part of the capacity reduction will be implemented through pension arrangements.

In 2009 restructuring took place in Sweden, North America and Russia with a reduction of about 200 people. The non-recurring cost of the retructuring is estimated to be EUR 2.5 million, which will be booked in the second-quarter results.

Demand for print & graphic paper to decline sharply by 2010 - New market report

In  printweek.com article, it has been reported that a Stationers' and Newsprint Makers' Company Report, entitled, 'Future of Paper and Print in Europe 2008-2020', that there will be a dramatic drop in demand for print and graphic grades of paper in Europe.  Some highlights are:

• Total demand to drop by 32.5% by 2020
• Newsprint demand to decline by 56% between 2008 and 2020 
  
• Business papers and print to decline by 45.5%
• Magazine paper demand to decline by 32%
• Advertising and commercial print sector to decline by 14.5%

It doesn't take a rocket scientist to conclude that digital media and online publishing is the prime reason for the predicted decline in use of these papers.

For paper chemical producers this is a significant market for process chemicals and functional chemicals aimed at this market (eg OBAs, internal sizing, surface treatment).  To compound the agony, it is well know that imports of OBA (and other paper chemicals) from China and India into Europe have increased significantly in the last year or so.  The market report will also not make good reading for the suppliers of fillers and pigments (eg calcium carbonate, kaolin).

The market report was prepared by NLK Associates.

Van Houtum Papier set new standard - first in the world with 'Cradle to Cradle' paper

Van Houtum Papier, an independent paper company based in The Netherlands has announced that it is the first to produce paper according to the 'Cradle to Cradle' or C2C standards operated by MBDC - in Europe, the certification is overseen by EPEA.

The 'Cradle to Cradle' product and process design philosophy was the brain child of William McDonough and Michael Braungart who founded MBDC in 1995 to promote their eco-effective design concept. There are some overviews on YouTube: The man himself and a review of a conference in Maastricht (in Dutch).

MBDC/EPEA are commercial organisations (charge a significant fee for C2C certification) and not regulated (accountable, independent), so some critics argue that certification of this kind lacks credibility when it is self-regulating. However, there is no question that their approach to design is holistic and goes beyond the 'cradle to grave' concept which has been promoted for decades. In the words of MBDC, C2C describes an approach in which, "products and services are designed based on patterns found in nature, eliminating the concept of waste entirely ........ optimising materials to be food either for natures ecosystems or for humans industrial systems - perpetually circulating in closed systems that create value and are inherently healthy and safe".

For the paper chemical producers this philosophy offers opportunities to design products which are biodegradable, based on sustainable raw materials and which are inherently safe. The Van Houtum Papier initiative is one to watch, but in the words of Henk van Houtm, "We will first look at the market response"......... will C2C certified paper carve out a valuable niche in the market?

A book has been written by McDonough and Braungart giving details of their admirable philosophy and there are a number of reviews available in the blogosphere (eg blogcritics). There are also some excellent blogs giving some insight into MBDC (eg greencitizenship).

Emotional Intelligence at Ciba - BASF?

When browsing recently, we came across an article on how Ciba used 'Emotional Intelligence' to accelerate its 'change programme'.  Like many chemical companies, Ciba implemented a survival strategy which essentially was geared to slashing costs across the entire organisation.  So how do you do this with the least amount of pain?  Call in the consultants, I guess, and introduce a 'new term', emotional intelligence (EI).

There are many definitions of EI and the original development of the understanding of what it means and its importance in communication and inter-personal relationships is not questioned.  The definition given in Wikipedia is quite detailed, but to steal a few lines: 

Emotional Intelligence (EI), often measured as an Emotional Intelligence Quotient (EQ), is a term that describes the ability, capacity, skill or (in the case of the trait EI model) a self-perceived ability, to identify, assess, and manage the emotions of one's self, of others, and of groups^[1].

What does all of this EI stuff mean?  It was tempting to write an essay and point out where big companies fail in recognising that the company is made up of people who are intelligent, have different abilities (real and perceived) and are able to perceive, understand and use emotion (positively and in a manipulative way) - we will avoid the essay, but conclude that if you harness the combined assets of the individuals you have a great company!  It simply distils into the following:

1. Understand
2. Communicate
3. Listen  
4. Involve
5. Decide

Sure, in these tough times, decisions have to be made but making them in the board room and then asking middle management to implement them may not be the best soultion, unless you don't give a damn about the individuals that make up the company.  The Alan Sugar approach popularised in the TV show, 'Apprentice', seems to lack any Emotional Intelligence and portrays a very old fashioned way to run a company.  If large companies (and SMEs) are to survive in the future, particularly in the developed world, a change of approach is needed - more of this 'Emotional Intelligence'.  In our experience, one advantage that SMEs have is that they are more emotionally intelligent.

The article which started this blog off concerned an approach used by Ciba, a Swiss company with a relatively multi-national outlook.  Ciba has now been acquired by BASF, a giant German company with a reputation for having an autocratic style of managememt (Do it!).  Does BASF have emotional intelligence?  Let us know.

Bioplastics continue their growth - opportunity for the future

Bioplastics have been around for a while now, but recently there has been significant developments and more small to medium sized enterprises moving into the market.  The opportunity is to use sustainable, biodegradable raw materials to make products which compete effectively with the hydrocarbon based synthetic plastics.  There have often been performance and cost issues but the volatility of the oil price, the 'green agenda' and the injection of money into biopolymer research, has driven the development of what can be described as 'eco-effective' alternatives to traditional plastics.

A recent study from Ceresana Research shows that bioplastics are flourishing.  During the last eight years, it is reported that consumption of biodegradable plastics based on starch, sugar and cellulose, has grown by 600%, albeit from a small base.  Starch-derived plastics dominate in Europe and polylactic acid is considered to offer significant promise.

This is an opportunity for companies back integrated into natural raw materials (eg suppliers of starch to the paper industry), but it is an opportunity for all synthetic chemical companies to look across their entire range and consider where natural raw materials could subsitute those derived from oil.

BASF to place Paper Chemicals HQ in Basel

BASF has announced that from July 1, 2009, BASFs Paper Chemicals operating division will be based in Basel together with two associated business units: Coatings & Starch Europe and Wet End Chemicals.  The cynic would say that this is another tax-dodging ruse followed by other companies such as Hercules and Clariant where repatriation to Switzerland has saved paying higher taxes in Europe; on the other hand, BASF had to make some promises to Ciba and Switzerland that in acquiring Ciba, some major businesses would remain in Switzerland.   Basel was the HQ for Ciba's paper business.

The details are available on the BASF web site including the overall plans for the Basel site - Research Centre; European Plastics and Additives Business Unit; and the Business Centre Switzerland.   

Clariant North America acquires defoamer business

Three months ago, Clariant USA fomed an exclusive strategic alliance to service the world-wide foam control market, they have now announced that they will acquire XL Performance Chemicals from Fibro Chem LLC.  The terms of the deal have not been disclosed.

The aquisition has been made by Clariant's Functional Chemicals Division and although claims are made for Clariant's ability to now service the global foam control market, the reality is that any impact of the acquisition is likley to be in the Functional Chemicals Division and North America - Clariant does not have a good track record of working across divisional 'silos' or in exploting regional sucesses world-wide.

In the paper business Clariant does not have a presence or reputation in the process chemicals market so would be at a distinct disadvantage were it to try to use its current business model to exploit the defoamer market.  Clariant essentially has two functional paper product ranges - speciality dyes and commodity fluorescent whitening agents.  

The future manufacture of the acquired foam control agent products will continue in Greenville SC, USA under a toll manufacturing agreement.  As the business develops, Clariant has the option to transfer production world-wide and use its own facilities.

Clariant's share price has continued to edge upwards from the rock bottom CHF3.71 on March the 9th to just above CHF7 today - a good increase for the short-term trader but far short of the CHF20 range in mid 2007.  As we have stated before, this is a watershed year for Clariant.

BASF Roadshow - 'The Chemical Company' pitch to investors

BASF has been on the road with a story to keep or entice future investors.  

Unde the title, 'Tackling the challeneges ahead", details of BASF's current performance and outlook are made.  In the last slide, the integration of the Ciba businesses into the BASF structure, effective 1 April, 2009,  is shown.

Clariant continue decline - paper business lacks direction

A familiar story at Clariant, as the first quarter results are announced - this time with an air of resignation and an acceptance of reality. It is best to spare the details, but they are available on the Clariant web site and there are many analyst reports on the web. Sales declined 19% in local currencies and 24% in Swiss francs.

The only comment regarding the paper business was 'lower demand, significantly affected by inventory devaluation'. The reality is that in Clariant's key markets:

• The OBA market has declined and, as predicted in this weblog, Clariant is becoming less competitive in the market where competent, lower cost suppliers based in China and India have made inroads.
  
• A similar story in paper dyes - Clariant is a high-cost supplier with a declining market share.
• Other segments? Clariant has had to face reality - efforts to enter the emulsion polymer market were doomed to failure from the start and rumour has it that they have now embarrasingly had to abandon their efforts. There continues to be a lack of strategy in the paper business - someone to lead the business with modicum of market knowledge would be a start.

A watershed year for Clariant ............

Kemira sales and profit down in 1Q09 - paper chemicals struggling

Kemira posted a first quarter pre-tax profit of EUR8 mio, down from EUR22 mio a year ago.  Sales fell from EUR684 million a year ago to EUR609 million.

Sales of pulp and paper chemicals declined from EUR247.7 mio a year ago to EUR225 mio and EBITDA fell 21% to EUR19.8 (8.8% of sales).  The reasons given for the poor performance were falling customer demand, especially in the 'traditional' markets of North America and Europe, linked to the global economic slow-down.  There was a positive currency effect of EUR2mio.

There was some mention of the cost saving projects which Kemira has undertaken such as temporary shout downs in production, closure of the AKD wax production in Vaasa, Finland (March 2009), in addition to the 6 production facilities which have been shut in North America in the last 6 years and the planned closure of the polymer production unit in Colombus, Ohio.

As the BASF acquisition of Ciba takes shape it will be interesting to see whether Kemira adapts its business model to gain an advantage - if Kemira wants to increase the size of its pulp and paper buiness to match that of the new BASF, there are some smaller specialist which could be acquired and help in the further, needed consolidation of the Europen paper chemicals industry.

Deatils of the Kemira performance in the first quarter of 2009 are available on their web site.

Sekisui Chemical buys the Celanese PVOH business

The Japanese company, Sekisui Chemical has agreed to buy the Celanes PVOH (polyvinyl alcohol) business for USD 173 mio.  

The business has sales of around USD300 mio and includes assets in Calvert City, Texas, Tarragona, Spain and the Houston, Texas technology centre.  Celeanese had bought this business from Air Products in 2000 for USD326 mio and later added the Acetex business in 2005.

The agreement with Celanese apparently includes a deal for the long supply of vinyl acetate (PVOH raw material) by Celanese to Sekisui. 

BASF start to implement the 'Plan' as key people in Ciba are replaced

BASF has started to implement its 'Plan' for swallowing Ciba.  As one of many moves, BASF announced today that it had appointed its Michael Heinz (45) as the new CEO of Ciba.  In addition, Heinz has the role of integrating Ciba into BASF.

Ciba's current CEO, Brendan Cummins, has been given an 'advisory capacity for the next few months.'

Federal Trade Commission USA requires BASF sell off some pigment business to receive go ahead for Ciba acquisition

The chemical  giant BASF has been instructed inder the terms of the US FTC consent order, to sell all assets, including intellectual property, to two pigments, bismuth vanadate and indanthrone blue, to a Commission-approved buyer within 6 months.  A mere drop in the ocean for a lumbering giant like BASF.

With both the European and USA monopolies regulators sanctioning the go-ahead for BASF to acquire Ciba, the re-organisation of the combined paper chemicals businesses will begin.  As a Ciba employee stated recently, 'We just wait for BASF to order us what to do.  They have made their plans and we will not be consulted.'

Consumption of tissue, towel and hygiene products to show future growth

At the Niece Tissue conference, Esko Uutela has reported that the global consumption of tissue products will continue to grow by around 4% per year until 2011.  This is good news for paper chemicals suppliers with a good range of products to offer this industry segment (eg Ashland, Nalco), provided profitable pricing can be achieved.

There are regional differences with the 'old' economies such as Japan, North America and Western Europe showing low relative growth when compared to the growth areas of China, East Europe and the Middle East.

Some specific information reported by Uutela was:

• China will add around 4.3 million tons
• Western Europe 1.8 million tons
• Latin America 1.7 million tons
• Eastern Europe 1.2 million tons
• The 'At Home' market will grow faster than the 'Away from Home' segment
• There has not been further consolidation - the top 4 in 2009 produced 38% of the global tissue, whereas they produced 42% in 1999
• Kimberly-Clark remains No 1 and SCA has moved to No 2 following the deal with P&G

The details of Uutela's presentation and other topics covered in the recent conference can be obtained from Tissue World.

Rhodia to cut jobs in bid to save EUR150 million

Rhodia announced it would start to implement plans to achieve savings of EUR150 million by 2011. The likley outcome is the loss of 91 jobs, especially at the Novecare and Polyamide production sites.

Clariant ditch the past and prepare for the future - paper chemicals to be slplit off as a stand-alone unit

With its lack of strategic direction and slow decision-making, Clariant has found itself in a position where it needs now to make some decisive moves.  The complexity of its paper, textile and leather division (TLP) and their non-transparent interrelationships have made it hard for Clariant to off-load any of these businesses as a separate entity.  That said, it is hard to see how anyone would want to pay much for these heavily European-based (Germany and Switzerland) businesses - the share price has continued to free-fall, reflecting the value of Clariant.

In one of the changes, described in management speak as, 'enabling each business to be managed as a stand alone unit, providing the operational and strategic flexibility required to improve profitability',  Clariant is continuing the process of trying to separate the textile, paper and leather businesses from each other in the hope that any of them would be more attractive to a potential buyer.  Too little, too late is the view of many in the industry.

Simultaneously, Hariolf Kottmann, the CEO of Clariant, has retired- off Peter Brandenberg, who was seen as a temporary, Swiss establishment head of the TLP Division as the slow process of deciding on future options for change were made.  Brandenberg spent 38 years at Clariant!

In Brandenberg's place, Kottmann has unsurprisingly brought in an ex-Hoechst colleague, Mathias Lutgendorf as head of the TLP Division and a member of Clariant's executive committee. He will lead the continuing process of separating the paper, textile and leather businesses from each other.

Interestingly, Lutgendorf moves to Clariant from the private equity owned DyStar, a textile dyes and chemical producer, so there could be some thoughts of consolidation on the horizon.

EU asks BASF to offload some business to comply with competition concerns - a good deal for BASF

The European Comission has concluded its look at the acquisition of Ciba by BASF and ruled that there are concerns in a number of market segments:

• DMA3 (dimethylaminoethyl acrylate - a chemical intermediate)
• Synthetic dry strength resins (used in the paper industry) 
• Bismuth vanadate (a pigment)
• Indanthrone blue (a pigment)
• Styrene acrylic (used as a glue for paper applications) - BASF will, of course remain a dominant producer of styre acrylate emulsion polymers
• HALS - hindered amine light stabilisers (used in plastics)
• UV filters for skin care products

To resolve the competition concerns, BASF and the EU have agreed that the following will be divested:

• BASF's DMA3 production assets in Ludwigshafen, Germany
• Ciba's entire EEA (Ethylene ethyl acrylate) synthetic dry strength agent business
• Ciba's global bismuth vanadate business
• Transfer Ciba's ' know-how of the finishing line', all supply contracts acustomer lists and inventories for the indanthrone blue
• Ciba's styrene acrylate business (and polyvinyl acetate, acrylic acid or acrylate) in the European Economic Area at Kaipianen, Finland
• HALS - Ciba's entire 'Chimassorb 119 FL' business, including the Chimassorb 119 FL production assets, releveant know-how and customer lists
• UV filters - BASF will conclude a UV Filter Licence Agreement, giving third party access to the technology behind Tinosorb S

Further information is available from the European Commission web site if one likes reading and can understand the EU mumbo jumbo.

This list of divestments is very light and a great deal for BASF who will continue to increase their dominance in a number of market segments - especially paper chemicals.  It raises the question as to whether this type of deal would have been allowed if the current poor economic environment had not existed.  In the last 6 months there have been a number of attempts to protect industries in Europe and past competition rules seem to have been relaxed.

How does transport affect your carbon footprint? CEPI Initiative.

Printweek.com has reported on the initiative by CEPI to look at te effect of transport on carbon footprint.  At a meeting on the 25th March the aims are to identify the specifics of transport for the European pulp and paper industry, and exchange experiences on how to tackle the environmental impact.

BASF stike a very good deal with EU in meeting competition concerns over Ciba acquisition.

BASF has reached agreement with the EU Union anti-trust approval board and found a way forward to complete its acquisition of Ciba Specialty Chemicals.

Last September, BASF agreed to buy Ciba for CHF6.1 billion, but the EU regulators had concerns over the distortion of competition in products used in paper, plastics and skin care.  BASF has agreed to sell off some of these businesses in order to win regulatory approval.

The details will become more clear, but the staement was that BASF, '.... will sell chemical plants in Ludwigshafen and Ciba units making synthetic dry strength agents for the European paper industry; the pigment, bismuth vanadate, sold globally; and a Finnish-based business making glue for the paper industry.'  The statements were made to confuse and not give a transparent view of what was being sold and to whom.  It will all come out within the next few days - it just takes a couple of phone calls to Ciba!

Furthermore, the 'statement' goes on to say that, ' ..... Ciba's know-how for making and selling the pigment indathrone blue will be transferred, and aunit making light-stabilisers for plastics will be divested.'  It will also strike a licensing deal to allow rivals to use an ultraviolet filter Ciba developed for skin care.

On the face of it, BASF has made a good deal with the EU and will now find themselves in a very dominant position in the paper chemicals industry.

CIBN (Zurich) rose 30 centimes to CHF48.30 and BASF (Frankfurt) rose 84 euro cents to EUR24.26.

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