Issue Date: March 25, 2013
CABB Settles On Chinese Frontier
CABB may not be a major player within the ranks of the global chemical industry, but the German firm is a celebrity in Jining, in northern China, where it’s the first foreign chemical maker to set up a manufacturing presence.
Earlier this month, the privately held company signed a memorandum of understanding to invest in a local producer of monochloroacetic acid (MCAA), an intermediate used to make agricultural chemicals and additives for food and plastics. The investment in China, and a similar one in India, is part of a corporate plan to become the global leader in MCAA and to double overall sales to more than $900 million.
The signing ceremony was a big event locally, attended by political leaders including the mayor and the local secretary of the Communist Party. Martin Wienkenhöver, CABB’s chief executive officer, remarked that his company had been negotiating with its Chinese partner, Jining Gold Power, for a year. “We are ready to move on and set up our joint venture in the biggest MCAA market there is,” he said.
MCAA is a toxic monomer made through a simple reaction of chlorine with acetic acid. One of its major applications, and a target market for CABB in China, is in the production of carboxymethyl cellulose, a cellulosic food thickener and personal care ingredient.
Many companies already make MCAA in China, but CABB will easily compete with them, claimed Uwe Brunk, CABB’s general manager for acetyl chemicals, at the event. CABB’s MCAA, he said, is 99.5% pure, whereas most of the MCAA sold in China has a purity of 97.5%. “Impurities may be acceptable in certain applications, but it’s definitely not okay when you’re talking about food and personal care,” he told C&EN. The contaminants, which may include di- and trichloroacetic acid, are difficult to remove, he added.
AkzoNobel, one of CABB’s main competitors in Europe, already produces high-purity MCAA at a 100,000-metric-ton facility in Taixing, near Shanghai. Yet the Dutch firm will not compete directly with CABB in China because its customers are primarily multinational companies operating throughout Asia, Brunk claimed. CABB’s main customers will be Chinese manufacturers located in the northern part of the country.
On the whole, the MCAA industry in both China and India is fragmented, according to William Bann, business manager for acetyls and methanol at the consulting firm Tecnon OrbiChem. Nearly 50 producers operate in China, but only four of them can make more than 20,000 metric tons per year. India has about 15, mostly small-scale, producers. Europe and the U.S. have a handful of large-scale producers including CABB, AkzoNobel, and Dow Chemical. Global consumption of the material is about 725,000 metric tons annually, Bann noted.
Because MCAA is a hazardous substance, CABB’s focus on local customers makes sense, according to Bann. “When it’s a dangerous chemical like MCAA that requires special handling, the users tend to be located nearby,” he said. According to the market research firm SRI Consulting, MCAA is so toxic that mere skin exposure can result in death.
Once CABB’s China venture is set up, Brunk said, one of the major priorities will be to upgrade the site’s health, environment, and safety procedures, with a particular focus on occupational health. “Emphasizing occupational health is a standard practice at plants where dangerous chemicals are handled or produced,” he said.
CABB will formally establish itself in China by acquiring a 67% stake in the MCAA business of its partner, Gold Power. The Chinese firm is an electricity generator that also makes a range of chemicals using calcium carbide as a starting material. It operates a 20,000-metric-ton MCAA plant at a site in the Jining area where it also makes chlorine. Gold Power buys acetic acid from a nearby firm, Brunk said. Like other Chinese producers, it uses a batch MCAA process.
After the acquisition, CABB will improve Gold Power’s manufacturing protocols to raise product purity. At a later stage, CABB plans to build a 25,000-metric-ton facility that will implement a proprietary continuous chlorination process. The German firm expects to spend $20 million on upgrading the old plant and building the new one.
CABB’s expansion in China will be overseen by Henry Ye, the company’s country manager, who is relocating from Shanghai to Jining with his family. Ye knows his way around the government agencies regulating chemicals in China. Before joining CABB, he was an administrator of the Taixing industrial park where AkzoNobel operates.
Whereas demand for MCAA is growing by less than 2% per year in Europe, growth exceeds 10% in China and 5% in India. In India, CABB is also expanding its MCAA business by acquiring a 76% stake in a producer in the northwest city of Ahmedabad. CABB plans to boost capacity at the Indian site from 12,000 to 20,000 metric tons per year to serve Indian and Southeast Asian markets.
CABB’s main MCAA plants are two facilities in Germany once operated by the chemical giant Hoechst. As part of a corporate restructuring, Hoechst spun off its specialty chemical business, including MCAA, in 1997 as Clariant. But MCAA was never a major focus for Clariant, and the company sold the business to a private equity firm in 2005. CABB, which once stood for Clariant Acetyl Building Blocks, has since changed hands twice among private equity firms.
Besides MCAA, CABB also supplies fine chemicals to the European pharmaceutical industry (C&EN, March 26, 2012, page 34).
Whereas MCAA had been an orphan business for Clariant, it is now a core activity of CABB, according to Brunk. “We will not only sell high-quality MCAA in China, we will also provide ready-to-use solutions tailored to our customers’ needs,” he said. Chinese MCAA producers, he reports, supply their product in a crystal form that is more complicated to use than a solution.
The German firm will enjoy strong local government support in Jining. At the signing ceremony, Zhihong Li, secretary of the local Communist Party committee, said she will set up a local government support team to help solve any administrative problems that CABB may encounter in Jining. “We can’t help you with your business problems, but we can offer support with everything else,” she said.
With friends like that, CABB’s foray in China seems to be off to a good start.
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