Emery Oleochemicals to intensify downstream segment activities

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KUALA LUMPUR: Emery Oleochemicals Group, which is 50% owned by Sime Darby Bhd, plans to intensify its downstream segment activities and further expand its business in Asia as it foresees stiffer competition in the oleochemicals industry in the coming years due to oversupply from newly announced capacities.

In an email interview with The Edge Financial Daily, Emery Oleochemicals (M) Sdn Bhd group chief executive officer Dr Kongkrapan Intarajang estimates that new fatty acid and fatty alcohol plants, with a combined capacity of over 1.5 million tonnes, are expected to commence this year.

Kongkrapan said Emery, which has moved from a commodity based company to a specialty company, has formalised its expansion into the downstream segment in 2011.

“To date [from 2011], we have invested RM487 million in downstream specialty chemicals for [the] green polymer additives, and [the] home and personal wellness [platforms],” Kongkrapan said, noting that this investment has increased the capacity of its downstream specialty chemicals by approximately 50,000 tonnes.

“Our investment in growth projects has enabled us to integrate our raw material production as captive supply, that is, using derivative products to produce specialty chemicals through our new assets,” Kongkrapan explained, adding that the group is constantly on the look out for investments that fit its growth strategy and product portfolio.

However, he said the group currently has no new planned investments this year.

Meanwhile, Emery’s “heavy” investment into downstream specialty chemical plants in Malaysia comes on expectations of high market growth in specialty chemicals in Asia, which it expects to spur demand for oleochemicals products.

“The average growth rate of specialty chemicals in the Asia-Pacific between 2011 and 2016 lies between 5.5% and 6.0%,” Kongkrapan said, noting that various chemicals such as specialty surfactants, construction chemicals and specialty polymers will see different growth rates.

On growth segments, Kongkrapan said Emery sees huge potential in bio-based solutions for lubricant applications (such as industrial and automotive lubricants), including renewable-based and high performance solutions for oilfield drilling applications.

Emery currently provides solutions for oilfield chemicals and plastic additives that are based on renewable, natural resources.

“We also see high potential for natural-based and high-performance crop care solutions that address the need for more environmentally responsible agrochemical formulations and greater agricultural productivity,” he said.

Kongkrapan said its products will face less price volatility by venturing downstream.

On the industry outlook, Kongkrapan said the global oleochemicals market was estimated at over 10 million tonnes in 2013 and is expected to grow at 3% to 4% per annum over the next years.

“[Meanwhile], the Asia-Pacific is expected to see an estimated CAGR [compounded annual growth rate] of 5.2% in volume [for 2013 to 2018]. The historical growth for 2009 to 2012 was slightly lower at an estimated 4.7%,” he said.

Globally, in the basic oleochemicals market, Kongkrapan said Emery currently commands about 5%. In the PVC market, Emery has a market share of around 12%.

“In other market segments, such as eco-friendly polyols, Emery is one of the new and few manufacturers that offer both recycled and renewable polyols solutions for the polyurethane industry. We expect to capture 2% of the North American polyols market,” Kongkrapan said.

On the global bio-lubricants market, it aims to capture some 3.5% of the market.

Presently, the group’s annual revenue is over US$1 billion (RM3.2 million), said Kongkrapan.

But the group’s 2013 financial performance was impacted by various challenges in the oleochemical industry brought on by the Indonesian tax issue and the economic slowdown in Europe. 

“In 2014, overall economic sentiment is recovering, coupled with competitive energy prices in the US. We expect to see a steady growth of revenue this year,” he said, adding that the growth in its product portfolio should allow the group to capture a bigger share of the specialty chemicals market.

To improve operational efficiencies, Kongkrapan said the group has begun operations of its first renewable energy source in the form of biogas from its waste water discharge, which reduces its total energy usage.

This article first appeared in The Edge Financial Daily, on September 15, 2014.