Lanxess in Antwerp Against the Tide: What Has Lanxess Planned with its State-of-the-Art Production in Belgium?
A German chemicals group planning a major investment in Central Europe is certainly something out of the ordinary. But a company that spends several hundred million Euros in ramping up capacities in a seemingly saturated market must have something in mind. Just like the polymer specialists Lanxess, who, since 2004, have invested over 300 million euros in its Belgian flagship site in Antwerp. What is the story behind these? On the 50-year anniversary of caprolactam production on the banks of the river Scheldt, the Cologne-based company lets us have a look behind the scenes…
Between container ships, tugboats, cargo barges and seagulls beats the heart of the chemical industry: Antwerp, Europe's second-largest freight port is also the home to largest chemical park on the continent. The port company believes that 70% of all leading chemical companies operate plants along the river banks in the harbour area.
Perfectly connected to seaports, motorways, a railway line to the Ruhr area and the inland waterway transport, the cluster is also one of the leading places for the reloading and shipping of chemicals: About 10% of all chemical products shipped worldwide are loaded in Antwerp. A pipeline network more than 1000 km long connects the individual plants across trades and corporate boundaries to form a mega-network.
Right in the centre of this mega-clusters stands the specialist chemicals group Lanxess. For the Cologne-based company, the flagship Belgian chemical park is the second largest production site, with a total of 1,200 employees on-site.
And this has been the case for over 50 years - on 24 April 1967, still under the auspices of Bayer, caprolactam production commenced in one of the first chemical plants in the harbour area. Just in time for the 50th anniversary, the company announced a further 25 million Euros investment in the production of polyamides and plastic precursors.
But this sum is only the tip of the iceberg: The company has already invested over 300 million Euros in Antwerp in the past decade. A central element of these expansion plans was the construction of a new polymerisation plant with an annual production capacity of 90.000 tonnes, directly connected to the caprolactam production. Since the start-up of the plant in summer 2014, polyamide from Antwerp has been delivered to compounding plants all over the world, where it is refined into high-performance plastics.
Expressed in figures. these investments are enormous: When Lanxess was split off from the Bayer group in 2004, the complex had a capacity of 160 000 tonnes caprolactam per year, which has increased to 220 000 tons as of today.
Since the start-up of the plant 50 years ago, over 6 252 000 tonnes of caprolactam have been produced. “Our integrated production complex is the backbone of our global business for high-performance plastics. Therefore, we are continuously strengthening the competitiveness of the site”, explains Lanxess CEO Matthias Zachert.
Where are the challenges? And what is the strategy of the Cologne based specialty chemicals producer? Discover more on page 2!
The decision to invest hundreds of millions on such a grand scale, especially in Europe, left many in the industry shaking their heads. The market for polymers and plastic precursors is a difficult one, especially after the development of enormous production capacities in China.
To understand the situation, it is necessary to look back: The years after the turn of the century represented a golden age for caprolactam - the constantly growing demand for high-performance plastics, particularly in Asia, drove profits and fired the imagination of investors.
The Up- and Down-Story of Polymers
The decline came soon: Around 2010, a number of large polymer megaplants went onstream in China. At the same time, the market for high-performance plastics virtually collapsed in the wake of the economic crisis. The result: Massive overcapacity and falling margins. Did people in Cologne plan and ignore the market?
After all, the previous years had not been easy for the former Bayer subsidiary. When CEO Matthias Zachert 2014 spoke of his famous “valley of tears”, the company faced high debt and low profits. The struggling synthetic rubber business particularly dampened the perspectives of the Cologne company. This concern is now a thing of the past - together with the Saudi oil giants Aramco, the division was brought into the joint venture Arlanxeo.
With the latest Chemtura acquisition, the signs are now pointing to growth. “We have done our homework and have gone through difficult times”, says Dr. Michael Zobel, Head of High Performance Plastics Materials. “Now, we are back in business!”
Growth in sight
The company has done their homework - this should also be the case with regard to caprolactam production in Antwerp. But what is the role of polymers in the plans of the chemicals specialists? Engineering materials have a key function in the new structure of the company.
After all, Lanxess is one of the five largest producers of high-performance plastics (Number 2 worldwide for polyamide). Zobel estimates that his business unit contributes to 15-20% of total turnover. The outlook is also good again: Up to the end of the decade, engineering plastics is due to grow by 5% per year and more in almost all key markets, analysts believe.
But where does the Antwerp site fit into these plans? See for yourself on page 3!
Networking is the key
The trend toward increasingly lighter cars has given particular impetus to polymer sales. Lanxess intends to develop strongly in this area: With the new product lines Durethan, Pocan and Tepex, they are well-positioned in high-performance plastics. With the Hi-Ant concept, the chemical company also provides know-how in engineering, concept studies and manufacturing for its customers.
Caprolactam is just one aspect of a bigger picture: “We do not want to sell commodities”, explains Zobel the Lanxess plans. Accordingly, the lion's share of the Antwerp production is consumed directly within the company - often also on the River Scheldt: A brand new state-of-the-art Polyamide-6-plant in Antwerp had cost the Cologne-based company 75 million Euros, making it the fourth-largest single investment of the company. For comparison: The initial “green field” development of the first caprolactam production in 1967 had cost Bayer about 200 million marks.
What is Behind the Concept of Forward Integration?
Polyamides are used for synthetic resin and film products. “Forward integration” is the key word, explains Dr. Stephan Deutsch, Head of Worldwide Intermediates Activities of the Lanxess business unit HPM. Around the clock, a fleet of trucks supplies caprolactam from Antwerp to Uerdingen on the Lower Rhine for polyamide production.
Through the use of energy and heat, the site is also well-integrated backwards, assures Deutsch. Economies of scale, the high level of capacity utilisation and the security of supply of its own polyamide lines do not only offer consistent product quality, but will also put Lanxess in pole position in terms of cost efficiency, explains the intermediates expert.
The announced increase of investments to about 400 million Euros in Antwerp is only a building block in the overall performance material plan: Support plastic solutions from concept to production with market proximity, innovations and expertise: “Our engineers speak the same language as the application specialists of our customers” explains Tim Arping, Head of Application Development. In contrast to decentralised, global production, formula development is centralised according to uniform standards in Germany.
There might be more to it than just Caprolactam - page 4 unveils 'the big picture'!
The Big Picture
The key is the entire value creation chain, reaffirms HPM-head Dr Zobel. And it is worth it: This enabled the high-performance materials business of the group to increase its margin from 6.1% in 2013 to over 15% in 2016. These figures are also reflected in the business results: Until 2010, the Business in intermediates and plastic raw materials was responsible for the majority of the turnover of the Performance Materials Division (63%).
Today, this share is less than 20% - money is earned from engineering plastics or compounds. Zobel is sure that the fact that these are so lucrative is down to the excellent integration over the entire manufacturing process. No wonder that the chemical giant also operates a state-of-the-art production for chopped fibreglass on the other side of the river.
Sometimes, it is worthwhile going against the flow: Today, almost half of a car is made of plastics - and the trend is increasing. By 2020, Zobel expects that world-wide demand for engineering plastics will increase by 50% compared to 2015. On the River Schelde, they are ready for when the tide turns.