Bayer MaterialScience: Polycarbonate industry in China still developing / Capacity expansion in Shanghai in 2015 / Automotive glazing meets Chinese market needs / Michelle Jou, head of Commercial Operations PC in Asia, talks to PIE
Recently, Plasteurope.com had an exclusive opportunity to interview Michelle Jou, senior vice president commercial operations APAC Polycarbonates at Bayer MaterialScience’s (BMS, Leverkusen / Germany; www.bayerbms.com), which moved its global polycarbonates headquarters to Shanghai / China in 2011. Plasteurope.com and Ms Jou met during this year’s Chinaplas (20-23 May) kick-off B2B conference in Guangzhou (see Plasteurope.com from 29.05.2013). From the success story of the PC business in China and the entire Asian region, to the latest innovations in the automotive sector, from price volatility in South China to capacity expansions in Shanghai, Jou provided a detailed perspective of the current market situation, special opportunities and challenges in China.

PIE: In the first quarter of 2013 the polycarbonate volume sales at Bayer MaterialScience both in Europe and in North America were down. How would you describe the situation in China over the last few months? And how will the PC business develop over the rest of 2013?

Jou: Overall, we are still very positive about the outlook for China's business in general, for PC applications and also for the entire Asia Pacific. Why? Because the industry – both here in China and in the Asia Pacific region – is still developing. And there are still lots of areas within the industry which are not only booming locally, but are also developing and extending their reach even in Europe and the US. So, we are still actually seeing very positive signs regarding long-term development.

We are currently experiencing a bit of a fluctuation in the market. This is linked to the global economy where weaknesses are having an impact elsewhere. Take the Euro zone where the economic situation is not very promising at the moment. This effect has spilled over into Asia.

PIE: You feel the Euro crisis in Asia?

Jou: We do feel this because some of our customers produce for the European markets or for the US market. Luckily, the USA’s market seems to be doing pretty well, which provides a good business environment for our products.
As for our customers who are doing business in the US, they, too, report that their market environment is a positive one.

PIE: And in Europe the PC market is in a downward trend?

Jou: It began some time ago, as we see it from here. The eurozone crisis has been around for something like two years and lingers on. So, overall, I think this is a challenge for the Asia Pacific business as well.

PIE: Now one special question about BPA-related concerns: Is there any negative impact in Asia Pacific regarding the BPA discussion as in Europe, or is it more of a minor interest?

Jou: No. It is not a major topic because, maybe very interestingly, people accept the scientific argumentations here; there are less emotional discussions. On the one hand, we did not have a lot of business producing baby bottles. Yet, and more importantly, in parallel to monitoring the debate around the topic, which has been going on for a few years, we have focused our resources and efforts on some other applications. We feel it is very important to continue discovering new applications for PC products because the markets are changing and customers also want new products and applications.
High PC price volatility in South China
PIE: Let’s talk about price development: In the domestic market, PC prices appear to have slipped slightly in the southern region of China where demand is said to have weakened a little bit. Is this something that is merely temporary or regionally influenced? If there really is some kind of slippage happening, do you feel it could spread to other regions in China?

Jou: Well, South China is a very sensitive market and that has always been the case, so this is nothing new. So, whenever there's a bit of a shock in the market, the price goes down, but then there’s another shock in the market and the price goes up immediately as well.

South China actually has a large industry base and if you look at the whole of China, this is the region where they consume most of the available polycarbonates, because it is quite concentrated. That’s why the dynamic is there. I personally believe trends in South China change rather dynamically.

PIE: So you believe the price will climb again soon?

Jou: Experience shows us that prices will go up one day and then go down the next. The PC market is quite volatile, as you know, so this is the kind of volatility we have seen regularly.

PIE: And PC price volatility is not the same than in northern China or in other regions?

Jou: China is so vast and its regions differ with regards to customer and industry needs so the volatility differs as well. To put it this way: some regions feel price effects earlier before other regions.
China important pillar for global PC business
PIE: How does your company want to further strengthen its PC position in Asia, especially in China, and where do you think are the highest growth rates in this region? What country do you expect to be bringing in most of the business in the future?

Jou: We actually continue to consider China as a very, very important pillar of our business. Not just for Asia, but also for the global business. China today is the biggest market for polycarbonates. So, we must very strong here and that’s why we moved our global headquarters from Germany to Shanghai in China last year. It was actually quite a pioneering move. It is a very strong signal to the market as it tells people how important China is. We have been operating larger-scale PC production in China over the past years; this is actually continuing to expand. So, production at our Shanghai site will become the biggest Bayer production site the world.

Another aspect of our commitment can be seen very soon: we are completing the further expansion of our R&D centre in Shanghai, a process that lasted three years. Thus, we have doubled our R&D capability and capacity in China almost every two to three years. China continues to be the strongest market for our industry. In ASEAN, the largest markets for PC are Indonesia and Malaysia driven by the construction, consumer products and electrical industries. The Philippines has the smallest but fastest growing market, mostly driven by IT&C, while markets such as Vietnam and Thailand are already relatively big markets, the former driven mainly by consumer electronics, (IT&C) and the latter by its automotive industry.

PIE: And growth rates are still highest in China, or are there other countries having similar growth rates? India or Thailand?

Jou: You have slightly higher growth rates in other countries because their bases are smaller. In the overall development cycle they are probably similar to the early stages here in China, so you see double-digit growth, for many years. You still have that in some of the countries but their bases are currently not very big. However, this doesn’t mean they are not important.

We also have a very strong foothold in India. We have a small production site for compounding and it has been fully utilised almost since the second month. Production has been developing into a very positive direction with good growth.
We have other countries that are interesting for us: Vietnam is emerging while, Indonesia is still booming. Indonesia is a huge country as well in terms of population. We see quite a bi of potential there though it is in early development stages, so we are putting our efforts into these markets. And, in a certain way, we are also going where our customers go because, some of them are moving their production into those countries, thus really supporting the development of the local GDP, so we are seeing a very positive development there as well.

PIE: What about the planned PC and MDI capacity expansion in Shanghai? Have you received the final government approval for the two additional PC lines in Shanghai?

Jou: For PC expansion, we have the project approval from government and already started the construction.

PIE: Will the new lines go on stream in 2014 as announced last year?

Jou: We have received all licenses for the expansion of polycarbonates production and have started construction. We will monitor the market environment and bring the plant on-stream when the timing is right for this capacity.

According to Plasteurope.com database Polyglobe (www.polyglobe.com) Bayer MaterialScience has currently a capacity of 200,000 t/y in Caojing near Shanghai / China and plans to raise capacity up to 500,000 t/y by 2015.
PC automotive glazing major topic
PIE: One final question about the PC applications in the automotive sector. We have heard much about PC glazing. Can you please give some details of the joint projects with Chinese car makers and some application developments?

Jou: Yes. Automotive glazing in China is a very exciting development. We have been promoting the concept for several years now. Three years ago, when we began having a forum discussion, we had roughly 10, 15 people joining because it was very early, very new. Then, two years ago, we organized a larger forum and introduced the glazing technology in a broader scope and we attracted nearly 100 people. This year, we have just wrapped up another very important automotive glazing symposium and we saw participation from across the region with around 250 people. You can see the industry value for the automotive – the value chain is very interested in this technology. Why? Because everyone is looking for better solutions; cars have to be light weight, they have to be efficient in terms of fuel consumption and they also have to save more energy in the production process. This is a perfect match for the needs in the Chinese market. What is really interesting is that Chinese car makers are very keen to accept and adopt and integrate the latest technology. Thus, we are seeing very positive momentum and we now have a few exciting projects developing.

PIE: It might work out differently than it has in Europe and the US where PC glazing is not as successful as they thought it would be. So it is interesting to know if the Chinese customers and also the Chinese car manufacturers are planning to use more of this PC glazing technology than in Europe?

Jou: I believe there is potential. The symposium examples I gave you prove that customers and their tier manufacturers are very much interested. They are much more open-minded because the industry is younger and more explorative.

PIE: Is it a special class of car where the PC material is used? Is it in a high-end segment or mid-level or is it for any price range?

Jou: We have projects for every class of car because, at the end of the day, qualities such as being lightweight and fuel efficient are required for every class of automobile – no matter whether it is a high-end or medium-range or low-end price segment. And for a lot of Chinese customers, we are promoting electric cars as well and this has to be very light. Because battery and electricity consumption are so important; this is somehow also a push for the customer to think, “Okay now, what kind of solution can I have by breaking through certain technology barriers?” The projects we are now working on come from all over the place.

PIE: And would e-cars be very recognized in the Chinese market? Are consumers really keen on doing something for the environment, or is it more a question of economics? Are e-cars cheaper than others? Why would a Chinese consumer buy an e-car?
Positive outlook for e-mobility
Jou: I think it is high on the government’s agenda as well. Just like the growing city concept, a growing mobility concept, energy conservation and emission reduction are important to Chinese government based on the current 12th five-year plan from China. As we are a huge country, we have resource challenges. If you use gasoline, how much gasoline will you need? It is not going to be sustainable. So the government of China will most likely continue to promote the most sustainable solutions.

PIE: And people will accept this kind of new mobility?

Jou: I think so. You have to reach a certain economic scale to make it work. This is only a matter of time but I think that you cannot stop the trend and the trend is there. So this is a very positive outlook really for the entire industry.

PIE: What do you think are other major applications for PC? Where do you see big potential in the future market?

Jou: We talked about potential in the automotive sector both for traditional applications as well as new applications going into different kinds of automotive applications. Here in Asia, consumer electronics is also an important market. Everything that you see, all the consumer electronics, our material goes into a lot of these applications, including office equipment, printer, copier, projector and other uses. With the countries in Asia Pacific developing even further, the demand for this equipment is going to further increase. We are seeing very positive development also on the construction-related area. We are also putting a lot of our R&D resources on the few areas that I’ve mentioned.

PIE: Thank you very much!
06.06.2013 Plasteurope.com [225392-0]
Published on 06.06.2013

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