Weak demand in Europe and the United States, along with rising raw material costs, are driving paper chemicals manufacturers to shift their operations to Asia and Latin America

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According to China Chemical Industry News, overcapacity in Europe and rising raw material costs worldwide have squeezed the profit margins in the global paper chemicals industry. Producers plan to make up for the losses by shutting down outdated production capacity, developing new technologies, and shifting operations to regions with rapidly growing demand such as Asia and Brazil. SRIC, a consulting firm under IHS, states that the global market share for specialty paper chemicals reached around $15 billion in 2009, and it is expected to grow at an annual rate of 2.3% until 2014. Among them, the Chinese market is expected to grow at an annual rate of 6%, while markets in other parts of Asia (excluding Japan) will grow at an annual rate of 4.6%. Although there are no specific statistics for Central and South America, producers say that demand in these regions is also expected to grow at a rate faster than the global average, albeit slightly slower than in Asia. Relatively speaking, the growth rates in developed ** and regions have slowed down. Among them, the North American market will grow at a slow pace of 1.7% per year, Japan will grow at 2% per year, while Western Europe will only grow at 1% per year. Source: (http://ipaper.ccin.com.cn) Additionally, SRIC noted that although the overall demand for papermaking chemicals globally is on the rise, demand for certain grades of these chemicals will decline. The fastest decline is expected in the field of newsprint, with a decrease of 2% to 3% per year, while demand for coated paper is expected to drop by 1% to 2% per year. AkzoNobel is benefiting from the rapid growth of the Latin American market. Ikas Chemicals, a paper chemicals company under AkzoNobel, recently announced that it will invest around 90 million euros to build a world-class sodium chlorate plant in Rio Grande do Sul, Brazil. The facility will be operated by Ika Chemical, and the products will be supplied to a newly built pulp plant with an annual capacity of 1.5 million tons at Edorado Celulose Papel, a large pulp manufacturer in Brazil. The pulp mill is expected to be completed and put into operation in September 2012, and will become the largest pulp mill in the world. Furio Frigerio, a board member at AkzoNobel responsible for the specialty chemicals business, said that the construction of the new factory demonstrates the company’s determination to accelerate its growth in Brazil, a market with high global growth potential. It highlights the importance of Latin America in the company’s development strategy, and it will help the company achieve its medium-term goal of doubling its revenue in the Brazilian market to 1.5 billion euros. The general manager of AkzoNobel’s Pulp and Paper Chemicals business unit said that demand for pulp and paper chemicals in Latin America is expected to grow significantly over the next 15 years. Apart from the Latin American market, most paper chemicals manufacturers are currently investing in Asia. The Finnish company Kemira is currently investing 25 million euros in Nanjing, China, to build a new plant for the production of specialty chemicals. One of the facilities to be established is a plant for producing the neutral paper sizing agent allyl succinate anhydride (ASA), which is set to come online in 2012. Furthermore, Kemira launched an alkylene dimer (AKD) plant in Yanzhou, China, in 2010. German company BASF will also expand its production capacity for paper chemicals in Asia, as part of a restructuring plan for its paper chemicals business aimed at transferring production facilities from Europe to Asia; this restructuring is expected to be completed by 2013. In 2010, BASF also planned to build a new facility for producing carboxybutyl styrene (XSB) latex and acrylic dispersions in Huizhou, China. It also announced that it would construct a new facility for producing cationic monomers as well as a facility for producing cationic polyacrylamide in Nanjing, China. In addition, BASF also plans to relocate its paper dye factory in Günzburg, Germany, to Gujarat in India, while reducing the quantity of paper dye products it supplies. BASF’s restructuring plan for its paper chemicals business reflects the challenging business environment in the European paper chemicals sector at present. Fred Pognar, head of BASF’s paper chemicals division, said, “The European paper chemicals market is currently in a very difficult situation, and manufacturers of paper chemicals are shifting their operations to emerging markets in Asia.” ” Swiss company Clariant will also begin restructuring its paper chemicals business this year, shutting down the production facility for paper chemicals located in Muttenz, Switzerland. Müntz’s production capacity will be transferred to Prat in Spain.