The latest in a string of investments being made in China, Bayer MaterialScience AG recently announced an agreement to develop a polycarbonate color competence and design center, as well as a polyurethane systems house, in the western Chinese city of Chongqing.
Rainer Rettig, the head of Bayer's polycarbonates Asia-Pacific business unit, discussed plans for the center at a news conference held to coincide with Chinaplas 2011, held May 17-20 in Guangzhou.
“The industries traditionally in Shanghai and Guangzhou have built new capacity in Chongqing,” said Rettig. “We follow our customers, which then helps us spread to local manufacturers.”
While Bayer did not feature an exhibit at Chinaplas, the company's continuing investment in the market has been hard to miss over the past six months.
In December, Bayer announced plans to double capacity in the polyurethane raw material MDI at its Shanghai facility by 2016. The company plans to invest 110 million euros ($155 million) in downstream facilities by 2012. In addition, Bayer is in the process of moving its global headquarters for polycarbonates to Shanghai.
“We want to increase group sales in Greater China to around 5 billion euros ($7.3 billion) by 2015,” said Marijn Dekkers, chairman of Bayer AG, in a statement. “MaterialScience is expected to contribute at least half of this amount.”
While Rettig said Bayer “always had to be big in China,” the boom in China's domestic market has encouraged the company to think even bigger. The Shanghai expansion will increase capacity to 1.1 billion pounds per year, adding two new lines. The first step of the expansion will be to install the two lines, said Rettig, and then debottleneck them in phases until 2016, when they will run at full capacity.
“For the time being, China is still importing a lot of material,” Rettig said. “We still bring in a lot of material from Europe.” By bringing up capacity, Rettig hopes to bring the firm's production closer to customers.
“We want to be self-sufficient in China,” he said.
The investment in both upstream and downstream facilities reflects a dual strategy for Bayer in China, Rettig said. The company wants to add value for its customers while at the same time offering commodity materials.
China consumes one-third of the world's polycarbonate, but per-capita PC consumption is still low.
“Markets tend to start with polypropylene then go to ABS,” said Rettig. As they get more sophisticated, markets will eventually land on PC. “Average polycarbonate consumption is still quite low in China,” he said. “The customers that are coming to us have made the decision to use polycarbonate.”
In China, Rettig sees two particularly promising areas: lightweighting in the automotive sector and what he called China's “illumination market.”
“We still have a lot of traditional lamps in China,” he said. “But, these lamps will eventually be replaced by [light-emitting diodes] or another generation of new lights.
“This is a step change and whenever an industry makes a step change, there are opportunities,” he said.
LEDs on their own do not disperse light well. The bulbs create a focused point of light. “To disperse the light, you need clever lenses,” Rettig explained.
In many cases, Bayer hopes to develop new applications for PC in collaboration with its customers. According to Michelle Jou, vice president of Bayer MaterialScience's polycarbonate business unit in China and Hong Kong, the company has been hosting technical days on site at some customers' plants.
“We are getting customers to come to us earlier,” Rettig said.