Showa Denko announces long-term strategy following Hitachi acquisition

MOSCOW (MRC) -- Showa Denko has announced a long-term strategy covering 2021-30 following the company’s acquisition of Hitachi Chemical, renamed Showa Denko Materials, earlier this year, reported Chemweek.

The acquired company became a consolidated subsidiary of Showa Denko in April. A “long-term vision” is needed to “integrate the two companies as soon as possible and establish a foundation for future growth” in the face of intensifying worldwide competition and expected changes in market structure, Showa Denko says. The strategy includes sales and earnings targets as well as restructuring measures such as divestments and job cuts.

Showa Denko has split the two companies' portfolios into four business categories: core-growth businesses, next-generation businesses, stable-earnings businesses, and fundamental technologies/materials businesses. Each will have “a competitive advantage commensurate with their respective roles,” Showa Denko says.

The core-growth and next-generation businesses will drive the Showa Denko group’s future growth, the company says. Core-growth businesses consist of electronics and mobility, including advanced materials, which possess “overwhelming scale/top-share products in growing markets and which will sustain the group’s future growth,” Showa Denko says. The next-generation businesses are life sciences, which are “in an advantageous position that can lead to future growth in promising markets, and that will be developed into a next-generation pillar,” Showa Denko says.

The stable-earnings businesses include carbon, petrochemicals, device solutions, industrial gases, basic chemicals, coating materials, electronics materials, energy. These activities “earn a stable profit and generate investment capital with competitiveness and a high share in markets where the competitive landscape is stabilizing,” Showa Denko says.

The fundamental technologies and materials business include ceramics and functional chemicals, “with a wide range of inorganics, organics, and aluminum technologies that support the competitiveness of the other three business categories,” Showa Denko says.

Showa Denko expects the electronics market to “remain fiercely competitive,” but says the “direction of technological development is set and rapid structural changes and new entries in the industry are less likely to occur.” The company highlights its position as the world’s biggest manufacturer of semiconductor materials with annual sales of about ?200.0 billion ($1.9 billion). “The Showa Denko group is in the top position, far ahead of all other players in terms of business scale and offers a broad product portfolio that boasts global top-level competitiveness and share in both wafer and packaging processes,” the company says.

In mobility, Showa Denko envisages that competition for the top position among multiple manufacturers of advanced materials will continue. The group “will manage certainty and uncertainty with its portfolio of businesses, by leveraging global top-share products and its product line-up, enhanced through integration,” it says. These include meeting demand from the trend toward vehicle-weight reduction and the shift to vehicle electrification.

Showa Denko expects the life sciences business to grow “significantly.” The company plans to leverage its contracting business, based on a worldwide production structure that includes three sites across Europe, Asia, and North America.

Cumulative sales for the core-growth and next-generation businesses totaled approximately Yen 230 billion in 2020, and the group will seek to expand this to Yen 600 billion by 2030, achieving a compound annual growth rate of 10% mainly through innovation. Together they will generate an additional Yen 18 billion and ?48 billion in operating income in 2025 and 2030, respectively, Showa Denko says.

Showa Denko says the integrated company will aim to be in the worldwide chemical industry’s top quartile over the medium- and long term, in terms of sales and profit. It is targeting an increase in overall sales from Yen 1.2 trillion in 2020 to Yen 1.6 trillion in 2025 and ?1.8-1.9 trillion in 2030. The company is aiming for an increase in EBITDA from Yen 900 million in 2020 to Yen 3.2 billion in 2025 and an increase in its EBITDA margin from 8% this year to 20% in 2025.

Showa Denko plans to restructure its portfolio steadily through 2023. The company says it is “considering and negotiating” the sell-off of multiple business. It envisages divestment proceeds totaling ?200 billion on an enterprise value basis.

The company is also planning profit-improvement and asset-streamlining measures. This includes synergies arising from the integration of Showa Denko and Showa Denko Materials. The company is considering six initiatives including reducing procurement and logistics costs, improving productivity, and cutting about 1,500 jobs. The aim is to boost annual profit by ?28 billion by the end of 2023.

Showa Denko, meanwhile, will consolidate its operating sites and says that these measures are not included in the profit-improvement initiatives. The company forecasts that asset streamlining will yield Yen 50 billion in additional profit through 2021.

Other measures include reducing working capital, which the company expects to yield about Yen 25 billion in additional profit and selling marketable securities, which is expected to generate about Yen 20 billion.

The group is due to complete construction of a worldwide R&D hub at Kanagawa in Yokohama, Japan, in spring 2022. It envisages an ESG-oriented R&D focus at the new facility based on the expertise of Showa Denko and Showa Denko Materials.

Showa Denko expects to complete the integration of the two companies into a single entity in January 2023, following “substantive integration” through July 2021 and the integration of head offices in October 2021.

As MRC informed earlier, Japanese firm Hitachi Chemical Company changed name to Showa Denko Materials on 1 October 2020.

MRC also wrote before that Showa Denko (SDK) expanded production lines to produce vinyl ester resin (VE) and synthetic resin emulsion (EM) in the premises of Shanghai Showa Highpolymer Co., Ltd. (SSHP), a Chinese subsidiary of SDK, and has increased production of VE and EM there, aiming to expand the Showa Denko Group’s functional resin business in China.

According to MRC's ScanPlast report, October total production of unmixed PVC grew to 86,600 tonnes from 86,000 tonnes a month earlier, SayanskKhimPlast and Bashkir Soda Company increased their capacity utilisation. Overall output of polymer was 805,100 tonnes in the first ten months of 2020, which virtually corresponds to the last year's figure. Two producers increased their production, whereas two other manufacturers reduced their output.

Showa Denko K.K. Mainly engaged in the petrochemical business. The company's petrochemical division produces and markets industrial gases, olefins, organic chemicals, and others.

Hitachi Chemical is a consolidated subsidiary of Showa Denko and is involved in the manufacturing, processing and sales of functional materials and advanced components and systems.
MRC

MOSCOW (MRC) -- Chile’s SQM said on Tuesday it had inked a long-term agreement with LG Energy Solution to supply the South Korean battery maker with ultralight metal lithium, a main ingredient in powering electric vehicles, said Reuters.

SQM, the world’s No.2 producer of lithium, said the contract would run between 2021 and 2029 and involves the supply of approximately 55,000 metric tons of lithium carbonate equivalent, SQM said in a statement.

Pablo Altimiras, who oversees SQM’s lithium business, said the deal demonstrated confidence in the quality of the company’s product.

"These are long-term contracts that point to SQM’s stability," Altimiras said, adding that the company would continue seeking out such deals in the future.

South Korea’s LG Chem, an electric car battery supplier for Tesla Inc and GM, said in September that it would separate its battery making business into a new company - LG Energy Solution - to meet growing demand from European car makers and increasing sales of cylindrical batteries used in Tesla cars.

Car and battery makers in the United States, Europe and China are scrambling to lock down supplies of lithium ahead of an anticipated boom in demand for electric vehicles.

Many miners had moved to boost output ahead of the rush, but the COVID-19 pandemic largely temporarily slammed the brakes on the electric vehicle revolution, driving down prices, denting profits and forcing many companies to shelve expansion plans.

In November, SQM nonetheless said its plans to boost its production of lithium carbonate and lithium hydroxide by the second half of 2021 were still on track.

SQM also plans to increase its production capacity to 180,000 and 30,000 metric tons of lithium carbonate and lithium hydroxide, respectively, by 2023.

As MRC informed earlier, LG Chem developed a new biodegradable material potentially with mechanical properties and transparency equivalent to synthetic resins such as PP.
MRC

MOSCOW (MRC) -- Aceto says it has acquired IsleChem (Grand Island, New York), a contract manufacturer and R&D organization. Terms of the transaction, including purchase price, were not disclosed, reported Chemweek.

The deal adds to Aceto’s capabilities in chemicals sourcing, quality and supply chain.

“The COVID-19 pandemic has reinforced that access to a diverse, secure supply chain and dependable manufacturing is essential to business continuity,” says Aceto CEO Gilles Cottier. “This acquisition adds manufacturing and R&D capabilities to enhance Aceto’s already robust supply network. IsleChem is poised for facility expansion to service growing market demand, allowing the combined company to support more of our customers’ needs from development through to commercialization and full-scale production.”

Aceto says it will invest in IsleChem’s operations, including expanding the business’ workforce.

As MRC informed before, chemical production in the US increased 0.4% on a sequential three-month-moving-average (3MMA) basis in November, according to the American Chemistry Council’s (ACC). This follows a 1.1% gain in October, and 0.6% gain in September. Improvement was evident in most chemical end sub-sectors, including fertilizers, synthetic dyes and pigments, chlor-alkali, and inorganic chemicals, although gains eased in coatings, adhesives, crop protection chemicals, and some other sectors. Chemical production also increased in all regions of the country.

We remind that Russia's output of chemical products rose in October 2020 by 7.2% year on year. At the same time, production of basic chemicals grew in the first ten months of 2020 by 6.3% year on year, according to Rosstat's data. According to the Federal State Statistics Service of the Russian Federation, polymers in primary form accounted for the greatest increase in the January-October output. October production of polymers in primary form grew to 857,000 tonnes from 852,000 tonnes in September. Overall output of polymers in primary form totalled 8,340,000 tonnes over the stated period, up by 17% year on year.
MRC

MOSCOW (MRC) -- NextChem, Maire Tecnimont Group’s subsidiary for the development of projects and technologies for energy transition, and JFE Engineering Corporation, engineering and operative company of Japan Group JFE, have signed a commercial agreement which strengthens the cooperation between the companies, according to Hydrocarbonprocessing.

The agreement aims at developing in cooperation the model which considers waste as a resource to produce advanced fuels, hydrogen, fertilizers and low carbon chemical products. The process of chemical conversion of waste into syngas and the use of this intermediate to produce circular hydrogen, advanced fuels and many other key products for world economies, allows to contribute to the decarbonization of production processes and to reduce the carbon footprint in the final use phase of products.

The alliance between the companies allows an integrated enhancement of plant technologies of JFE and Maire Tecnimont Group for the realization of Waste to Chemical projects, starting from the feasibility study from an economic and technical perspective, up to the turn key construction, including the high qualified training of the staff in JFE plants in Japan. Starting from JFE’s experience Nextchem has defined an integrated Waste to Chemicals technological platform that is ready and willing to license worldwide.

“The recovery of carbon and hydrogen contained in waste allows to reduce the use of fossil sources for the production of fuels and basic chemicals. The collaboration between NextChem and JFE Engineering Corporation enhances the know-how of the Groups. NextChem aims to expand its offer to the global market of technological solutions for the energy transition and circular economy, stimulating the demand. Our technological Waste to Chemical platform is solid, referenced, ready and profitable; it is our response to the forced and virtuous path to a low-carbon economy, to the problem of dependence from abroad of many countries for some basic products of the chemical industry and also to the global problem of recovery of waste fractions currently not recyclable”, commented Pierroberto Folgiero, CEO of Maire Tecnimont Group and NextChem.

As MRC reported before, in July 2020, Eni and NextChem, the Maire Tecnimont Group’s subsidiary for green chemistry, strengthen their partnership one year after their first agreement. This partnership will conduct research for a new project to be developed in Taranto, in addition to ongoing engineering studies for a waste-to-hydrogen production plant at the Eni bio refinery in Venice, Porto Marghera, and for a waste-to-methanol production plant at the Eni refinery in Livorno.

Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 1,760,950 tonnes in the first ten months of 2020, up by 3% year on year. Only high density polyethylene (HDPE) and linear low density polyethylene (LLDPE) shipments increased. At the same time, PP shipments to the Russian market reached 978,870 tonnes in January-October 2020 (calculated using the formula: production minus exports plus imports minus producers' inventories as of 1 January, 2020). Supply of exclusively of PP random copolymer increased.
MRC

MOSCOW (MRC) -- Royal Dutch Shell on Monday said it will write down the value of oil and gas assets by USD3.5 billion to USD4.5 billion following a string of impairments this year as it adjusts to a weaker outlook, said Reuters.

In an update ahead of its fourth quarter results on February 4, Shell said the post-tax charge was due in part to impairments on its Appomattox field in the U.S. Gulf of Mexico, the closure of refineries and liquefied natural gas (LNG) contracts.

It said some charges involved in its restructuring would be recognised in 2021. Shell shares were down by around 4% in early trading in London. In October, Shell, the world's biggest LNG trader, wrote down the value of its LNG portfolio by just under USD1 billion, focusing on its flagship Prelude project in Australia.

That followed a USD16.8 billion writedown in the second quarter which also included Prelude and a sharp cut in its price outlook. CEO Ben van Beurden on Feb. 11 will unveil Shell's long-term strategy to sharply reduce its greenhouse gas emissions and expand its low-carbon energy and power businesses.

In its update, the Anglo-Dutch company also said it expects oil and gas production in its upstream division to be around 2.275 to 2.350 million barrels of oil equivalent per day, slightly higher than in the third quarter. Production was impacted by the closure of platforms in the Gulf of Mexico due to hurricanes as well as mild weather in Northern Europe. LNG liquefaction volumes are expected to be between 8 and 8.6 million tonnes.

Oil refinery utilisation is expected to be between 72% and 76% of capacity in the quarter, reflecting continued weak demand due to the coronavirus pandemic. Shell, the world's largest retailer, said its fuel sales were expected to be in a range of 4 to 5 million barrels per day, roughly similar to the third quarter.

Record profits from its marketing business, which includes over 45,000 petrol stations, strongly boosted Shell's third-quarter results. The company said, however, that its fourth-quarter marketing results were expected to be "significantly lower" than the previous quarter. Oil and gas trading profits were also set to decline sharply in the fourth quarter from the third quarter, it said.

As MRC informed previously, Royal Dutch Shell plc. said in November that its petrochemical complex of several billion dollars in Western Pennsylvania is about 70% complete and in the process to enter service in the early 2020s. The plant's costs are estimated to be USD6-USD10 billion, where ethane will be transformed into plastic feedstock. The facility is equipped to produce 1.5 million metric tons per year (mmty) of ethylene and 1.6 mmty of polyethylene (PE), two important constituents of plastics.

Ethylene and propylene are feedstocks for producing PE and polypropylene (PP).

According to MRC"s ScanPlast report, Russia's estimated PE consumption totalled 1,760,950 tonnes in the first ten months of 2020, up by 3% year on year. Only high density polyethylene (HDPE) and linear low density polyethylene (LLDPE) shipments increased. At the same time, PP shipments to the Russian market reached 978,870 tonnes in January-October 2020 (calculated using the formula: production minus exports plus imports minus producers' inventories as of 1 January, 2020). Supply of exclusively of PP random copolymer increased.

Royal Dutch Shell plc is an Anglo-Dutch multinational oil and gas company headquartered in The Hague, Netherlands and with its registered office in London, United Kingdom. It is the biggest company in the world in terms of revenue and one of the six oil and gas "supermajors". Shell is vertically integrated and is active in every area of the oil and gas industry, including exploration and production, refining, distribution and marketing, petrochemicals, power generation and trading.
MRC