Chemical giants cross the border into Huntsman to lift the aldehyde-free wave of China plate market

Zhong' ang Dongying Report

In the Internet age, the more cross-border business rivals come, the more dangerous they are. Just like Kodak, which made camera film, was quickly eliminated by smart phones, instant noodle giant Master Kong was hit hard by take-away food delivery. Sometimes, seemingly powerful industry leaders may be subverted by unexpected business rivals overnight.

On June 4th, 2019, Huntsman Group, a global top 500 chemical giant, officially announced in Dongying, a major chemical town in China, that it would join hands with many local and international resources, including the Forest Products Industry Planning and Design Institute of the State Forestry and Grassland Bureau, to cross-border into the China board market: to build an automatic production line of polyurethane "formaldehyde-free plywood" and use polyurethane instead of formaldehyde as adhesive to produce formaldehyde-free plywood, so as to solve the formaldehyde pollution of plywood that has long troubled many users and improve the automation level of the industry in China.

Digging business opportunities in chaos

Headquartered in the United States, Huntsman is a global special and special chemical manufacturing and sales group with a global operating income of 9 billion US dollars in 2018. As early as the early 1980s, Huntsman was the first foreign-funded enterprise in MDI industry to enter China.

However, as a world-renowned chemical enterprise, Huntsman once suffered from MDI capacity bottleneck due to the rapid development of China market. In 2018, Huntsman's expansion plan with a total investment of 5.1 billion yuan and 240,000 tons of MDI capacity was completed and put into operation. At present, its total MDI production capacity in China has reached 400,000 tons, accounting for about half of its global production capacity.

Few people can tell clearly how many market segments there are in the chemical industry. Among all kinds of chemicals, there are few products that are controlled by a few giants and are profitable like polyurethane. In the field of polyurethane, it is divided into bulk raw materials with low profit (pure MDI and polymeric MDI) and downstream products with high added value (such as applications in automobiles, coatings, buildings, pipelines, etc.). After the expansion of Huntsman, the production capacity in Asia-Pacific ranks behind Wanhua, BASF and Kostron. But what Pan Lumin values is that in terms of unit output value, Huntsman surpasses all industry rivals such as Wanhua and BASF in Asia-Pacific.

After the expansion of Huntsman in China, it is urgent to find ways to release the production capacity. "If only 10% of the scenes used in one-third are replaced by polyurethane, it means that the demand for MDI is expanded by 150,000 tons, which is one-third of Huntsman's production." More importantly, this is in line with Pan Lumin's "Leaping Tiger Plan" in the Asia-Pacific region-the strategic transformation from bulk raw materials to downstream application fields, so that the unit output value will be doubled again.

The downstream of Pan Lvmin's choice is the plate market in China. "Three years ago, we visited a customer who made floor heating panels in Chengdu, because polyurethane was used as insulation material under the floor. At that time, we found that polyurethane can solve the problem of floor heating and insulation, but the floor itself is made of plywood containing aldehydes. " This shocked Pan Lumin, president of Huntsman Polyurethane Division in Asia Pacific! Because in the case of heating, formaldehyde will accelerate the release, which will bring incalculable potential threat to the health of residents.

At present, the vast majority of boards in China use formaldehyde as adhesive, and all kinds of man-made boards are widely used, such as floors, cabinets, bookcases, decorative boards and so on. The harm of formaldehyde is well known, and it is the main cause of leukemia and various cancers.

Since then, Pan Lvmin has been considering whether to enter the artificial board market in China in view of how to solve the market pain points.

In 2018, the output of plywood in China is about 180 million cubic meters, which is the largest of the three kinds of artificial boards in China, accounting for about 60% of the whole market. At the same time, the output of 180 million cubic meters also accounts for 60% of the global plywood market.

However, after six months of market research, Huntsman discovered the chaos in this industry: as a big consumer and trading country, there were more than 5,300 plywood production enterprises in China at the end of 2018, with a total production capacity of about 180 million cubic meters per year, distributed in 28 provinces (cities, districts). From small workshops to medium and large enterprises, the scale ranges from 10,000 cubic meters to 30-40 cubic meters, and there are 700,800 to 1,000 employees. The characteristics of labor-intensive industries are outstanding, and the automation and continuity of production need to be improved. The phenomenon of "scattered pollution" is prominent in some areas.

What makes Liu Xuehong, general manager of composite wood products in Asia-Pacific region of polyurethane division of Huntsman Group, curious is that "after talking with equipment manufacturers, plywood enterprises and plywood users, I found such a strange phenomenon: every customer is complaining about the low level of the industry, but no one is willing to come out and do something."

After analyzing some current situations, Huntsman draws the following conclusions: First, the scale of the enterprise is very small, and the annual profit may be only a few million to 20 million yuan, so the investment in automation is limited; Second, the market competition is fierce. More than 5,000 enterprises and small and medium-sized enterprises are worried about survival, while big enterprises are worried about the competitive pressure brought by small enterprises ... The biggest advantage of Huntsman is that polyurethane can be formaldehyde-free as an adhesive.

In response to this phenomenon, Liu Xuehong analyzed, "After visiting a circle, Huntsman realized that the whole industry urgently needs to upgrade to formaldehyde-free, automation and intelligence. The limitations of innovation within the industry are often very large, so this industry change may come from the outside. Therefore, Huntsman decided to roll up his sleeves and develop an entry-level automation production line suitable for the China market, which will be a stepping stone for the whole industry to a higher level of automation in the future. "

"Tiger Leaping Plan"

However, from the familiar upstream chemical manufacturing cross-border to the unfamiliar downstream application market, Huntsman must find solutions for all the pain points in the industry in order to achieve rapid market promotion. And every step to resolve the pain points faces new challenges.

"Although there are complete sets of automation equipment abroad, the investment threshold is very high, which is difficult for most existing enterprises in China's artificial board industry to bear. If we want to do research and development within the industry, it will be a very complicated and huge project. " As a result, Huntsman began to actively seek partners in China, trying to promote the reform of China plate market with external forces.

The cooperation between Huntsman and the National Forestry and Grassland Bureau Forest Products Industry Planning and Design Institute is a coincidence. One day in 2017, Liu Xuehong suddenly realized that the specialty of the planning and design institute lies in process design, and Huntsman's advantage lies in adhesive, and the combination of the two parties can take advantage of each other's strengths. When meeting the next day, Liu Xuehong cut to the chase, and it took only a few minutes to introduce the business model clearly and expressed the desire for cooperation. Zhang Zhongtao, member of the Party Committee of the Forest Products Industry Planning and Design Institute of the State Forestry and Grass Bureau, director of the First Institute of Industry and deputy secretary-general of the China Forestry Industry Association, responded quickly and the two sides hit it off.

"When considering the key elements of the automatic production line, we feel that there is only one-it is suitable for the China market and has good economy." Liu Xuehong explained that, first, the initial investment threshold for equipment should be lowered. Second, improve the efficiency of long-term operation. Improving the long-term operating efficiency is reflected in two aspects: reducing costs, raising prices and improving the comprehensive added value of products. In the end, Huntsman focused its cross-border products on geothermal plywood. This is because the release of formaldehyde in the floor is accelerated under heating, and the environmental protection needs of residents are more urgent.

In the research and development of automatic production line, Huntsman combined the technological factors of different industries: blank assembly is the equipment assembled by Finnish companies in the professional field, and continuous hot pressing is the process used by MDF and particleboard, which realizes the localization of automatic production line, thus ensuring the economy of equipment investment.

Up to now, this automatic production line of polyurethane "formaldehyde-free" plywood has completed the debugging and improvement of design and technology, and can realize commercial technology transfer.

According to Huntsman's calculation, the total investment of a production line does not exceed 200 million yuan. Because the new plate is formaldehyde-free, consumers are willing to pay more, which can increase the added value of the product by 25%. At the same time, the degree of automation has increased, and the number of workers used has dropped from about 900 to less than 100; The total investment in the production of core equipment will be reduced by more than 30%, and the expected return period will be shortened by two years.

"The first generation scheme, Process 1.0, was developed for the China market, but it was mainly to make plywood enterprises in China affordable, affordable and able to realize the first step towards automation. In the future, it still has a lot of room for upgrading, which can achieve 2.0 and 3.0 and continue to promote the development of the industry. " Liu Xuehong said.

Although Huntsman has crossed the border from chemical industry to plate market, this multinational giant only hopes to provide polyurethane and technical equipment, and will not really enter the unfamiliar terminal market. This business model seems to be similar to that of Pepsi-Cola in China, which only sells cola concentrate and jointly builds a filling plant.

Huntsman set the standard of investment cooperation as "We hope to have plywood production experience and certain investment and financing ability and management experience when selecting the first builder" and "be close to resources, which are not only local resources, but even imported resources", which can make this production line commercialized faster.

A senior person of China Internet whole house soft binding enterprise pointed out that with the improvement of urban living standards, consumers' demand for formaldehyde-free products such as furniture, doors, windows and floors is getting higher and higher, and the market potential is huge. However, at present, there are many products with the concept of non-aldehyde, and the market order is chaotic. He believes that Huntsman uses polyurethane as adhesive to cross-border into the plate market, and how to popularize science and educate potential customers will be the primary problem in project promotion.

Editor in charge: Zhang Guoshuai