Engaging in Growing and Emerging Markets
Clariant engages in growing and emerging markets, particularly in China and India. These markets enhance Clariant’s global growth potential. Oxford Economics forecasts that the nominal CAGR of the specialty chemicals sector will be 6.2 % in advanced economies, but 8.6 % in China and 9.7 % in India. Clariant also plans to allocate more capital expenditure to growing regions – like Asia and North America – in the years up to 2025. For example, in 2022, the company announced two new investment projects in Daya Bay (China) for Care Chemicals and Additives, summing up to CHF 120 million.
By engaging in growing and emerging markets, Clariant develops deeper customer relationships on a global basis. Greater global market penetration also helps to innovate in accordance with local customer needs and to outcompete local rivals.
Clariant’s customers in India and China are located in various steps of the value chain: Business Unit Catalysts sells mainly to base chemical and polymer producers. As China and India enhance their domestic production capacities, Clariant catalysts will be in great demand there. Business AreaBusiness AreaFor the financial reporting, Clariant grouped its businesses in three core Business Areas: Care Chemicals, Catalysis, and Natural Resources. As of 1 January 2023, the Group conducts its business through the three newly formed Business Units Care Chemicals, Catalysts, and Adsorbents & Additives and will report accordingly as of the first quarter of 2023. Care Chemicals sells largely to producers of consumer applications. Business AreaBusiness AreaFor the financial reporting, Clariant grouped its businesses in three core Business Areas: Care Chemicals, Catalysis, and Natural Resources. As of 1 January 2023, the Group conducts its business through the three newly formed Business Units Care Chemicals, Catalysts, and Adsorbents & Additives and will report accordingly as of the first quarter of 2023. Natural Resources helps industrial customers to meet changing consumer demands, for example, with adsorbents for edible oil purification. In this sector, Asia-Pacific is one of the company’s major markets. Additives like Exolit® are used in energy storage systems of electric vehicles or for fire security of 5G technology.
In 2022, Clariant’s sales in Asia-Pacific remained resilient and grew by 21 % in local currency while recording notable growth in India (21 %) and China (23 %). Sales in China alone amounted to CHF 572 million, which represented approximately 11 % of Clariant’s global continuing business sales. Latin America also increased revenues by 31 % in local currency. Following the positive trend of the other regions already mentioned, Middle East and Africa grew by 26 %.
Management approach
Clariant’s Strategic Management ProcessStrategic Management ProcessClariant’s Strategic Management Process (SMP) is conducted by the business units in collaboration with Corporate Planning & Strategy. The SMP ensures Group level and business unit strategies are connected and are updated together. Clariant refreshed its SMP in 2021. addresses global growth and capital expenditures for four main regions: APAC (Asia-Pacific), EMEA (Europe, Middle East, and Africa), LATAM (Latin America), and NORAM (North America). In addition, all business units develop strategic business plans that address objectives and specific strategic initiatives for these four regions and for China in particular. Also, each business unit management committee – except that of Business Unit Oil and Mining Services – has one representative with responsibility for China.
Clariant applies a differentiated steering approach to allocate capital, innovation, human resources, and M&A to businesses with an attractive market outlook. This means investing in areas where the company is already strong or closing gaps where Clariant aims to improve its position.
In 2023, Clariant will transfer the President of its Care Chemicals business to Charlotte, USA, and the President of its Catalysts business to Shanghai, China. This increases senior management focus on these growth markets.
Clariant aims to grow its business globally by leveraging its product portfolio and customer base across all regions. Some products have particularly strong growth potential in certain regions, such as DEPAL flame retardants in China for electronic and e-mobility applications and CATOFIN® in China for propylene dehydrogenation units. There is also a demand for bio-based ethoxylate materials globally from the Clariant IGL Specialty Chemicals JV in India.
In 2022, Clariant closed its acquisition of the BASF Attapulgite business based in the USA to enable it to significantly expand its North American AdsorbentsAdsorbentsUsually solid substances which are able to selectively accumulate certain substances from adjacent gaseous or liquid phases. business. Clariant also announced that it would invest in a second flame retardants line in Daya Bay, China, to support rapidly growing local demand for flame retardants for the electronics industry.
China
Clariant has for many years been following a growth strategy in China. The company conducts profitable business there and experienced a high single-digit annual average growth rate over the last five years. Clariant plans to grow further and expand its footprint in China to outgrow the market. By producing locally, transport emissions will be reduced on imports from other production sites.
Catalysis is the company’s biggest business, serving the petrochemical industry with catalysts for several chemical process improvements. The plastic industry is served by the Additives business with flame retardants which are used in the electric and electronic industries. Clariant is also a leading supplier of bentonite clay to the foundry industry. Closer to the end consumer, the Care Chemical business is a supplier of a vast range of products for the personal and home care industry, but also serves the construction, automotive, and agricultural industry.
Clariant already reached its sales targets in China for 2023 in 2022, mainly due to price increases. The company also intends to improve its year-on-year Group EBITDAEBITDAEarnings before interest, taxes, depreciation, and amortization. margin levels despite the increasingly challenging economic environment. In the medium term, Clariant aims to increase its sales share share from 10 % in 2020 to 14 % in 2025 and to enhance the local production rate from 35 % in 2020 to 50 % in 2025. Growth will be driven by the Business Units Care Chemicals, Catalysts, and AdsorbentsAdsorbentsUsually solid substances which are able to selectively accumulate certain substances from adjacent gaseous or liquid phases. & Additives, which serves the growing electric vehicle market.
Today, China already accounts for about 28 % of the global specialty chemical market. Also, 40 % of the global growth for specialty chemicals between now and 2025 is expected to come from China.
An increasing share of Clariant’s products for the Chinese is produced domestically, which meets China’s drive for self-sufficiency and avoids supply chain issues and cost differences for Chinese customers, even more now with the high energy prices. Given the strategic investments in Chinese capacities, this share is expected to grow even further. Clariant has the vision of supporting the high-quality growth of China with sustainable and innovative solutions.
Clariant is determined to become a »China insider,« using its understanding of the local market and customer needs for local innovation and local decision-making. Clariant offers solutions that are not easy to copy and sells specialties with limited local competition, like catalysts and green surfactants. For more commoditized products, for example, in the pigments business, competition in China is very intense with high pressure on margins.
As of the end of the reporting year, Clariant was operating a total of nine production sites and three technical centers throughout China, with approximatively 1 000 employees. With the company’s One Clariant Campus and China Innovation Center, it is able to speed up its product development processes and increase its abilities to fulfill the specific needs of its Chinese customers with innovative and sustainable Clariant solutions. The company believes that stronger innovation capabilities and the increased manufacturing footprint in China will help to achieve its targeted increase in the China sales contribution to the entire Clariant Group.
In 2022, One Clariant Campus hosted the event TechConnect China, which aims to promote cross-departmental. and cross-business technical exchanges to identify opportunities for innovation and cooperation. During the technical gathering, the suppliers’ sustainability award and the winners of the Innovation Star of Clariant China were also announced.
Sustainability policy in China
With the fourteenth five-year plan (2021–25) and related policy announcements, China has raised its level of sustainability in chemicals significantly. The country now plans to achieve carbon neutrality by 2060. Therefore, it enhances investments in carbon emission reduction, especially in energy supply and mobility. There is a significant customer pull for sustainable solutions for a smaller carbon footprint. This entails huge growth potential for Clariant, for example, with next-generation catalysts that diminish the production of carbon dioxide.
China has also established a nationwide mandate for a share of renewable ethanol in transportation fuels. The Business Line Biofuels & Derivatives profits from the ensuing demand for advanced biofuels with its low-emission product sunliquid®.
Finally, China’s environmental policy aims to move chemical production sites to specialized zones with a shared centralized wastewater and hazardous waste treatment infrastructure. Off-gas and wastewater standards in China are often stricter than in Europe or the US. Clariant welcomes strict laws and their execution to avoid competitive disadvantages. It is an early adaptor of high standards and sees its efforts rewarded when all competitors must comply with strict legislation.
Business framework in China
The legal and regulatory environment in China has become more favorable in terms of acquisitions. For example, it is no longer mandatory for foreign companies to establish a joint venture structure. China even promotes fair competition between domestic and foreign enterprises and protects the interests and rights of enterprises with foreign investment. In 2022, Clariant sold products to both multinationals and domestic companies in China.
Since the 2014 free trade agreement between China and Switzerland, the protection of Clariant’s intellectual property in China has improved gradually. China has issued several intellectual property law updates and reached a new level for infringement penalties.
Clariant has an excellent reputation in China in terms of sustainability, innovation, and corporate citizenship. The company is committed to plastics recycling along its value chain and to advocacy for its EcoCircle initiative with sustainable products, solutions, and partnerships. These efforts earned Clariant several awards and helped the company to attract young Chinese talents.
Nearly 200 employees participated in various trainings in 2022 putting an emphasis on Clariant´s Key Sustainability Focus areas and the sustainability-driven value propositions in the portfolio.
Projects in China
Clariant started production in a new production facility for CATOFIN® catalysts in Jiaxing, Zhejiang province. Since 2022, the plant has addressed the strong growth in the propane hydrogenation market in this region. It produces a key product that is driving Clariant’s growth and is the most digitized Clariant facility to date, using sophisticated automation systems throughout the production process. These catalysts help to convert propane into propylene, which is used, for example, to produce plastics.
Clariant’s number one sustainable and innovative product in China is the halogen-free flame retardant Exolit® OP used in electrical vehicles, for which China is the biggest market in the world. With sales having doubled in 2022, Clariant announced that it would build. Exolit® OP factory. Before, the company had already started enhancing its existing flame retardant production facility in Daya Bay, Guangdong province. These two investments will allow the company to respond to the rapidly growing demand from the Chinese and Asia-based electrical and electronic equipment industries. By establishing local production capacities for its innovative and sustainable Exolit® OP range of flame retardants, Clariant significantly reduces time-to-market.
To meet emissions regulations, Clariant also collaborated with Jiangsu Jinneng, a specialist in volatile organic compound (VOC) abatement technology in Zibo, Shandong province. The phthalic anhydride plant of Shandong Qilu Plasticizers Co. Ltd. uses Clariant’s EnviCat® VOC catalyst to purify production off-gases, thereby removing 99 % or more of VOCs and carbon monoxide.
In Care Chemicals, Clariant continues to look for opportunities to both expand and upgrade its Chinese business, including potential further investments in local manufacturing. Clariant announced an investment to expand its production capacity for personal and home care, as well as industrial applications, in Daya Bay, China. The enhanced ethoxylation plant will also enable the introduction of new products. As a result, it will step up its production of more sustainable ingredients that can help customers advance their environmental targets and create differentiated, more sustainable solutions to meet sector demands.
The One Clariant Campus in Shanghai is one of Clariant’s major projects in China. Since 2022, it has been fully operational, and the laboratories have been finalized. It is an integrated operational headquarters in the region, an innovation facility to strengthen Clariant’s position in the country, and a chance to enhance the company’s market position. The facility combines technological knowledge and local support. It has become a platform to exchange with customers and vendors and already played a key role in the development of products for the local market, including, for example, sustainable additive solutions for China’s growing plastics, coatings, and adhesives industry.
During the 2022 China National Safety Month, Clariant hosted its first OCC Safety Week in order to get closer to achieving the goal of zero accidents by building a safe culture together. The various activities included courses and trainings in office safety, ergonomics, firefighting, first aid, AEDs, and safety devices. Clariant offered practice and drills in using fire extinguishers, first aid, AEDs, and protection equipment. Topics included leadership sign-off and safety commitment, among others. Various safety awards included »Best Slogan, Online Safety Knowledge Competition Top 10, Best Safety Deviation Report, Special Contribution Award during OCC Lockdown«, two competitions were carried out on site. In a lab area, ten best practices were shared.
India
Clariant is committed to supporting its Indian customers with the complete range of its product portfolio. This commitment is well in line with the governmental initiatives »Make in India« and »Self-Reliant India« as Clariant continues to focus on strengthening its own manufacturing facilities in India and expanding its service hubs to cater to global Clariant operations. Clariant is confident that it can contribute to the rapidly growing local market in India across all businesses – AdsorbentsAdsorbentsUsually solid substances which are able to selectively accumulate certain substances from adjacent gaseous or liquid phases. & Additives, Care Chemicals (through its joint venture, Clariant IGL Specialty Chemicals Private Limited), and Catalysts (through its joint venture with Sud Chemie India Private Limited).
Projects in India
In 2022, the 51 %/49 % joint venture with India Glycols Limited, under the name of Clariant IGL Specialty Chemicals Private Limited, became fully operational. It produces and markets ethoxylates based on ethylene oxide from bioethanol. They meet the diversified needs of various end-use industries, for example, the textile, pharmaceutical, personal care, emulsion polymerization, paint, detergent, automotive, and agrochemical industries.
This joint venture gives Clariant a strong position in the Indian ethoxylate market and turns the company into one of the leaders in the global market for green ethylene oxide derivatives and bio-based ethoxylates for home and personal care.
India Glycols will contribute its renewable bio-ethylene oxide derivative business. This includes a multipurpose production facility with an alkoxylation plant in Kashipur, Uttarakhand. Clariant will contribute its local Industrial and Consumer Specialties business in India, Sri Lanka, Bangladesh, and Nepal, as well as a payment of a mid-double-digit million amount. Like this, the joint venture allows Clariant technology to be leveraged with low-cost manufacturing.
Clariant expects the collaboration to deliver profitable growth in the next few years. For the 2022 financial year, Clariant IGL Specialty Chemicals Private Limited generated revenue including exports, which contributed positively to the top line of the Business AreaBusiness AreaFor the financial reporting, Clariant grouped its businesses in three core Business Areas: Care Chemicals, Catalysis, and Natural Resources. As of 1 January 2023, the Group conducts its business through the three newly formed Business Units Care Chemicals, Catalysts, and Adsorbents & Additives and will report accordingly as of the first quarter of 2023. Care Chemicals.
With regard to ethics, environment, safety, and health, the joint venture will follow the higher of the standards of Clariant or India Glycols.
Since 2021, Clariant has also strongly leveraged its 2017 catalyst joint venture with SCIL in India. It serves both to access the fast-growing local market for emission catalysts for two- and three-wheelers and to form a global manufacturing base for Clariant catalysts.
Clariant’s global IT hub in India
Clariant is further expanding its IT hub in Airoli/Mumbai which was created in2021. The IT hub focuses on all IT aspects including the development, implementation and support of global business applications and IT infrastructure in addition to the needs of the local businesses in India.