Dr. Helmut Plum, Global Business Director Paints & Coatings sector

As a world-scale supplier of many chemicals including acetic acid, vinyl acetate monomer (VAM) and emulsion polymers, Celanese designs and builds its production facilities based on the best available technologies and production processes. The complex at Nanjing, engineered to function efficiently, is a true world-class operation conceived to make acetyl-based products reliably and consistently from low-cost coal-based feed stock, a plentiful resource within China.

Celanese is known as a reliable and trusted source for emulsion polymers around the world. The company’s sales success strategy remains essentially the same in China as it is in Europe and the Americas; that is, to support coatings makers with the technologies, technical services and formulating insights that allow for the manufacture of higher-value products made with emulsion polymers.

This article is based on an interview with Dr. Helmut Plum, Global Business Director Paints & Coatings sector.

1. In what sectors of the industry do you see the greatest growth in China now? Is it architectural or industrial? What do you predict the situation to be five years from now? What are the biggest growth areas in the architectural sector?

The building sector in China has been growing by approximately 10 to 15% per year. Although there are some statements that this increase will stabilize, a growth rate of 10% can be expected for the next few years. Accordingly, architectural coatings have extraordinary upside potential within the Chinese economy. We estimate that within five years this market will virtually double in size. Also, the industrial sector will grow about 80% over the next five years. According to Eric Wu, our commercial manager in China, the majority of growth will come from water-based coatings formulas. Celanese is actually on the ground in China now, with a sales and technical team and an application lab, setting the groundwork that will help to ensure coatings makers can produce new generations of architectural paints that fulfill needs for better performance, quality and environmental friendliness.

2. For interior architectural coatings, what is the consumer preference or emphasis in China – matte finishes vs. gloss? Scrubability? Or color?

Matte finish is the preferred architectural gloss level. Consumers also prefer low odor and a washable finish, very similar to the rest of the world. With regard to color selection, 95% of the market in China is based on ready-mixed colors. A relatively small percentage of the market, say 5%, is available as base paints for custom tinting.

3. Is the interior architectural market in China primarily a DIY market or contractor?

Without a doubt, the architectural market in China is predominantly based on contractor work. Our team in China estimates that up to 95% of coatings projects are handled by contractors. Generally, contractors prefer many of the features of paint that are attributable to our vinyl acetate/ethylene (VAE) emulsion technology: that is, easy application, good leveling and excellent touch up.

4. How many plants do you currently have in China, and what are your long-term goals for further growth there, including the geographical areas?

We’re now in the process of building a fully integrated emulsion facility in Nanjing, within close proximity to Shanghai, one of China’s largest centers of commerce. The new facility is the 10th within the Celanese family of emulsion facilities around the world and the first on mainland China.

Included in the back-integrated complex will be a 600,000-metric-ton acetic acid plant and a 300,000-metric-ton vinyl acetate monomer (VAM) plant, which will begin operations in 2007 and 2008 respectively. One of the distinguishing features of the facility will be a state-of-the-art pressure reactor designed to produce (VAE) vinyl acetate/ethylene copolymers very efficiently. An atmospheric reactor will also be incorporated within the complex for the manufacture of other emulsions such as PVA, etc.

When the emulsions facility goes on stream, we will already have a number of customers in place who plan to utilize emulsions in new products engineered for performance. For the better part of a year, we have had sales and marketing professionals within China. In fact, one of our customers just launched a new line of premium low-VOC paints featuring our VAE emulsions.

5. How do you view the QC effort in China’s coatings manufacturing facilities? What about at the raw material plants?

High-quality ingredients serve as the starting point in the manufacture of high-quality coatings products. As an established supplier of the high-quality emulsions, we have a detailed program in place to produce world-class latex resins. We actually started the raw material qualifications process more than a full year in advance of the scheduled opening of the Nanjing facility to ensure that the emulsions are exactly the same in quality and consistency as every other Celanese facility.

Quality paints are on the rise in China. This market dynamic bodes well for Celanese emulsions on several fronts. First, as expectations for high quality goes up, every coatings maker in the country will look closely at the ingredient technologies available to them as an option for improving quality and differentiation. Certainly VAE emulsion technology will be at or near the top of that list. Also, in order to assist the paint producers, our Nanjing facility will also have a complete technical service facility staffed by industry professionals.

6. What are the environmental regulations for coatings in China compared to Europe and the United States? Are they as restrictive or heading in that direction? Are there any regulations such as we have relative to emissions or disposal?

According to our coatings technical manager, -Jeffrey Wu, the national standard in China for VOC in interior and exterior architectural coatings is < 200 g/l. But most likely the limit for interior coatings will be reduced to < 100 g/l, which is very similar to the United States. Further, there is non-compelling certification of China Green Label of Environmental Protection with a VOC regulation ≤80g/L.

There is also a trend in China toward zero-VOC (<1g/L) paints. Celanese was the first to develop emulsions for this kind of paint. These emulsions are based on vinyl acetate/ethylene (VAE) copolymers and are utilized in paint formulations around the world as an option to make high-quality paint without any solvent or plasticizer. Coatings made with VAE emulsions are capable of achieving very low and even zero VOC levels. As the world’s leading supplier of VAE emulsions, we are able to provide paint manufacturers with expert technical service to help them achieve these goals. In Europe, for example, we have been selling VAEs for low- to zero-VOC paints for decades. These coatings have been driven by consumer preferences for a ‘green’ product. Low- to zero-VOC paints are seen increasingly as a path to line expansion and product differentiation.

The Chinese people have also expressed a sincere interest in environmentally friendly products, including paint. This is very similar to the green movement seen in central Europe in the past few decades.

7. How will you handle the labor needs in China? How long a training period is envisioned? Do people from other geographical locations permanently move and take up residence to train and supervise the upcoming new plants?

Actually, Celanese has over 20 years of hands-on experience in China, working through its affiliate companies. These long-standing relationships have allowed us to establish a very strong employee training and preparation program. Today, we are training the future employees and managers of the Nanjing facility at our facility in Singapore. A select few expatriates will also support the start-up of the facility in Nanjing, China, on an interim basis. By all means, we have a very strong, well-qualified labor pool ready to operate the Nanjing facility.

8. Are most of the coatings being produced in China for internal use or are they for export of either the coating or a coated product (like coil)?

The vast majority of coatings makers in China – more than 95% – currently produce products for domestic use, though a limited number of products are currently offered in Honk Kong and to other areas within Asia.

It is important to note that nearly 88% of emulsion polymer demand in China was consumed domestically only a few years ago. With China’s economy stronger today than in 2002, it may well be that this utilization rate goes higher in the years ahead.

9. Has the cost of raw materials increased in China and Asia as it has in the United States? If so, what is the impact?

In general, raw material prices globally have been very volatile. Celanese has a distinct advantage in the raw materials area because the acetic acid plant providing the starting materials for higher-value emulsion polymers such as VAE is based on coal technology. There is plenty of coal available in China, a commodity that affords us long-term supply security. By the time the Nanjing complex is finished, it will be a fully integrated acetyls complex and the value chain will become clear to everyone.

10. Who are your competitors in China? Is the profile similar to that in the United States?

When it comes to emulsions for coatings in China, we view the large multi-national companies as competitors in the premium emulsions market including VAE. There are also many small-scale competitors set up to serve local markets. These players by definition have significantly less resources to support their customers and generally provide the more basic emulsions.

11. Are there any problems with energy shortages, fuel, etc., or with the infrastructure?

Based on discussions with our project managers at the Nanjing site, we do not anticipate any problems in this regard.

12. Other than China, where else is Celanese focusing its efforts in the global community? (i.e., the former Eastern Bloc countries like Poland and Russia, India, etc.)

Celanese remains the industry leader in Europe and North America in the area of vinyl-based emulsions. And as such we plan to leverage that leading technology and constantly evaluate all of the emerging markets of the world, including Eastern Europe, Russia and India. Celanese understands well that it needs to be globally agile in today’s marketplace. To be agile, you need to be on the ground where markets are evolving, and not simply looking at maps and supply chains from 5,000 miles away. Our employees, and in fact our whole company, is adapting to the new level playing field around the world.