draft 4, 07/09/2007 managing under uncertainties / a right time for a change epichlorohydrin (c 3 h...
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![Page 1: Draft 4, 07/09/2007 Managing under Uncertainties / A Right Time for a Change Epichlorohydrin (C 3 H 5 OCl) molecule Bruno Jestin / Senior Vice President](https://reader035.vdocuments.us/reader035/viewer/2022070402/56649f255503460f94c3bc5d/html5/thumbnails/1.jpg)
Draft 4, 07/09/2007
Managing under Uncertainties /A Right Time for a Change
Epichlorohydrin (C3H5OCl) molecule
Bruno Jestin / Senior Vice President
Head of the Business Unit
Organic Products / SBU EDS
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C H E M I C A L S
Let’s go back two years ago…
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C H E M I C A L S
Epichlorohydrinworldwide market
Epichlorohydrin producer number 4 on a worldwide basis
(Dow, Hexion, Bohai),
Production sites: FRANCE (Tavaux) - 40KT/y Germany (Rheinberg) – 56 KT/y
SOLVAY
325 310
580
60
Europe NAFTA Asia RoW
2,0%
3,5%
8,5%
7,0%
Europe NAFTA Asia RoW
Demand in 2007 (KT/y) Expected Growth
(CAGR 2007-2012)
Glass reinforced fiber
Bonding and adhesive
Protective coatings
Source: Solvay analysisSource: Solvay estimates
A robust growing market
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C H E M I C A L S
Epichlorohydrinstandard process
Chlorine
Synthetic glycerin
From 1999 to 2007: price multiplied by 4
Reinvestment under question
Growing market waiting for new capacities
?Hydrochloric
acid
Epichlorohydrin
Oil Oil derivative: derivative: propylenepropylene
Oil Oil derivative: derivative: propylenepropylene
Issues with the standard
technology
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C H E M I C A L S
950
1000
1050
1100
1150
1200
1250
1300
kT/year
2005 2007 2010
ECH supply / demand
Supply
Demand
Tight market expected in 2010
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C H E M I C A L S
Glycerinealternative renewable feedstock
0
1000
2000
3000
2007 2008 2009 2010 2011 2012
1T of oil
0,1T of methanol
1T of biodiesel: green fuel mixed with standard diesel
0,1T of glycerin
Glycerin production (estimates)
By-product frombiodiesel production process
Available
Affordable cost
Example: 0,7 ha of rapeseed
Source: ICIS, HBI,Solvay analysis estimates Source: ICIS
0%
100%
200%
300%
400%
500%
1999
2000
2001
2002
2003
2004
2005
2006
2007
H1 20
08
H2 20
08
Propylene price €/T (EU)
Glycerin price €/T (EU)
Source: ICIS, HBI,Solvay analysis estimates
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C H E M I C A L S
SOLVAY’s INNOVATION Epicerol® process - the reversed reaction
38 patent applications
Chlorinated byproducts
Chlorine consumption
divided by 10 divided by 2
Water consumption
divided by 8
Pull out from oil chain
FRANCE “Pierre Potier Prize” for Innovation in Favor of the
Environment
U.S.A. “2007 Glycerine Innovation Award” American Oil Chemists’
Society
U.K. “2008 Award for Innovation” Chemical Industries Association
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C H E M I C A L S
The Epicerol® processa big step toward sustainable development
TAVAUX, France
Targeting the growing Asian market, approval from the COMEX for an investment in a 100kT/y capacity in Map Ta Phut (TH)
Represents 25% of the market growth from 2007 to 2012
Other projects under study in various part of the world
First lab trials in Bruxelles (B)
Pilot Plant in Tavaux (F)
April 2007, startup of a 1st industrial unit of 10kT/year of Epicerol® in Tavaux (F)
50
100
New Epicerol line Average line size in theworld
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C H E M I C A L S
Where are we now?...
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C H E M I C A L S
Evolution of the glycerin price
GLC vs. Propylene v.s Brent price (Dec 95-Oct 07)
0
500
1000
1500
2000
2500
Dec-9
5
Jun-
96
Dec-9
6
Jun-
97
Dec-9
7
Jun-
98
Dec-9
8
Jun-
99
Dec-9
9
Jun-
00
Dec-0
0
Jun-
01
Dec-0
1
Jun-
02
Dec-0
2
Jun-
03
Dec-0
3
Jun-
04
Dec-0
4
Jun-
05
Dec-0
5
Jun-
06
Dec-0
6
Jun-
07
US
D/t
0
10
20
30
40
50
60
70
80
90
100
US
D/b
bl
Refined GLC Propylene Brent
Note to the COMEX for
investment in Thailand
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C H E M I C A L S
Biofuels 'crime against humanity' By Grant Ferrett
BBC News 27/10/2007
A United Nations expert has condemned the growing use of crops to produce biofuels as a replacement for petrol as a crime against humanity.
The UN special rapporteur on the right to food, Jean Ziegler, said he feared biofuels would bring more hunger.
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C H E M I C A L S
Propylene price evolution
0%
100%
200%
300%
400%
500%
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
Q1
2009
Propylene price (EU)
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C H E M I C A L S
Evolution of REBIT
0102030405060708090
100
%
janv-08
march may july sep nov janv-09
REBIT
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C H E M I C A L S
0
500
1000
1500
2000
kT/year
2005 2007 2010
ECH supply / demand update
Supply
Demand
Impact of the economic crisis on
Supply / Demand
Weakening demand
Our Chinese competitors invested in
Epichlorohydrin
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C H E M I C A L S
What would you do right now?
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C H E M I C A L S
Deeply understand what happens
Large expertise:
From the seeds (rapeseed, palm…) to our final applications (automotive, airplane, windmill…) through intermediates (Biodiesel, refining glycerin, Epoxy Resins…)
About our customers and the customers of our customers
About our suppliers and the suppliers of our suppliers About our competitors About potential substitution of our products
(Epichlorohydrin, Epoxy Resins), new applications for glycerin and new technologies (Epsilon…), legislations…
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C H E M I C A L S
Deciding about a clear strategy and stick to it despite the crisis!
Easy to explain / to share Based on a strong financial model with sensitivity
analysis + risk analysis => clear goals Sustains a very strong alignment of our people on a
worldwide basis and on a multi-function basis Constructive criticisms are warmly welcome! Once a
decision is made => we do not discuss anymore In the long term, our Epicerol® project in Thailand is still a
strategic project for the Solvay Group, supporting our diversification and risk hedging (markets, currencies and raw materials)
In the short term, need for a flexible tactic, strongly communicated
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C H E M I C A L S
Against emotion => coming with facts
« Biofuels = Crime against Humanity » => Position paper globally in favor of Biodiesel, helping us in lobbying internally and externally
« Glycerin price explosion » => In-depth study about the glycerin market, anticipating a price decrease (now ongoing) / strengthening our credibility
« Asian customers do not need us » => Strengthening our relationship with strategic prospects in Asia
“We should invest heavily in a peaceful place like Tavaux (FR)” => Going where the market is growing fast, our European plants being focused on Europe and Americas
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C H E M I C A L S
Interesting time for opportunities
Most of our customers and suppliers are ready to explore new ways of managing this crisis
We have creatively been working on these potential alternatives with several partners in term of: Extension of past agreements dealing with the long
term; New kind of contracts protecting both profitabilities; Epicerol® valorization all along the value chain; Co-investments.
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C H E M I C A L S
Demonstrated skills
Behaving as an entrepreneur: Not as a cowboy… Rejecting the « PTC » approach…/ Accepting failures But taking calculated risks, avoiding the 99,9999% accuracy Stepping back before moving forward, anticipating problems
and opportunities, balancing short and long term targets Making quick and wise decisions => clear strategy / tactic
and goals towards people Trusting people Aware of emotions Managing by examples Rewarding collaborators full of entrepreneurship