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Feedinfo News Service: Your recent announcement concerning the expansion of your Methionine and raw material capacities has reinforced your position as the global leader in this business. Could you be more precise regarding where and when these capacity increases will occur?
Dr. Beste: This is a comprehensive mid-term program, making some of the new capacity available towards the end of 2010, and then growing stepwise over the next years. Our expansion plans are basically in line with the expected development of the methionine markets in the years ahead, with some flexibility built in to respond to short term fluctuations. In our expansion concept, the existing plants in Antwerp, Mobile and Wesseling are all involved, covering not only the expansion of the production capacity for the final product DL-Methionine but also the essential intermediates.
Feedinfo News Service: Will all your production sites be fully integrated once you have completed your announced projects?
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Dr. Reiner Beste
President Evonik Degussa
Business Unit Health & Nutrition |
Dr. Beste: Owning and optimizing the various production technologies for each intermediate together with full backward integration has been one of our major strengths in the past decades. Thus, this strategy will be continued with the present expansion projects. But on the other hand we do not generally exclude alternative options for long term strategic deals with external suppliers if they support our growth strategy and help assure our cost leadership targets.
Feedinfo News Service: What is your estimate of the size of the world market during 2008 and what was your market share?
Dr. Beste: For the year 2007, our estimates are close to FeedInfo’s estimate of about 730 kt global methionine demand (FeedInfo Nov. 26, 2008). In 2008, we observed a strong market growth which exceeded the average market growth rate over recent years by 1 or 2%. In this environment, the re-start of our “old” Antwerp methionine production facility helped us to grow over-proportionally.
Feedinfo News Service: What market growth rates have your new projects been based on?
Dr. Beste: In the plannings for our expansions, the identification of market growth drivers and their effects on market growth are essential pillars. In this context, meat and egg consumption are the basic drivers, and continuous development of modern feed formulation systems in emerging markets as well as the development of upside potentials like feed production for aquaculture come on top. Overall, we are confident that methionine market growth rates will consistently exceed global GDP growth rates. |
Feedinfo News Service: What changes in consumer eating habits have you observed since the beginning of the financial crisis?
Dr. Beste: This question is extremely difficult to answer as the economic crisis has only been felt for less than one year now, and it typically takes more time to measure shifts in consumption patterns accurately. There are some indications - especially in emerging markets with lower income - where consumers seem to shift from the more expensive types of meat like e.g. beef to the cheaper poultry meat and eggs. On the other hand, Rabobank recently reported the lowest drop in global meat trade in 2009 for beef (-4,4 %) and the highest for pork (-12,4%). Poultry meat in this statistics was at -6,2 %. Overall: no clear picture, no consistent change visible up to now. Nevertheless, we feel that the preference for poultry products in urban societies is likely to persist.
Feedinfo News Service: From a Methionine producer standpoint, what risks have you identified during the coming 1 - 3 years?
Dr. Beste: Higher volatility in raw material cost as well as temporary supply disruptions for specific raw materials seem to be the most challenging issues for the years ahead. This is especially true in case of an ongoing crisis affecting chemical supply chains negatively. Hence it will be extremely difficult to make accurate assumptions for future raw material price developments. Cost inflation as we have seen in 2008 e.g. for sulfur is likely to re-occur without much warning. Nevertheless, we feel quite well prepared for such scenarios given our globally balanced and integrated production and sourcing set-up.
Feedinfo News Service: Have you already experienced a recovery in the global demand for Methionine during this year? What variations do you see geographically?
Dr. Beste: Latest market reports indicate that especially poultry production seems to get close to previous years figures in the third quarter of this year and to further increase in Q4 and beyond. So there are strong signs of recovery for the remainder of this year, and these tendencies are reportedly most pronounced in South America and in Asia.
Feedinfo News Service: Two of your competitors have also announced plans to increase capacities during the same timeframe. Given your current estimates for the growth in the global Methionine market, is there a risk of a significant overcapacity developing during the coming years?
Dr. Beste: Common sense suggests investments in growing markets, however the high specific capital expenditure in this business forces investors to match demand growth of our customers reasonably well. Our timing takes the growth of our customers into account. With the recent expansion announcements for the next years on the table, we still see ourselves well positioned.
Feedinfo News Service: China is destined to become the geographical zone where growth will be the most significant in the years to come. Two of your competitors have already announced concrete plans to build Methionine hydroxy analogue facilities in China. Your competitors say they expect the growth rates for Methionine hydroxy analogue to exceed that of dl Methionine in the future. Will your current expansion policy not exclude you from obtaining a significant share of this key market?
Dr. Beste: We would strongly disagree with any claims that the Methionine hydroxy analogue facilities announced to be built in China would be built because the market demands this product. The reasons for such decisions are probably more based on production-related preference than customer benefit. We at Evonik have positioned ourselves with what we think is the best methionine source for our customers now and in future: DL-Methionine. And the current market shares of the two products provide additional proof: DL-Methionine is clearly the No. 1 methionine source in the world! On this basis, we do not see any reason why we shouldn’t be able to further develop our strong position in the China market with DL-Methionine.
Feedinfo News Service: Why have you not planned to produce DL-Methionine in China?
Dr. Beste: Our recently published expansion scenarios completely rely on the synergies at our existing sites, however there is no decision made that a potential future site could not be located in China. As stated before, investments in this business are significant. From a customer perspective, reliable supply at competitive cost and quality matters most. Large scale plants will always serve a global region rather than a single market in order to secure economies of scale. Generally, a selection process for future Methionine production sites could identify three groups of potential locations: the existing sites, sites with low cost raw materials and sites located in big end-user markets. In this context, a potential site in the key market China could well be “in scope” of the basic selection criteria for Evonik’s potential next methionine complex.
Feedinfo News Service: Some analysts say that the first production of Methionine in China will be based on a fermentation process. Would you agree with this statement or do you expect the announced projects to be successful?
Dr. Beste: Not from our perspective. These days, many chemical processes are evaluated by science in the field of biotechnology. However, to really challenge a highly optimized and efficient large-scale process, it takes more than lab-scale concepts. Currently, we see little evidence that research on fermentative production of Methionine is seriously pushed in China or elsewhere. There is ongoing basic research, and publications indicate some progress at a scientific level. We are monitoring these developments carefully, but there is obviously still a long way to go to get the technology from laboratory scale to any kind of industrial production. |