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Adisseo BlueStar - Exclusive Interview with Mr Gerard Deman, CEO

Click on Links below:   Part 1 - Adisseo BlueStar - Exclusive Interview with Mr Gerard Deman, CEO   Part 2 - L-Methionine by Fermentation - A Threat to Adisseo's Future?   Part 3 - Adisseo Aims to Become a Market Leader for Feed Additives   Part 4 - Who are BlueStar?   Part 5 - Methionine - Facts and Figures

[FEEDINFO] - In January 2008, Adisseo BlueStar announced plans to build a new Methionine production unit in China. You have confirmed that the new facility will be integrated into a petrochemical facility owned by China National BlueStar and will have an annual capacity of 70,000 tons.

We understand that this new facility will exclusively manufacture Methionine hydroxy analogue. Is this correct and does the «70,000 tons» pa refer to tonnage volume or is it an equivalent dl Methionine output?

[GD] - It is true that the new facility will exclusively produce Rhodimet AT 88 (Methionine hydroxy analogue) and the volume capacity will be 70,000 tons per annum. The plant will be designed for doubling its production capacity when required by the market.

[FEEDINFO] - Did you choose Methionine hydroxy analogue for nutritional or for technical manufacturing reasons?

[GD] - We chose to manufacture Rhodimet AT 88 because we are convinced that it is the product for the future. It has already been used for years by the world's largest integrators and we expect the growth rates for Methionine hydroxy analogue to exceed that of dl Methionine in the future.

At Adisseo we launched a programme called 'team up with Rhodimet' which shows that various additional advantages are achieved when Methionine hydroxy analogue's usage is compared to dl Methionine.

This program clearly demonstrated that Methionine hydroxy analogue is a better choice for the larger consumers due to its easy usage which is a key issue for the big industrial scale integrators. Apart from logistic advantages, we also found that the product offers significant nutritional advantages over dl Methionine: eg: acidifying properties, reducing nitrogen excretion...

[FEEDINFO] - So, you chose to manufacture Methionine hydroxy analogue because you believe that globally there will be stronger market growth for this product rather than dl Methionine?

[GD] - Yes, however, we are aware that Rhodimet NP 99 (DLM) will keep a significant place in the market, especially for premixers and smaller users. That is why, in parallel, we have also announced new investments aimed at improving reliability and productivity which will enable to marginally increase capacity and at our existing dl Methionine facilities in France.

[FEEDINFO] - Methionine is a very complex and dangerous product to manufacture. Barriers to entry are high. In the past your predecessors have tried unsuccessfully to manufacture it both in China and Brazil. Why are you confident you will succeed this time?

[GD] - We are establishing an industrial partnership with our mother company BlueStar. It is not a transfer or cession of European technology to China. It is a partnership which takes into account the advantages of each party. We will not be negotiating with our partner rather we will be working together to ensure that this project is a success for both parties.

Moreover, it is important to understand that we will focus on the safety and environmental aspects of this project. It is our first priority and we have already started work on these issues with BlueStar.

[FEEDINFO] - One of Adisseo’s strengths in Methionine production is the fact that your French facilities are almost fully integrated. Will you achieve the same degree of integration with your new plant in Tianjin? Will all key raw materials such as propylene, methanol and sulphur etc..., be available on the same site?

[GD] - Yes, in fact we will be even more integrated because BlueStar will have a refinery which will produce propylene at the same site. There will be no transport of MMP, and even sulphuric acid will be produced at this industrial platform. The vast majority of raw materials used in the production of the Methionine hydroxy analogue will be produced on site. Our risks will be minimized due to the fact that we will have a reduced need to transport hazardous raw materials.

[FEEDINFO] - Are these raw materials already being produced at the site or will they be once the Methionine facility is operational?

[GD] - No, they are not being produced at this moment. This is a green field project which forms part of a much bigger project which BlueStar is undertaking. The facilities that will produce these raw materials will be built at this industrial platform 1-2 years before the start of the commercial production of Methionine hydroxy analogue. At this moment there are no products being manufactured at the site.

[FEEDINFO] - We understand that BlueStar's primary motivation for acquiring Adisseo was to secure the technology and know-how to manufacture Methionine. Indeed since the early 1990s, the Chinese government has identified integrated Methionine production as strategically important. Fundamental to the success of this project is the relocation of key personnel at Adisseo who have developed years of experience in Acrolein and Mercaptan chemistry.

Will the cultural differences that exist between China and France create a barrier to progress? Are your key engineers in France prepared to move to China?

[GD] - This is a key question. The question of cultural differences between France and China is the principal challenge for this project. It is greater than the technical challenge. That’s why we decided to have a mixed management team.

[FEEDINFO] - In the past cultural differences have led to the failure of joint venture projects in China. For instance, recently a lysine producer failed in a Chinese JV due to the barriers between the nationalities.

[GD] - Adisseo and BlueStar teams began working on this project more than two years ago. The director of the project is from Adisseo and 50% of his team are from BlueStar. In France we have been training a BlueStar industrial manager for two years now. He will move to Tianjin in the upcoming year. We have also been training several Chinese engineers in France. The former Commentry site director is now responsible for liaising between the Adisseo project managers and local BlueStar management in Tianjin. The French engineering company, contracted by Adisseo, is very well established in China through their local subsidiary.

From the outset we have put in place an action plan which has encouraged the integration of both cultures and paved the way for the success of this complex project. It is important to underline that the Methionine production unit will be operated by engineers and personnel from BlueStar and that Adisseo's involvement has not been limited to the transfer of some people key people.

[FEEDINFO] - How many key people are there from Adisseo on this project?

[GD] - Today, about 10 Adisseo employees are totally dedicated and key to this project. They share their time between France and China. There will be more people involved in the next steps of the project but the total number is not totally fixed yet.

[FEEDINFO] - How much time will the Adisseo people be spending in China?

[GD] - They will be 100% involved in the project for about four years. A portion of their time will be spent in China, the rest in France.

[FEEDINFO] - How many BlueStar employees have come to France on a temporary basis?

[GD] - Today, we have one engineer responsible for each step of the project. We are still in the process of identifying all the human resources necessary for this project and in particular what our requirements will be concerning the movement of personnel between France and China.

What is clear is that the human component of this project will be the key to its success. However, a considerable and important advantage we have is that BlueStar have been involved in this initiative right from the beginning. This is significant as it has allowed BlueStar to progressively learn about Adisseo's technology.

[FEEDINFO] - The production of Methionine in China is clearly a very strong strategic move. Why have you been the first to go ahead with such a project? Why are you better positioned than your competitors?

[GD] - An important point is that we probably have better technological knowledge and have been fully integrated for a longer period than anybody else. Thanks to our years of experience we have mastered all the steps in the production process. Also, our Methionine hydroxy analogue process is probably the most competitive in the world and through our partnership with BlueStar we have a clear advantage in being present and competitive in the Chinese market.

[FEEDINFO] - Will the successful construction of your plant in China take you to a leadership position in the global Methionine market?

[GD] - Leadership does not exclusively mean largest capacity; it includes customer relationships, services, logistics, Research and Development… For many years Adisseo has been a leader from a production standpoint but also in the various services offered to clients including nutritional back-up, technology, logistics, etc. On top of this we have launched 3 years ago our Rhodimet research grant program by which we aim to “add new horizons to Methionine”. These factors are key components in our position as a global leader. 

" It is essential that we are present in the geographical zone where growth is the most significant."

The global Methionine market is growing and for us it is essential that we are present in the geographical zone where growth is the most significant. That means Asia and especially China. Therefore, our new project involves strategic geographic positioning and not just additional output. 70 000 mt additional capacity is not enormous when compared to a market which is growing at around 30 000 mt per annum.

[FEEDINFO] - Are you confident your new plant will be up and running by 2011?

[GD] - Yes, absolutely.

[FEEDINFO] - Your announcement to build in China will probably mean that other producers will be less likely to invest and bring additional capacity to the market at that time. Today we see the impact of demand outstripping supply: ie: the spot market in Europe has exceeded EUR 4.00 per kg. What will happen if you are not ready by 2011? Do you have a back-up plan if delays occur?

[GD] - When we announced the project in November 2007, we had already been working on it for nearly two years. Therefore, several key fundamental issues have already been put in place since the acquisition of Adisseo by BlueStar. We are fully aware of our responsibilities. We have put all our resources in place to ensure that we start operating in late 2010 so that we will have Rhodimet AT88 available by early 2011. At the moment, we do not need any back-up plan. Regarding Methionine, Adisseo has two objectives: improve the productivity of our European units and make sure the Chinese project goes ahead as planned.

[FEEDINFO] - The global Methionine market continues to grow. One producer will increase output by the end of this year. Do you believe there will be sufficient supply available to meet expected demand through to 2011 when your new plant comes on stream?

[GD] - Based on our current projections, we believe we can cater for demand up to late 2010. Our current 20 million Euro investment in our European facilities will allow us to slightly grow capacities at a minimal cost. Also, we have small production reserves which can be brought to the market on condition that we have sufficient notice. The problem with the market today is that it was very difficult to anticipate the recent surge in demand and so additional output is not immediately available to rectify this imbalance.

[FEEDINFO] - We have seen 2007 was an exceptional year for Methionine consumption. This was partially driven by high demand in China and Asian countries as consumers increase meat consumption in line with greater disposable income. Indeed the FAO and other sources anticipate strong poultry growth in those regions during the next decade – that is the major reason behind your decision to build a plant in China. However, one concern is that food price increases due to agflation might cause a reversal in meat consumption in developing countries. Will such populations continue to consume higher rates of meat when it becomes more expensive? Is this recent growth sustainable and how have you dealt with this in your projections?

[FC] - Our projections have been based on a global growth rate for Methionine of 4% pa. This is actually lower than the historical forecasts of 5-6% which we think will not continue. We estimate that growth during 2007 was around 7%, which is exceptional based on historical data. Several issues were responsible for this dramatic growth including a general recovery from bird flu. Also, there was a switch towards increased poultry consumption in China due to pig disease and greater demand for synthetic Methionine in some geographical regions due to higher raw material costs.

Regarding agflation and the consequences it could have on meat consumption in developing regions, we believe that those populations who have recently started consuming meat will continue to do so. However, poorer populations who have not yet been able to convert to a meat-based diet will probably delay their consumption of meat due to agflation driving up prices. The huge potential that China offers as a meat consumer may therefore take much longer to materialize. This is one of the main reasons why we have based our growth projections on 4% per annum.

"Poorer populations will probably delay their consumption of meat due to agflation."

[FEEDINFO] - Could you elaborate further on the extra Methionine demand you have identified as a result of raw material changes?

[FC] - One example is fishmeal. Asia has always been a big consumer of fishmeal. However we have noticed that usage is gradually decreasing as it becomes more expensive. The consequent change in formulations is drawing more synthetic Methionine into the rations. Increased usage of tapioca has also had the same effect. In specific cases, we have identified situations where the inclusion rates of Methionine have grown by up to 10% due to raw material related adjustments.

Also in Europe, we have noticed increased usage of Methionine by feed mills which have used less corn. Those feed mills in Europe which are located close to major ports have reported increased inclusion rates of Methionine as a result of greater tapioca usage.

In 2007, China alone consumed an additional 30 000 mt of Methionine compared to the previous year. Poultry consumption is not the only factor which influences Methionine market growth. Changes in the consumption of other kinds of meat products can also have indirect effects on Methionine.

[FEEDINFO] - Had you anticipated this additional demand for Methionine?

[GD] – Actually,we do not think that anybody did really. This is why the Methionine market is extremely tight today. Moreover, nobody expected the dollar to be so low, and nobody predicted oil at $100 per barrel. We had expected oil at such a price but in 5 years time not before. We have been facing so many major changes at the same time which were really extremely difficult to foresee!

[FEEDINFO] - Have you also identified increased demand from the Americas?

[FC] - We have not observed such changes in inclusion rates in the NAFTA region but have identified strong growth rates for Methionine in certain Latin American countries.

We understand that this growth is not really due to raw material changes but rather associated with improvements in the genetic makeup of poultry now used in countries such as Brazil. Typically breeding companies recommend the use of higher levels of amino acids for their new poultry strains. Integrators in South America focusing on achieving maximum performance levels do not hesitate to follow those guidelines. This phenomenon has boosted Methionine usage in those regions.

In the US and Europe however, where production costs are higher nutritionists try to identify an different optimum taking into account bird performance but also feed cost. This tends to drive a more conservative approach towards amino acid nutrition than in Latin America.

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