29 October 2020 - On October 13, Evonik announced plans to cluster its DL-methionine production at three international hubs: Mobile, Alabama (the Americas hub), Antwerp, Belgium (Europe hub) and Singapore (Asia hub) – three sites earmarked as conducive to further opportunities for expansion and ready for cost efficient modular debottlenecking.
Evonik’s efficiency plan also includes the closing of its smallest DL-methionine plant located in Wesseling, Germany, by the end of Q1 2021. Evonik has been producing DL-methionine in Wesseling since 1967. Today the Wesseling plant has a capacity of 65,000 tonnes per year.
Although DL-methionine production in Wesseling will be stopped, Evonik will invest about EUR 25 million at the site in the upgrade of its methionine intermediate methyl mercaptan-propionaldehyde (MMP) plant with a view to safeguard long-term supply to Antwerp.
According to Evonik, the plan will lead to a better cost position for the firm through improved utilisation of capacity and with economies of scale and an enhanced ability to adapt to any market condition.
Further to the announcement, we were able to talk to Dr. Jan-Olaf Barth, Head of Product Line Efficient Nutrition at Evonik Animal Nutrition. Dr. Barth not only provided some background on the Wesseling site closure and the significance of the three hubs, but also his views of other methionine market developments Evonik is monitoring.
[Feedinfo] Mr. Barth, why is Evonik concentrating its methionine production in three hubs?
[Jan-Olaf Barth] Our animal nutrition business plays a central role in Evonik's Nutrition & Care growth division. We are aware of our responsibilities, which is why we are taking all appropriate steps to ensure our actions support security of supply in combination with the delivery of products and services. All three hubs are ideally positioned geographically to cater for the needs of growth markets and maintain proximity to our customers in all regions. Consolidating production at these plants, with cost leading positions, will ensure a reliable product supply, and offer the potential for cost-efficient debottlenecking in the coming years.
|
DL-methionine is, and will remain, one strong pillar of our animal nutrition business, together with our fermentative amino acids. Evonik is, and will remain, a leading manufacturer of DL-methionine and is ideally positioned to support the growth of the methionine market and its key customers. The asset set-up with three world-scale hubs enables us to implement smart debottlenecking at the time the market requires greater capacity at a competitive cost position. We are actively taking all efforts to strengthen our competitiveness to secure reliable supply to our customers. We believe this can only be achieved by taking advantage of economies of scale, leading cost position and technology. The methionine industry has gone through a fundamental change in recent years. Evonik has adapted to this change through substantial investments of more than EUR 1 billion into new DL-methionine capacities, process technologies, patents, IT, product-logistic- and service innovations. |
Dr. Jan-Olaf Barth |
[Feedinfo] How does the shut-down of the Wesseling plant fit into Evonik’s cost optimisation program? And did the market context of oversupply and weak demand in Europe pressuring methionine prices and the consequences of COVID-19 accelerate your plans to close it down?
[Jan-Olaf Barth] Over the past few years Evonik’s animal nutrition business has implemented efficiency improvements across all areas of the organisation. Cost savings were realised exceeding our original target of about EUR 50 million. During this phase, we have adapted our global set-up to the changing market and industry environment. We will further leverage economies of scale on our three hubs and close the smallest existing plant (65,000 tonnes per year) in Wesseling, Germany, by the end of March 2021. However, the Wesseling site will continue as a world-scale MMP plant to supply the Antwerp DL-methionine site with this intermediate.
We have taken the decision to close our smallest methionine asset in Wesseling as part of our strategic asset plan; it is unrelated to the COVID-19 situation.
[Feedinfo] The three hubs are seen to be ready for modular debottlenecking in the future. Can you share any details?
[Jan-Olaf Barth] We have several modular expansion options ready to be realised at our three hubs with a relatively short lead time, hence we can reliably accompany the growth of our customers by increasing supply volumes needed in the coming years. We will decide on these modular expansion options in the coming years. Evonik is well prepared to serve the growth of our customers from our three hubs.
[Feedinfo] How does the investment of EUR 25 million in Wesseling strengthen the European methionine hub? Besides MMP, will Evonik be investing further in its intermediates supply. E.g. hydrocyanic acid (HCN)?
[Jan-Olaf Barth] Evonik’s Wesseling production plant for MMP will be further upgraded so that it safely continues to supply the Antwerp site. This MMP plant will remain an integral part of our European production hub for DL-methionine. Our investment supports the technology to leverage cost efficiency and highest process safety standards at the same time. It will position Evonik’s European MMP-Verbund long-term as a sustainable and viable operation to serve Antwerp.
We are continuously implementing process innovations at all sites. Evonik’s intermediate capacity is fully aligned with our global DL-methionine production capacities. Back integration into key raw materials is a major winning factor which distinguishes Evonik from other suppliers.
[Feedinfo] Evonik had to declare Force Majeure at its methionine manufacturing plants in Antwerp in November 2019 due to an outage of HCN supply. The Force Majeure was lifted after only two weeks and Evonik was able to rely on other methionine supply from its global production hubs. Aren’t you afraid that by closing the Wesseling methionine plant, you have one less factory to count on in these situations and are therefore exposing yourselves to more risk?
[Jan-Olaf Barth] The Force Majeure situation in Antwerp was caused by a chain of several unfortunate factors. Evonik worked diligently to quickly get the situation under control. We immediately took advantage of our global supply chain from our other hubs and fulfilled all contractual delivery obligations. We believe that our precision in managing global and regional inventories, fast response times in a digitalised supply chain, and three manufacturing sites perfectly located logistically in the Americas, Asia and Europe will continue to enable us to successfully and reliably supply our customers in more than 100 countries globally.
[Feedinfo] Evonik’s methionine plant in Mobile is also a relatively small site when compared to Singapore and Antwerp, and at the same time its location is often on the path of the various hurricanes which come from the Gulf of Mexico every year during the summer season. Given the methionine oversupply noticed in the US market, Mobile has its challenges. How committed are you to the Mobile site and what are your prospects for expansion in the Americas?
[Jan-Olaf Barth] Mobile is a great production site and we have been producing DL-methionine there since the 1970s. Mobile serves the largest protein producers in the Americas. Especially in times of global trade uncertainties, we feel that the US protein industry needs a strong, reliable, and local DL-methionine producer with a clear growth track record. Supply reliability and further improving our regional cost position remains a strong focus of the engineering efforts and is in line with expansion options when the market is ready. Let me say it clearly: Mobile has the same priority as Antwerp and Singapore.
Regarding your question on the hurricane situation: the whole US chemical industry on the Gulf Coast has learnt to deal with hurricanes. We have been operating in Mobile for more than 40 years. We have clear plans and our supply chain all around the Americas is very well prepared for such events.
[Feedinfo] On another matter, China terminated its anti-dumping investigation on methionine imports from Malaysia, Japan and Singapore on 10 October. As a result, no import tariff will be imposed on methionine shipped from these countries. Evonik welcomed the decision and restated its commitment to the region. What kind of opportunity will this create for your Singapore hub?
[Jan-Olaf Barth] We very much appreciate the decision by the Chinese authorities. The decision by MOFCOM builds on facts and is a very strong signal pushing the future growth of the Chinese protein industry. Evonik fully cooperated with MOFCOM right from the start of the proceedings as we show a strong commitment to open markets and fair trade. As Singapore is our gateway to Asia, with China being Asia’s largest single market, Evonik is very well prepared to support the ambitious growth agendas of all Asian customers.
[Feedinfo] Mr. Barth, when we last spoke in April, we discussed the global COVID-19 pandemic and challenges such as African Swine Fever (ASF). With these two issues still pretty much at the forefront, in your view what impacts have they had on markets?
[Jan-Olaf Barth] ASF was certainly the big story in the animal nutrition sector last year and it remains a significant concern. ASF outbreaks meant there was an additional need to supply methionine to the growing poultry industry in the second half of 2019 as people looked towards alternative protein sources.
On top of ASF, the COVID-19 pandemic has caused high– and currently significantly increasing - insecurity in the market and supply chains for amino acids. This is an ongoing concern, especially these days where we see the Covid-19 situation worsening again in many parts of the world. In a very bullish demand situation over the first six months of the year, driven by strong supply uncertainty as a consequence of COVID-19 related lockdowns, Evonik has done its utmost to meet the strong amino acid demand from all our customers globally. Over summer, the situation has normalised in many countries. Yet, we see more and more countries – especially in Asia, Latin America and Europe –impacted by economic downturns and lockdowns because of COVID-19. Uncertainty stays high as infection rates are growing all over the world these days.
In our view the protein industry went through a steep learning curve and has developed the ability to cope with this uncertainty. However, global supply chains remain fragile and local lockdowns impose risks on all producers within the feed and food value chain. We are confident that markets will gradually recover from the COVID-19 crisis and Evonik is well prepared to support customers during this challenging period.
