Rising Above the Competition

Vipul Shah
Chairman, CEO and President, Dow Chemical International Pvt Ltd. (Dow India)
In an invterview with Mittravinda Ranjan, Vipul Shah, Chairman, CEO and President, Dow Chemical International Pvt Ltd (Dow India), opened up about the company’s progress and discussed its marketing strategy in Asia Pacific region, updated on company’s two major projects; the Sadara Chemical Complex and SCG JV, shared his thoughts on the shale gas play in USA and much more. Shah says that the company, leveraging on its joint ventures, is gearing itself up to “utilise the capacities by creating infrastructure and mapping the country for ideal tanks and warehouse locations, aligned to the customer needs.”

You talked about the Dow’s strong focus on Asia Pacific market in December 2012, when we spoke last. How has the organisation progressed since?
The Asia-Pacific market is booming, and it is estimated that the region will account for a quarter of Dow’s revenues by 2020. India lies at the heart of this growth and is expected to be a major contributor to this slice of the pie.

Part of the reason for this growth is the breadth of our product portfolio – there is hardly any industrial sector where Dow products are not utilised. We continue to consolidate our existing and well-established portfolios in sectors such as automotive, packaging, coatings, etc. We are now also focusing on expanding businesses in underserved segments such as pharma, food, water, alternative energy. We can offer sustainable solutions for energy savings and efficiency improvements in each of these segments.

Our biggest challenge, when we spoke in 2012 was our footprint, which we have now resolved with planned investments in the region. Strategic investments like our JV with Siam Cement Group in Thailand and with Saudi Aramco – SADARA, are contributing to our growth in the region.

Our proprietary HPPO technology from the Thai JV bypasses chlorine and ensures a clean process. We have the Hydrogen Peroxide to Propylene Oxide (HPPO) plant along with Polyethylene (PE) which covers the wide range of application markets like packaging films, grocery sacks, trash bags, high-strength shipping sacks, plastic bottles, foamed building insulation, fire-retardant appliance housings and high-impact performance parts. In addition, our polyols plants will commence production next year.

The Sadara Chemical Complex investment was a strategic move to take competitive advantage of production in the Middle East (ME) and cater to the Asia Pacific market. The JV is an investment of USD 20 billion and the complex, which is now under construction, will be one of the world’s largest integrated chemical facilities ever, built in a single phase.

The combined production capacity of this complex is around three million tonnes per year and 60 per cent of this production is targeted for the Asia Pacific market.

If you look at the big picture, the growth for Asia Pacific becomes very imminent. Dow had the customer reach, offices and relationships across major countries in the region. Now, we also have a strategic positioning from a competitive stand-point and a dedicated supply of products coming in. This is the biggest game changer for us at Asia Pacific and the global level.

Tell us about the Asia Pacific marketing strategy.
From the Sadara perspective, India and China will continue to be the largest targeted markets for us as far as the petrochemicals business is concerned. We have grown significantly in Indonesia, Thailand, Vietnam, Philippines and Malaysia. Dow has presence in Australia and New Zealand as well. And we are confident about the growth in these regions. Post the Rohm & Haas acquisition, we have expanded our specialty chemicals portfolio and are looking at the countries in the electronics belt - Korea, Japan, Taiwan, Hong Kong and China. We are looking forward to having local presence in Myanmar and Bangladesh, which are the new frontiers for us. Having said that, we are currently selling in both the countries and are looking at our setting up locally for expanding our footprint in the near future. From a strategy standpoint, we tend to focus on the industry with the idea to grow the market share, by reaching out to a wider base.

How do the two major projects - Sadara Chemical Complex and SCG JV put Dow in a stronger position?
The Sadara Chemical Complex and the SCG JV are big enablers for Dow in India. Both the projects are unique in nature and put us in a competitive position in the Asia Pacific market.

Since Thailand does not have the raw material advantage, the idea was to build a competitive position through this consortium cracker in free trading block and ASEAN, in order to gain access to the South East Asian market, at zero duty.

On the other hand, the Sadara Chemical Company (Sadara), houses 26 different plants and some of the units are mega projects in itself. We will have PE trains including LDPE, elastomer trains, PU, MDI/TDI, amines and glycol ethers – the full building block range - which is a necessity for the growth of countries like India.

Utilising many of Dow’s industry leading technologies, the complex will possess cost-advantaged flexible cracking capabilities and produce over 3 million metric tonnes of high value-added chemical products and performance plastics annually. The JV complex, along with the adjacent ‘value parks’, will capitalise on rapidly growing local, regional, and international markets in energy, transportation, infrastructure and consumer products.

These two JVs should also help in the availability of feedstock in India. We are gearing ourselves up to utilise the capacities by creating infrastructure and mapping the country for ideal tanks and warehouse locations, aligned to the customer needs.

How do you plan to gain the edge amongst the stiff international competition offered by other MNCs and large scale indigenous petrochemical manufacturers in India as many of the public & private sector refining companies are scaling up and expanding downstream value chains?
One of Dow’s goals has been differentiating the company from its competition by raising the bar of market standards, through constant innovation. We closely observe the market segments and offer customised solutions through our product portfolio, which makes a difference to the end-user segments.

To give an example of this, we brought in memory retention elastomeric materials in PU and helped take the market to a different level. Even in packaging, the grades we supply from the PE perspective are not available locally. Our products have elevated the packaging industry’s capabilities, growing markets with it and we continue to be in the top end of the segment. Packaging is a classic example where the pie has grown exponentially and we see huge potential going forward.

Usually, before companies start selling-up, they are in a sell-out mode which may give short-term competition; but in the long term, the knowledge of the application segments and aligning it to the current and potential needs of the market is critical.

Our well thought-out and well-positioned assets will continue to provide the much needed competitive edge, which allows us to continue to do value addition for the customers. We focus on innovating for local solutions, bringing about those little tweaks in our product or application portfolio that cater to the needs of the market. We believe in staying close to our customers and innovating locally, which reduces the development cycle of end-products.

How do you see the impact of shale gas play in the USA on global and particularly on the ME where Dow has made massive investment in Sadara?
I can talk from a Dow stand-point. We are the first ones to have announced an investment of USD 6 billion in the US-Gulf in cracker to produce elastomers in the Ethylene Propylene Diene Monomer (EPDM).

The production from this project will primarily cater to the domestic demand, since shipping the product over large distances would not be a competitive option. So, while this particular investment will cater to the American markets, the Sadara complex will supply to the Asia-Pacific market, the Middle East zone, Eastern Europe and African.

At some point of time in the near future, naphtha pricing will play a role, since shale gas prices cannot be dissociated from the naphtha gas prices. In my view, it is more of wait-and-watch situation on how the shale gas will impact the global market.

What are the future plans of Dow in specialty chemicals in India?
The targeted segments for speciality chemicals in India are home and personal care, food, pharma, water, construction chemicals, textiles and coatings. In the oil & gas segment, we are at a cutting-edge in this space and contribute to formulations and simulations.

Another area of focus, where we have global expertise and competitiveness, is microbial-control. Of the nine labs located world over, one is in Kalwa, Mumbai. The capability of this lab is state-of-the-art and caters not just to the Indian market but to the global market as well.

Almost every global capability of Dow has been mirrored in India and we are nearly a billion dollar enterprise with 900 employees and two global business centres, today.

How do you see the Indian market now post the announcement of budget?
Personally, I feel the budget is a step in the right direction and reflects a lot of optimism for the industry. If you look at the announcement of 100 smart cities or satellite cities, you can see that this will correspond to a huge demand in the speciality chemicals sector. The government has started focusing on energy conservation and it would be interesting to see (as an industry) how we can contribute. The government’s strategic thrust on infrastructure, ports, renewable energy and agriculture will support the growth of the manufacturing sector which will in turn propel the chemical industry into the next growth trajectory. From the long term perspective, it is right on the spot whereas the quantum of reforms can be argued over.