15/11/2001 (00:00)

Brief History

DSM is a global leader and internationally respected chemicals producer that has been in business for nearly a century. It was originally founded in 1902 by the Dutch government to produce coal. In 1929 it began chemical production and by the 70's and 80's it experienced a strong expansion in polymers and industrial chemicals, it also diversified into performance materials and fine chemicals during this period. In 1989, the company was privatized and it then spent the 90's solidifying its strong position in polyolefins.

The company has 22,000 employees worldwide, working on state of the art chemicals and plastic materials. It has three coherent business divisions by which it approaches the market. Those three divisions are: Life Science Products, Performance Materials, and Polymers & Industrial Chemicals.

The focus of the ChemOrbis profile, "Polymers & Industrial Chemicals" accounted for 43% of sales in 1999. Its strategy is to maintain its leading position in polyethylenes and polypropylenes. It produces a variety of polyethylenes using different technologies and these are marketed under the trade names, Stamylan LD, Stamylan HD, Vestolen A, Stamylex, Stamylan LL, Stamylex, Yparex, Stamylan UH and Exact. For its propylenes, the main trade names are Stamylan P, Vestolen P, Stamyroid , Keltan TP, Stamytec, Kelburon and StaMax. The main production sites are at Geleen, Netherlands and Gelsenkirchen, Germany. This group also manufactures the raw materials for polymer production at two steam crackers and it supplies feedstocks to other DSM groups for the production of EPDM rubber and acrylonitrile. The business group's product range also includes butadiene, benzene, MTBE, gasoline components, raw materials for hydrocarbon resins, aromatics, carbon black oil and styrene.

Compared to the long history of the company, the DSM Turkey office is relatively new, having opened just three years ago. It now has seven employees and conducts approximately 70-80% of DSM's buiness in Turkey. There are two sales offices, one in Istanbul and one in Izmir. The Istanbul office covers all three of the business clusters of DSM. The Izmir office focuses on Life Sciences.

Product Range

As for polymers, under the Polymers & Industrial Chemicals division, the DSM product range includes:

Plastics for packaging applications
e.g. carrier bags, films, crates, tubs, interior linings of beverage cartons, bottles, closures.
Plastics for automotive applications
e.g. dashboards, bumpers, body panels, engine components
Plastics for household applications
e.g. vacuum cleaners, telephone sets, power drills, garden furniture, buckets, food storage containers
Fibre intermediates
e.g. for production of fibres used in clothing, curtains and carpets

The DSM Turkey office supplies to Turkey on average:

PE 15,000 tons/year
PP    15,000 tons/year

An estimated breakdown by polymer is as follows:

LDPE 3,000-4,000 tons/year
LLDPE (C8 mostly) 2,000-3,000 tons/year
HDPE 8,000-10,000 tons/year
Metallocene PE small quantities for specialty markets
PP injection molding    2,500 tons/year
PP extrusion 10,000 tons/year
PP pipe grade 2,500 tons/year

DSM says that LDPE is not a main focus for Turkey because of its very strong position in Europe which accounts for most all of its output. Also, DSM produces many specialty LDPE types which have not found a market in Turkey yet, not to mention the fact that it is very difficult to compete with Petkim for LDPE.

As for LLDPE, DSM does not provide C4 or C6 due to extreme competition from the Middle East and its own limited availability, it does provide C8 for the specialty packaging firms in Turkey.

DSM says it is very strong in HDPE pipe grade for infrastructure applications. They produce only PE 80 and PE 100 and even have a PE 120 under development. They mention that PE 100 is growing rapidly not just in Turkey, but in Europe as well. They also pointed out that during the devastating earthquake that hit Turkey a few years ago, none of the PE pipes broke. They also sell all other types of HDPE including injection molding, blow molding, and film, but in smaller volumes than their pipe business. DSM is also one of the few producers of metallocene PE, which is sells in small quantities to the specialty film market in Turkey.

DSM considers its PP sales organized into three categories: injection molding, extrusion, and pipe. They are strong in all three categories. As for PP for extrusion, they say they do not sell raffia, but they do sell fibre, BOPP and pipe grades. Their main focus is textile and film, particularly since they are so well known for the quality of their fibre production. Their high quality fibre is known throughout Europe and Turkey and they have built a strong reputation among this sector. As for PP pipe which covers the homopolymers, block copolymers and random copolymers, they have material for every aspect of construction, both inside and outside the main structure.

Expansion Plans

DSM, being relatively new to the Turkish market, of course wants to expand its sales and marketing efforts in the domestic market. It also wants to expand the use of high quality PE and PP materials in Turkey.

Market Conditions

In general, PE prices are under pressure and there appears to be high stock levels, but there is less pressure on PP than PE. DSM will perform maintenance on its PP production in January and therefore they don't plan to reduce prices at this time. In some plastics, however, prices remain stable due to the nature of the contract business, particularly for PE 100.

When asked about Petkim's new PE 80 production, the DSM office expresses some doubt as to their ability to produce the same quality material as the European producers. They doubt that Petkim will produce the bimodal type since it requires a two stage polymerization process and therefore they expect a mono-modal type which is not the same quality as the European bi-modal. The positive aspect of this new production, however, is that the new specifications of Petkim's PE 80 can influence the specifications of future state tenders, raising the standards for all. For now companies are able to use natural grade PE pipe material, but if specs are raised the companies may be forced to use black grade.

Commenting on longer term market conditions, DSM pointed out that HDPE 100 will grow rapidly due to its superior qualities and as it becomes more competitive in price it will begin to replace other infrastructure materials such as PVC.

DSM also confirmed that the company wanted to sell a stake in its petrochemicals business which is only natural since it needs to expand to stay competitive, but cannot do it all and has chosen to expand its Life Sciences business line. So far there have been no significant developments and the company is not in a hurry due to its strong financials. DSM has a very strong position in Europe, it is number 2 on the list of the lowest cost producers and will soon move to number 1 once new production starts up next year.

In any case, no matter how the sale proceeds, it is certain that there will be no changes to DSM production, nothing would be shut down due to its strong, efficient and low cost position. They don't foresee a lot of changes organizationally or operationally from any joint venture or sale and it's always possible it won't be sold at all. No one can doubt the future of the company considering it is one of the lowest cost producers worldwide, its factories are new, its products are high-quality, it has great technology, and produces such a wide variety of grades.

ChemOrbis/Internet Strategy

DSM says it does business through the Internet and has an e-commerce strategy. The Turkey office does not have plans separate from headquarters for now. It does plan to implement direct trade with Turkish companies like the headquarters is doing currently in Europe once technology develops a bit further domestically. For now, the office wants to be involved in new technology projects such as ChemOrbis in order to learn what it brings to them and to learn whether it makes business easier. They believe ChemOrbis is a good development particularly for the smaller converters as they can now reach a much wider supply source. They are also happy with ChemOrbis' ability to educate the market through its content and hopes that together the entire market can move to higher levels of quality for all products.

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