INTERNATIONAL BUSINESS
DSM Changing Face from Coal To Specialties Chemicals Firm Slated to take reins this summer, Hans van Liemt plans to carry Netherlands concern further into new products, processes Dermot A. O'Sullivan, C&EN London
The metamorphosis of a national coal-mining company to an interna tional concern trading in sophisti cated chemical processes and spe cialties seems unlikely. But it accu rately describes the transition at DSM of the Netherlands. Headquar tered in Heerlen in the southeast corner of the country tucked be tween Belgium and West Germany, DSM is gearing up for what some call the company's third develop ment phase. Hans B. van Liemt, a youthfullooking 51, will be responsible for bringing the plan to full fruition after he moves up to the presidency on July 1. As he sees it, specialty chemicals together with DSM's fledgling oil and gas activities will account for about 50% of the profits by the end of the decade, in con trast to 20% now. "It is an ambition, but we should be able to achieve it," he says. Van Liemt, a lawyer by training, seems a worthy successor to Wim A. }. Bogers. It was Bogers who was the chief architect of DSM's move away from deep-mined coal and into petrochemicals and fertilizers (C&EN, Oct. 1, 1973, page 11). Now van Liemt is taking the company a step further, encouraging his re search and technical development staff to seek higher value-added opportunities. "When you consider diversifying into products of higher added value,
Encouraging technical staff to seek higher value-added opportunities you quickly find that everyone talks about it," van Liemt observes. "You cannot meet a chemical executive or attend a conference without the topic coming up. And all are pretty vague on the subject. That is under standable, because some of the things talked about have yet to be found out." Vagueness there may be. Never theless, DSM is on the verge of launching a number of products and processes, some new for the com pany, some entirely novel, all with a high degree of profit potential. More notable examples are: • Nylon 46, which will extend the range of engineering plastics and synthetic fibers. Tradenamed Stanyl, it is formed by interaction of 1,4-diamino butane with adipic acid. Plastic parts and fibers made from it are claimed to have physical characteristics superior to the more usual nylon 6 and nylon 66. A semicommercial plant is planned.
• Fibers drawn from high-density polyethylene by a DSM-developed process, with strength superior on a weight basis to carbon fibers, more exotic aramid aromatic polyamide fibers, or even steel. They hold promise as low-weight components of reinforced plastic composites in a variety of applications. A joint de velopment study is getting under way with Japan's Toyobo, a leading fiber-spinning and textiles company, that could lead to a commercial unit's being built in the Netherlands (C&EN, March 19, page 10). • Nylon 6 molded parts made by a newly developed, low-pressure re action injection molding (RIM) tech nology in a three-minute mold cy cle starting from liquid caprolactam formulations. Parts toughened by the addition of polyol modifiers like ly will find use in automobile body components, the electric and elec tronic industries, machine construc tion, and leisure goods. They are distortion-free, may be large, thinwalled, and of complex shape de pending on mold design, have ex cellent mechanical properties, are abrasion-resistant and resistant to chemicals and temperature. • 2,3-Dimethyl pyridine, to be made this year in a plant that currently produces α-picoline, an in gredient of insecticides and resins. On oxidation, dimethyl pyridine yields quinolinic acid used for mak ing agrochemicals, pharmaceuticals, and specialized surface coatings. DSM has a strong position in het erocyclic chemistry research. • Cinnamic acid, cinnamic alco hol, and related products made by a DSM-developed route starting from benzaldehyde. The chemicals are used in fragrances and flavors. Cin namic acid also is the precursor of p h e n y l a l a n i n e , a component of aspartame, the novel d i p e p t i d e May 7, 1984 C&EN
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International Business sweetener being produced by G. D. Searle. Units are scheduled to come on stream shortly with capacity for 2.2 million lb annually of cinnamic acid, 1.1 million lb of the alcohol. • Nitrilotriacetic acid (NTA), rapidly gaining ground in Western Europe for the formulation of detergents. DSM has developed a process for making NTA from its captive supply of ammonia, formaldehyde, and hydrogen cyanide. A plant due for startup next year will have an initial capacity of 22 million lb annually. European demand is expected to reach upward to 110 million lb annually within the next few years. In view of these and other developments coming from DSM's laboratories, van Liemt's optimistic outlook is u n d e r s t a n d a b l e . But he doesn't intend to ease the company out of commodities. "Why should we?" he asks. "We have a tremendous investment built up in major engineering plants. Many are quite new. One doesn't walk away from that kind of hardware." By any standards, the amount that DSM has poured into chemical units is considerable. During the past 10 years or so, the investment has totaled some $3.51 billion ($1.00 = 2.85 guilders in 1983, the conversion rate used throughout). Most of it has gone into facilities in the Netherlands. But there also has been a buildup of capacity elsewhere in Western Europe and in the U.S. The products that DSM makes are many and varied. They range from naphtha-derived ethylene, propylene, and butadiene; and natural gasbased ammonia, methanol, and urea; to aromatic building blocks (benzene, cyclohexanone, phenol); acids (nitric, phosphoric, sulfuric); organic chemicals (acrylonitrile, caprolactam, formaldehyde, melamine); to acrylonitrile-butadiene-styrene; high-, low-, and linear low-density polyethylene; polypropylene; polyvinyl chloride; synthetic rubbers; and a wide range of industrial resins, including powder paints. Capacities are sizable, too. Annual global output capability for fertilizers amounts to 11.55 billion lb; ammonia, 5.06 billion lb; polyethylenes, 1.15 billion lb; caprolactam, 20
May 7, 1984 C&EN
clip— so much so, that van Liemt is convinced that the 1984 net profit gain will at least match that of last year. The company wasn't alone in going through a rough patch in 1982, the year when the effect of the poor economic situation in Western Europe and throughout the world generally began to bite. As demand for commodity chemicals receded, companies found themselves operating their plants at levels well below their economic breakeven point in an environment where overcapacities abounded. This, in turn, led to a slide in prices, which served to worsen the companies' financial position. "What we have experienced in general is that the economic swings For specialties, Japan, Europe, are much sharper in the U.S. than and U.S. are of primary interest to us they are here in Europe," van Liemt 1.1 billion lb; and vinyl chloride, observes. "When things go well in the U.S., you quickly see profits com990 million lb. The buildup of in-house chemi- ing back. When things are not doing cal engineering expertise also pro- well, you see the results immedivides DSM additional money-mak- ately. This means that management ing opportunities. Stamicarbon, the can react much faster to changing company's engineering contractor business conditions in the U.S. and subsidiary, has emerged as a world take corrective measures." DSM's large-scale U.S. activities leader in providing plants for making fertilizers, urea, caprolactam are based in Augusta, Ga. There, (precursor for nylon 6), and other the company has two wholly owned subsidiaries—Columbia Nitrogen chemicals. The idea of building large-capacity Corp. (CNC) makes fertilizers based plants for commodity petrochemi- on ammonia, Nipro Inc. produces cals and plastics seemed logical at caprolactam—that are closely interthe time the decisions were taken, linked. Ammonia capacity at CNC which was when producers could exceeds 1.12 billion lb annually. Ferexpect with a fair degree of confi- tilizer sales are confined mainly to dence double-digit annual growth customers in the five southeastern rates for their products. DSM's sales states of Alabama, Florida, Georgia, grew about 15% a year on average North Carolina, and South Carolina, during the 10-year period 1973-82. although as van Liemt points out, When 1983's results are unveiled "These cover an area nearly half next week, they will show a further that of Western Europe." sales rise to about $7 billion from He admits to having had some the 1982 level of $6.38 billion. difficulties in the fertilizer side of Net profits, on the other hand, the business in the U.S. "We exfollow a decidedly different pattern. panded enormously in ammonia and From a 1974 high of $182 million, downstream products during the earnings underwent an essentially 1970s. But agricultural products beuninterrupted decline to $8.8 mil- came greatly depressed as the relion in 1980. They moved back up sult of [U.S. federal] government to $35.4 million in 1981, but plunged measures which had a big impact to a $66 million loss the following on our position. The picture began year. The 1983 results will show a clearing last year because of the genrevival of profits, probably back to eral improvement in the situation. As we see it now, we can be reasonabout $55 million. So far this year, business has been ably optimistic about our U.S. fertilmoving along at an encouraging izer business."
DSM sales have risen steadily over past decade,
... but net profits have not kept pace.
... and capital spending remains below 1977 peak
$ Billions 7\
$ Millions 200
$ Millions 5001
1973 74 75 76 77 78 79 80 81 82 83 a
1973 74 75 76 77 78 79 80 81 82 83 a
1973 74 75 76 77 78 79 80 81 82 83 a
Note: Values based on 1983 currency conversion rate of $1.00 = 2.85 guilders, a C&EN estimate.
Nipro has capacity for making 363 million lb per year of caprolactam, which also is based on ammonia. The company is the sole U.S. merchant supplier. The other two producers of caprolactam, Allied and Badische, use most of their own production for making nylon 6 yarns and fibers. "The reason [DSM is a merchant s u p p l i e r ] / ' van Liemt explains, "stems from the European situation where there always has been a division of activities between ourselves and Akzo [the major synthetic fiber firm based in Arnhem, the Netherlands]. They were the polymerization people, we were the producers of monomer. Where Akzo set up its installations around the world, we were there with caprolactam." Not surprisingly, much of Nipro's output goes to Akzona, Akzo's U.S. arm. "Akzo and DSM are completely separate companies," he adds. "Nevertheless, there is an excellent relationship between the two of us." Caprolactam n o w is emerging from the cloud it has been under caused by the global slowdown in synthetic fibers. "The market has improved tremendously," van Liemt says. "In addition, our research has led to a number of process improvements. At the same time, however, the variable costs of ammonia and cyclohexane, the main raw materials, can be pretty high in relation to overall production cost." He admits that such costs in the U.S. are generally lower than for Europe.
It's unlikely that DSM will add to its U.S. caprolactam and fertilizer capacities in the next few years. "We expanded during the mid-1970s to the level where we are satisfied with what we have," he notes. This does not mean that DSM is resting on its oars in the U.S. The company is aggressively pursuing markets in other fields. "We are in engineering plastics, and in special products connected with resins and with the paint and printing inks industries," he observes. "These are being promoted both through acquisitions and through our own inhouse developments." The wholly owned companies pursuing these activities—for example, Custom Chemicals and Daniel Products in New Jersey, and Sheffield Plastics in Massachusetts—are relatively small. "And they should stay small," van Liemt says, "because they are highly specialized and customer-oriented, with emphasis put on their technical service capabilities. We do the things that the paint industry people, for instance, aren't interested in doing. They just want to make product and bring it to the customer. We deliver specialized services to the industry. This may sound a bit arrogant but it is the case." DSM's North American sales account for about 5% of the company's total. U.S. business makes up the major slice, comprising products made locally and some shipped from the Netherlands. In contrast, sales
within the Netherlands amount to just under 40%, those in other European countries in excess of 50%. DSM doesn't split out profits by geographical area. Van Liemt does acknowledge, however, that "relatively, there is more profit in the U.S. than in Europe. Whenever we cross a border in Europe, it nearly always costs us 5%, for whatever reason. This is a factor when you are dependent on exports for the major portion of the business." There isn't a target for sales growth in the U.S. in absolute terms. But as van Liemt puts it, "In the sense that five of our seven divisions—chemical products, fertilizers, plastic products, resins, and energy (we have a joint interest in a coal mine in Kentucky)—have vested interests in the U.S. and have further ambitions, there are targets. We think more in terms of product profiles. But sales will grow. "For added-value specialty products, there are three marketing regions of primary interest to us: Japan, Western Europe, and the U.S. These are where the potential really is in such end markets as the automobile industry, the building industry, and the like. "What we are looking at are components, making customized packages to present to the customer and providing the necessary technical service backup. That is where our strength lies, much more so than being directly involved in the fields themselves." D May 7, 1984 C&EN 21
