Melamine Outlook
Sietse van der Sluis
Director Research & Technology
DSM Melamine
September 2006
MelaminebyDSM
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Content
1
• Who are DSM and DSM Melamine ?
• How is the (future) global supply – demand balance ?
• What is the costs position of all melamine plants in the
world ?
• For whom is there a future in melamine?
• How to make a small fortune in melamine ?
MelaminebyDSM
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Who is DSM?
2
DSM, a globally active ‘multi-specialty’ chemical company
• Leadership positions in ~75% of product portfolio
• Innovation driven, R&D spend ~ € 300 million
• Financially sound, solid balance sheet
• Net debt ~ € 0.5 billion
Life Science Products
Industrial Chemicals
Key data
Sales :
~ € 8 billion
EBITDA: ~ € 1 billion
EBIT:
~ € 0.5 billion
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Nutritional Products
Performance Materials
DSM’s key end markets
Automotive/
Transport 9%
Performance
Materials
Other 4%
18%
Industrial 15%
Chemicals
3
Pharma 20%
Life
Science
Products
63%
Food & Feed
34%
E & E 6%
Building &
Construction
11%
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Who is DSM Melamine ?
•
The world’s no. 1 melamine producer
•
•
•
•
Workforce 400 employees
Global headquarters in Sittard, The Netherlands
Sales office in the USA, DSM Melamine Americas (DMA)
Two operating companies with production sites
•
•
DSM Melamine Europe
DSM Kaltim Melamine
•
Proprietary low cost technologies
•
Plans to build a new 120 kt plant in China
•
The only producer with a global presence
•
Innovative
•
Excellence in services (logistics, technical service, new development)
•
Total market share around 20%
•
Preferred supplier at global customers
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4
DSM Melamine: building on global leadership
5
DSM Melamine Europe
The Netherlands 150 kt
China 120 kt
•
Production JV ended and
replaced by first class
logistic system able to
supply globally,
competitively, while
maintaining sales office
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DSM Kaltim Melamine
Indonesia 60 kt
60% owned JV with 2 local
partners
- confidential -
What is the outlook for global supply and
demand ?
6
Trendline based on
announced projects
101%
95%92%
100%
91%
89%90%88%86%
86%
86%
85%
85%
84%
60%
1200
40%
GUR (%)
80%
1800
600
20%
0
0%
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
melamine volume (kt)
2400
supply (ctp)
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demand
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global utilisation rate (%)
Main projects:
• creep
• Adnoc 80 kt
• Qafco 60 kt
• Trinidad 60 kt
• China 300kt
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demand
20
11
20
10
20
09
20
08
20
07
0
600
20
06
800
20
05
200
20
12
20
11
20
10
20
09
20
08
20
07
20
06
20
05
20
04
20
03
20
02
20
01
800
20
04
400
20
03
demand
20
02
0
20
00
400
melamine volume (kt)
600
20
01
Americas:
+8%
melamine volume (kt)
20
12
20
11
20
10
20
09
20
08
20
07
20
06
20
05
20
04
Europe:
+ 3%
20
00
20
12
20
11
20
10
20
09
20
08
20
07
20
06
600
20
05
800
20
04
20
03
20
02
20
01
20
00
melamine volume (kt)
800
20
03
20
02
20
01
20
00
melamine volume (kt)
Demand forecast per geographic region
7
China:
+11%
600
400
200
200
0
demand
APAC:
+2%
400
200
0
demand
2001 2004 2008
What is the cost position of all melamine plants in the world ? 8
Cash cost delivered in Europe: determined by technology, energy costs,
capacity, transportation costs, labour, material costs
Cost of production (USD/T)
1700
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0
0
200
400
600
800
Cumulative capacity (kT)
1000
1200
1400
1600
Two most competitve technologies of DSM
Melamine
Gas phase technology:
SLP technology:
- Economy of scale (120 kt)
- Lower energy usage
- simple process
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Low cost producers are the winners
Cold
Flu
10
Pneumonia
Death
1600
1400
Marging above cash costs
1200
Cost of production (USD/T)
Market
price
1000
800
600
400
200
0
0
200
400
600
800
1000
1200
1400
Cumulative capacity (kT)
Total O.O.P. cost
Demand
DSM
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1600
New competitive plants will lower the market price
and will induce cash loss of the marginal player
11
1700
Market
price old
Market
price new
0
0
200
400
600
800
Cumulative capacity (kT)
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1000
1200
1400
Demand
1600
New plants with expensive technology will generate
12
cash losses
1700
Cold
Flu
Pneumonia
Death
Cost of production (USD/T)
Market
price
0
0
200
400
600
800
Cumulative capacity (kT)
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1000
1200
1400
Demand
1600
Will cheap gas change the profitablity of melamine
manufacturing ?
gas
Furnace & steam generation
urea
Merchant market
@ market price
melamine
Cheap gas:
• Urea will be sold against local market
prices to the melamine plant.
• Reduction in the gas price for utlilities and
energy will result in a lower cash cost for
production of melamine.
•Transport of melamine to the melamine
markets will consume a great deal of the
margin.
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How to make a small fortune in melamine ?
1. Start with a big fortune
2. Invest it in the wrong melamine technology, scale or
at the wrong place
3. Sooner than you want you will have a small fortune !
Think, before acting:
•
•
•
•
•
•
Do you have the right technolgy ?
Do you have the right partner ?
Do you have the right location ?
Do you have the right scale?
Do you have the right market knowledge?
Do you have the right view on the prices?
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