Wacker to Exit Wafer Business and Industrial Collaboration to Create Sustainable Meat Packaging
Wacker to Exit Wafer Business and Industrial Collaboration to Create Sustainable Meat Packaging
I don't purposefully aim to write a lot about sustainability, but rather this the majority of the chemical news these days.
It is December 4th, 2020. I have been writing The Polymerist for just over 2 months now and the feedback I’ve gotten from readers has indicated I should keep going. It has taken awhile to figure out the structure, but I think this feels right. If you like reading this there are some ways you can show me you care this holiday season. You can subscribe to the newsletter (button below) and you can share these posts on your social media, tell your friends and coworkers, and tell me what you want me to write about.
Innovation
Semi-Circular Food Packaging
On Tuesday I wrote about turning Trash into Money and apparently DSM, Sabic, Cepsa, Fibrant, and Viscofan have been after this for sometime now and achieved a circular route to food packaging. It is a bit complex, but essentially Sabic is able to turn mixed use plastics into benzene (key platform chemical) and ethylene which they can use to make polyethylene. It is unclear how Cepsa is making their phenol, if they are using the cumene route then I suspect they would need to show their circular route to propylene. Then Fibrant and DSM turn those chemicals into the nylon needed to block the gases that point spoil food. I tried to show this in the figure above.
All of this is great, but I think Sabic needs to show that they can then turn the final packaging back into benzene via pyrolysis for this to be truly circular. To me it was unclear that this was possible, but I believe it should be. Additionally, recycling laws will have to change as the multi-layered films used in food packaging are restricted from going into recycling streams.
High Performance Sustainable Materials
DSM Engineering Materials and Neste announce a partnership to develop high performance sustainable materials. Neste has a strong history as the Finnish oil company, but recently has made strategic moves to become a company that is focused on renewable fuels and chemicals. DSM sold their resins and functional materials business to Covestro earlier this year to focus on being a purpose-led company focused on sustainability, nutrition, and health. This partnership is interesting because it is a joint effort by two large European companies seeking to completely transform the way they do business compared to 10-15 years ago. Neste is focusing on supplying DSM new raw materials from new carbon sources like spent cooking oil and plastics that were bound for the incinerator. DSM hopes to turn those new raw materials from Neste into high performance specialty materials. These companies are attempting to do well by doing good.
Business Distillates
Road Coatings Company Sold for $1.15 billion dollars
PPG is acquiring Ennis-Flint for about $1.15 billion dollars. Ennis-Flint makes road coatings that are specific to government specifications and does business primarily in providing coatings to public sector entities. Ennis-Flint is privately held, but is expected to reach a 2020 revenue of about 600 million with probably about 12-16% EBITDA. The business sounds like real money maker and if they can go global in supplying road marking coatings to other countries around the world then I suspect PPG has just completed a very profitable transaction despite it sounding quite boring. Specialty products with minimal competition and being sold to customers who always need your product is a good place to be so I’m not surprised that the transaction appears to be going for about 10x EBITDA or more.
Global Wafers To Be Largest Silicon Wafer Producer in the World
Siltronic AG got an offer to sell to Global Wafers at $126 dollars per share this week. The board seems receptive and Wacker Chemie AG, the largest shareholder, also seems to be on board with the sale. This fits in with Wacker’s overall goal it appears to cut costs, raise capital, and pivot into something potentially more profitable. Last month Wacker had announced their finalized plans to cut 1200 jobs this year. I believe Wacker may be out to do some acquisitions that more reflect its core business such as acquire a construction products company, a personal care company, or invest more into their electroactive polymers business. It all depends on if the board and shareholder envision of Wacker Chemie is to be a vertically integrated chemical company like Covestro or become a technology company similar to Johnson-Matthey. Most likely, they will be somewhat more of the same and stay a specialty chemical company trying to maintain a 15% EBITDA margin despite all of the efforts to change.
Lactic Acid - Becoming a Platform Chemical
Cargill is teaming up to make acrylic acid from lactic acid with IFPEN and Axens. This development, which will take years to deploy at scale, could be another step towards lactic acid becoming a viable biobased platform chemical and see it used outside of making polylactide. Cargill got the exclusive rights to commercialize Proctor and Gamble’s lactic acid to acrylic acid technology earlier this year.
P&G sells a bunch of stuff, but licensing technology (patents) is another way to make money and is a viable way to make money. The biggest costs in this type of business model are developing the IP (R&D scientists, lab space, and patent attorneys) and selling that IP to bigger companies. There are probably also some good consulting opportunities during scale-up as well. As a pure technology company the capital intensive nature of the chemical industry is pushed off onto someone else and could be a faster route to developing and commercializing new technologies.
Cargill is one of the biggest players in producing polylactide through Natureworks and have invested heavily into lactic acid production. If Cargill can unlock acrylic acid and the downstream chemicals from acrylic acid such as butanol (which can also be made from sustainable feedstocks) then Cargill will become well positioned to become a unique supplier when it comes to paint feedstock monomers. Acrylic acid while valuable for paint and vinyl esters it is also used in super absorbent hydrogels (think baby diapers). NC State has a good overview of lactic acid and how it can be used to make other chemicals.
You cannot fix a problem unless you understand it.
Tony
The views here do not represent those of my employer, should not be considered investment advice, and when handling any chemical you should thoroughly understand the risks by reading the safety data sheet.