SCG Chemicals seeks world class status

SCG Chemicals seeks world class status

Company gets big boost from HVA

Representatives from petrochemical and plastic converting companies around the world visit SCG Chemicals booth at the K Fair 2016 in Dusseldorf, Germany.
Representatives from petrochemical and plastic converting companies around the world visit SCG Chemicals booth at the K Fair 2016 in Dusseldorf, Germany.

SCG Chemicals plans to become an integrated petrochemical producer and total solution services company that is driven by research and development, says president Cholanat Yanaranop.

"We want to be recognised as a world class player, not just a global player," he said.

Mr Cholanat said being a "world class" player means the company, the petrochemical arm of Siam Cement Group, has developed its own cutting edge technology and products without the need to expand capacity to push sales volume, as it relies on value-added products.

Also, such a company will generate revenue through new services so as to offset risks associated with crises spurred by declining petrochemical prices.

Apart from being a producer, the company aims to offer total solutions for the petrochemical industry, which is segmented into both petrochemical and non-petrochemical businesses.

Its petrochemical business includes polyethylene (PE), polypropylene (PP) and Polyvinyl chloride or PVC.

For the non-petrochemical side, its activities range from being an inventor and producer of disruptive innovative products like its functional material to a maker of robotics that can be custom-made for use in various industries.

On the service side, it offers industrial solutions such as production upgrades, output debottlenecking, and another service called design catalyst, in which it offers product design for clients, including a specially-designed sling waste cartridge for the Bangkok Dusit Medical Service. It also offers human resources management for the petrochemical company.

"All of these businesses have been developed to be buffers for us from the petrochemical cycle. In the future, let's say 5-10 years ahead, we will no longer be hurt by the up and down petrochemical cycle, which is driven by the uncontrollable price of petroleum," said Mr Cholanat.

For the first half of the year, SCG Chemical accounted for 55% of SCG Group's sales revenue and two-thirds of its profits.

"It means we are going in the right direction. Our strategy is not to be a mass product producer but to offer something that might be expensive but is unique in terms of quality because we have own the technology and know-how," he said.

After years of creating high-value added (HVA) products, this year the company rolled out its first genuine disruptive innovation at K Fair 2016 in Dusseldorf -- the world's largest plastic fair last week.

The new invention is called "functional material", which Mr Cholanat said is entirely "new to the world".

This functional material or lactate dehydrogenase (LDH) is inorganic. It works as an additive that can boost up the performance of certain materials.

For example, it could be mixed into a plastic product and create a new type of material that had previously never existed, such as packaging to preserve food that is resistant to the effects of humidity but looks like ordinary cellophane plastic.

"Previously, only aluminium foil could perform this role, but no one can see the product inside. With plastic, on the other hand, you could see the product but it didn't preserve food as well as foil does. With our functional material, we can do both for the first time, said Mr Cholanat.

"Aluminium foil is the first target we expect to replace with our new material in the food industry," he added.

It can also be anti-microbial, flame retardant without being toxic, and have controlled permeability, among other properties.

The functional material has been given the trade name Cierra. It was originally initiated by Oxford University in collaboration with the technical research and laboratory works of Norner for SCG Chemicals, who has provided them funding and commercialised the product.

SCG owns the patent to the product.

As Cierra is a disruptive innovation, the company still needs some time to work on a suitable business model to make an impact on the world market.

"Marketing is very important to make the world know what we have and how our magic powder can make their products a lot better," said Mr Cholanat.

At the K Fair 2016, many of the company's clients and potential clients showed their interest in the new material.

"There are a few clients who are ready for the trial stage with our functional material. The first one is one of the world biggest food companies. They want to see whether we could develop better packaging for a certain product of theirs," he said.

Cierra will be produced on a commercial scale around the end of 2018, said Mr Cholanat.

The company has also launched a new product which is upgraded from existing polyethylene, so-called new generation polyethylene (PE).

Developed by a Norwegian research laboratory, Norner AS was acquired by SCG Chemicals in 2014 at a price 340 million baht.

The new PE product has been a major step for the company to shift its production from commodities to innovation.

New gen PE can increase the strength of plastic resin to suit the customer's ambitious requirements for various applications while using 25% less materials in the production process.

"Let me put it this way, with the new technology, we use less materials to make higher quality products such as food preservation film, which we can make as thin as 0.3 micron, as opposed to 0.5 micron, which is currently the thinnest in the world," he said.

The new film also has better quality, added Mr Cholanat.

New gen PE will be rolled out commercially by the end of 2017.

"Our plan is to gradually phase out the current PE and replace it with the new gen PE, starting from 10,000 tonnes initially," he said. "We have to do the marketing to create demand for better products and upgrade production in tandem. Overhauling production to only make new might take around 4-5 years, but we will become one of the top three PE producers in the world in terms of value, because it will be high value," said Mr Cholanat.

This year SCG has allocated a budget of 3.3 billion baht or around 54% of the total R&D budget for the entire Siam Cement Group to move the company's revenue proportion from mass products to high value ones.

By the end of this year, SCG Chemicals will have more than 140 patent applications, both in Thailand and abroad. Over the next five years its annual R&D budget will reach 5 billion baht.

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