January 16, 2015

Sumitomo Chemical: Committed to sustainable supply and market responsibility


Commemorating its 100th anniversary, the company cites 'being in harmony with public interest' as the secret behind its long life and success


By Ngai Meng CHAN and F.E. OLIMPO


In the 1960s, Japanese companies went through rapid growth and internationalisation. And it was the time Sumitomo Chemical began petrochemicals production at its site in Niihama city, Ehime, Japan.


These chemicals included ammonia and propylene, two basic materials for methionine production. That Sumitomo Chemical would enter into the methionine business was thus a logical decision to make.


Today, methionine is part of the company's health and crop sciences sector, where the amino acid business contributes around 20% of the sector's revenue.

Sumitomo Chemical's methionine plant at Ehime Works


Given its ready access to raw materials, Sumitomo Chemical's methionine production at Ehime Works is on-site backward integrated.


On-site backward integration increases the company's resilience to supply disruptions of raw materials and intermediates.


Being backward integrated is just one of the company's many competitive advantages. As a major chemical company, it has access to a wide array of, and the latest in, chemical technologies, some of which can be used to enhance methionine production.


In more than half a century of presence in Asia, Sumitomo's methionine business has built up a large customer base in the region, which has been responsible for its relatively strong, lower-product-distribution cost position and continued success.


Abiding by its own business dictum of "being in harmony with public interest," the company doesn't fall for easy gains. Prospects and opportunities are carefully weighed, leaving no chance of, for instance, overestimating market demand, the cause of many business failures. 


Capacity expansions have been always well-timed. These include the 2010 capacity expansion at Ehime Works by about 40,000 tons to about 140,000 tons per year, and the 2012 opening of the 20,000 ton-per year liquid methionine plant in Dalian, China.


Although Asia accounts for more than 50% of the business, Sumitomo's methionine operation is unarguably a global enterprise, with exports reaching more than 70 countries. Sales are usually negotiated through affiliate companies, especially with large feed mills and integrators. But where they are more cost-effective, normally the case with supply to smaller customers, sales are done via distributors.


Some affiliate companies under Sumitomo Chemical involved in methionine in various parts of the world include: Sumitomo Chemical (Asia Pacific) Pte. Ltd; Sumitomo Chemical Shanghai Co., Ltd.; Sumitomo Chemical Agro Seoul, Ltd.; Sumitomo Chemical India Pvt. Ltd; and, Sumitomo Chemical do Brasil Representações Limitada. etc.


Sumitomo Chemical conducts extensive feasibility studies before developing any new feed additive or amino acid product, as it did in 2005, when it added methionine hydroxy analog to its product portfolio to meet the growing demand for a liquid form of methionine.


The company's liquid methionine product, which has a content of 88%, comes in either 250 kg drums or 1,200 kg Intermediate Bulk Containers. The company's main methionine product, DL-methionine, has a content of 99% and is available in 25 kg or 1,000 kg bags.


Within the next five years, the company also expects to roll out new product to its feed additive portfolio.


Future opportunities and challenges


According to an eFeedLink survey, the combined annual production capacity of China's methionine producers is projected to reach 560,000 tonnes by 2019.


However, Sumitomo Chemical believes that newcomers to the methionine business have to overcome many hurdles to reach their targeted capacities. The biggest hurdle is to reach a technological level to effectively manage industrial chemicals such as methyl mercaptan, acrolein and hydrogen cyanide.


There have been many cases of industry upstarts failing to meet their target capacities. One key question to ask is: were those targets in fact realistic?


Nonetheless, Sumitomo Chemical is confident that the growing global demand for methionine will be able to absorb the added capacity. The company thinks that the high methionine prices seen in the second half of 2014 were unsustainable and unhealthy for the market.


Mr. Shinichiro Imai, general manager, Business Planning & Administration Department of Animal Nutrition Division, strongly believes global supply is unlikely to outpace global consumption in the long run with continual growth in poultry consumption in the developing world as the main driver for expansion of the methionine business.


Methionine is variously classified as either commodity chemical, with little variation in constitution from producer to producer, or specialty chemical, which means exclusive to a certain producer. Both aspects are inherent in methionine.


The fact that customers were willing to accept the record high prices of the product in the second half of 2014 indicates that, like any specialty chemical, there is no real alternative to methionine after all, says Dr. Atsuro Matsuda, head of the Animal Nutrition Division. Clearly, this makes methionine a high-value product, he adds.


Sumitomo Chemical provides added value to its customers through technical service. This service is particularly important for feed formulation or when feeding conditions change, when it becomes necessary for customers to adjust and optimise the inclusion levels of methionine accordingly, Dr. Matsuda adds.


Prices and value-added aspects aside, methionine's future as an industry rests on its sustained supply. Sumitomo Chemical clearly had made this its unbreakable commitment as her marriage with the methionine business approaches its diamond jubilee.

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