GUANGZHOU - The German specialty chemicals company Lanxess AG is eyeing acquisitions in China, across the entire gamut of business, according to the head of its Chinese division.
The interest comes as ongoing urbanization, booming car sales, a massive agricultural sector and water treatment industry drive demand for the company's products, said Martin Kraemer, CEO of Lanxess Greater China, on the sidelines of a major plastics and rubber trade show in Guangzhou.
Lanxess' business segments include performance polymers, advanced intermediates and performance chemicals. They are used primarily in industries such as automobile, electronics, construction, paint and coating.
Lanxess is expanding its annual production capacity in Wuxi, Jiangsu province, from 40,000 tons to 60,000 tons of high-tech plastic products this year, as demand begins to outstrip supply. The company's leather chemicals facility in Changzhou, Jiangsu province, is scheduled to be operational by 2013. Meanwhile, a joint venture with TSRC Corp to produce nitrile rubber in Nantong, Jiangsu, is expected to start production in 2012.
Kraemer expects China's share of the company's global business to increase from the 11 percent registered in 2010, without specifying a precise figure. That's as Lanxess aims to boost its yearly EBITDA (earnings before interest, taxes, depreciation, and amortization) by 80 percent to 1.4 billion euros ($2 billion) by 2015.
Although the Chinese government has lowered the economic growth target for the coming five years, Kraemer expects the Chinese economy to "come down a bit, but not much".
The demand for higher quality goods is increasing, as China moves up the value chain and sees better quality products being designed in the country, he said.
Lanxess posted "strong double-digit growth" in China during the first four months of 2011, after a 30 percent rise in 2010, and 15 percent in 2009, amid the global economic downturn.
"The global chemical industry enjoyed good growth of 7.5 percent. China led the way," said the company's first-quarter report.
It's projected that China will contribute 31 percent of the growth in the world's automotive market in the next 15 years. The use of high-tech plastics in Chinese-made cars, which helps make them lighter and more fuel-efficient, however, is estimated to be only 25 percent of that in Germany, leaving huge potential for chemical companies.
"China is the world's largest market for high-tech plastics," Kraemer said, adding the country has been one of the pillars of the company's long-term growth strategy.
Chinese sales of high-tech plastics made by Lanxess are expected to generate "slightly higher" growth than the annual 7 percent for the global market by 2020, he added.