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Chemturas Big Ideas for Lubes

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On Oct. 10, Chemtura Corp. unfurled a plan to transform itself into a pure-play industrial specialty chemicals company by agreeing to sell its pool and spa chemicals business and to explore the potential sale (for the right price) of its agrochemicals division. Nearly half of the remaining company would be Industrial Performance Products – home to Chemturas Petroleum Additives business as well as its Urethanes busines – while Industrial Engineered Products (bromines and organometallics) would make up the rest.

Under this new blueprint, Chemtura will depend more than ever on Petroleum Additives to generate a healthy stream of income from its sales of branded synthetic and industrial lubricants, polyalphaolefin base oils, phosphate ester fluids, lubricant additives and specialty greases.

Ensuring the business delivers on these ambitions falls to Simon D. Medley, the head of Industrial Performance Products whos been at the helm of Petroleum Additives since Oct. 1, 2012. His role, he explains, is to build a strategic framework for Petroleum Additives based on factual, analytical assessment. We want to bring together our collective best knowledge, and build off our distinct competitive advantages. Chemturas size – it had 2012 sales of $2.6 billion – means we can be quick, entrepreneurial, and adapt to the dynamics of the marketplace. The culture we want is to be a connected organization, with a strategic, long-term plan – not just here-and-now. And its my responsibility to make sure the pieces are in place.

Medley says now that Chemtura is not looking to sell any part of the lubes portfolio. Of course, any company continually reviews its portfolio, and Chemtura has aspirations to grow as a specialty chemical company, one that focuses on value-added growth businesses where we have a sustainable competitive advantage. So everything we do must help achieve that goal.

In Petroleum Additives, we have a unique position encompassing the entire value chain from base stocks to additives to branded, finished fluids. This gives us a unique perspective to offer solutions to customers. We can take a holistic approach, and leverage the entire portfolio when we go to market.

Todays lubricant customers, he says, demand greater attention to fuel economy, fluid life, emissions reduction, equipment durability, and OEM designs that impose extreme and arduous conditions on fluids. Our friction modifier additives, refrigeration lubricants and PAO all connect back to these needs, and weve verified our growth platforms through discussions with the OEMs.

Driving the market, he adds, are globalization, the shift of industrial activity to emerging markets, urbanization, and sustainability. Our synthetic fluids, base stocks, additives, finished fluids – theyre all enablers for each of these megatrends, and with our ties to OEMs, we can uncover areas for growth, Medley declares.

Taking the Leap

Medley, a chemical engineer, began his career at ICI Chemicals and Polymers in 1988. BASF acquired ICIs polypropylene business in 1994, and he moved three years later to BASF headquarters in Ludwigshafen, Germany, rising to EU director of sales for specialty chemicals and then vice president for automotive and oil.

In 2004, he took up a position in the United States as senior vice president of the BASF fine chemicals division, which was in need of bolstering. A successful turnaround there led to Medley being chosen to lead a reorganized care chemicals division. In late 2010, BASF bought Cognis and he became senior vice president and CEO of the newly combined companies personal care and nutrition subsidiary – once again, piloting a reorganization. For that job, he headed back to Germany, to Dusseldorf.

Why, with that successful track record, did Medley two years later decide to jump to Chemtura, a comparatively small player and one that only 18 months earlier had emerged from Chapter 11 bankruptcy proceedings? What appeal did it offer, versus the global giant BASF?

That was a major decision, and well thought through, he told LubesnGreases in an exclusive interview in August. What it boiled down to was I wanted to lead a transformation at a company level. This would be my fourth significant transformation throughout my career, and I felt it would re-energize myself and the core organization.

Petroleum Additives is one of two significant-size divisions of this company, Medley continued. Clearly what we do in terms of change has impact on the whole company. I wanted to bring in new ideas, new business, talent, organizational development, standards of excellence. And of course, fresh eyes are always good to bring into an organization. The move also reunited Medley with his family, who had stayed on after his earlier U.S. sojourn.

Medley first task was to analyze the business and define strategies. He then tackled a rapid, intense project, which in January – three months after his start – launched a quarterly communications series called In Pursuit of Excellence to instill consistency in the performance of the business. You cannot underplay the role of communications, he stated. Each employee should be asking, whats my role in this?

Second quarter 2013 saw Medley introducing structural change to the organization. In the reorganization, managers were given clear accountability for profit and loss, governance, discipline and vigor. This strategy is a significant change, as were looking to enhance the process and structure of innovation. Were also hiring-in industry expertise. Lots of things are changing, internally and externally, said Medley. But were being very clear about the sales channel management.

By the third quarter, things were really hopping. In August two big projects came to fruition, as Chemtura commissioned a new PAO plant in Ankerweg, Netherlands, and almost simultaneously started up a grease manufacturing plant in Nantong, China.

PAO, Grease Grow

The Nantong plant has made its first batches of calcium sulfonate complex grease, a product enjoying buoyant demand which also is made at Chemturas facility in West Hill, Ontario.

Nantong, located about 80 miles northwest of Shanghai, has sent grease samples to customers and original equipment manufacturers in China for testing and approvals, and expects to be producing commercial batches before year end, said Medley, who is based in Philadelphia. The multipurpose plant will make products for other Chemtura businesses in China as well, including urethanes.

Meanwhile, construction of the Netherlands PAO plant is complete, and we expect to begin producing sample PAO quantities so customers can get their approval processes under way, Medley said. Commercially approved volumes should be ready to ship to customers at the beginning of 2014.

Situated outside Amsterdam, the Ankerweg plant uses process technology equivalent to that at Chemturas existing PAO plant in Elmira, Ontario. The Canadian plant makes high-vis Synton brand PAOs, and increased capacity in 2011 by 25 percent to meet demand in both North America and Europe. LubesnGreases estimates Elmiras capacity at 15,800 metric tons per year.

The Netherlands Foreign Investment Agency put the initial target capacity for Ankerweg at 5,000 metric tons per year, to grow eventually to 15,000 t/y. The agency also said the plant cost nearly 25 million. Medley declined to confirm the size or cost of the new PAO facility, only remarking, I can say that it represents a significant investment.

Like its Canadian sister, Medley said, Ankerweg will make conventional high-viscosity PAOs in 40 and 100 cSt grades under the Synton brand name. We have metallocene catalyst capability for making PAO, but Ankerweg will make conventional PAOs because thats the type that has dominated demand in this market, he pointed out.

The new PAO plant represents great value as well as supply security for our customers in Europe, being based in their home market, he continued. Thats also where the highest demand is seen for high-viscosity PAO in the most demanding and sophisticated of automotive and industrial applications.

Both the Ankerweg and Nantong plants were given the green light in 2011, and finished on schedule, Medley said. He said a major emphasis throughout both projects has been safety: safe construction, safe start up, safe plants. The two plants took over 1.8 million man-hours to build and commission, he added, and were accident-free throughout.

Next: More Asia

Phase two of Nantongs lubricants operation will begin in about a years time, he related. At that stage, the plant will begin blending Anderol brand synthetic lubricants for sale in China and possibly elsewhere in Asia. Its production portfolio will grow to include compressor lubricants, refrigeration lubricants, gear oils, aviation oils and other high-performance industrial lubricants.

A further goal for Nantong involves producing a new calcium sulfonate complex grease that, rather than the high-end product made in Canada, will be specific to Chinas market. We will have some products whose price-performance ratio is different for China, Medley said. Things are evolving in China and we want to reach those industries that are moving to higher levels of sophistication, but also to reach down the pyramid. With that in mind, well be adapting some of our greases for those performance requirements. Calcium sulfonate complex is a premium grease product, but we can modify it to more fringe applications, in areas where for a technical and value point of view it fits better.

He went on, Nantong is also clearly involved in our Asia Pacific platform. China is a fascinating and exciting market, no question that we will also use Nantong to serve the region. This is hardware, steel in the ground. Weve invested in the region, which makes sense because Asia Pacific is the highest growth area for Petroleum Additives, even if the growth trajectory in the short term is a bit slower.

Steaming Ahead

Looking ahead to next year, Medley said his top goal is to drive growth in Petroleum Additives. We need to grow, grow, grow. Well do this by focusing on fast-growing regions, on channel man agement, and by scouting beyond what we do today. I personally have had a lot of customer interaction, to let them know were seeking a collaborative relationship. Weve had a series of discussions with the owners and senior management of these customers.

A second goal is to enable innovation, he added. Well be seeking every opportunity to accelerate our project pipeline, to ensure our portfolio is most suitable, to have a continuous improvement ethic, and to have good management and operation of our facilities and our manufacturing assets. We also may revamp our R&D pipeline. And then we need to network all these. For example, we want to make sure the stimulation we receive at the market interface is connected back to the network and to the innovation pipeline. The goal here is to maximize idea generation, maximize the size of the idea funnel. That means having solid relationships with OEMs, because they have great input to our innovation funnel.

Our third goal, he continued, is excellence, in manufacturing and throughout our global footprint, supply channels and commercial standards. We serve many different types of customers. Some are very large, multinational global players. They account for a significant amount of business, with a strategic relationship already in place. We also have many large and important core accounts, where we want to work together appropriately as opportunity allows, and others where sometimes its more of a transactional relationship. We need to maximize all these efforts.

Since emerging from bankruptcy in Nov. 2010 – three years ago – Chemtura has worked to ensure it has a better basis to carry out its business, Medley stated. Weve been very pleased with 2013 and especially with the way the first half developed. I attribute this very much to creating excitement and energy, and to aligning the organization so that from manufacturing to supply to sales there is clear direction. We are doing things better, and listening more closely to the market.

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