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Evonik expands Singapore footprint even as trade war bites into growth

Evonik second DL methionine plant.jpg
Evonik's second DL-methionine plant in Singapore. The group noted that its investment for the Singapore plant made for the group’s largest single investment so far.

THE trade conflict between the United States and China has led to slower growth for Germany-based chemicals giant Evonik Industries, a senior executive said.

But executive board chairman Christian Kullmann still called business growth levels above economic expansion “a must” at the launch of the company’s new specialty chemicals plant in Singapore on Tuesday morning.

Despite cooling in the Chinese market’s automotive and construction industries, business segments such as healthcare still see “good and steady growth”, he noted.

“We consider Singapore our gateway to extend and expand our businesses, our growth, in the South Asian region,” Mr Kullmann added, while noting a target of “GDP-plus” business growth.

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Evonik has invested roughly 500 million euros (S$768.8 million) into its new facility here, which will make the amino acid methionine - a protein component used in animal feed supplements. Another methionine plant here, which opened in 2014, is part of the same complex on Jurong Island.

The Republic, which houses an innovation hub for Evonik, also serves as the group’s headquarters for the Asia-Pacific South - a region stretching from Pakistan to New Zealand, which made up 6 per cent of its sales in 2018.

Meanwhile, the nutrition and care segment, which includes the methionine business, contributed close to one-third of Evonik’s 15 billion euros in sales in the same period.

Evonik, which has identified animal nutrition as a growth driver, also makes materials and additives for automotive, coatings and adhesives, construction, rubber, plastics and other industries.

The group noted that its investment for the Singapore plant made for the group’s largest single investment so far. It has six methionine facilities worldwide, including in Belgium, Germany, and the US state of Alabama.

With the latest plant opening, Singapore is set to produce as much as 41 per cent of Evonik’s global methionine output, as the company’s annual capacity here will double to 300,000 tonnes.

But Peter Meinshausen, Evonik’s regional president, citing Singapore’s role as a trade and logistics hub, told a press briefing ahead of the launch that the output here would be driven by growth in end-markets across Asia.

“We are here to produce, and we are here to produce at full capacity,” he said.

Investments in solutions such as the latest methionine complex are, he added, “in many cases, the completion of a global asset footprint”.

“Global population growth means that demand for animal protein will continue to rise steadily in the future,” Evonik had previously said in its full-year financial report.

“Moreover, environmentally compatible, resource-saving manufacture of products for animal and human nutrition is becoming increasingly important worldwide for ecological reasons.”

Deputy Prime Minister Heng Swee Keat characterised the latest Evonik facility as an investment in food security and innovation in the Republic, which has embarked on a quest to raise both domestic food production levels and agri-food research funding.

“We hope that our recent investments in innovation for food and nutrition will bring companies along the ‘farm-to-fork’ value chain,” said Mr Heng, who is also Minister for Finance, at the launch at the Capitol Theatre.

The Government pledged in March up to S$144 million to food research, including urban farming, aquaculture and alternative proteins.

Singapore’s growing food and nutrition ecosystem “will also contribute to our broader effort to build Singapore as a global-Asia node of technology, innovation and enterprise”, Mr Heng said.

He called specialty chemical companies “key suppliers to the broader food and nutrition ecosystem”, while naming both specialty chemicals and food and nutrition as “growth sectors” for Singapore.

“We hope our efforts can, over time, also strengthen food security in the region,” the minister added.

“So this growing ecosystem offers opportunities for companies such as Evonik to develop new partnerships in Singapore, and enter new business and technology areas.”

Such tie-ups “will strengthen and add vibrancy to the ecosystem over time”, Mr Heng said.

The new plant is expected to add more than 100 jobs to the company’s 600-strong headcount here, including engineers and lab and process technicians. Evonik’s other operations in the Republic include an oil additives plant on Jurong Island and a regional research hub in Biopolis.

Singapore’s specialty chemicals industry produced S$9.89 billion worth of output in 2018, government data showed. It employed 9,160 people, or 2.4 per cent of the manufacturing workforce.

Temasek Holdings, Singapore’s national investment firm, took a 4.6 per cent stake in Evonik in the run-up to a Frankfurt bourse debut in 2013, but divested its position during the 2016-2017 financial year.