Target Information

Kemira Oyj has established a joint venture in China known as Kemira TC Wanfeng Chemicals Yanzhou, referred to as NewCo. This collaboration is formed with the local producer Shandong Tiancheng Wanfeng Chemical Technology, with Kemira holding an 80% stake in the venture. NewCo's primary focus is on the production of AKD wax and its raw material, fatty acid chloride (FACL). AKD wax, which is heavily based on renewable resources, serves as a crucial sizing agent in the paper and board manufacturing industry, enhancing their resistance to liquid absorption. Kemira is recognized as the global leader in the production of sizing chemicals.

Industry Overview in China

The Chinese chemical industry has consistently demonstrated robust growth, driven by increasing demand across various sectors, including pulp and paper. As one of the largest consumers of chemicals globally, China's pulp and paper sector is expanding rapidly due to rising consumption levels and technological advancements.

The push towards sustainability and the adoption of renewable materials is shaping the future of the industry. Companies are focusing on integrating eco-friendly processes and materials to meet regulatory requirements and consumer expectations. China’s efforts to modernize its industrial base and shift towards higher value-added production align perfectly with Kemira’s strategic objectives.

Moreover, the government's initiatives to support innovation and improve product quality in the chemical sector are fostering a competitive environment. With policies aimed at boosting foreign investment and technological partnerships, companies like Kemira are well-positioned to capitalize on these opportunities.

The growing importance of water treatment and resource efficiency in China also creates a positive outlook for companies investing in chemical production. As environmental regulations tighten, the demand for effective coagulants, such as polyaluminum chloride (PAC), produced by NewCo, is expected to rise substantially.

Rationale Behind the Deal

The establishment of NewCo represents a strategic move for Kemira to enhance its standing as a primary supplier to the pulp and paper sector. This joint venture not only increases Kemira's production capacity for AKD wax, allowing for backward integration into the supply chain, but also secures a reliable supply of vital raw materials. Operating in proximity to Kemira's existing facility in Yanzhou aids in maximizing operational synergies.

Furthermore, this partnership opens new avenues for growth by enabling Kemira to expand its product offerings, particularly with the anticipated production of PAC for water treatment applications. The investment of approximately EUR 55 million illustrates Kemira's commitment to expanding its footprint in the Asia-Pacific region.

Investor Information

Kemira Oyj is a global chemicals company dedicated to serving industries that are highly dependent on water. With vast expertise in various applications, Kemira aims to enhance product quality and operational efficiency for its customers. In 2017, the company reported revenues of approximately EUR 2.5 billion and employed over 4,700 people worldwide.

Listed on Nasdaq Helsinki Ltd, Kemira has extensive experience in the pulp and paper, water treatment, and oil and gas industries. Its strategic investments and partnerships underline its goal of becoming a leader in sustainable chemical solutions, particularly in high-growth markets like Asia.

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From an investment perspective, the formation of Kemira TC Wanfeng Chemicals Yanzhou is a strong strategic alliance that aptly positions Kemira to meet the growing demands of the Asian pulp and paper market. The focus on AKD wax manufacturing, coupled with the integration of sustainable practices, aligns with global industry trends and regulatory shifts towards environmentally friendly chemicals.

The joint venture is particularly compelling considering the rising need for innovative water treatment solutions. As environmental issues become more pronounced and regulations become stricter, the anticipated production of PAC at NewCo sets a solid foundation for long-term profitability and market relevance.

Moreover, the operational synergies realized by the co-location of NewCo with Kemira's existing facility can lead to reduced production costs and enhanced capacity utilization. This will not only improve Kemira's competitive edge but also increase its responsiveness to market changes.

In conclusion, this joint venture appears to be a sound investment strategy for Kemira, with significant potential for growth and an enhanced market presence in the Asia-Pacific region.

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