Keeping it together with MEGlobal

Ramachandran, however, says that is the mistake most commodity producers make. “It is a misnomer that commodities need no marketing or innovation. Handing a product blindly to a distributor and making no efforts to invest in innovation needs to be a cause for concern for any manufacturer,” he says.

At MEGlobal, we look constantly at ways to innovate, says Ramachandran, as he goes on to speak about the current rebuilding of the front end of manufacturing of the mono ethylene glycol plant in Canada.

“We are putting in eight reactors with completely new technology. This reactor design will allow us to use catalysts at a much higher efficiency. So, instead of producing carbon dioxide, we actually make more glycol. Dow Chemical is supplying the technology.

We are optimising the existing facility that is operating at Fort Saskatchewan with innovative technology, which allows to also lower our carbon footprint,” he says.

MEGlobal’s ethylene glycol chiefly reaches the polyester market. More than 60% of their customers are from the polyester industry and the rest from PET and anti-freeze.

“Polyester is one of the most resilient industries that there is today. The fabric has diversified itself from textiles to furnishing, and to even packaging. It is a big market in the emerging markets because polyester is the fabric that signals the climb out of poverty,” he says.

A simplistic way of looking at the industry is, if every Indian or every Chinese person picks up a polyester garment, you will need a new glycol plant every year.

Today, MEGlobal is a well established company with the ethylene glycol market looking at it for guidance, regarding innovation and technology. It maybe recalled that MEGlobal rose to the second-largest player in the EG market, just after Sabic almost overnight.

2011 was considered a record year for the company, as it sold nearly 3 million tonnes of EG, with a mere workforce of 240 people. Though MEGlobal does not reveal its profits, Ramchandran says it is a ‘comfortable’ double digit per cent of sales, which keep the parent companies happy.

MEGlobal’s ‘parents’ are Kuwait’s Petrochemical Industries Corporation and Dow Chemical. Ramachandran was formerly with Dow Chemical in various roles across the world, before he headed up this joint-venture. But the initial days of this successful joint-venture was not without hardship, especially in terms of employee engagement.

“When we decided to form this company in 2004, I was on the Dow side and the first question that the Canadian employees asked were why should I give up this wonderful American company called Dow and go into this joint -venture.

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We need to understand that there was the fear of the unknown, especially because of the Kuwaiti partner. It took a lot of convincing from my side to tell people that it will be great to work on this joint-venture.

But, it is nice feeling for me today, as I head the company – I wanted my colleagues to join, so life has come a full circle in many ways,” he says. Ramachandran agrees that a joint-venture culture is not for everyone, but his policy of employee retention is excellent financial benefits coupled with a rich work experience.

“Even if someone is keen to work only for a shorter period in a smaller set-up like MEGlobal, they at least have a great resume, which makes them a more valuable employee at a larger organisation,” he says. Also speaking further about a JV culture, he says, there are times when the parent companies are not always in agreement about the future course.

“During the course of this JV even, the parents have had their differences, but MEGlobal has been the poster child of what is possible if two different cultures work well together. Bottom line is – making money helps,” he laughs. MEGlobal is a 3.5 – 4 billion dollar company today, and is looking for future growth avenues constantly, he adds.

Joint- Venture Culture
Whether joint ventures are liked or disliked, they cannot be ignored in the petrochemical industry. The industry is set up in a way where the feedstock, lies with a set of companies, and the technologies with another set, both at different ends of the globe usually.

So, to optimise the use of feedstock effectively, the JV model maybe the best to work with. “Let me put it this way, a joint venture is the only place where you can say, two plus two is ten,” he says.

So the next question is what happens with the profits made by MEGlobal?

The predominant amount of the company’s earnings goes back to the parents as dividends. “But in terms of reinvesting in the business, if we have a powerful business case, then, there is no problem at all. However, we will not sit on cash as the parents can redeploy it a whole lot better than we can,” says Ramachandran.

MEGlobal has made it clear that the company is looking to expand. Ramachandran in a number of forums has said that he wants the company to go ahead with building more plants.

He stands by his statements and says he would like to see more plants in India, the Middle East and America, but leaves the order of expansion to the parent companies.

Worldwide demand for ethylene glycol is projected to rise 5.4%/year through 2015, spurred by PET, polyester fiber growth in China, other emerging markets.

Kuwait has been debating building another EG unit, but there has not been much progress. He hopes that the situation will change and the country will have another EG unit soon. When asked about the biggest challenge for the Gulf petrochemical manufacturers today, he says, it is undoubtedly the shale gas revolution in the United States.

“We cannot ignore the shale gas find. The current projection is the shale gas-based petrochemicals will be competitively priced, when compared to the naphtha – based ones and this has created a very interesting challenge for the GCC. The assumptions in the subsidised feedstock export model is no longer valid. This topic needs discussion,” he notes.

But rather than get negative about it, Ramachandran says, we have to understand that the petrochemical industry has always had its share of challenges.

“When the Middle East began building its industry, everyone said that the United States industry was almost wiped out, but now with the shale gas, the US industry is back on its feet.

So, neither is the US a dying industry, nor is the GCC going to get wiped away, but the truth is somewhere in the Middle today. Also, please remember technology changes everything.

So, as we speak there is a coal-based petrochemical industry emerging in China,” he explains.
So, what is his mantra to remain a competitive producer in the industry, we ask and he says, ‘marketing’ and notices we have reached a full circle in the interview.

“Look, I cannot emphasise enough about marketing the commodity. Don’t get me wrong, I don’t mean fancy EG bottles or coloured containers – I just think any commodity producer needs to be able to understand the customers. We, at MEGlobal, for instance have a strong Asian sales force, as that is our main market.

“We make sure our customers are taken care by way of supplying the product on time and thinking of little ways for making it more convenient for them to take delivery of the product,” he adds.

With this strategy, Ramachandran is confident of MEGlobal’s loyal customer following and hopes that the company can build a new EG plant every five years to keep that base growing strongly.

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Who is he?
A chemical engineer by training, Ramachandran earned his Doctorate in surface and colloid chemistry from Columbia University, New York and has several publications and patents to his credit.

He has spent his entire career in the chemical industry, initially as an analytical chemist before moving into the commercial side of the business holding product and marketing manager roles for a wide variety of business units.

Ramachandran holds a Masters of Business Administration (MBA) degree in finance from Rutgers University in New Jersey, USA, as well.

Ramachandran joined Dow in 2001, as business director in the performance chemicals division for the acrolein derivatives, divynyl benzene, ENB and specialty ketones businesses.

MEGLOBAL:
A JOINT VENTURE

Formed in July 2004, MEGlobal is a 50:50 joint venture between The Dow Chemical Company (Dow) of the United States and Petrochemical Industries Company (PIC) of Kuwait.

Strategic Resources: MEGlobal produces, sells and distributes its products, as well as, those made by Dow and Equate.

Key end markets – particularly fiber and PET resin producers, are concentrated in Asia and are expected to drive MEG growth by at least 5% for the foreseeable future.

Parents of the JV

The Dow Chemical Company
• Ethylene
• Oxide/Ethylene Glycol (EO/EG) assets
• Marketing rights for production from Dow’s global asset base in excess of internal requirements

Petrochemical Industries Company
• Capital
• Expanded market access

MEGlobal
• Sole focus on the production, sales & marketing of ethylene glycol (EG)
• Strong global ethylene integration
• Cost competitive EO/EG assets and technology
• Positioned to serve the fastest growing markets

In numbers:
– 3 mln tonnes of ethylene glycol was sold in 2011 by the company with a mere workforce of 240 people
– 5% MEG market is expected to grow at least at five per cent
– 2.6mln tonne/year of new polyester capacity is being added in China in the first quarter of 2013
– 1.9m Tonnes of MEG is needed for the new polyester capacity in China