Baalbaki plans systems house network across ME

Third systems house to be added soon

Report by Liz White, editor

Syrian-based polyurethane company Baalbaki Chemical Industries is so convinced of continuing high growth in the Gulf States and urther afield in the Middle East and North Africa that it plans to set up a network of systems houses in the area.

"It is no secret, we've already publicised that we plan to invest in further systems houses in our territory," explained Hassan Baalbaki, managing director of the polyurethanes business unit of Syrian group Baalbaki.

Baalbaki already has a highly integrated operation, with two plants, and another one nearly operating: "Currently we are located in Syria, and have also a plant in the United Arab Emirates (UAE)," (see box p44)," with a third systems house about to start operating in an unspecified location in the Middle East.

For Baalbaki, integration means that, as well as making polyester polyols, isocyanate prepolymers, formulated polyurethane systems and thermoplastic polyurethanes, the company has moved downstream into flexible foam for bedding, rigid foam, discontinuous insulation panels for the construction industry, mobile spray foam, adhesives and more, said Baalbaki.

The polyurethanes unit is a fully owned family business, alongside other Baalbaki interests in real estate, banking and clothing. "Our number of employees (in the chemicals business) is about 580 going up to about 620 in the next 1-2 months," Baalbaki added.

For polyurethanes, "we produce our own saturated esters, we have unsaturated esters capacity coming up in the next two months, we also have speciality polyols," he said.

Baalbaki sells currently in the Middle East, North Africa and GCC (Gulf Cooperation Council - Saudi Arabia, Kuwait, Bahrain, Qatar, the UAE, and Oman) regions. "we are selling in Turkey, Ukraine, Greece, Italy, France and West Africa, so we are quite diverse in our selling regions," Baalbaki observed.

As well as its investing in systems houses, the company is also developing its product range, Baalbaki said: "We are constantly investing in our product portfolio so we're not just expanding our distribution and systems houses network but within the countries we are also investing to grow in an increasing application portfolio."

"For example, because there are no cold- cure manufacturers in Syria we will be adding a cold-cure production line mainly for the automotive industry," he revealed. Today, Syria has one automotive manufacturer, Saipa, but "potentially within the next year we will have another one," he said.

These operations will need to be supplied with cold-cure moulded foams for seats, head rests, and other parts: 'We have already received the first specification from the first car manufacturer in Syria for supply of the seat cushions" Baalbaki said. For the second one, which is a venture with an Iranian company, plans are in motion, Baalbaki said.

Regarding other growth options, Baalbaki said: "We are already investing in our own plant network. However we are obviously open for any possible acquisitions."

Profits can always be better

"In polyurethanes profits can always be better," Baalbaki observed, saying the same goes for systems houses. "Prices, eventually, in our opinion will have to cover the increasing raw material costs and have to keep the know-how margin."

Desite some potential short-term dips, Baalbaki does not think in a short-term manner. "We are investing significantly in the development of the key polyurethanes market, not only in Syria but also in the whole Middle East, both as a systems house and backwards integrated foamer. We've taken the decision to integrate the industry as we have become an integrated consumer of polyurethanes ourselves."

He would like to see Baalbaki become "the number one local supplier of polyurethanes in our region. I think given the diversity of our products today and the production output we have, we're not too far from reaching this goal."

Scrap polyester route used

For polyester polyols, one production route is based on scrap polyester, where Baalbaki is integrated with the local authority in Syria. "We have a contract with a local waste-management company." Baalbaki cleans up the PET chips in­ house before they use the recycled product in its process. "Of course this is a very beneficial approach for our polyester manufacturing," said Baalbaki . "It gives us a firm edge in the marketplace," he added.

Use of polyester polyols is increasing in polyurethane rigid foams, "mainly because of increasing fire ratings for rigid foam insulation in our territory." Also, higher local insulation codes and standards are being spearheaded by the UAE today, because of energy costs, Baalbaki pointed out.

Once these codes are changed and enforced "the insulation consumption in our territory will grow substantially, so we see this as a major growth developer for the polyurethanes business." Companies who change systems to meet the new regulations in Syria receive 50 percent of the investment required from the government," said Baalbaki.

To exploit the energy saving potential of rigid PU foam. Baalbaki is looking at creating an environment where, "you live in a home and basically need no oil for heating purposes whatsoever." The energy within the house is solar, with insulation to such a level that all heating in winter is solar and minimum cooling is needed in summer because of the insulation.

Ever-higher oil prices will "have a bigger effect on an individual's net income and he will think more and more towards insulation," and this is true in the Middle East as well, Baalbaki is sure.

In raw materials and products Baalbaki aims to conform with European standards, "because we are also supplying European customers," Baalbaki said. 'We are QV approved and we have received ISO certifications.

Raw material supply issues

In terms of raw material delivery during tight supply situations, Baalbaki said, "this is a very important perpetual question affecting all independent systems houses."

He pointed out that 16 years of polyurethane business means "good relationships with all international suppliers.... We have maintained good contact,” with all of them, adding that these relationships "are flourishing due to our continued growth and specially our commitment to the industry."

"The commitment from Baalbaki towards the polyurethane industry has helped in structuring and strengthening our relationships with the key suppliers. "He added that, "we are seeing a lot of changes in the industry and we're seeing some suppliers more interested in short-term profit rather than a long-term supply contract with a developing long-term relationship."

"We will have to see what happens, since periods of shortages in our perception are always followed by longer periods of over­ supply. It's an up-hill down-hill challenge for all involved parties so we'll have to wait and see what happens when things are changing."

The cold-cure unit for automotive uses is another adaptation Baalbaki has made to meet changing local needs.

POLYURETHANES AT BAALBAKI

Baalbaki first introduced systems for PU spray foam and refrigerator insulation to the Middle East in the late 1970s. Anticipating large growth in demand for polyurethanes in the Middle East and North Africa (MENA) regions, the group set up its first systems house in 1994.

In April 2005,Baalbaki moved to a new 15,000­ m2 facility, with bulk storage capacity of 2kt, in Baalbaki Industrial Zone, putting all of its production of polyester polyols, isocyanate pre-polymers, and formulated polyurethane systems under one roof.

Baalbaki claims this modern systems house is the only one in the region with: integrated polyesters; bulk delivery possibilities; and a complete range of polyurethane systems and thermoplastic urethanes (TPUs) covering applications in the insulation, footwear, automotive seating and adhesives market.

As part of its forward integration strategy, in 1999 Baalbaki established a continuous line for flexible foam, commissioned by Cannon Viking in early 2001. It says it is the only line in the Levant which uses self-generated carbon dioxide as blowing agent instead of ozone-depleting gases or solvents such as methylene chloride. The 7500-m2 plant is also equipped with modern cutting equipment, and can store 200 tonnes of product.

In 2003, Baalbaki set up a plant to make re-bonded flexible foam from scrap foam.

The company is also currently commissioning a cold-cure polyurethane injection machine to make office chairs. A new product is PU continuous flexible facings for air-conditioning ducting and insulation.

In 2002,Baalbaki also set up an auxiliary chemicals business unit, producing and trading polyurethane chemicals, including pigments and colorants for flexible and rigid foam and elastomers and dipping and spray varnishes for PU and PVC.

In adhesives, Baalbaki manufactures one- and two-component adhesives, polychloroprene and PU adhesives for leather and wood, as well as laminating adhesives for flexible packaging and textiles . Other products include release agents and TPUs.

Baalbaki also distributes catalysts, stabilisers, flame retardants, blowing agents and PU machinery.