January-March 2011 Issue 4

THE FUTURE IS BRIGHT / STRATEGY PLANNING / ROAD TO A CLEANER ENVIRONMENT / R&D / STALLINGBOROUGH R&D AT PROUD 50 / TRACK RECORD / OIL ON THE BOIL/ OUTLOOK 2011 FinalCover_HighRez.indd 1

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TEL: +966 (2) 652 9966 FAX: +966 (2) 652 652 9933 EMAIL: [email protected] WEB: www.cristalglobal.com

C O N T E N T S

4

8 R&D

TRACK RECORD

THE ROAD TO A CLEANER ENVIRONMENT

STALLINGBOROUGH R&D AT PROUD 50

The first in a series of articles on R&D, starting with the evolution of photocatalytic TiO2 from pigmentary TiO2.

Robert McIntyre, Commercial R&D Director, outlines five decades of research achievements at Stallingborough.

12

17 STUDY

STRATEGY PLANNING

HONORED FOR AN ULTRAFINE EFFORT

LOOKING AHEAD... THE FUTURE IS BRIGHT

Dr. David M. Chapman of Cristal’s Performance Chemicals business explains an acclaimed technical paper he co-authored.

John Hall, Senior VP for Strategy, reveals the key elements of the Strategic Plan that will soon be ready for a broad-based rollout.

20

25 EMERGING MARKETS

SITE

INDIA NEEDS ECO-COATING

POWERED BY THE BAHIA COMMUNITY

Ramesh Balan makes the case for a socially committed and timely entry into a robust and fast expanding market.

Our Bahia TiO2 plant demonstrates exemplary commitment to its neighboring communities and respect for the environment.

29 TECHNOLOGY BEMAX NEW SNAPPER SAFE, EFFICIENT 31 MANAGEMENT A DATA DRIVEN WAY TO WORK 33 CASE STUDY INTEGRATION: THE TATA-CORUS MODEL 37 ECONOMIC OUTLOOK 2011 OIL ON THE BOIL

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editorial

STRATEGIC PLAN FOR BETTER TIMES

PUBLISHER Cristal Global Corporate Communications P.O. Box 13586 Jeddah 21414 Kingdom of Saudi Arabia

CRISTAL GLOBAL CHAIRMAN & CEO Dr. Talal Al-Shair

PRESIDENT Jamal Nahas

EXECUTIVE COMMITTEE Sam Alexander, EVP Operations & Technology Abdalla A. Ibrahim, SVP Finance John E. Hall, SVP Strategy & Development

EDITOR Ramesh Balan [email protected] + 91 80 41162633

ASSOCIATE EDITOR Shom Seth

DESIGN/ PICTURE RESEARCH Warren Hannington

STUDIO C.H. Ajith

COVER DESIGN Turba Studios

2

C

ristal Global achieved a sharp increase in business last year and there is good reason to expect further improvement in building competence and productivity this year. Central to this optimistic projection is a Strategic Plan that is ready for rollout across the employee base in the first quarter of this year. John Hall, Senior VP for Strategy, explains in this edition how the Strategic Plan came about, what it took to develop and why it should improve efficiency and focus across the entire organization. The plan is exceptional in that it will aim to create a base to drive forward performance by “increasing collective and individual capability, attracting and retaining key talent and developing a learning and performance-based culture.” Cristal Global’s people are its biggest asset, who have risen to the occasion time and again and made the organization proud. One significant achievement is the recent publication of a technical paper co-authored by Dr. David M. Chapman of Cristal Global’s Performance Chemicals business in the prestigious SAE International Journal. The recognition accorded to the paper is proof of the leading edge capability of our researchers to develop new titania materials that can meet perhaps the biggest challenge of our times – the restriction of the level of pollutants resulting from the burning of fossil fuels. Incidentally, the achivement coincided with the 50th anniversary of Stallingborough’s Research and Development Building. Robert McIntyre, Commercial R&D Director, traces in this edition the challenges faced by the site over the past six decades and puts in perspective the combined efforts currently under way to build strong competence in the area of ultrafine titanium dioxide. Today, Cristal Global is recognized as the world’s leading provider of ultrafine TiO2 photocatalysts derived from TiO2 research. The product is increasingly being used in paint and concrete for depollution. As such, a better understanding of its science is imperative, especially for those outside the TiO2 research community. Towards this end,we begin with this edition a series of articles to explain the essence and course of ultrafine TiO2 research at Cristal Global. We also focus on sustainable development of our Bahia plant, India as a promising emerging market, an exciting future ahead for Murray Basin, and our data driven work culture that holds great promise for outstanding achievements in the long run. Have a great year!

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response

Inspiring interview The third edition of the Cristal Globe magazine was comprehensive and it had left me with a wonderful feeling. Abdullah Ibrahim’s interview was specially inspiring. His enthusiasm and deep knowledge of the history of the company is remarkable. As he had mentioned, Cristal Global has the potential for vast expansion and integrating its TiO2, mineral sands and titanium powder businesses to emerge as the number one global TiO2 producer in the world in less than a decade. I’m proud to be part of the Cristal Global Family! Malik Hussein Yanbu

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As part of a continuing effort to better focus and improve Cristal Globe, we invite suggestions, clarifications and other comments from readers. Please send your comments by email to Berhan. [email protected] under the subject header ‘Cristal Globe Response.’

Great detail I must say this is a most impressive issue of Cristal Globe! It provided excellent reading with great detail on a number of subjects everyone will be interested in. Great work. Mark J. Stoll Vice President - Commercial Cristal Global

Big change Issue is spectacular! Quite a big change. Robert J. Daniels Vice President - Titanium Metals ITP - Cristal US, Inc. A subsidiary of Cristal Global

Cristal Globe is published quarterly. The Communications Team

Excellent I had a chance to read the issue. It is excellent. Nice job. Thomas M. Van Valkenburgh Vice President of Supply Chain Cristal Global

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research & development

Figure. 1 Conventional pigmentary TiO2 (above) and UF TiO2 TEM micrographs (right)

The evolution of photocatalytic TiO2 from pigmentary TiO2 This is the first in a series of articles on research and development at Cristal Global.

4

THE ROAD TO A CLEANER ENVIRONMENT

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By Robert McIntyre, Commercial R&D Director, Julie Maltby, Research Manager -Ultrafine, and Brian Pickett, Business Director, Performance Chemicals.

I

n Cristal Global and most of the titanium dioxide industry, we know that TiO2 is the most widely used pigment imparting opacity and whiteness to a broad range of materials. The principal uses of TiO2 are in paints, plastics, paper and inks, but it also has broad application in food and pharmaceuticals, as well as in materials such as glass and ceramics. The high refractive index enables efficient scattering of light and its ability to absorb ultraviolet light allows TiO2 to impart durability to many products. It’s non-toxic nature has allowed its use without risk to health and safety. However, the primary reason for its success is in its ability to reflect and refract, or scatter light more efficiently than any other pigment. Titanium dioxide has the highest average refractive index known. For anatase, it is 2.55 and for rutile it is 2.76. These high values account for the exceptional light scattering ability of pigmentary TiO2 when dispersed in various media, which in turn yield the high reflectance and hiding power

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research & development

Figure. 1 Conventional pigmentary TiO2 (above) and UF TiO2 TEM micrographs (right)

The evolution of photocatalytic TiO2 from pigmentary TiO2 This is the first in a series of articles on research and development at Cristal Global.

4

THE ROAD TO A CLEANER ENVIRONMENT

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By Robert McIntyre, Commercial R&D Director, Julie Maltby, Research Manager -Ultrafine, and Brian Pickett, Business Director, Performance Chemicals.

I

n Cristal Global and most of the titanium dioxide industry, we know that TiO2 is the most widely used pigment imparting opacity and whiteness to a broad range of materials. The principal uses of TiO2 are in paints, plastics, paper and inks, but it also has broad application in food and pharmaceuticals, as well as in materials such as glass and ceramics. The high refractive index enables efficient scattering of light and its ability to absorb ultraviolet light allows TiO2 to impart durability to many products. It’s non-toxic nature has allowed its use without risk to health and safety. However, the primary reason for its success is in its ability to reflect and refract, or scatter light more efficiently than any other pigment. Titanium dioxide has the highest average refractive index known. For anatase, it is 2.55 and for rutile it is 2.76. These high values account for the exceptional light scattering ability of pigmentary TiO2 when dispersed in various media, which in turn yield the high reflectance and hiding power

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associated with the pigment. As a finely divided powder it has a very high reflectance and it is intensely white because its high reflectance is substantially uniform throughout the visible light spectrum. The performance of a pigment in a surface coating is significantly affected by the interaction of the medium with the pigment surface. The consequences are felt at all stages, but are particularly relevant for dispersion, shelf stability and exterior durability. Treated TiO2 absorbs UV radiation and protects the polymer photochemically; untreated TiO2, however, is itself photocatalytic. Although it converts most of the UV energy into heat, the remaining energy creates radicals and other active species which accelerate the breakdown of the polymer. While TiO2 pigment particles are designed to have uniform particle size and distribution around 0.2-0.4 micron, which are engineered to maximize the scattering of light resulting in optimum brightness and opacity, another type of TiO2 exists whose median crystal size has been explicitly reduced to 0.02-0.03 microns. These are what we call ultrafine TiO2 . The history of UF TiO2 dates back to the 1970’s when the first patent for the preparation of these materials was issued in Japan. Several wet chemical processes were developed for producing these materials in the 1980’s by TiO2 pigment manufacturers like Ishihara, Tioxide and Rhone Poulenc (Thann facility). The first part of the process, the production of the ultrafine base material, uses titanium hydroxylate as the raw material. After subsequent process steps involving the decomposition of the hydroxylate crystal structure and the re-precipitation of the TiO2,

TiO2 electron orbit

the product is calcined to obtain the oval-shaped particles with a targeted primary crystal size and narrow size distribution. The base crystals are coated in the after-treatment unit according to the requirements of the end-use. One of the primary goals of after-treatment is to ensure good dispersibility of extremely fine particles in the final application. Typically, the crystal size of these products is about one-tenth the size of the normal pigmentary grade. Figure 1 shows typical TEM micrographs for pigmentary and ultrafine titanium dioxide at the same magnification. The optical behavior of UF TiO2 differs dramatically from that of conventional TiO2 pigment. The UF TiO2 which has very small particles is more efficient at scattering shorter wavelengths of light than are the larger particles of pigmentary TiO2. In practical terms, reduction of the crystal size of UF TiO2 leads to an optimum size of 20-50nm where the UV spectrum of light (200-400nm) is effectively scattered from the particles while the visible wavelengths are transmitted through the material. The UF TiO2 thus appears virtually transparent to the naked eye, while the pigmentary TiO2 in this case appears opaque and bright white, scattering the longer wavelengths of visible light. The picture of the optical behavior of TiO2 becomes more complete by recognizing that TiO2 is a semiconductor, meaning that its electrons are free to move when properly excited. TiO2 exhibits a characteristic energy gap of 3.23 eV (electron volts) or 3.06 eV between the valence band and the conduction band for anatase and rutile, respectively. Wavelengths of light at the proper en-

Conducive band

O2 + e

O2H

-

-

-

-

+ -

-

-

3.2 3 .2 2 eV V

-

Valance bands

Figure 2: Free Radical formation upon absorption of UV Radiation by TiO2

6

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Free Radicals Nox reacting

Band gap

-

-

OH- + h+

OH

ergy level, typically those shorter than 390nm for anatase and 405nm for rutile, will excite electrons causing them to jump from the valence band to the conduction band. These excited electrons have absorbed energy which can then be released as chemical energy giving rise to the various chemical reactions that characterize the photoactive nature of the materials. Figure 2 gives a diagrammatic view of this process. The free radicals produced during the absorption and release of the UV light energy, are available to reduce NOx to far less harmful nitrates. This same process accounts for the self-cleaning behavior of photocatalyts. In addition photocatalytic TiO2 has been shown to reduce volatile organic compounds (VOCs) and inhibit the growth of algae and bacteria. This feature of photocatalysts makes them useful across a broad range of applications. Photocatalytic ultrafineTiO2 One of the most important functions for photocatalytic ultrafineTiO2 is to utilize the product in paint and concrete for depollution. In Figure 3 this process is demonstrated. In recent trials in London, Paris and Manila, Cristal Global and its partner companies have demonstrated how effective paints can be at reducing pollution. In Manila, we conducted a trial in which the MRT rail station was coated with a paint produced by Pacific Paints in conjunction with Cristal Global. The trial was conducted by Connexor, a consultant specializing in pollution monitoring. We are measuring NOx reduction in the vicinity of the painted walls to be equivalent to removing the NOx of 1.7 cars/m2/ day. In Paris, France, we applied a photocatalytic coating to the inside and outside of a car park. The outside facing walls of the car park receive outside light while the inside of the car park receive light from fluorescent lighting. In this trial, we have verified that the depolluting effect also takes place even under fluorescent lighting.We conducted a photocatalytic trial in the borough of Camden in the city of London, U.K., which has been struggling for years to meet its air quality standards. The trial was carried out with chemiluminescent monitoring of NO, NO2 and NOx, and with the collection of meteorologic data such as wind speed and direction, rainfall, temperature and humidity every 15 minutes. Parallel monitoring of a nearby area was performed to establish an ongoing baseline of air quality levels as a basis of comparison. The results from this trial show NOx reductions of 35-65% depending upon the time of year and local weather conditions. Our calculations show that the product is capable of removing 200-500g/m2/yr of NOx. All of these trials confirm that the depolluting behavior of the TiO2 can be measured and is consistent over the 2½-3 years of monitoring. The above trials demonstrate the effectiveness of pho-

DEPOLLUTION Pollutants (NOx) are trapped on the surface and transformed into nitrates (which are then eliminated by the cementitious maxtrix of the coating).

Pollutants TiO2

Figure 3: Mechanism for depollution

tocatalytic coatings as a tool in pollution control. These trials consistently demonstrated significant NOx reduction rates ranging from 35-65% based upon the observed monitoring results. The interest in photocatalytic TiO2 products has been growing at a rapid rate. Many companies are evaluating these materials across a broad range of applications and markets. Cristal Global is recognized as the technology leader in photocatalytic TiO2 applications and as a leading provider of ultrafine TiO2 photocatalysts to the marketplace. Cristal’s Research & Development organization has been involved with many companies in setting up demonstration trials and analytical techniques. In an effort to accelerate the acceptance of these materials as a tool in the fight to improve air quality, Cristal Global is undertaking a number of steps. We have branded those UF TiO2 products that are used as catalysts to facilitate improvements in air quality with the CristalACTiVTM name. These include not only our photocatalytic products which are branded CristalACTiVTM for earth-friendly coatings, but also our UF TiO2 products sold into applications for mobile and stationary DeNOx applications. We believe that our products set the standard for performance for these applications and we expect to firmly establish our company in the minds of our customers and potential future stakeholders. ✦

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associated with the pigment. As a finely divided powder it has a very high reflectance and it is intensely white because its high reflectance is substantially uniform throughout the visible light spectrum. The performance of a pigment in a surface coating is significantly affected by the interaction of the medium with the pigment surface. The consequences are felt at all stages, but are particularly relevant for dispersion, shelf stability and exterior durability. Treated TiO2 absorbs UV radiation and protects the polymer photochemically; untreated TiO2, however, is itself photocatalytic. Although it converts most of the UV energy into heat, the remaining energy creates radicals and other active species which accelerate the breakdown of the polymer. While TiO2 pigment particles are designed to have uniform particle size and distribution around 0.2-0.4 micron, which are engineered to maximize the scattering of light resulting in optimum brightness and opacity, another type of TiO2 exists whose median crystal size has been explicitly reduced to 0.02-0.03 microns. These are what we call ultrafine TiO2 . The history of UF TiO2 dates back to the 1970’s when the first patent for the preparation of these materials was issued in Japan. Several wet chemical processes were developed for producing these materials in the 1980’s by TiO2 pigment manufacturers like Ishihara, Tioxide and Rhone Poulenc (Thann facility). The first part of the process, the production of the ultrafine base material, uses titanium hydroxylate as the raw material. After subsequent process steps involving the decomposition of the hydroxylate crystal structure and the re-precipitation of the TiO2,

TiO2 electron orbit

the product is calcined to obtain the oval-shaped particles with a targeted primary crystal size and narrow size distribution. The base crystals are coated in the after-treatment unit according to the requirements of the end-use. One of the primary goals of after-treatment is to ensure good dispersibility of extremely fine particles in the final application. Typically, the crystal size of these products is about one-tenth the size of the normal pigmentary grade. Figure 1 shows typical TEM micrographs for pigmentary and ultrafine titanium dioxide at the same magnification. The optical behavior of UF TiO2 differs dramatically from that of conventional TiO2 pigment. The UF TiO2 which has very small particles is more efficient at scattering shorter wavelengths of light than are the larger particles of pigmentary TiO2. In practical terms, reduction of the crystal size of UF TiO2 leads to an optimum size of 20-50nm where the UV spectrum of light (200-400nm) is effectively scattered from the particles while the visible wavelengths are transmitted through the material. The UF TiO2 thus appears virtually transparent to the naked eye, while the pigmentary TiO2 in this case appears opaque and bright white, scattering the longer wavelengths of visible light. The picture of the optical behavior of TiO2 becomes more complete by recognizing that TiO2 is a semiconductor, meaning that its electrons are free to move when properly excited. TiO2 exhibits a characteristic energy gap of 3.23 eV (electron volts) or 3.06 eV between the valence band and the conduction band for anatase and rutile, respectively. Wavelengths of light at the proper en-

Conducive band

O2 + e

O2H

-

-

-

-

+ -

-

-

3.2 3 .2 2 eV V

-

Valance bands

Figure 2: Free Radical formation upon absorption of UV Radiation by TiO2

6

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Free Radicals Nox reacting

Band gap

-

-

OH- + h+

OH

ergy level, typically those shorter than 390nm for anatase and 405nm for rutile, will excite electrons causing them to jump from the valence band to the conduction band. These excited electrons have absorbed energy which can then be released as chemical energy giving rise to the various chemical reactions that characterize the photoactive nature of the materials. Figure 2 gives a diagrammatic view of this process. The free radicals produced during the absorption and release of the UV light energy, are available to reduce NOx to far less harmful nitrates. This same process accounts for the self-cleaning behavior of photocatalyts. In addition photocatalytic TiO2 has been shown to reduce volatile organic compounds (VOCs) and inhibit the growth of algae and bacteria. This feature of photocatalysts makes them useful across a broad range of applications. Photocatalytic ultrafineTiO2 One of the most important functions for photocatalytic ultrafineTiO2 is to utilize the product in paint and concrete for depollution. In Figure 3 this process is demonstrated. In recent trials in London, Paris and Manila, Cristal Global and its partner companies have demonstrated how effective paints can be at reducing pollution. In Manila, we conducted a trial in which the MRT rail station was coated with a paint produced by Pacific Paints in conjunction with Cristal Global. The trial was conducted by Connexor, a consultant specializing in pollution monitoring. We are measuring NOx reduction in the vicinity of the painted walls to be equivalent to removing the NOx of 1.7 cars/m2/ day. In Paris, France, we applied a photocatalytic coating to the inside and outside of a car park. The outside facing walls of the car park receive outside light while the inside of the car park receive light from fluorescent lighting. In this trial, we have verified that the depolluting effect also takes place even under fluorescent lighting.We conducted a photocatalytic trial in the borough of Camden in the city of London, U.K., which has been struggling for years to meet its air quality standards. The trial was carried out with chemiluminescent monitoring of NO, NO2 and NOx, and with the collection of meteorologic data such as wind speed and direction, rainfall, temperature and humidity every 15 minutes. Parallel monitoring of a nearby area was performed to establish an ongoing baseline of air quality levels as a basis of comparison. The results from this trial show NOx reductions of 35-65% depending upon the time of year and local weather conditions. Our calculations show that the product is capable of removing 200-500g/m2/yr of NOx. All of these trials confirm that the depolluting behavior of the TiO2 can be measured and is consistent over the 2½-3 years of monitoring. The above trials demonstrate the effectiveness of pho-

DEPOLLUTION Pollutants (NOx) are trapped on the surface and transformed into nitrates (which are then eliminated by the cementitious maxtrix of the coating).

Pollutants TiO2

Figure 3: Mechanism for depollution

tocatalytic coatings as a tool in pollution control. These trials consistently demonstrated significant NOx reduction rates ranging from 35-65% based upon the observed monitoring results. The interest in photocatalytic TiO2 products has been growing at a rapid rate. Many companies are evaluating these materials across a broad range of applications and markets. Cristal Global is recognized as the technology leader in photocatalytic TiO2 applications and as a leading provider of ultrafine TiO2 photocatalysts to the marketplace. Cristal’s Research & Development organization has been involved with many companies in setting up demonstration trials and analytical techniques. In an effort to accelerate the acceptance of these materials as a tool in the fight to improve air quality, Cristal Global is undertaking a number of steps. We have branded those UF TiO2 products that are used as catalysts to facilitate improvements in air quality with the CristalACTiVTM name. These include not only our photocatalytic products which are branded CristalACTiVTM for earth-friendly coatings, but also our UF TiO2 products sold into applications for mobile and stationary DeNOx applications. We believe that our products set the standard for performance for these applications and we expect to firmly establish our company in the minds of our customers and potential future stakeholders. ✦

CRISTAL GLOBE - January 2011 Issue 4

7 1122322 11:43:17 AM

track record

The 2010 group

STALLINGBOROUGH R&D AT PROUD 50 Robert McIntyre, Commercial R&D Director, traces six decades of achievements at Cristal Global’s largest-volume TiO2 facility in Europe today.

8

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L

ate last year, Stallingborough celebrated the 50th anniversary of its Research and Development Building. The official opening in 1960 was attended by local dignitaries and conducted by P.D. O’Brien, then Chairman of Laporte Industries. Initially there were about 40 people working in the building, mainly research chemists and chemical engineers. The building was extended in 1964 and a pilot plant was added in 1968. In the late 1990’s, a major refurbishment of the building was carried out at a cost of approximately £5 million (about $8m today). The plant, located on a 160-hectare site in North East Linconshire, on the east coast of England, 7 miles (11 km) from Grimsby on the south bank of the River Humber, produces titanium dioxide for Cristal Global’s Millennium Inorganic Chemicals business. Outlined here are the R&D challenges Stallingborough overcame over the decades, which have gone a long way in making the site the largest-volume TiO2 facility in Europe today.

R&D entrances, 1960 (left) and 2011

50’s

In 1948 Laporte and FPC Thann (La Fabrique de Produits Chemiques Thann et Mulhouse) bought specifications and drawings for a chloride process from a Swiss firm of manufacturing chemists, Saurefabrik Schweizerhalle. Thann went on to develop a full-scale plant, but Laporte continued with pilot scale investigations at Luton, U.K. The Thann plant was not successful. It used a briquetting type chlorinator which produced phosgene in its off-gases which killed several employees and was closed in 1955. A team from Laporte was able to inspect the plant prior to dismantling. The main lessons were to change to the alternative fluid bed chlorination and to feed oxidation gases directly to the chlorinator rather than separat-

ing chlorine using sulfur monochloride. Thann went on to collaborate with Cabot on chloride technology. Cabot built a 20,000MT/yr plant in 1963 at the site that became Millennium’s Ashtabula 2 plant in the U.S. Laporte inherited further titanium tetrachloride experience when it acquired Peter Spence and Sons Ltd. in 1960. The Research and Development Center at Stallingborough was built in 1958. The pace of change in the TiO2 industry also pointed to a need for a dedicated organization. Surface treated pigments were introduced at Stallingborough in 1958 based on research at Luton. Much effort was also being put into the development of a chloride process to complement the older sulfate process. Fluid bed chlorination had been run at Luton, but oxidation of

Research directors, 1960 to 2011 (from left): Bill Holmes, Peter Lynskey, John Dunderdale, Maurice Claridge, James Richmond, and Robert McIntyre

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track record

The 2010 group

STALLINGBOROUGH R&D AT PROUD 50 Robert McIntyre, Commercial R&D Director, traces six decades of achievements at Cristal Global’s largest-volume TiO2 facility in Europe today.

8

CRISTAL GLOBE - January 2011 Issue 4

CG JAN PG 1-32 PRINT.indd 8-9

L

ate last year, Stallingborough celebrated the 50th anniversary of its Research and Development Building. The official opening in 1960 was attended by local dignitaries and conducted by P.D. O’Brien, then Chairman of Laporte Industries. Initially there were about 40 people working in the building, mainly research chemists and chemical engineers. The building was extended in 1964 and a pilot plant was added in 1968. In the late 1990’s, a major refurbishment of the building was carried out at a cost of approximately £5 million (about $8m today). The plant, located on a 160-hectare site in North East Linconshire, on the east coast of England, 7 miles (11 km) from Grimsby on the south bank of the River Humber, produces titanium dioxide for Cristal Global’s Millennium Inorganic Chemicals business. Outlined here are the R&D challenges Stallingborough overcame over the decades, which have gone a long way in making the site the largest-volume TiO2 facility in Europe today.

R&D entrances, 1960 (left) and 2011

50’s

In 1948 Laporte and FPC Thann (La Fabrique de Produits Chemiques Thann et Mulhouse) bought specifications and drawings for a chloride process from a Swiss firm of manufacturing chemists, Saurefabrik Schweizerhalle. Thann went on to develop a full-scale plant, but Laporte continued with pilot scale investigations at Luton, U.K. The Thann plant was not successful. It used a briquetting type chlorinator which produced phosgene in its off-gases which killed several employees and was closed in 1955. A team from Laporte was able to inspect the plant prior to dismantling. The main lessons were to change to the alternative fluid bed chlorination and to feed oxidation gases directly to the chlorinator rather than separat-

ing chlorine using sulfur monochloride. Thann went on to collaborate with Cabot on chloride technology. Cabot built a 20,000MT/yr plant in 1963 at the site that became Millennium’s Ashtabula 2 plant in the U.S. Laporte inherited further titanium tetrachloride experience when it acquired Peter Spence and Sons Ltd. in 1960. The Research and Development Center at Stallingborough was built in 1958. The pace of change in the TiO2 industry also pointed to a need for a dedicated organization. Surface treated pigments were introduced at Stallingborough in 1958 based on research at Luton. Much effort was also being put into the development of a chloride process to complement the older sulfate process. Fluid bed chlorination had been run at Luton, but oxidation of

Research directors, 1960 to 2011 (from left): Bill Holmes, Peter Lynskey, John Dunderdale, Maurice Claridge, James Richmond, and Robert McIntyre

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titanium tetrachloride was proving more difficult.The first major project for the Stallingborough R&D group was to bring the chloride process into commercial operation.

60’s

This was the decade when Stallingborough developed the oxidation process. But there were ups and downs. In 1962, American Potash (Ampot) approached Laporte for a license to build a sulfate plant at Trona, California, in the Greater Mojave Desert. Ampot realized that water supply and effluent problems were severe, especially in a desert. Water would have to be pumped 60 miles (96 km); worse, in the long term they could have contaminated the water supply of Los Angeles. Another approach was needed. Laporte was confident about chlorination and surface treatment, but not about oxidation. A joint project was therefore set up at Stallingborough (NBlock) to develop a new oxidizer. This succeeded and in late 1964 the pilot plant ran for a week without a shutdown. It was a huge achievement. Meanwhile, a plant had already been designed and largely built in Hamilton, Mississippi, USA. The plant was commissioned by nine people from the United Kingdom and eight Americans who had been in the U.K. Once the plant was running fairly well, the Laporte/Ampot relationship broke up. They had our know-how, especially of chlorination and surface treatment; and Laporte had learnt how to build a full-scale oxidizer. Ampot became Kerr McGee, and the pigment business later demerged as Tronox. The team came home and specified a full-scale plant at Stallingborough, which was commissioned in 1970.

70’s

In the 70’s a lot of the original work on the development of the Star reactor took place at Stallingborough. A pilot reactor was developed in N-Block and work continued there until the mid-80’s when centers of excellence were set up and oxidation was carried out in the U.S. at Baltimore, Maryland, USA, under the direction of James Deberry. The group that stayed in the U.K. continued to develop pigment finishing. Rolls were introduced to the sulfate plant to give high gloss products and, in anticipation of the new chloride process, sandmills were developed. Construction materials for the new plant had to be found and tested. Introduction of the new chloride process also meant a strong patents department was needed. The company’s own inventions needed protection and it also had to devise alternatives to process steps already patented by the competition. The product range was updated and heavily treat-

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ed and water dispersible grades were developed, namely Tiona® RCL-376 and Tiona® 535. Developed in the early 1970’s, both were successfully sold until they were superceeded in 2002 by Tiona® 595, which is currently one of the largest volume grades in the world.

80’s

Research continued into the further development of chlorination of lower grade ores and chlorina-

tion of non-TiO2 materials. Three pilot chlorination reactors were built in N-Block. A small 7-inch reactor was more widely used to do laboratory chlorination of selected ores. The two larger reactors, 18 in. and 24 in., were used to pilot materials that were to be used in the various plants around to world. There was also a lot of beneficiation work carried out in the 80’s to try to upgrade ilmenite. Dupont had a significant cost advantage by using ilmenite and this was something Stallingborough wanted to do. Unfortunately, Dupont was allowed to deep-well the iron chloride waste materials, which made their process very cost effective; this was not something Stallingborough would have been allowed to do in Europe. Stallingborough was also still actively working on the sulfate process in the 80’s. The emphasis was very much on environmental issues. Sulfuric acid recycling had just been introduced by Tioxide at the Calais plant in northern France at a huge cost of £30m. The return on the investment was much longer than most businesses could tolerate. Stallingborough was working actively to come up with a lower cost acid recycle process. Unfortunately, the size of the sulfate plant meant that the economics for the investment did not work out. Later on in the 80’s, a significant investment was made with respect to state of the art microscopes. At the time the Philips CM10 was a state-of-the-art Transmission Electron Microscope (TEM), which allowed a very close look at chlorinator brick failures. This, together with the Scan-

N-Block in the early 1980s

In the lab, 1971 (left) and 1981

sition of Rhone Poulenc’s two plants in France, the Stallingborough group led the development of two new sulfate grades Tiona® 568 and Tiona® 105 coatings, and plastics products for Le Havre. Both received the Chairman’s Award at the time. This was when the company was actively trying to reduce the number of duplicate or equivalent grades around the world so as to consolidate its product offering. A number of global teams were formed, led by researchers from both Stallingborough and the U.S. Researchers from Australia were also very actively involved in designing the new grades, most notably Tiona® 596 and 696. Although never used in Australia in the early days, they were developed in Bunbury for use in the U.S. market.

2000’s

(From left): Transmission Electron Microscope Philips CM10 Model (1986) and Scanning Electron Microscope Topcon SM 720 (installed in 1986)

ning Electron Microscope Topcon SM 720, with elemental analysis capability, allowed R&D to understand the chemistry of failure and develop new chemical and thermal resistant chlorinator bricks. Furthermore, for the first time, Stallingborough was able to support customers who were complaining about problems with the aesthetics of coatings surfaces. It was very useful to be able to prove it was not the TiO2 which was causing the poor surface appearance in many of the industrial coatings, a market which Stallingborough had not focused on until the late 80’s.

90’s

During the early 1990s, a project was carried out in partnership with Quebec Iron and Titanium (QIT) to beneficiate QIT sub-optimal ore. The aim was to produce a low iron slag suitable as a feedstock for use in chloride plants The work was carried out on the 18-inch chlorinator and involved teams of engineers and operators from Stallingborough and QIT. The process equipment was designed in-house and installed in N-Block 2. Also in the 1990’s, the product development group was actively working on Tiona® 595 and Tiona® RCL188. The Tiona® 595 global team was led from Stallingborough while the Tiona® 188 global team was led from the US. Tiona® 595 and Tiona® 188 are current chloride coatings and plastics grades respectively. After the acqui-

Stallingborough’s focus during the decade was very much on product development since the global objective was to renew the product line. To develop a global product line the company had global product teams led by individuals from Stallingborough for Tiona® 595, Tiona® 568 and Tiona® 105. Members of the teams were from Australia and Research Center-Baltimore (RCB), Maryland, so as to get input on the local requirements for the products. Equally, development of other products such as Tiona® 696 and Tiona® 188 were led from Australia and the U.S. respectively with team members from Stallingborough. Also from the late 1990’s to date (2011), two research groups were formed under one leadership to support the development of the ultrafine product range in Thann, France. The facilities at both RCB and Research CenterStallingborough (RCS) have been used to build strong competence in the area of ultrafine titanium dioxide. Most recently, RCB and RCS have been looking at other ultrafine-mixed oxides to get into new emerging markets for ultrafine-mixed oxide. The two centers are actively pursuing the use of ultrafine TiO2 in both dye sensitized solar cells with Dyesol and also for polymer-based solar cells with Solar Press. Work is also progressing with Cytec on new opportunities for ultrafine TiO2. Projects are underway with universities for photocatalytic conversion of CO and CO2 to methanol and other fuels. The collaboration with universities is also to explore the use of ultrafine TiO2 and other mixed oxides for the advanced electronics market, such as quantum computers and large area electronics. Additionally, European funding has been obtained for a project on antibacterial surfaces using Cristal Global’s ultrafineTiO2. ✦

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titanium tetrachloride was proving more difficult.The first major project for the Stallingborough R&D group was to bring the chloride process into commercial operation.

60’s

This was the decade when Stallingborough developed the oxidation process. But there were ups and downs. In 1962, American Potash (Ampot) approached Laporte for a license to build a sulfate plant at Trona, California, in the Greater Mojave Desert. Ampot realized that water supply and effluent problems were severe, especially in a desert. Water would have to be pumped 60 miles (96 km); worse, in the long term they could have contaminated the water supply of Los Angeles. Another approach was needed. Laporte was confident about chlorination and surface treatment, but not about oxidation. A joint project was therefore set up at Stallingborough (NBlock) to develop a new oxidizer. This succeeded and in late 1964 the pilot plant ran for a week without a shutdown. It was a huge achievement. Meanwhile, a plant had already been designed and largely built in Hamilton, Mississippi, USA. The plant was commissioned by nine people from the United Kingdom and eight Americans who had been in the U.K. Once the plant was running fairly well, the Laporte/Ampot relationship broke up. They had our know-how, especially of chlorination and surface treatment; and Laporte had learnt how to build a full-scale oxidizer. Ampot became Kerr McGee, and the pigment business later demerged as Tronox. The team came home and specified a full-scale plant at Stallingborough, which was commissioned in 1970.

70’s

In the 70’s a lot of the original work on the development of the Star reactor took place at Stallingborough. A pilot reactor was developed in N-Block and work continued there until the mid-80’s when centers of excellence were set up and oxidation was carried out in the U.S. at Baltimore, Maryland, USA, under the direction of James Deberry. The group that stayed in the U.K. continued to develop pigment finishing. Rolls were introduced to the sulfate plant to give high gloss products and, in anticipation of the new chloride process, sandmills were developed. Construction materials for the new plant had to be found and tested. Introduction of the new chloride process also meant a strong patents department was needed. The company’s own inventions needed protection and it also had to devise alternatives to process steps already patented by the competition. The product range was updated and heavily treat-

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ed and water dispersible grades were developed, namely Tiona® RCL-376 and Tiona® 535. Developed in the early 1970’s, both were successfully sold until they were superceeded in 2002 by Tiona® 595, which is currently one of the largest volume grades in the world.

80’s

Research continued into the further development of chlorination of lower grade ores and chlorina-

tion of non-TiO2 materials. Three pilot chlorination reactors were built in N-Block. A small 7-inch reactor was more widely used to do laboratory chlorination of selected ores. The two larger reactors, 18 in. and 24 in., were used to pilot materials that were to be used in the various plants around to world. There was also a lot of beneficiation work carried out in the 80’s to try to upgrade ilmenite. Dupont had a significant cost advantage by using ilmenite and this was something Stallingborough wanted to do. Unfortunately, Dupont was allowed to deep-well the iron chloride waste materials, which made their process very cost effective; this was not something Stallingborough would have been allowed to do in Europe. Stallingborough was also still actively working on the sulfate process in the 80’s. The emphasis was very much on environmental issues. Sulfuric acid recycling had just been introduced by Tioxide at the Calais plant in northern France at a huge cost of £30m. The return on the investment was much longer than most businesses could tolerate. Stallingborough was working actively to come up with a lower cost acid recycle process. Unfortunately, the size of the sulfate plant meant that the economics for the investment did not work out. Later on in the 80’s, a significant investment was made with respect to state of the art microscopes. At the time the Philips CM10 was a state-of-the-art Transmission Electron Microscope (TEM), which allowed a very close look at chlorinator brick failures. This, together with the Scan-

N-Block in the early 1980s

In the lab, 1971 (left) and 1981

sition of Rhone Poulenc’s two plants in France, the Stallingborough group led the development of two new sulfate grades Tiona® 568 and Tiona® 105 coatings, and plastics products for Le Havre. Both received the Chairman’s Award at the time. This was when the company was actively trying to reduce the number of duplicate or equivalent grades around the world so as to consolidate its product offering. A number of global teams were formed, led by researchers from both Stallingborough and the U.S. Researchers from Australia were also very actively involved in designing the new grades, most notably Tiona® 596 and 696. Although never used in Australia in the early days, they were developed in Bunbury for use in the U.S. market.

2000’s

(From left): Transmission Electron Microscope Philips CM10 Model (1986) and Scanning Electron Microscope Topcon SM 720 (installed in 1986)

ning Electron Microscope Topcon SM 720, with elemental analysis capability, allowed R&D to understand the chemistry of failure and develop new chemical and thermal resistant chlorinator bricks. Furthermore, for the first time, Stallingborough was able to support customers who were complaining about problems with the aesthetics of coatings surfaces. It was very useful to be able to prove it was not the TiO2 which was causing the poor surface appearance in many of the industrial coatings, a market which Stallingborough had not focused on until the late 80’s.

90’s

During the early 1990s, a project was carried out in partnership with Quebec Iron and Titanium (QIT) to beneficiate QIT sub-optimal ore. The aim was to produce a low iron slag suitable as a feedstock for use in chloride plants The work was carried out on the 18-inch chlorinator and involved teams of engineers and operators from Stallingborough and QIT. The process equipment was designed in-house and installed in N-Block 2. Also in the 1990’s, the product development group was actively working on Tiona® 595 and Tiona® RCL188. The Tiona® 595 global team was led from Stallingborough while the Tiona® 188 global team was led from the US. Tiona® 595 and Tiona® 188 are current chloride coatings and plastics grades respectively. After the acqui-

Stallingborough’s focus during the decade was very much on product development since the global objective was to renew the product line. To develop a global product line the company had global product teams led by individuals from Stallingborough for Tiona® 595, Tiona® 568 and Tiona® 105. Members of the teams were from Australia and Research Center-Baltimore (RCB), Maryland, so as to get input on the local requirements for the products. Equally, development of other products such as Tiona® 696 and Tiona® 188 were led from Australia and the U.S. respectively with team members from Stallingborough. Also from the late 1990’s to date (2011), two research groups were formed under one leadership to support the development of the ultrafine product range in Thann, France. The facilities at both RCB and Research CenterStallingborough (RCS) have been used to build strong competence in the area of ultrafine titanium dioxide. Most recently, RCB and RCS have been looking at other ultrafine-mixed oxides to get into new emerging markets for ultrafine-mixed oxide. The two centers are actively pursuing the use of ultrafine TiO2 in both dye sensitized solar cells with Dyesol and also for polymer-based solar cells with Solar Press. Work is also progressing with Cytec on new opportunities for ultrafine TiO2. Projects are underway with universities for photocatalytic conversion of CO and CO2 to methanol and other fuels. The collaboration with universities is also to explore the use of ultrafine TiO2 and other mixed oxides for the advanced electronics market, such as quantum computers and large area electronics. Additionally, European funding has been obtained for a project on antibacterial surfaces using Cristal Global’s ultrafineTiO2. ✦

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study

HONORED FOR AN ULTRAFINE EFFORT Dr. David M. Chapman of Cristal Global’s Performance Chemicals business explains the technical paper he co-authored that was recently published in the prestigious SAE International Journal. In a letter to David, SAE said: “Your effort has produced a valuable addition to the SAE International Journals; one that will educate and influence engineers for years to come.”

I

n this article we will give some background and a summary of the technical paper “New Titania Materials with Improved Stability and Activity for Vanadia-Based Selective Catalytic Reduction of NOx” that was recently honored by the Society of Automotive Engineering (SAE) International Journal as an outstanding technical paper for 2010. The article was co-authored by several researchers at Cristal Global’s Baltimore Research Center (RCB) in Maryland, USA – Dave Chapman, Guoyi Fu, Steve Augustine, Jennifer Crouse, Lubov Zavalij, Mark Watson and Dale Perkins-Banks. The work supports the efforts of the Performance Chemicals group to develop new materials to help meet challenging new regulations in many countries that restrict the level of pollutants resulting from the burning of fossil fuels. The quality of the air we breathe is of worldwide concern, and governments began serious efforts to protect air quality roughly 40 to 50 years ago. For example, in the U.S., the early 1970’s were a period when the U.S. Congress took concrete action. The Environmental Protection Agency (EPA) was created,

12

and Congress passed environmental statutes like the Clean Air Act that gave the EPA the authority to regulate emissions. As time has passed and as technology has evolved, the emission regulations have become increasingly strict. Since 1990, the emissions of six key pollutants have been reduced by over 40%, while at the same time gross domestic product has increased over 60%! There are many sources of pollution, but two that are of particular commercial relevance to Cristal Global are “stationary” engines such as that burn fossil fuels to generate power, and “mobile” engines, those used to power vehicles. Any time a fossil fuel is burned in an engine, there are several types of pollutants that are generated. For example, there are usually some unburned hydrocarbons in the exhaust, such as soot. This is the “smoke” coming out of the exhaust of older-model trucks and buses. Another type of pollutant is not so easy to see but is also harmful. Since the combustion occurs at high temperatures, the harmless oxygen and nitrogen gases in the combustion air can combine to form oxides of nitrogen – NO, NO2 and N2O (the latter is also known

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‘

as “laughing gas”). We lump all these together and call them NOx. These oxides of nitrogen can cause respiratory problems, and they contribute to groundlevel smog, ozone formation and acid rain. Laughing gas is also a potent green-house gas. Fortunately, there are ways of getting rid of these pollutants, and in the case of NOx, a catalyst is used to chemically react them back to nitrogen (N2) and oxygen (O2). The catalyst doesn’t actually get used up in the reaction, but it does make the reaction go much faster than it otherwise would. Historically, one of the main catalysts that has been used for this “selective catalytic reduction” (SCR) of NOx is vanadia.Vanadia by itself is not very active, but when it is deposited on the surface of anatase titania along with a promoter (tungsta), the vanadia becomes very active. The anatase titania is very special in that one gram of material has a surface that covers about the same area as a tennis court. This ultrafine titania is manufactured by Cristal Global at the Thann, France plant. Cristal Global is a leading supplier to the emission control market, consistent with the company vision for creating a cleaner world. Even though vanadia-titania catalysts have been used commercially for many years, the main drawback with them is that they are not very stable at high temperatures. And it just so happens that in order to meet the newest regulations, the catalysts must be

Over the last few years we have been working to improve the catalyst stability, and two methods have been developed to do so.

subjected to much higher exhaust temperatures than for previous applications. Over the last few years we have been working to improve the catalyst stability, and two methods have been developed to do so. We sought to generate interest in our new technical solutions by presenting this work at an important industry conference, the annual SAE World Congress, and the technical paper supported that presentation. The first approach to improve stability was developed by Guoyi and Steve and two U.S. patents (U.S. 7,820,583 B2 and U.S. 7,842,641 B2) were granted for this invention. By using a special synthesis

Visible soot emissions from a diesel truck

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NO2 in a test tube

NO Conversion to N2 Activity at 350 C 0

85

Conversion,%

80 Activity improvement

75 80

New V-Ti Catalyst

65

Commercial Catalyst

60 55 600

650

700 750 Age Temperature, C

Activity of new vanadia-titania catalyst as a function of age temperature for NO conversion, compared to a commercial benchmark catalyst

14

800

method, they were able to incorporate nanoparticle “spacers” composed of zirconia (smaller than 50 nanometers) into the titania (a nanometer is 1 x 10-9 meters). These spacers literally hold the titania crystallites apart at high temperature, and by doing so, they stabilize the area of the titania surface that is needed for the catalyst. The second approach was developed by Dave more recently, and it involved a novel and special way of adding silica to the titania surface. The silica then also served to stabilize the surface area of the titania. A patent was filed in 2009 to protect this invention. Jennifer provided the key experimental support for making the silicastabilized titania catalysts.

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Anatase TiO2

Anatase ZrO2

ZrO2

TiO2 TiO2

Anatase TiO2 ZrO2 TiO2

ZrO2

ZrO2

ZrO2

ZrO2 ZrO2

5 5 nm nm

Transmission electron microscope (TEM) image showing ~5 nm zirconia particles among titania crystallites, identified by their lattice fringes

‘

In the course of this work, it was necessary to analyze the samples in detail. We relied upon two key analytical methods available at RCB, x-ray diffraction (XRD) and transmission electron microscopy (TEM) and on the expertise provided by the respective analysts Lubov and Mark. The XRD method enabled us to follow the changes that occur to the crystals during high temperature exposure. As the titania ages at high temperatures, the individual crystallites grow in size and the crystal structure changes from anatase to rutile. Also, during very high temperature exposure, the tungsta present on the titania surface begins to crystallize. This method provided a sensitive and detailed means for demonstrating that the two synthetic approaches resulted in catalysts that were more stable than commercial vanadia-titania catalysts. The TEM method enabled us to actually image individual nanoparticles that were present on the titania. This was important for the silica-stabilized titania because the silica could not be seen using XRD (the silica did not diffract x-rays because it was not crystalline). In fact, the TEM method provided key information that supported the patent strategy. While the above methods were important, in the end the actual activity of the catalyst is the key parameter. The catalyst activity is also measured at RCB in a test run by Dale. One difficulty that is often encountered in the design of catalyst materials is that chemistries that provide enhanced stability can also interfere with the

TEM image D18848 with anatase and ZrO2 phases labeled based on 0.35nm spacing for anatase and 0.295nm spacing for ZrO2

We relied upon two key analytical methods available at RCB, xray diffraction (XRD) and transmission electron microscopy (TEM) and on the expertise provided by the respective analysts Lubov and Mark.

catalyst function that is responsible for high activity. Thus, we found it necessary to optimize the overall system by carefully balancing these two opposing functions. In the end, it was possible to design a system based on the novel silica-stabilized titania that showed both higher activity and greater stability than commercial benchmark vanadia catalysts. There was one remaining issue that was important to address, however, and that involved the vanadia on the catalyst. Pure vanadia is slightly toxic, and is of concern to the EPA who would like assurance that the

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5 nm

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vanadia in the catalyst does not come off the catalyst and enter the environment. Pure vanadia melts at 670°C, and to meet U.S. 2010 regulations, vanadia catalysts must be stable at higher temperatures than that. In the same way that steam rises from hot water, gaseous vanadia can rise from a hot catalyst. During the development of catalyst systems, accelerated aging protocols are used to simulate the lifetime exposure of the catalyst during real use. In early 2010, the generally accepted aging test was at 670°C for 64 hours in order to simulate 120,000 miles (192,000 km) of on-road use. Since this protocol is far too long for our screening experiments, we developed a shorter (but nearly equivalent) aging protocol at 750°C for four hours. We then developed a novel and sensitive in-house test, again run by Dale, that was used to actually measure the amount of vanadia that came off the catalyst (by vaporization) during the high temperature exposures. What we found was very surprising. Based on previous work reported in the literature for pure vanadia, we were able to estimate how much vanadia was expected to vaporize under the test conditions. In fact, we found amounts that were far lower than expected for the titania-supported vanadia catalysts. Thus, the vanadia distributed on the titania surface actually has a much lower vapor pressure than for pure vanadia. And even better, we found that the tendency for the titania-supported vanadia to vaporize was even lower for the new and more stable materials that had been developed at RCB. The key for lowering the vaporization of vanadia was to improve the stability of the titania surface! Prototypes of the materials have been produced at the pilot-scale in Thann France, and sampled to potential customers for their evaluation. In the

What we found was very surprising. Based on previous work reported in the literature for pure vanadia, we were able to estimate how much vanadia was expected to vaporize under the test conditions. In fact, we found amounts that were far lower than expected for the titania-supported vanadia catalysts.

meantime, the challenge is not over, particularly in the U.S., where recent experience with efforts to meet the U.S. 2010 regulations has led to even more demanding application conditions, e.g., involving aging protocols up to 800°C for 64 hours! Furthermore, alternative catalysts based on zeolites are gaining market share. Nonetheless, we hope that the new materials will be commercialized in Europe and in other parts of the world where the application conditions are not quite as demanding as in the U.S. ✦

– Dr. Chapman received his Ph.D. in Inorganic Chemistry from the University of Tennessee in 1984, after completing his graduate research at Oak Ridge National Laboratory in the field of molten-salt catalysis. He began his industrial research and development career in the Molecular Sieves Department of the Union Carbide Corporation, where he was engaged in the development of zeolite-based catalysts. He moved to W. R. Grace in 1987, where over the period of 20 years he was involved in a number of different product development areas, including the development of catalysts for fluid-catalytic cracking, silicas for edible oil refining, and materials for ink-jet printing media. In 2003 he joined the automotive emission control catalysis group at W. R. Grace, and focused on the development of alumina and ceria-zirconia catalyst supports for gasoline three-way and diesel catalyst applications. He moved to Millennium Inorganic Chemicals in 2007 to assume his present position that involves the development of titania-based catalyst supports primarily for the selective catalytic reduction catalyst application. Dr. Chapman holds nine patents and has published 18 peer-reviewed articles.

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strategy planning

LOOKING AHEAD... THE FUTURE IS BRIGHT John Hall, Senior VP for Strategy, explains the key elements of the Strategic Plan that will soon be ready for a broad-based rollout across the employee base in the first quarter of 2011.

I

t is important to remember that we are a young company. Formed in May of 2007 when Cristal Arabia acquired the former Millennium Inorganic Chemicals (MIC) division from Lyondell, the transaction was one of the last to be concluded before the credit restrictions effectively suspended major consolidation activities in the chemical industry. In the first year post acquisition, we were focused on integration and forming the new organization. The next year we turned our attention to business performance improvement, made significant progress in this area and stood poised to deliver a truly remarkable turnaround in a very short period of time. Unfortunately, at the end of 2008 the world witnessed a rapid and alarming economic decline with the short-term outlook becoming increasingly pessimistic and the longer view very unclear. Fortunately, we as Cristal Global faired relatively well compared to many of our chemical industry peers during a very difficult 2009 (the biggest economic correction in 25 years) and began to see a solid improvement in business results by the end of the year. Now, having just concluded 2010 with a significant profitability increase over the previous year, it is very clear that our business has improved sharply and we are very optimistic about

2011 and 2012. It would be totally understandable that given these developments we would have had little time for longer-term thinking. So exactly how much work has been completed on Strategic Planning in the last 12 months? The answer is, a lot more than you might think. Strategic picture In 2008 we developed the Strategic Picture which was widely communicated internally as well as at selected outside venues. With this high-level view, we focused on the theme of extracting more from the titanium value chain. Our commitment to this vision was demonstrated by the acquisition of Bemax in Australia (May 2008), a heavy mineral sands producer which is a feedstock for our pigment business, rapidly followed by the acquisition of technology to produce titanium metal powder via the Armstrong Process® in October 2008. The latter event has now resulted in a start-up business based in Ottawa, Illinois, that will be producing material early in 2011. Armed with these initial thoughts and the Cristal Mission and Vision, we have since conducted an extensive series of internal and external interviews and workshops to develop a Strategic Plan which both supports and

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STRATEGIC PICTURE – An integrated Cristal Global to capture more from the titanium value chain

UPSTREAM

SIDESTREAM

DOWNSTREAM

Chlorine Coke Chemicals Other Pigments

Mineral Sands Mining Zircon

Core Bus rated ine g e ss Int TiO Pigment 2 TiCl4 UF Catalysts Co products

Larger Feedstock Position

Titanium Metal Titanium Alloys Services Application Licenses

Geographic Expansion

Vision: Cristal Global will be the recognized leader for products and services that create a brighter and cleaner world. Mission: Meet the expectations of our people, customers, partners and communities.

nal Excellenc o i t e ra

d

People G ro

w th

us in a n c i al tain a b ili t y

Op e

Operational excellence drives financial sustainability, which enables disciplined growth. Purpose, Processes and People enable and support our progress as a company.

e

18

STRATEGIC PRIORITIES

D is c i p li n

challenges the initial strategic picture. This Plan has now been reviewed with the Executive Committee and will soon be ready for a broad-based rollout across the employee base in the first quarter of 2011. At the simplest of levels, Strategic Planning is about choices. It is about what we will do and what we will not do to advance our business or deliver our ultimate goals (which are usually expressed in both financial results and a small number of selected non-financial measures). We must understand what actions we need to take to build a sustainable business and also how we will focus the efforts of the entire organization. It involves understanding what competitive advantages we have and how we can build and leverage them. As complicated as this process is, it is the implementation, communication and measurement of progress that often contains the highest degree of challenge. Recognizing that implementation in a relatively new organization can be a very challenging task, we thought long and hard about how best to execute the plan and rapidly achieve our ambitious goals. This “Execution Gap” as it has been called, has been studied by numerous experts at business schools around the world. After

F S

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Relentless focus on cost and efficiency improvement to drive financial sustainability

d

e

• Profitable growth • Long-term debt reduction • Liquidity – credit revolver management • Efficient utilization of working capital • Effective hedging program

l Excellen iona ce rat

People G ro

w th

us in a n c i al tain a bili t y

Op e

FINANCIAL SUSTAINABILITY

D is c i pli n

careful study of theses activities, we believe that the Balanced Scorecard is the most effective business perfor mance measurement system. This approach is used in many businesses around the world and was developed by Robert S. Kaplan and David P. Norton at Harvard Business School who created a six-step process to enable • planning a strategy by selecting theme-based measures, targets and initiatives, along with accountability for performance, and • the alignment of all organiza tional functions and employees with our strategy via KPI’s (Key Perfor mance Indicators). We will continue to link the KPI process with our reward processes so that as we progress all employees will share in the value which is created.

F S

• Improve credit rating to investment grade • Capital available for expansions, transactions and M&A • Dividends to shareholders

STRATEGIC EXECUTION ENABLER – PEOPLE

D is c i pli n

e

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- January 2011 Issue 4

us in a n c i al tain a bili t y

Op e

Three key elements Current HR strategy has five focus areas The Strategic Plan is based on three key elements – Operational Ex Optimize organizational and individual performance to enable cellence, Financial Sustainability and delivery of the business strategy Disciplined Growth, all underpinned by People – perhaps our most valu • Increase organizational and individual able resource. We see Operational capability l Excellen iona ce Excellence as a platform to drive t a r • Develop a learning and performance efficiency and focus across the entire culture organization, not just in Manufacturing. This will require that we secure a first • Attract and retain key talent and skills decile SH&E position, have a relentless People • Integrate business performance and talent improvement on cost improvement, F d management G ro S standardize and streamline our opera w th • Leverage technology to enhance tions as far as possible as well as devel performance oping clear, simple and effective metrics to drive performance measurement. Specifically within the manufacturing community, we will focus on process safety management, we have termed the strategic enabler – People. By increasing specific cost reduction initiatives, improved reliability across collective and individual capability, attracting and retaining the unit operations, as well as reduced energy consumption key talent and developing a learning and performance based and a manufacturing–to-target philosophy. culture, we will create a base to drive forward performance. On the concept of Disciplined Growth, we aim for the Our people are our future and we cannot underestimate this sensible, orderly development of additional volumes from our contribution. core business as well as significant investment in our relatively Much has happened in a relatively short duration at Cristal new additions, Bemax and ITP, plus highly selective invest - Global and much has been achieved. But there is still more to ments in key raw material projects. The successful execu - do and still significantly more opportunity for our company. tion of these first two initiatives will drive improvements in Together we will make it happen. The future is bright for financial performance, but in order to do so, we need what Cristal Global. ✦

19 1122322 11:52:38 AM

emerging markets

INDIA NEEDS ECO-COATING Ramesh Balan examines the TiO2 sector in India and makes the case for a socially committed and timely entry into a robust and fast expanding market.

I

ndia is an exciting emerging market for the coatings industry. Coating output in the country has increased 12-15% or approximately 1½-2 times as fast as the overall economic growth rate, and this is expected to continue in the coming years. Equally encouraging for the world TiO2 industry – especially Cristal Global with its vision of providing a ‘Cleaner, Brighter World’ – is India’s growing emphasis on public health and environmental issues as its booming middle class indulges in a spending spree. In May last year, the federal government released the country’s emissions inventory – the first and only such report issued by a developing country. The report said that India’s greenhouse gas (GHG) emissions grew 58% between 1994 and 2007 to 1.9 billion tonnes, driven by its growing energy and transportation sectors, making it the fifth largest emitter after the United States, China, the European Union and Russia. The report was released by the Environment and Forests Ministry, which has grown so stringent in curbing rampant mining and deforestation that it stands accused by other ministries and corporates of “aggressive green activism.” Nonetheless, the government’s broad message is clear: A rapidly rising India, which will very likely become within two decades or less the world’s third largest economy after (Right) Fossil fuel emissions by vehicles create a serious pollution problem in India. Annual car sales are projected to increase to up to five million vehicles by 2015 and more than nine million by 2020. By 2050, India with approximately 611 million vehicles is expected to top the world in car volumes

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emerging markets

INDIA NEEDS ECO-COATING Ramesh Balan examines the TiO2 sector in India and makes the case for a socially committed and timely entry into a robust and fast expanding market.

I

ndia is an exciting emerging market for the coatings industry. Coating output in the country has increased 12-15% or approximately 1½-2 times as fast as the overall economic growth rate, and this is expected to continue in the coming years. Equally encouraging for the world TiO2 industry – especially Cristal Global with its vision of providing a ‘Cleaner, Brighter World’ – is India’s growing emphasis on public health and environmental issues as its booming middle class indulges in a spending spree. In May last year, the federal government released the country’s emissions inventory – the first and only such report issued by a developing country. The report said that India’s greenhouse gas (GHG) emissions grew 58% between 1994 and 2007 to 1.9 billion tonnes, driven by its growing energy and transportation sectors, making it the fifth largest emitter after the United States, China, the European Union and Russia. The report was released by the Environment and Forests Ministry, which has grown so stringent in curbing rampant mining and deforestation that it stands accused by other ministries and corporates of “aggressive green activism.” Nonetheless, the government’s broad message is clear: A rapidly rising India, which will very likely become within two decades or less the world’s third largest economy after (Right) Fossil fuel emissions by vehicles create a serious pollution problem in India. Annual car sales are projected to increase to up to five million vehicles by 2015 and more than nine million by 2020. By 2050, India with approximately 611 million vehicles is expected to top the world in car volumes

20

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MAJOR INDIAN PLAYERS OF TiO2 These are the Indian companies involved in the production of TiO2: Kerala Minerals & Metals Ltd.; Cochin Minerals and Rutile Limited; Travancore Titanium Products Limited, Trivandrum; V.V. Mineral; Beach Mineral Company; Indian Rare Earths Limited (IREL); Kilburn Chemicals Limited.

MAJOR FOREIGN PLAYERS OF TiO2 These are some of the major foreign companies that do not produce TiO2 in India, but do have a supply base there: DuPont Titanium Technologies, Tronox, Huntsman Pigments, Kronos Worldwide, Inc.

China and the US, is attempting to define what kind of superpower it will or could be. Unlike in the past when a sluggish socialist economy negated serious moves to protect public health or the environment, India in the 21st century is driven by a combination of rapid growth and growing public awareness on health and eco issues. This has much to do with the country’s raucous democratic system where even the poorest people exercise their political rights actively, and where fairness and inclusion have become very critical for social stability. By raising public awareness, the country’s free press is making the most of the ongoing information and communications revolution. In all there are 515 over-theair and satellite television channels available. Moreover, India has the world’s fastest growing telecommunications industry with 742.12 million telephone (landlines and mobile) subscribers and 706.69 million mobile phone connections as of Oct. 2010. High lead content With technology-borne awareness fast dominating mainstream consciousness, the paint industry recently took a bad hit. The Quality Council of India (QCI), the

22

CRISTAL GLOBE - January 2011 Issue 4

CG JAN PG 1-32 PRINT.indd 22-23

country’s accreditation authority, in association with the Consumer Association of India (CAI) and the National Referral Center on Lead Poisoning in India, examined paints of all major manufacturers operating in India and found unacceptable amounts of lead in them. Lead fumes are hazardous to human health and detrimental to a child’s development. QCI and CAI want government intervention with strict regulation. Their report recommends penalties for misleading advertisements, banning usage of lead pigments and lead octate in paints and compelling all paint companies to indicate lead content on the containers. Girdhar J. Gyani, QCI secretary-general, says global standards for lead content are not being applied uniformly. “The BIS (Bureau of Indian Standards) standard, which is voluntary, has permitted lead content in paints up to 1,000 ppm (parts per million), while WHO and other international organizations recommend up to 600 ppm and are now revising it to 90 ppm,” Gyani said. “It is unfortunate that paint manufacturing industries are not complying or concerned with lead-safe standards as globally implemented.” The pollution problem posed by fossil fuel emissions is also mounting. In 2009, more than 2.6 million cars were sold and the country became the world’s second fastest growing automobile market with 40 million passenger vehicles on the roads. The country’s urban centers are jammed with traffic and choking in smog. According to the Society of Indian Automobile Manufacturers, annual car sales are projected to increase to up to five million vehicles by 2015 and more than nine million by 2020. By 2050, India with approximately 611 million vehicles is expected to top the world in car volumes. Since there appears to be no reversing this consumer trend, demand is fast growing for the latest emissions reduction technologies. The 2nd Diesel Emissions Conference India 2011 scheduled for September this year will bring together over 200 leading stakeholders from India and beyond to discuss the automotive industry’s progress in meeting emission standards.

MAJOR CONSUMERS OF TiO2 in India Asian Paints, Hindustan Latex and Revin, Shalimar Paint, Corlass Nerolac, Jenson and Nicholson, Sanderson Chemicals, Mega Meditex, Camlin, Plastic Chemix Industries, Berger Paints, Rajdoot Paints.

The International Monetary Fund acknowledges India’s broad inclusive strategy. “Improving social outcomes and infrastructure are two key pillars of the government’s strategy to achieve rapid and inclusive growth,” the IMF said in a January 2011 report. The report said India’s medium-term growth prospects remain strong and its economy “is expected to continue to expand rapidly, supported by high investment and productivity gains.” Growth was projected “by 8.75% in real terms in 2010-11, moderating to about 8% the following year.” Exciting times All this points to both exciting and very challenging times ahead for the coatings industry. The Indian paints market size is valued at $4.63 billion (Rs. 210 billion), having grown by 15% in FY10. Per capita paint consumption, however, stands at 0.5 kg per annum, compared to 1.6 kg in China and 22 kg in the developed economies. India’s share in the world paint market is just 0.6%. The unorganized sector controls around 35% of the paint market, with the organized sector accounting for the balance. In the unorganized segment, there are about 2,000 units having small-and medium-sized paint manufacturing plants. Top organized players include Asian Paints (30% market share of organized sector), Kansai Nerolac (20%), Berger Paints (19%) and Akzo (12%). Decorative paints account for over 75% of the overall paint market in India, and are expected to witness higher growth going forward, especially since government fiscal incentives have benefited the housing sector immensely. With more residual income with the population, home loan disbursals are reportedly expected to grow at 25% CAGR in the next three years, which is positive for paint companies. Sector analysts also see demand soaring for industrial paints, especially powder coatings and high performance coatings, on account of increasing investments in infrastructure and a reduction in peak customs duty from 12.5% to 7.5%, which has lowered the import cost of key

raw materials. Automotive paint manufacturers are also upbeat, especially in view of the long-term plans of global auto majors for the emerging Indian market, the secondfastest growing after China’s. The continually developing coatings industry in India will certainly drive up TiO2 consumption. India’s vast deposits of ilmenite, the raw material for TiO2 production, are estimated to exceed 14% of the total world reserves. The sidebars in this article show the nature and extent of TiO2 consumption in the country. Environmentalists, when told, are instantly curious about paint developed with CristalACTiVTM technology, which can reduce smog pollution in cities and possibly slash state spending on public health problems arising

TiO2 IMPORTS Local production does not meet overall Indian demand. As per the Titanium Dioxide Report, India imported approximately 101,880 MT of TiO2 from Jan. 2009 to Dec. 2009, against 83,847 MT from Jan. 2008 to Dec. 2008. Compared to 2008, India’s imports climbed up by 21% in 2009. The United States, Taiwan, Saudi Arabia, Australia and China etc. are the major exporters of TiO2 to India.

TiO2EXPORTS TiO2 producers in India do export to other countries. India exported nearly 3,336 MT of TiO2 from Jan. 2009 to Dec. 2009, according to the Titanium Dioxide Report.

TiO2 PRODUCTION IN INDIA TiO2 production in India stood at 53,244 MT for the year 2008-2009 and 44,600 MT for 2009-2010 until Dec. 2009 as per the 2009-2010 Annual Report from Ministry of Chemicals and Fertilizers. (Figures in MT)

Product

2003-04

2004-05

2005-0

2006-07

2007-08

2008-09

2009- 10 until Dec ‘09

TiO2

49839

57560

60293

62921

59148

53244

44600

CRISTAL GLOBE - January 2011 Issue 4

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MAJOR INDIAN PLAYERS OF TiO2 These are the Indian companies involved in the production of TiO2: Kerala Minerals & Metals Ltd.; Cochin Minerals and Rutile Limited; Travancore Titanium Products Limited, Trivandrum; V.V. Mineral; Beach Mineral Company; Indian Rare Earths Limited (IREL); Kilburn Chemicals Limited.

MAJOR FOREIGN PLAYERS OF TiO2 These are some of the major foreign companies that do not produce TiO2 in India, but do have a supply base there: DuPont Titanium Technologies, Tronox, Huntsman Pigments, Kronos Worldwide, Inc.

China and the US, is attempting to define what kind of superpower it will or could be. Unlike in the past when a sluggish socialist economy negated serious moves to protect public health or the environment, India in the 21st century is driven by a combination of rapid growth and growing public awareness on health and eco issues. This has much to do with the country’s raucous democratic system where even the poorest people exercise their political rights actively, and where fairness and inclusion have become very critical for social stability. By raising public awareness, the country’s free press is making the most of the ongoing information and communications revolution. In all there are 515 over-theair and satellite television channels available. Moreover, India has the world’s fastest growing telecommunications industry with 742.12 million telephone (landlines and mobile) subscribers and 706.69 million mobile phone connections as of Oct. 2010. High lead content With technology-borne awareness fast dominating mainstream consciousness, the paint industry recently took a bad hit. The Quality Council of India (QCI), the

22

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CG JAN PG 1-32 PRINT.indd 22-23

country’s accreditation authority, in association with the Consumer Association of India (CAI) and the National Referral Center on Lead Poisoning in India, examined paints of all major manufacturers operating in India and found unacceptable amounts of lead in them. Lead fumes are hazardous to human health and detrimental to a child’s development. QCI and CAI want government intervention with strict regulation. Their report recommends penalties for misleading advertisements, banning usage of lead pigments and lead octate in paints and compelling all paint companies to indicate lead content on the containers. Girdhar J. Gyani, QCI secretary-general, says global standards for lead content are not being applied uniformly. “The BIS (Bureau of Indian Standards) standard, which is voluntary, has permitted lead content in paints up to 1,000 ppm (parts per million), while WHO and other international organizations recommend up to 600 ppm and are now revising it to 90 ppm,” Gyani said. “It is unfortunate that paint manufacturing industries are not complying or concerned with lead-safe standards as globally implemented.” The pollution problem posed by fossil fuel emissions is also mounting. In 2009, more than 2.6 million cars were sold and the country became the world’s second fastest growing automobile market with 40 million passenger vehicles on the roads. The country’s urban centers are jammed with traffic and choking in smog. According to the Society of Indian Automobile Manufacturers, annual car sales are projected to increase to up to five million vehicles by 2015 and more than nine million by 2020. By 2050, India with approximately 611 million vehicles is expected to top the world in car volumes. Since there appears to be no reversing this consumer trend, demand is fast growing for the latest emissions reduction technologies. The 2nd Diesel Emissions Conference India 2011 scheduled for September this year will bring together over 200 leading stakeholders from India and beyond to discuss the automotive industry’s progress in meeting emission standards.

MAJOR CONSUMERS OF TiO2 in India Asian Paints, Hindustan Latex and Revin, Shalimar Paint, Corlass Nerolac, Jenson and Nicholson, Sanderson Chemicals, Mega Meditex, Camlin, Plastic Chemix Industries, Berger Paints, Rajdoot Paints.

The International Monetary Fund acknowledges India’s broad inclusive strategy. “Improving social outcomes and infrastructure are two key pillars of the government’s strategy to achieve rapid and inclusive growth,” the IMF said in a January 2011 report. The report said India’s medium-term growth prospects remain strong and its economy “is expected to continue to expand rapidly, supported by high investment and productivity gains.” Growth was projected “by 8.75% in real terms in 2010-11, moderating to about 8% the following year.” Exciting times All this points to both exciting and very challenging times ahead for the coatings industry. The Indian paints market size is valued at $4.63 billion (Rs. 210 billion), having grown by 15% in FY10. Per capita paint consumption, however, stands at 0.5 kg per annum, compared to 1.6 kg in China and 22 kg in the developed economies. India’s share in the world paint market is just 0.6%. The unorganized sector controls around 35% of the paint market, with the organized sector accounting for the balance. In the unorganized segment, there are about 2,000 units having small-and medium-sized paint manufacturing plants. Top organized players include Asian Paints (30% market share of organized sector), Kansai Nerolac (20%), Berger Paints (19%) and Akzo (12%). Decorative paints account for over 75% of the overall paint market in India, and are expected to witness higher growth going forward, especially since government fiscal incentives have benefited the housing sector immensely. With more residual income with the population, home loan disbursals are reportedly expected to grow at 25% CAGR in the next three years, which is positive for paint companies. Sector analysts also see demand soaring for industrial paints, especially powder coatings and high performance coatings, on account of increasing investments in infrastructure and a reduction in peak customs duty from 12.5% to 7.5%, which has lowered the import cost of key

raw materials. Automotive paint manufacturers are also upbeat, especially in view of the long-term plans of global auto majors for the emerging Indian market, the secondfastest growing after China’s. The continually developing coatings industry in India will certainly drive up TiO2 consumption. India’s vast deposits of ilmenite, the raw material for TiO2 production, are estimated to exceed 14% of the total world reserves. The sidebars in this article show the nature and extent of TiO2 consumption in the country. Environmentalists, when told, are instantly curious about paint developed with CristalACTiVTM technology, which can reduce smog pollution in cities and possibly slash state spending on public health problems arising

TiO2 IMPORTS Local production does not meet overall Indian demand. As per the Titanium Dioxide Report, India imported approximately 101,880 MT of TiO2 from Jan. 2009 to Dec. 2009, against 83,847 MT from Jan. 2008 to Dec. 2008. Compared to 2008, India’s imports climbed up by 21% in 2009. The United States, Taiwan, Saudi Arabia, Australia and China etc. are the major exporters of TiO2 to India.

TiO2EXPORTS TiO2 producers in India do export to other countries. India exported nearly 3,336 MT of TiO2 from Jan. 2009 to Dec. 2009, according to the Titanium Dioxide Report.

TiO2 PRODUCTION IN INDIA TiO2 production in India stood at 53,244 MT for the year 2008-2009 and 44,600 MT for 2009-2010 until Dec. 2009 as per the 2009-2010 Annual Report from Ministry of Chemicals and Fertilizers. (Figures in MT)

Product

2003-04

2004-05

2005-0

2006-07

2007-08

2008-09

2009- 10 until Dec ‘09

TiO2

49839

57560

60293

62921

59148

53244

44600

CRISTAL GLOBE - January 2011 Issue 4

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site

INDIAN DUTIES LEVIED ON FOREIGN TIO2 SUPPLIERS INDIAN DUTIES LEVIED ON FOREIGN TIO2 SUPPLIERS Duty to be paid by TiO2 suppliers based on the country from which they import. HS Classification

Product/ Category

Basic Customs

Asia Pacific Duty

IndiaSri Lanka Trade Agreement

SAPTA

Indo Singapore CECA

IndiaS. Korea CEPA

ASEAN

2823 00 10

Titanium Dioxide

10%

Not Covered

Nil• Duty

Nil*

5%

Nil duty in 2016

Nil in 2013

* SAPTA SAARC Preferential Trade Agreement. ISL FTA Indo-Sri Lanka Free Trade Agreement.

POWERED BY THE BAHIA COMMUNITY

•

from harmful substances in the air. The paint specifically destroys nitrogen oxides (NOx) – the key componets in smog – and volatile organic compounds, breaking them down into less harmful substances. CristalACTiVTM technology has been introduced successfully by Boysen Paints in Manila, the Philippines. In a novel demonstration, 6,200 sq.m of a roadside surface area was coated with the specialized paint, which helped reduce emissions equivalent to taking 30,000 vehicles off the road each day as they passed the trial area. Similar photocatalytic trials were conducted with equally impressive results in Paris, France, and in the borough of Camden in London, U.K. “This looks like disruptive technology that will radically transform not only the market but the environmental movement,” said K. R. Shashi, an acclaimed documentary film maker and environmental activist. Cristal Global manufactures ultrafine TiO2 at its plant in Thann, France, and is already a leading supplier to the emission control market. Expansion phase For the very competitive Indian coatings market, especially in view of the rap on their knuckles over excessive lead content in paints, CristalACTiVTM technology can possibly work wonders in reviving a company’s social commitment and hence market standing. All the key players are in an expansion phase after a strong showing in FY10 and recovery from FY9. Asian Paints’ plant in Rohtak, Haryana, has commenced operations and it has acquired land in Maharshtra to set up another plant. Kansai Nerolac is undertaking brownfield expansions at its Lote and Bawal plants. Meanwhile operations have commenced at its greenfield project in Hosur, Tamil

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Nadu. Berger Paints has acquired land in Andhra Pradesh for setting up a water-based paint plant besides enhancing its current plant capacities at Goa and Jammu. By every measure, opportunities beckon in India. While a 100% approval is granted for FDI in the chemical industry, however, there are constraints governing the industry. These include bureaucratic hassles, high power tariff, inadequate infrastructure, expensive logistics, and land allotment. For example, Tata’s $550 million (Rs. 25 billion) TiO2 project in Tamil Nadu is in limbo as the steel major was not able to acquire the needed land – around 10,000 acres – at Sattankulam in Tirunelvelli district. The group has managed to acquire just 300 acres. In another instance, a $265 million (Rs.12 billion) titanium project in Orissa is stalled after the pullout of the Kolkata-based Saraf Agencies. The state government has asked the Russian promoters of the project to settle all outstanding dues with their former joint venture partner, in order to start work on the project. But these are aberrations in the overall picture of a robust and promising market for innovative developers of TiO2 pigments. ✦

ANTI-DUMPING DUTY In August 2009, the Indian government extended the anti-dumping duty on imports of TiO2 (anatase grade) originating in or exported from China. The anti-dumping duty imposed shall be effective for a period of five years from the date of notification (unless revoked, superseded or amended earlier).

Taking the high road to sustainable development, our Bahia TiO2 plant demonstrates exemplary commitment to its neighboring communities and respect for the environment.

C

ristal Global’s Bahia TiO2 plant is the only industrial unit in Brazil to be honored with the National Award of Conservation and Rational Use of Energy, awarded by the Ministry of Energy in 2009. The plant achieved a 10.8% reduction in power consumption (natural gas and electricity) from 2001 to 2005 and another 28.8% from 2005 to August 2010. Ronaldo Alcantara, industrial director of the Brazilian operation, says energy efficiency was improved by replacing obsolete equipment. He also credits the Internal Committee of Power Conservation (CICE) for the gains. In recent years, he says, the gains have increased further due to modifications in the production process, especially in the proportion of the raw materials being used. The transformation involved a total investment of approximately $2.4 million (R$4m), which was recovered in less than a year from the annual savings of $2.8 million (R$4.76 m) accrued in the plant operation. With reduced use of natural resources, mainly from 2008 on, it has been possible to reduce carbon dioxide emission into the atmosphere by 12.01%. This means a lot to Bahia’s North Coast, one of the most beautiful areas of the vast Brazilian coastline, where the plant is located 20 km from Salvador, the state capital. It’s located along the Estrada do Coco (Coconut Road) that tourists from all over the world take on their way to the naturally beautiful districts of Abrantes, Jauá and

Arembepe in Camaçari municipality. The municipality is also home to Camaçari Industrial Complex, the largest integrated industrial complex in South America, having more than 90 petrochemical and chemical industries as well as other industries like car, copper, textile and beverage. The complex is managed by the Commission for Camaçari Industrial Development (COFIC), which has a Cristal Global representative on its board of directors. The Cristal Global plant is located strategically within 20 km (13 miles) of the industrial complex, allowing for convenient access to the company’s major raw material suppliers and some of its most important customers, and resulting in lower transportation costs, more synergy and fewer risks. The company’s history goes back to 1998 when Millennium Inorganic Chemicals (MIC) purchased the plant and began investing in the recovery of the environmental liabilities left behind by the former plant owner. MIC made important environmental gains by investing a further $60 million to improve the production process. Waste management The Bahian plant works hard to responsibly dispose of its waste. This is recorded in a ongoing study that has been monitoring the sea outfall for more than 10 years. Done in partnership with the Federal University

CRISTAL GLOBE - January 2011 Issue 4

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site

POWERED BY THE BAHIA COMMUNITY Taking the high road to sustainable development, our Bahia TiO2 plant demonstrates exemplary commitment to its neighboring communities and respect for the environment.

C

ristal Global’s Bahia TiO2 plant is the only industrial unit in Brazil to be honored with the National Award of Conservation and Rational Use of Energy, awarded by the Ministry of Energy in 2009. The plant achieved a 10.8% reduction in power consumption (natural gas and electricity) from 2001 to 2005 and another 28.8% from 2005 to August 2010. Ronaldo Alcantara, industrial director of the Brazilian operation, says energy efficiency was improved by replacing obsolete equipment. He also credits the Internal Committee of Power Conservation (CICE) for the gains. In recent years, he says, the gains have increased further due to modifications in the production process, especially in the proportion of the raw materials being used. The transformation involved a total investment of approximately $2.4 million (R$4m), which was recovered in less than a year from the annual savings of $2.8 million (R$4.76 m) accrued in the plant operation. With reduced use of natural resources, mainly from 2008 on, it has been possible to reduce carbon dioxide emission into the atmosphere by 12.01%. This means a lot to Bahia’s North Coast, one of the most beautiful areas of the vast Brazilian coastline, where the plant is located 20 km from Salvador, the state capital. It’s located along the Estrada do Coco (Coconut Road) that tourists from all over the world take on their way to the naturally beautiful districts of Abrantes, Jauá and

Arembepe in Camaçari municipality. The municipality is also home to Camaçari Industrial Complex, the largest integrated industrial complex in South America, having more than 90 petrochemical and chemical industries as well as other industries like car, copper, textile and beverage. The complex is managed by the Commission for Camaçari Industrial Development (COFIC), which has a Cristal Global representative on its board of directors. The Cristal Global plant is located strategically within 20 km (13 miles) of the industrial complex, allowing for convenient access to the company’s major raw material suppliers and some of its most important customers, and resulting in lower transportation costs, more synergy and fewer risks. The company’s history goes back to 1998 when Millennium Inorganic Chemicals (MIC) purchased the plant and began investing in the recovery of the environmental liabilities left behind by the former plant owner. MIC made important environmental gains by investing a further $60 million to improve the production process. Waste management The Bahian plant works hard to responsibly dispose of its waste. This is recorded in a ongoing study that has been monitoring the sea outfall for more than 10 years. Done in partnership with the Federal University

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Cristal Global’s Bahia TiO2 plant in one of the most beautiful areas of the vast Brazilian coastline. (Inset) Ronaldo Alcantara, site director

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1122222 4:51:51 PM

GJ/MT GJ/MT GJ/MT

of Bahia, the study is the most important and welldocumented ocean monitoring project in Brazil. For the study, water and sand samples are taken from the area around the discharge point of the industrial wastewaters system, which comprises two storage tanks and a six-kmlong outfall. The plant’s solid industrial wastes are sent to Cetrel for treatment and final disposal, as well as to

47.0 47.0 45.0 47.0 45.0 43.0 45.0 43.0 41.0 43.0 41.0 39.0 41.0 39.0 37.0 39.0 37.0 35.0 37.0 35.0 33.0 35.0 33.0 29.0 33.0 29.0 27.0 29.0 27.0

CU M/MT CUCU M/MT M/MT TiO2TiOTiO 2 2

27.0

GJ/Ton TiO2 average – 12 months

J A J O J A J O J A J O J A J O J A J O J 2002 2003 2005 J A J O J A J O J A2004 J O J A J O J A2006 J O J 2002 2003 2004 2005 2006 J A J O J A J O J A J O J A J O J A J O J 2002 2003 2004 2005 2006

TOTAL WATER CONSUMPTION TOTAL WATER CONSUMPTION TiO2 average – 12 months MT/Ton 190.0 TiO2 average – 12 months MT/Ton TOTAL WATER CONSUMPTION 190.0 177.0 MT/Ton TiO2 average – 12 months 190.0 177.0 164.0 177.0 164.0 151.0 164.0 151.0 138.0 151.0 138.0 125.0 138.0 125.0 112.0 125.0 112.0 99.0 112.0 99.0 86.0 99.0 86.0 73.0 86.0 73.0 60.0 73.0 J A J O J A J O J A J O J A J O J A J O J A J O J A 60.0 60.0

MWh/MT MWh/MT MWh/MT TiO2 TiOTiO 2 2

TOTAL ENERGY CONSUMPTION TOTAL ENERGY CONSUMPTION (natural gas and power) (natural gas and GJ/Ton TiO average – 12power) months TOTAL ENERGY CONSUMPTION 2 GJ/Ton(natural TiO2 average – 12power) months gas and

the environmental monitoring project for the Camaçari Petrochemical Complex and its impact area. Additionally, the plant has a self-sustainable Keep it Clean program for selective collection of waste from the plant’s administrative activities and delivery to recycling companies. The program also has educational aspects for the employees and their families, so as to further limit environmental damage from administrative and household waste. Keep it Clean draws its funds from the sale of non-industrial waste to recycling companies. Metallic scrap resulting from equipment maintenance, the recyclable waste mostly generated at various areas of plant, accounts for 65.6% of all the material sold, followed by plastic materials (13% ), pallet wood (10.5), paper (9%) and other materials (1.9%). In 2009, the company donated 37 tons of recyclable pallet wood to the community for use in wood ovens and to small businesses for furniture manufacture. Over the years, there has been a A J O J A J O J A J O J A J gradual reduction in waste A2007 J O J A2008 J O J A2009 J O J2010 A J 2007 2008 2009 2010 generation. From 664 tons A J O J A J O J A J O J A J 2007 2008 2009 2010 sent to recycling companies in 2004, the number fell to 335. In 2009, the drop was 17 tons below the 2008 figure, and an even greater reduction is expected in 2010.

2002 2003 2004 2005 2006 J A J O J A J O J A J O J A J O J A J O J A2007 J O J 2002 2003 2004 2005 2006 2007 J A J O J A J O J A J O J A J O J A J O J A J O J 2002 2003 2004 2005 2006 2007

Water treatment Last May, the plant pioneered an environment initiative in its region by implanting a new technology at the Water Treatment Station (ETA). This was to ensure that separated solid material from water treatment does not go back to the Capivara River crossing the region. ETA’s Unit for Contention and Dehydration of Sludge is different from the traditional model in that all the solid material J O J A J O J A J from the water treatment process 2008 A J O J 2009 A J O 2010 J A J is collected in the decanters and 2008 2009 2010 A J O J A J O J A J pumped to the contention unit, 2008 2009 2010 where it is dehydrated with the addition of flocculating material. The dehydrated material is today sent to Cetrel.

TOTAL ELECTRICITY CONSUMPTION ELECTRICITY CONSUMPTION TiO2 average – 12 months 1.85 TOTAL MWh/Ton TiO2 average – 12 months 1.85 TOTAL MWh/Ton ELECTRICITY CONSUMPTION 1.78 MWh/Ton TiO2 average – 12 months 1.85 1.78 Management model 1.71 1.78 1.71 Staff commitment and an efficient and transparent 1.64 1.71 1.64 communication system between managers and staff 1.57 1.64 1.57 are strong characteristics of the plant. An 1.50 1.57 1.50 Integrated Central Production Room 1.43 1.50 1.43 was introduced in 2009 to enable 1.36 1.43 1.36 more speed and interaction in the 1.29 1.36 processes performed in the areas 1.29 1.22 of Operation, Maintenance and 1.29 1.22 1.15 J A J O J A J O J A J O J A J O J A J O J A J O J A J O J A J O J A J Maintenance Planning. In all, 25 1.15 1.22 J A2002 2003 2004 2009 J O J A J O J A J O J 2005 A J O J 2006 A J O J 2007 A J O J 2008 A J O J A J O J2010 A J 2002 2003 2004 2005 2006 2007 2008 2009 2010 1.15 J A J O J A J O J A J O J A J O J A J O J A J O J A J O J A J O J A J 2002 2003 2004 2005 2006 2007 2008 2009 2010

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Community partnership projects Friendly Fisherman • Partnerships to increase the productivity of local fishermen by offering courses and renovating their boats. Reading Club • For children and youths to find pleasure in reading, using drama and other play activities to foster learning; Education for the Millennium • Professional courses in areas of high labor demand in the region. Composition, mathematics, physics, chemistry and current affairs tutorials. •Teachers’ qualification • English and sports classes Health and Well Being Program • Participation in the Local Health Council. • Health Education – with the participation of Cristal Global’s Employees PREVECOM • To raise youth awareness on drug abuse and its dangers.• Participatory and illustrative workshops • Lectures on sex education

employees in these areas work totally integrated and in synergy. The concept is being implanted all over the plant in order to improve the company’s competitiveness. “We have automated the plant with the best in terms of industrial technology and this has to happen in parallel with the implantation of best management practices,” says Ronaldo. “To improve the integration between teams means to improve production.” Autonomous maintenance Do more with less – this is one of the principles being disseminated amongst the work teams by the Autonomous Maintenance Program. The program qualifies operators to solve simple maintenance problems of their equipment so as to free up mechanics for specialized maintenance work that strongly impacts production. To become an autonomous maintainer, an operator has to attend a 140-hour course. Approximately 70% of the plant operators have already been qualified. Additionally, an in-house survey to chart how work hours are used in the maintenance area has helped evolve simple ways to increase productivity without placing the workers at risk or increasing the professional staff. “It is important to rely on professionals who have knowledge and individual expertise, but collective behavior is necessary to meet the present needs,” says Ronaldo. “In other words, we have always been searching for excellent people who are highly

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specialized and who work within a unique, common and collective context.” Educating the youth In the northeastern region, 66% of the children and youths are poor, according to a study divulged in late 2009 by the Brazilian Institute of Geography and Statistics (IBGE). The region’s youths who cannot afford professional qualification and personal growth are hence the major focus of the company; they are the ones who can ensure business sustainability, besides working as multipliers of Cristal Global’s values. The company has granted high school scholarships to the youths and, together with the Camaçari municipality, has launched the Education for the Millennium Program that offers training and professional qualification courses such as English classes, tutorials and sports. Approximately 600 teachers and technical staff of the municipal system of education are being qualified by the project, with the participation of professors from the University of the State of Bahia (UNEB). In the health area too, the municipality partner the company in raising awareness through lectures, youth discussion groups and popular health councils. The idea is to educate and change population habits that have caused ser i ous health pr oblems i n the past. The plant, having about 500 full-time employees and contracted help, has established a network of more than 50 people amongst Bahian residents, local authorities and uni ver si ti es. T he goal i s to be vi ewed as a par tner i nf usi ng greater confidence and credibility into the dialogue between the company and the community. Towards this end, the company has encouraged partnerships in worker cooperatives for recycling and handicrafts, besides supporting the maintenance or renovation of fishermen’s boats. A comprehensive public relations program helps strengthen the bridges with the various segments of Bahia society. In the chemical segment, the company is an associate of the Brazilian Association of Chemical Industry (ABIQUIM) and the Brazilian Association of Paint Manufacturers (ABRAFATI). The company is additionally on the COFIC administration board, the board for two designated Areas of Environmental Protection located around the North plant, and it also is a member of the Federation of Industries of the States of Bahia and Paraíba – where the Cristal Global mine is located. In the political sphere, meetings are held periodically between Cristal Global and the state government. These ongoing activities have combined to help achieve the environmental and social goals established by local authorities, which has resulted in a VAT tax exemption of $8.32 million (R$14m) in 2009. ✦

- July 2010 Issue 3

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technology

Bemax dedge

BEMAX SNAPPER SAFE, EFFICIENT

T

From design and construction to hardware and software, a state-of-the-art wet plant is readied to usher in an exciting future for Murray Basin, writes Summa Hollins, Bunbury Operations.

he future looks bright for Cristal Bemax in the Asia Pacific marketplace. A state-of-theart wet plant at our Murray Basin mine site is set for commissioning. Design started in 2008 and took 12 months to complete, construction work stretched from June 2009 to September 2010. At every point, down to the smallest details, safety and efficiency were given the highest regard.

“The wet plant processing facility is the absolute latest technology when it comes to safety, quality control, productivity and efficiency,” says Dominic Manganaro, Directorof Cristal Bemax. All fire extinguishers are encased in plastic cases to ensure they are kept clean and functional, Dominic elaborates. There is extensive reticulation of compressed air for powering tools areas that may pose a risk for

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electrical tools. Safety handrails are constructed from angle iron to eliminate any potential internal corrosion or hidden hazards. Even the roof is designed to improve ventilation and evacuate moisture from the plant. Tripping hazards are avoided by locating major pipework above the main operating ground floor, and equipment was positioned to provide ample access for maintenance and potential expansion. As for efficiency, the control room is strategically positioned so as to continuously monitor the tail end of the plant while the dredge operator looks after the front end. Closed circuit television screens provide a second set of eyes on the dredging activity. The Snapper mine uses a high-end architecture platform that integrates all control hardware. The database is also fully integrated. “All control components are on Ethernet networks,” says Joe Bannister, Development Manager Bemax. “This includes all motors controls, motor control centers, network controllers (PLC’s), power monitors, and operator interfaces (SCADA). This has been done across the whole of the mine including integration of the bores, tails and HMC field pumps.” The Broken Hill processing facility will refine high mineral concentrate into magnetics and nonmagnetics with ilmenite, leucoxene, zircon and rutile as the end product. Ilmenite, leucoxene and rutile are titanium based minerals that are used extensively as feedstock for the pigment industry and further downstream. These include paints, medicine, uses in the aeronautical and defense industries, welding rod manufacture, cosmetics, paper and plastics. Zircon

30

Tim Chase (left), Acting Ginkgo & Snapper Mine Manager, and Gavin Swart, Operations Manager, Murray Basin

MILESTONES 1990’s Started out as junior explorer and made a series of mineral sands discoveries in the Murray Basin region

2003 National Titanium Dioxide Company acquired an interest in Bemax 2004 Acquires the Cable Sands assets in Western Australia to become a producer and not just an explorer

2005 Construction begins on the Ginkgo Mine, dredge, floating mineral concentrate plant and infrastructure

2006 Ginkgo mine and Broken Hill Mineral Processing plant are completed. Bemax are the 5th largest TiO2 feedstock producer in the world

2008 Cristal Australia Pty Ltd acquires all of the shares in Bemax in an off-market takeover bid and the company is removed from the Australian Stock Exchange

2009 Construction begins on the new Snapper Wet Plant.

The

workforce peaks at 460 employees

2010 Construction is completed on the Wet Plant and commissioning of the mine site is due to commence of the Christmas and New Year period with production ramping up in 2011

is used in the ceramic industry for tiles, baths, basins and is also used as a refractory. State-of-the-art technologies,

dedicated staff and a commitment to the industry will be the core ingredients for a successful future in the Murray Basin. ✦

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management

A DATA DRIVEN WAY TO WORK

S

Jerry E. Jordan, Director, Six Sigma, presents the tools and techniques that continue to help our many teams in executing their projects.

ince its origin at Motorola back in the early 1980s, Six Sigma has become one of the most popular and longest lasting quality and process improvement methodologies. It is a structured process improvement methodology that combines statistical techniques with project management discipline to produce financial benefits for the company by reducing variation. Six Sigma was created with a unique set of titles for its practitioners: Master Black Belt, Black Belt, Green Belt, Yellow Belt. The color of the belt indicated the level of training and expertise in the Six Sigma methodology. These titles are coveted by the Six Sigma community members, much like the titles of their martial arts counterparts. At the heart of Six Sigma is the concept of consistently meeting customer’s expectations by reducing variation of products and services, thereby enabling the customers to reduce their cost by using us as a supplier. A few key concepts that facilitate this thinking and help focus the Six Product or service characteristics Critical to Quality Characteristic (CTQC): most important to the customer Defect:

Failing to deliver what the customer wants

Process Capability:

The ability of your process to deliver what the customer wants

Variation:

The variability of your product or service that the customer sees and feels

Sigma effort on the customer are shown below: Why “Sigma”? The Greek letter s (sigma) is the symbol statisticians use to denote the standard deviation, a measure of variation. A central idea of Six Sigma is the sigma level, i.e., the number of process standard deviations that would fit within the customer specification range. A

process with a higher sigma level is more capable of staying within the customer’s specifications, thereby meeting the customer’s needs more consistently. The table below shows comparisons of sigma level, defects per million opportunities, percent defective and corresponding yield. At the Six Sigma level the process will produce no more than 3.4 defects per million opportunities. An Sigma level 1 2 3 4 5 6 7

DPMO 691,462 308,538 66,807 6,210 233 3.4 0.019

% defective 69% 31% 6.7% 0.62% 0.023% 0.00034% 0.0000019%

% yield 31% 69% 93.3% 99.38% 99.977% 99.99966% 99.9999981%

“opportunity” is defined as a chance for nonconformance, or not meeting the customer requirements. At the 3 sigma level you must resort to increased inspection to meet the customer needs, and at the 1 and 2 sigma levels your product is not sustainable in a competitive market place. The average company is in the 3 to 4 sigma level range. Notice that there is a 10-fold difference in DPMO (defect per million opportunities) between the 4 sigma level, 66,807 and the 3 sigma level, 6,210. The manufacturing cost difference and customer satisfaction benefits are dramatic. Measure

Define

Control

Analyze Improve

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The Six Sigma methodology is a five-step stage-gate progression of employees trained and financial benefits process, involving the following steps in sequence: Define, achieved. In late 2004, Millennium Chemicals was purMeasure, Analyze, Improve and Control. The Define and chased by Lyondell Chemicals. This acquisition brought Measure stages ensure that you have identified a high a complete change in upper management. The new task priority need and understand how the process is currently for the Six Sigma group was now to convince the new under performing. A champion is identified and the project management of the value of Six Sigma. A number of new team is formed. With the completion of a project charter Lyondell initiatives became the priority during the first the team is authorized to start working on the project. year following the acquisition, however the Six Sigma proThe Analyze and Improves stages focus on determining gram continued within the TiO2 business. During 2006, the critical few key process input variables that have Six Sigma was embraced by the Lyondell Supply Chain strong influence on the output. Using advanced statistical group and a pilot program for manufacturing was started techniques, the optimum settings for the inputs are in Lyondell’s Northern Region. Management training, determined. followed by Green Belt and Black Belt sessions were comThe Control stage involves the development of a process pleted for the plants in the Northern Region. A couple of control standard and operator training which ensures the the completed Black Belt projects were presented as case key inputs continue to operate in the controlled manner studies at Lyondell’s annual reliability conference. Folthat ensures the output meets customer requirements. lowing this success, the next location for focus was to be Millennium Inorganic Chemicals (MIC) introduced the Channelview plant, the largest Lyondell facility. Those the Six Sigma methodology in a phased approach starting plans were interrupted by another acquisition. in 2001. In the initial phase, an external consultant was In May 2007, MIC was purchased by Cristal. Six hired to train select engineers from the US TiO2 business. Sigma continued through 2007 but was combined with The management directive for the program was, “It must the BIP program in 2008. While the complete DMAIC save more than it costs.” We met that requirement and, approach of Six Sigma did not apply entirely to all BIP starting in 2002, we eliminated the cost of the external projects, it was the preferred methodology for completing training contractor and began training Green Belts and projects as appropriate. Black Belts in-house. During 2002 and 2003 the program Today many teams use the Six Sigma tools in executwas expanded to France, Brazil and Australia. ing their projects, e.g., Chloride Tech Team, Quality Tech The second management directive was, “Don’t grow Team, and The International Test Committee to name faster than your ability to manage the program.” As of the a few. In addition, all plant trials are conducted using a beginning of 2004 we had trained over 400 employees on Designed Experiment (DOE) approach – also a Six four continents and were experiencing difficulties manag- Sigma tool. Six Sigma tools will be used extensively by ing the effort. The remedy was to take seven of our best Tech Teams in new manufacturing initiatives aligned with Black Belts and provide additional training and promote the Company’s long term strategic plan them to the position of Master Black Belt. Five of the According to General Electric, a pioneer in the deployMaster Black Belts managed the Six Sigma program in re- ment of Six Sigma, the success of a Six Sigma deployment gions aligned with our major manufacturing sites; France, is measured not by the presence of a well-run program England, Brazil, Australia and the US. A sixth Master but, rather, by the routine practice of the discipline and Black Belt specialized in Design for Six Sigma (a vari- skill-set throughout the company, without the need to ant of the process focused primarily on product/process explicitly drive and manage its use. In other words, Six development) and a seventh focused on transactional Six Sigma must become “The way we do all our work”. Sigma within our supply chain. Over the years many employees have attended our Six As the program administration improved, the program Sigma training program, and the Six Sigma techniques and became more focused, and Six Sigma was now being tools continue to be used across all functions. A number used in areas outside of manufacturing. Our training of these practitioners are now in positions of leadership as was improved by well. As a result, 2001 2002 2003 2004 2005 2006 2007 translating the employees at all Benefits $1.5m $8.3m $18.3m $26.5m $15.3m $12.2m $13.5m materials into levels of the comActive Black Belts 5 26 63 46 45 39 28 French and Porpany are making Green Belts 20 100 343 437 386 413 345 tuguese and givbetter decisions ing the training in those languages. During this period the by using and understanding data (process data, safety, Six Sigma program had steady growth in both personnel reliability, as well as financial data). We have become data trained and financial benefits. The table above shows the driven, and it is now the way we do work. ✦

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S

ince its origin at Motorola back in the early 1980s, Six Sigma has become one of the most popular and longest lasting quality and process improvement methodologies. It is a structured process improvement methodol ogy that combines statistical techniques with project management discipline to produce financial benefits for the company by reducing variation. Six Sigma was created with a unique set of titles for its practitioners: Master Black Belt, Black Belt, Green Belt, Yellow Belt... The color of the belt indicated the level of training and expertise in the Six Sigma methodology.These titles are coveted by the Six Sigma community members, much like the titles of their martial arts counterparts. At the heart of Six Sigma is the concept of consistently meeting customer’s expectations by reducing variation of products and services, thereby enabling the customers to reduce their cost by using us as a supplier. A few key concepts that facilitate this thinking and help focus the Six rt on the customer are shown below: Why “Sigma”? The Greek letter s (sigma) is the symbol statisticians use to denote the standard deviation, a measure of variation. A central idea of Six Sigma is the sigma level, i.e., the number of process standard deviations that would fit within the customer specification range. A process with a higher sigma level is more capable of staying within the customer’s specifications, thereby meeting the customer’s needs more consistently. The table below shows comparisons of sigma level, defects per million opportunities, percent defective and corresponding yield. At the Six Sigma level the process will produce no more than 3.4 defects per million opportunities. An “opportunity” is defined as a chance for nonconformance, or not meeting the customer requirements. At the 3 sigma level you must resort to increased inspection to meet the customer needs, and at the 1 and 2 sigma levels your product is not sustainable in a competitive market place. The average company is in the 3 to 4 sigma level range. Notice that there is a 10-fold in DPMO (defect per million opportunities) between the 4 sigma level, 66,807 and the 3 sigma level, 6,210. The manufacturing and customer satisfaction benefits are cost dramatic.

32

The Six Sigma methodology is a five-step stage-gate process, involving the following steps in sequence: Define, Measure, Analyze, Improve and Control. The Define and Measure stages ensure that you have identified a high priority need and understand how the process is currently under performing. A champion is identified and the project team is formed. With the completion of a project charter the team is authorized to start working on the project. The Analyze and Improves stages focus on determining the critical few key process input variables that have strong influence on the output. Using advanced statistical techniques, the optimum settings for the inputs are determined. The Control stage involves the development of a process control standard and operator training which ensures the key inputs continue to operate in the controlled manner that ensures the output meets customer requirements. Millennium Inorganic Chemicals (MIC) introduced the Six Sigma methodology in a phased approach starting in 2001. In the initial phase, an external consultant was hir ed to tr ain select engineer s f r om the U S T iO 2 business. The management directive for the program was, “It must save more than it costs.” We met that requirement and, starting in 2002, we eliminated the cost of the external training contractor and began training Green Belts and Black Belts in-house. During 2002 and 2003 the program was expanded to France, Brazil and Australia. The second management directive was, “Don’t grow faster than your ability to manage the program.” As of the beginning of 2004 we had trained over 400 employees on four continents and were experiencing difficulties managing the rt. The remedy was to take seven of our best Black Belts and provide additional training and promote them to the position of Master Black Belt. Five of the Master Black Belts managed the Six Sigma program in regions aligned with our major manufacturing sites; France, England, Brazil, Australia and the US. A sixth Master Black Belt specialized in Design for Six Sigma (a variant of the process focused primarily on product/pro cess development) and a seventh focused on transactional Six Sigma within our supply chain. As the program administration improved, the program became more focused, and Six Sigma was now being used in areas outside 2001 2002 2003 2004 2005 2006 2007 of manufactur Benefits $1.5m $8.3m $18.3m $26.5m $15.3m $12.2m $13.5m ing. Our training Active Black Belts 5 26 63 46 45 39 28 was improved by Green Belts 20 100 343 437 386 413 345 translating the materials into French and Portuguese and giving the train ing in those languages. During this period the Six Sigma program had steady growth in both personnel t rained and

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- January 2011 Issue 4

case study

Tata-Corus steel plant

INTEGRATION – THE TATA-CORUS MODEL While the acquisition patterns differ, there’s similarity between Tata’s acquisition of Corus and Cristal Arabia’s acquisition of Millennium Inorganic Chemicals. In 2007, Tata acquired a company four times its size, and Cristal Arabia acquired a company four to five times its size. The integration was difficult and complex, overshadowed by the subsequent global economic meltdown. Both companies rigorously stuck to their separate integration strategies,and each has evolved into a unified entity on the strength of compatible core values and strategic fit. M.M. Paniel examines the Tata-Corus integration model. CRISTAL GLOBE

- January 2011 Issue 4

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O

ne of the deals that grabbed headlines worldwide in 2007 was that of India’s Tata Steel buying the Anglo-Dutch conglomerate Corus, Europe’s second largest steel company. The $12 billion deal made the combination one of the world’s top 10 steel producers. The takeover was ambitious and, according to some commentators, even “audacious” since Corus was four times bigger than Tata Steel. But Tata has a history of braving the odds. Its foray into the steel business goes back to the turn of the 20th century in British India when a skeptical Sir Frederick Upcott, the erstwhile boss of the Railway Board, offered to “eat every pound of steel rail” from Tata if it could produce as per British standards. As it turned out, within a decade and a half, Tata was producing enough steel to support the emerging railway lines, and it is not known whether Upcott changed his food habits. Today, the Tata tradition of sourcing the best personnel and products and marketing across borders is occuring in the context of the Indian economic boom. Indian firms are making a global footprint. “The Tata Steel-Corus deal is a part of the Tata Group’s strategy to expand in the international markets and thereby enhance the customer reach,” said Prof. P. Vijayakumar at the Center for Social and Organizational Leadership, Tata Institute of Social Sciences (TISS), Mumbai. Observers who study the challenges involved in such mergers and acquisitions note that it is not geographical spread or size that matters in effective management but, indeed, the way companies are run. Firms across the world have common values that help them gel with partners and progress. Though Asian management practices – that respect hierarchy, loyalty and collective gains – have famously clashed sometimes with a more individual-oriented western culture, geography and culture need not be a divisive factor when there are enough unifying factors. For example, Tata’s lowest cost of steel production and Corus’ access to the European market make a winwin situation. Moreover, “Tata Steel and Corus have compatible core values and complementary strengths in technology, efficiency and geographical presence,” Vijayakumar said. “The challenge is in identifying the business priorities, identifying capabilities that can drive competitive advantage.” ‘Strategic fit’ Over a year before the takeover, when Jim Leng, the erstwhile chairman of Corus, was scouring the world for low-cost sources of steel, he visited Tata. Steel prices were rising and Corus was in a slump. On the other hand, Tata

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Steel was expanding abroad with acquisitions of Singapore’s NatSteel and Thailand’s Millennium Steel in the bag. The Tata group, one of the most cash-rich entities in India, saw in Leng’s visit the opportunity to meet its global ambitions. Soon after the Corus takeover, the group’s head, Ratan Tata, explained that the aim was not just to expand but also to ensure a “strategic fit.” Tata wanted to produce steel close to its iron-ore deposits and then ship it for finishing work close to foreign consumer markets so as to efficiently meet local requirements. Corus was a good fit.The industrial logic also fitted with a cultural affinity between the two groups, as observers note.Tata Tea had taken over Britain’s Tetley Tea in 2000 after which Tata Consultancy Services (TCS), the infotech arm of the group, had set up a business-process outsourcing operation in Britain with the life-assurance group Pearl. So, enough ground was covered for an amicable takeover. There also existed a common line on corporate leadership practices and business ethics. Tata Steel made it clear that it had no plans to close Corus plants or lay off workers. Clear strategic reasons and common business practices make management work smoothly across borders. “One of the most striking features in both companies is the presence of the (Kaizen) employee involvement practice called continuous improvement (CI),” explained Vijayakumar. Tata Steel calls it ‘Aspire’ and Corus calls it ‘The Corus Way.’

‘

One of the most striking features in both companies is the presence of the (Kaizen-derived) employee involvement practice called continuous improvement. – Prof. P. Vijayakumar at the Center for Social and Organizational Leadership, Tata Institute of Social Sciences (TISS), Mumbai

Aspire encourages the creative potential of employees required by various units to establish basic management through a combination of best practices and improve- systems ment methodologies. These include active participation Corus had a similar system in place. By the midensured through organizational target setting for divi- 1990’s, it was the world’s eighth biggest steel maker opsions and departments, reaching up to individual manag- erating in over 40 countries, but it ran into losses after ers. Shop-floor employees are its 1999 mergers with Britengaged through small-group ish Steel and the Dutch firm activities like Daily ManageHoogovens. ment, Total Productive MainIn 2004, Corus brought in tenance (TPM) and Quality a program called ‘Restoring Circles, Suggestion ManageSuccess’ to reduce waste and ment and Self-Initiated Projincrease efficiency. The proects. A well established reward gram was a success with half and recognition system is in of the target savings achieved, place. and Corus made a profit in Aspire tools include im2004 for the first time since the provement tools like Suggesmergers. tion Management, Six Sigma The following year, Corus and Knowledge Management. decided to improve on the ‘ReThe broad improvement prostoring Success’ program by cesses relate to Total Quality getting better all round. The Management (TQM) prinnew program was called ‘The ciples of daily management, Corus Way.’ policy management, problem It envisaged three main aims solving and task achieving unfor Corus: der the Aspire model. • To become the best supOn ground, the initiative plier to the best customers has given rise to improvement • To adopt world class Tata Group Chairman Ratan Tata initiatives. A few examples methods based on CI are: • To grow • Value Engineering (VE) for identification and elimThe motto of continuous improvement that is cenination of unnecessary cost tral to ‘The Corus Way’ grew out of Kaizen, a Japanese • Juran Trilogy – Quality Improvement Projects method of business management. The idea is for firms to (QIP), Quality Circles (QC) and Benchmarking. Small- always be trying to improve, even in small ways, so as to circle activities involve first-line employees to improve develop the work culture or the way workers behave. It work quality while benchmarking explores international involves generating less waste and working ‘smarter’ – by best practices and performances spending time creating value for customers and avoiding • Total Operational Performance (TOP), involving activities that waste time. cost reduction, quality and throughput improvement Modern business practices acknowledge that inter• Total Productive Maintenance (TPM) to optimize actions among various factors that lead to success and equipment effectiveness, eliminate breakdowns and pro- growth are not linear but rather multiway and dynamic. mote autonomous maintenance by operators through So it is imperative that a business strategy be adopted that allows coevolution of these factors. day-to-day activities involving the total workforce “Organizations need to be adaptive to be successful • Knowledge Management (KM), which aims to share and transfer learning concepts, best practices and in a dynamic market,” Vijayakumar said. “While efficiency facilitates routine management, the other implicit knowledge culture of continuous improvement prevalent in both the • Define-Measure-Analyze-Design-Improve-Control (DMADIC), focused on design aspects for Six Sigma companies facilitates adaptiveness and thereby develops specific process, quality and delivery capabilities for philosophy business success.” • Quality Management Systems (QMS) like ISO In short, a formula for a win-win strategy. ✦ 9000, TS16949, OSHAS, ISO 14000 etc., adopted as

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O

ne of the deals that grabbed headlines worldwide in 2007 was that of India’s Tata Steel buying the Anglo-Dutch conglomerate Corus, Europe’s second largest steel company. The $12 billion deal made the combination one of the world’s top 10 steel producers. The takeover was ambitious and, according to some commentators, even “audacious” since Corus was four times bigger than Tata Steel. But Tata has a history of braving the odds. Its foray into the steel business goes back to the turn of the 20th century in British India when a skeptical Sir Frederick Upcott, the erstwhile boss of the Railway Board, offered to “eat every pound of steel rail” from Tata if it could produce as per British standards. As it turned out, within a decade and a half, Tata was producing enough steel to support the emerging railway lines, and it is not known whether Upcott changed his food habits. Today, the Tata tradition of sourcing the best personnel and products and marketing across borders is occuring in the context of the Indian economic boom. Indian firms are making a global footprint. “The Tata Steel-Corus deal is a part of the Tata Group’s strategy to expand in the international markets and thereby enhance the customer reach,” said Prof. P. Vijayakumar at the Center for Social and Organizational Leadership, Tata Institute of Social Sciences (TISS), Mumbai. Observers who study the challenges involved in such mergers and acquisitions note that it is not geographical spread or size that matters in effective management but, indeed, the way companies are run. Firms across the world have common values that help them gel with partners and progress. Though Asian management practices – that respect hierarchy, loyalty and collective gains – have famously clashed sometimes with a more individual-oriented western culture, geography and culture need not be a divisive factor when there are enough unifying factors. For example, Tata’s lowest cost of steel production and Corus’ access to the European market make a winwin situation. Moreover, “Tata Steel and Corus have compatible core values and complementary strengths in technology, efficiency and geographical presence,” Vijayakumar said. “The challenge is in identifying the business priorities, identifying capabilities that can drive competitive advantage.” ‘Strategic fit’ Over a year before the takeover, when Jim Leng, the erstwhile chairman of Corus, was scouring the world for low-cost sources of steel, he visited Tata. Steel prices were rising and Corus was in a slump. On the other hand, Tata

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Steel was expanding abroad with acquisitions of Singapore’s NatSteel and Thailand’s Millennium Steel in the bag. The Tata group, one of the most cash-rich entities in India, saw in Leng’s visit the opportunity to meet its global ambitions. Soon after the Corus takeover, the group’s head, Ratan Tata, explained that the aim was not just to expand but also to ensure a “strategic fit.” Tata wanted to produce steel close to its iron-ore deposits and then ship it for finishing work close to foreign consumer markets so as to efficiently meet local requirements. Corus was a good fit.The industrial logic also fitted with a cultural affinity between the two groups, as observers note.Tata Tea had taken over Britain’s Tetley Tea in 2000 after which Tata Consultancy Services (TCS), the infotech arm of the group, had set up a business-process outsourcing operation in Britain with the life-assurance group Pearl. So, enough ground was covered for an amicable takeover. There also existed a common line on corporate leadership practices and business ethics. Tata Steel made it clear that it had no plans to close Corus plants or lay off workers. Clear strategic reasons and common business practices make management work smoothly across borders. “One of the most striking features in both companies is the presence of the (Kaizen) employee involvement practice called continuous improvement (CI),” explained Vijayakumar. Tata Steel calls it ‘Aspire’ and Corus calls it ‘The Corus Way.’

‘

One of the most striking features in both companies is the presence of the (Kaizen-derived) employee involvement practice called continuous improvement. – Prof. P. Vijayakumar at the Center for Social and Organizational Leadership, Tata Institute of Social Sciences (TISS), Mumbai

Aspire encourages the creative potential of employees required by various units to establish basic management through a combination of best practices and improve- systems ment methodologies. These include active participation Corus had a similar system in place. By the midensured through organizational target setting for divi- 1990’s, it was the world’s eighth biggest steel maker opsions and departments, reaching up to individual manag- erating in over 40 countries, but it ran into losses after ers. Shop-floor employees are its 1999 mergers with Britengaged through small-group ish Steel and the Dutch firm activities like Daily ManageHoogovens. ment, Total Productive MainIn 2004, Corus brought in tenance (TPM) and Quality a program called ‘Restoring Circles, Suggestion ManageSuccess’ to reduce waste and ment and Self-Initiated Projincrease efficiency. The proects. A well established reward gram was a success with half and recognition system is in of the target savings achieved, place. and Corus made a profit in Aspire tools include im2004 for the first time since the provement tools like Suggesmergers. tion Management, Six Sigma The following year, Corus and Knowledge Management. decided to improve on the ‘ReThe broad improvement prostoring Success’ program by cesses relate to Total Quality getting better all round. The Management (TQM) prinnew program was called ‘The ciples of daily management, Corus Way.’ policy management, problem It envisaged three main aims solving and task achieving unfor Corus: der the Aspire model. • To become the best supOn ground, the initiative plier to the best customers has given rise to improvement • To adopt world class Tata Group Chairman Ratan Tata initiatives. A few examples methods based on CI are: • To grow • Value Engineering (VE) for identification and elimThe motto of continuous improvement that is cenination of unnecessary cost tral to ‘The Corus Way’ grew out of Kaizen, a Japanese • Juran Trilogy – Quality Improvement Projects method of business management. The idea is for firms to (QIP), Quality Circles (QC) and Benchmarking. Small- always be trying to improve, even in small ways, so as to circle activities involve first-line employees to improve develop the work culture or the way workers behave. It work quality while benchmarking explores international involves generating less waste and working ‘smarter’ – by best practices and performances spending time creating value for customers and avoiding • Total Operational Performance (TOP), involving activities that waste time. cost reduction, quality and throughput improvement Modern business practices acknowledge that inter• Total Productive Maintenance (TPM) to optimize actions among various factors that lead to success and equipment effectiveness, eliminate breakdowns and pro- growth are not linear but rather multiway and dynamic. mote autonomous maintenance by operators through So it is imperative that a business strategy be adopted that allows coevolution of these factors. day-to-day activities involving the total workforce “Organizations need to be adaptive to be successful • Knowledge Management (KM), which aims to share and transfer learning concepts, best practices and in a dynamic market,” Vijayakumar said. “While efficiency facilitates routine management, the other implicit knowledge culture of continuous improvement prevalent in both the • Define-Measure-Analyze-Design-Improve-Control (DMADIC), focused on design aspects for Six Sigma companies facilitates adaptiveness and thereby develops specific process, quality and delivery capabilities for philosophy business success.” • Quality Management Systems (QMS) like ISO In short, a formula for a win-win strategy. ✦ 9000, TS16949, OSHAS, ISO 14000 etc., adopted as

CRISTAL GLOBE - January 2011 Issue 4

35 1122222 5:55:52 PM

ONE GOAL, ONE FUTURE, ONE PROUD FAMLIY

outlook 2011

OIL ON THE BOIL Varun Joseph culls from various institutional reports the gist of forecasts on global economic recovery in 2011 as popular uprisings rage across the Middle East and threaten the oil-rich Gulf countries.

P

TEL: +966 (2) 652 9966 FAX: +966 (2) 652 652 9933 EMAIL: [email protected] WEB: www.cristalglobal.com

opular revolt spreading across the Middle East has disturbed the oil-rich Gulf econo mies, forcing urgent spending to appease populations frustrated by serious livelihood concerns. Also brought about by the upris ing is the prospect of higher income from higher oil prices driven by a variety of coverging stresses threatening global economic recovery in 2011. The Middle East holds 60% of the world’s proven oil reserves and accounts for 36% of current supply. Within a week of the Jan. 25 protests erupting in Cairo’s Tahrir Square, Brent crude topped more than $102 a barrel – a 28-month high. By mid-February, after Hosni Mubarak quit the presidency, the contagion spread to Algeria, Bahrain, Iran, Jordan, Libya and Yemen, and Brent crude hit $104, a 30-month high. Sustained oil prices at $100 pose “a real risk” to global economic recovery, the International Energy Agency has warned. Its latest report estimated a jump in consump tion by over two million barrels per day (mbd) to 89.3 mbd in 2011, an increase of 1.5 mbd from 2010. The global oil burden will rise sharply to 4.7, “close to levels that have coincided in the past with a marked economic slowdown.” “The combination of higher prices, emerging infla tionary pressures and instability in the Middle East is not a healthy one,” the IEA said. Separately, the Organization of Petroleum Exporting Countries (OPEC), raised its 2011 estimate of global oil demand to 87.74 mbd (lower than the IEA forecast). OPEC is already overshooting its output target by some 2 mbd. The International Monetary Fund says that with

rebounding demand, crude oil production in Middle East and North Africa (MENA) should grow from 25 mbd in 2010 to 26 mbd in 2011, which will raise gross domestic product (GDP) growth in these countries from 3.5% to 4.3%. While windfalls from oil are not uncommon in the Gulf Cooperation Council (GCC), this time around it comes in the face of dire circumstances forcing a reas sessment of the types of reforms to be urgently funded and implemented. To compound matters, Gulf produc ers also have a stake in global recovery and need to help rein in oil prices and curb inflationary pressures already crippling high-growth developing economies. Differentiating factor Prior to the Tunisian revolution, Arab stock markets had been recovering from the global economic crisis, gaining more than $100 billion in value last year, NCB Capital, a leading Saudi investment company, reported. But within a week of the protests erupting in Cairo, the Saudi bourse — the largest in the Arab world — lost $21 billion out of a total share value drop of almost $50 billion in the Arab world, Kuwait’s KIPCO Asset Man agement Company (KAMCO) said. In Egypt, the stock market lost $12 billion in the first two days of the protests before it was closed. Despite the sharp plunge, Gulf markets quickly re turned to modest levels by mid-February, mainly because the MENA region attracts far lower foreign direct invest ment (FDI) than Asia-Pacific, Europe and the United States. A lot of capital flow in the Middle East is from within the region. Gulf investors are heavily involved in

CRISTAL GLOBE

CG-1 Pg 33-40.indd 28-29

- January 2011 Issue 4

37 1122222 5:55:53 PM

ONE GOAL, ONE FUTURE, ONE PROUD FAMLIY

outlook 2011

OIL ON THE BOIL Varun Joseph culls from various institutional reports the gist of forecasts on global economic recovery in 2011 as popular uprisings rage across the Middle East and threaten the oil-rich Gulf countries.

P

TEL: +966 (2) 652 9966 FAX: +966 (2) 652 652 9933 EMAIL: [email protected] WEB: www.cristalglobal.com

opular revolt spreading across the Middle East has disturbed the oil-rich Gulf econo mies, forcing urgent spending to appease populations frustrated by serious livelihood concerns. Also brought about by the upris ing is the prospect of higher income from higher oil prices driven by a variety of coverging stresses threatening global economic recovery in 2011. The Middle East holds 60% of the world’s proven oil reserves and accounts for 36% of current supply. Within a week of the Jan. 25 protests erupting in Cairo’s Tahrir Square, Brent crude topped more than $102 a barrel – a 28-month high. By mid-February, after Hosni Mubarak quit the presidency, the contagion spread to Algeria, Bahrain, Iran, Jordan, Libya and Yemen, and Brent crude hit $104, a 30-month high. Sustained oil prices at $100 pose “a real risk” to global economic recovery, the International Energy Agency has warned. Its latest report estimated a jump in consump tion by over two million barrels per day (mbd) to 89.3 mbd in 2011, an increase of 1.5 mbd from 2010. The global oil burden will rise sharply to 4.7, “close to levels that have coincided in the past with a marked economic slowdown.” “The combination of higher prices, emerging infla tionary pressures and instability in the Middle East is not a healthy one,” the IEA said. Separately, the Organization of Petroleum Exporting Countries (OPEC), raised its 2011 estimate of global oil demand to 87.74 mbd (lower than the IEA forecast). OPEC is already overshooting its output target by some 2 mbd. The International Monetary Fund says that with

rebounding demand, crude oil production in Middle East and North Africa (MENA) should grow from 25 mbd in 2010 to 26 mbd in 2011, which will raise gross domestic product (GDP) growth in these countries from 3.5% to 4.3%. While windfalls from oil are not uncommon in the Gulf Cooperation Council (GCC), this time around it comes in the face of dire circumstances forcing a reas sessment of the types of reforms to be urgently funded and implemented. To compound matters, Gulf produc ers also have a stake in global recovery and need to help rein in oil prices and curb inflationary pressures already crippling high-growth developing economies. Differentiating factor Prior to the Tunisian revolution, Arab stock markets had been recovering from the global economic crisis, gaining more than $100 billion in value last year, NCB Capital, a leading Saudi investment company, reported. But within a week of the protests erupting in Cairo, the Saudi bourse — the largest in the Arab world — lost $21 billion out of a total share value drop of almost $50 billion in the Arab world, Kuwait’s KIPCO Asset Man agement Company (KAMCO) said. In Egypt, the stock market lost $12 billion in the first two days of the protests before it was closed. Despite the sharp plunge, Gulf markets quickly re turned to modest levels by mid-February, mainly because the MENA region attracts far lower foreign direct invest ment (FDI) than Asia-Pacific, Europe and the United States. A lot of capital flow in the Middle East is from within the region. Gulf investors are heavily involved in

CRISTAL GLOBE

CG-1 Pg 33-40.indd 28-29

- January 2011 Issue 4

37 1122222 5:55:53 PM

Egyptian equities, real estate and industrial projects, and they have taken a hit. But, according to Banque Saudi Fransi, the slump has also “created buying opportunities for local investors confident in macroeconomic fundamentals as oil prices rise and global energy demand grows.” There is widespread agreement on the fundamental stability of the GCC states, comprising Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates (UAE). “One simple differentiating factor for the GCC versus other countries in the Middle East is the fact that the hydrocarbon rich GCC is simply wealthier than most of the other countries in the region,” NCB Capital said. Thanks to oil income and generally smaller populations, the GCC countries have achieved globally high figures of gross domestic product (GDP) at purchasing power parity (PPP) per capita, ranging from $23,000 to $88,000. In contrast, the figures for Egypt and Tunisia are $6,367 and $$9,489, IMF data showed. Economic analysts polled by Reuters say Saudi Arabia, the largest GCC and Arab economy, should expand by 4.3% in 2011 following an estimated 3.8% growth in 2010, helped by robust crude prices and generous government spending. The Kingdom – believed to sit on almost a quarter of the world’s oil reserves – has been focused on internal investment to diversify its economy, spending an estimated $70 billion on infrastructure in 2010 alone. Aiming to create jobs and lower an unemployment rate of 10.5%, the government has embarked on an ambitious plan to build four economic cities at an initial cost of $60 billion. In the 2011 national budget, 58% of the allocations went to capital investment projects, up 10% from the previous year. Education and training got 26%, an increase of 8% over 2010. The government expects GDP to grow by 3.8%, the oil sector by 2.1%, and the nonoil sector by 4.4%. Business contribution to GDP is set at 47.8%, with the government sector growing by 5.9% and the private sector by 3.7%. As of last November, the kingdom’s central bank (Saudi Arabian Monetary Agency) held SR1.63 trillion ($434.67) in foreign assets. Like Saudi Arabia, Qatar is also leading the Gulf region’s economic pace. The Wharton School Global Economy Forecast 2011 said that Qatar, through garnering world attention with its successful bid to host the 2020 World Cup, already has a record of high profile investment plays, such as the $2.3 billion acquisition of luxury retailer Harrods. According to research site RGE Monitor, Qatar – perhaps better known outside the region as home of Al-Jazeera satellite television network – now has roughly $75 billion in external investments.

38

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CG-1 Pg 33-40.indd 30-31

Coupled with its efforts to diversify its economy beyond liquefied natural gas and crude oil exports, Qatar’s GDP is expected by the IMF to grow by more than 20% in 2011. For Dubai, slowly emerging from its debt woes, a much needed spurt in tourism – the Emirate’s mainstay – is likely as Egypt and Tunisia, which had been together attracting 17 million tourists a year, inch towards democratic stabilty. Another plus point for the region, noted in fifth Global Investment Trends Monitor released by United Nations Conference on Trade and Development (UNCTAD), is the UAE’s establishment of a 420-square kilometer industrial zone, said to be one of the largest in the world, where foreign businesses will enjoy full ownership of their ventures. The Wharton report said Qatar’s World Cup preparations – expected to cost $65 billion – and Saudi Arabia’s likely passage of a mortgage law this year will bring new Islamic finance deals, giving the Islamic loan industry a much needed shot in the arm. FDI flows Saudi Arabia and Qatar received $44 billion in FDI in 2009, half the region’s entire investment flows, according to the World Investment Report. But in 2010, despite the steady recovery registered by the many economies of East Asia, capital flows to the region totalled only $57 billion. “The picture varies by country, with inflows to the (UAE) rebounding modestly from the low values of 2009, to little change in performance for Lebanon, to a drop in Saudi Arabia due in part to foreign investors pulling out of or freezing large refinery projects (Conoco Phillips, Dow Chemicals),” UNCTAD said. Apart from attracting foreign capital, another challenge for the region this year is resource strain. “The (UAE), Egypt and Saudi Arabia have decided nuclear energy is the route to meet rising domestic energy demands, but few solutions are at hand to buttress water supply in the region, which is around 1,200 cubic meters per person per year compared with the average of about 7,000 worldwide, according to The World Bank,” Wharton said. Just days before Mubarak steeped down, Joseph Stiglitz, the 2001 Nobel Economics laureate, speaking to reporters in New Delhi where he was attending a conference, cautioned that uncertainty in the Middle East would “impose risks on oil and higher prices of oil could lead to inflation.” His warning put a damper on UNCTAD’s 2011 trends forecast released a week before the Egypt uprising. It estimated global FDI flows to be between $1.3 trillion and $1.5 trillion in 2011, up from an estimated

FDI inflows and cross-border M&As, by region and major economy, 2009-2010 (Billions of dollars) FDI inflows Net cross-border M&Asb Region / economy World Developed economies Europe European Union Austria Belgium Czech Republic Denmark Finland France Germany Greece Ireland Italy Luxembourg Netherlands Poland Portugal Spain Sweden United Kingdom United States Japan Developing economies Africa Egypt Nigeria South Africa Latin America-Caribbean Argentina Brazil Chile Colombia Mexico Peru Asia and Oceania West Asia Turkey South, East & South-East Asia China Hong Kong, China India Indonesia Malaysia Singapore Thailand South-East Europe and the CIS Russian Federation

2009

2010a

Growth rate (%)

2009

2010

Growth rate (%)

1 114.1 565.9 378.4 361.9 7.1 33.8 2.7 7.8 2.6 59.6 35.6 3.4 25.0 30.5 27.3 26.9 11.4 2.9 15.0 10.9 45.7 129.9 11.9 478.3 58.6 6.7 5.9 5.7 116.6 4.9 25.9 12.7 7.2 12.5 4.8 303.2 68.3 7.6 233.0 95.0 48.4 34.6 4.9 1.4 16.8 5.9 69.9 38.7

1122.0 526.6 295.4 289.8 12.6 50.5 8.2 6.3 2.6 57.4 34.4 2.1 8.4 19.7 12.1 -24.7 10.4 3.4 15.7 12.1 46.2 186.1 2.0 524.8 50. 6.8 2.3 1.3 141.1 5.1 30.2 18.2 8.7 19.1 6.9 333.6 57.2 7.0 274.6 101.0 c 62.6 23.7 12.8 7.0 37.4 6.8 70.5 39.7

0.7 -6.9 -21.9 -19.9 78.8 49.5 199.6 -19.2 3.1 -3.7 -3.5 -38.3 -66.3 -35.5 -55.7 .. -8.9 17.8 4.3 11.6 1.2 43.3 -83.4 9.7 -14.4 1.7 -60.4 -77.9 21.1 4.0 16.3 43.4 20.8 52.9 44.7 10.0 -16.2 -8.0 17.8 6.3 29.2 -31.5 162.7 409.7 122.7 14.2 0.8 2.5

249.7 203.5 133.9 116.2 1.8 12.1 2.7 1.7 0.5 0.7 12.8 0.5 1.7 1.1 0.4 18.0 0.8 0.5 32.2 1.1 25.2 40.1 - 5.8 39.1 5.1 1.0 - 0.2 4.2 - 4.4 0.1 - 1.4 0.8 - 1.6 0.1 0.0 38.3 3.5 2.8 34.7 10.9 3.0 6.0 1.3 0.4 9.7 0.3 7.1 5.1

341.4 252.1 125.0 115.3 4.9 9.4 - 0.5 1.4 0.3 4.3 10.8 - 1.2 2.3 7.7 2.1 3.5 1.0 2.2 8.5 0.8 56.3 79.6 7.1 85.1 7.7 0.2 0.4 3.9 32.0 3.5 9.4 1.8 0.6 8.0 0.7 45.3 4.8 2.1 31.5 6.0 12.2 5.2 0.9 3.7 4.7 0.5 4.3 2.9

36.7 23.9 -6.6 -0.8 174.2 -22.3 ... -12.6 -36.3 500.3 -15.2 ... 31.8 590.2 368.9 -80.8 32.5 338.1 -73.4 -23.0 123.5 98.6 ... 117.6 49.3 -80.4 ... -6.5 ... 3001.5 . .. 121.0 ... 7616.1 1689.7 18.4 34.5 -28.0 -9.2 -44.6 301.5 -14.3 -33.1 939.0 -51.1 32.0 -39.8 -43.6

Preliminary estimates by UNCTAD. b Net cross-border M&As are sales of companies in the host economy to foreign transnational corporations (TNCs) excluding sales of foreign affiliates in the host economy. c Not including the financial sector. Note: World FDI inflows are projected on the basis of 153 economies for which data are available for part of 2009 or full year estimate, as of Jan. 7. 2011. Data are estimated by annualizing their available data, in most cases the first two or three quarters of 2010. The proportion of inflows to these economies in total inflows to their respective region or subregion in 2009 is used to extrapolate the 2010 regional data. Source: UNCTAD a

CRISTAL GLOBE - January 2011 Issue 4

39 1122222 5:55:55 PM

Egyptian equities, real estate and industrial projects, and they have taken a hit. But, according to Banque Saudi Fransi, the slump has also “created buying opportunities for local investors confident in macroeconomic fundamentals as oil prices rise and global energy demand grows.” There is widespread agreement on the fundamental stability of the GCC states, comprising Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates (UAE). “One simple differentiating factor for the GCC versus other countries in the Middle East is the fact that the hydrocarbon rich GCC is simply wealthier than most of the other countries in the region,” NCB Capital said. Thanks to oil income and generally smaller populations, the GCC countries have achieved globally high figures of gross domestic product (GDP) at purchasing power parity (PPP) per capita, ranging from $23,000 to $88,000. In contrast, the figures for Egypt and Tunisia are $6,367 and $$9,489, IMF data showed. Economic analysts polled by Reuters say Saudi Arabia, the largest GCC and Arab economy, should expand by 4.3% in 2011 following an estimated 3.8% growth in 2010, helped by robust crude prices and generous government spending. The Kingdom – believed to sit on almost a quarter of the world’s oil reserves – has been focused on internal investment to diversify its economy, spending an estimated $70 billion on infrastructure in 2010 alone. Aiming to create jobs and lower an unemployment rate of 10.5%, the government has embarked on an ambitious plan to build four economic cities at an initial cost of $60 billion. In the 2011 national budget, 58% of the allocations went to capital investment projects, up 10% from the previous year. Education and training got 26%, an increase of 8% over 2010. The government expects GDP to grow by 3.8%, the oil sector by 2.1%, and the nonoil sector by 4.4%. Business contribution to GDP is set at 47.8%, with the government sector growing by 5.9% and the private sector by 3.7%. As of last November, the kingdom’s central bank (Saudi Arabian Monetary Agency) held SR1.63 trillion ($434.67) in foreign assets. Like Saudi Arabia, Qatar is also leading the Gulf region’s economic pace. The Wharton School Global Economy Forecast 2011 said that Qatar, through garnering world attention with its successful bid to host the 2020 World Cup, already has a record of high profile investment plays, such as the $2.3 billion acquisition of luxury retailer Harrods. According to research site RGE Monitor, Qatar – perhaps better known outside the region as home of Al-Jazeera satellite television network – now has roughly $75 billion in external investments.

38

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CG-1 Pg 33-40.indd 30-31

Coupled with its efforts to diversify its economy beyond liquefied natural gas and crude oil exports, Qatar’s GDP is expected by the IMF to grow by more than 20% in 2011. For Dubai, slowly emerging from its debt woes, a much needed spurt in tourism – the Emirate’s mainstay – is likely as Egypt and Tunisia, which had been together attracting 17 million tourists a year, inch towards democratic stabilty. Another plus point for the region, noted in fifth Global Investment Trends Monitor released by United Nations Conference on Trade and Development (UNCTAD), is the UAE’s establishment of a 420-square kilometer industrial zone, said to be one of the largest in the world, where foreign businesses will enjoy full ownership of their ventures. The Wharton report said Qatar’s World Cup preparations – expected to cost $65 billion – and Saudi Arabia’s likely passage of a mortgage law this year will bring new Islamic finance deals, giving the Islamic loan industry a much needed shot in the arm. FDI flows Saudi Arabia and Qatar received $44 billion in FDI in 2009, half the region’s entire investment flows, according to the World Investment Report. But in 2010, despite the steady recovery registered by the many economies of East Asia, capital flows to the region totalled only $57 billion. “The picture varies by country, with inflows to the (UAE) rebounding modestly from the low values of 2009, to little change in performance for Lebanon, to a drop in Saudi Arabia due in part to foreign investors pulling out of or freezing large refinery projects (Conoco Phillips, Dow Chemicals),” UNCTAD said. Apart from attracting foreign capital, another challenge for the region this year is resource strain. “The (UAE), Egypt and Saudi Arabia have decided nuclear energy is the route to meet rising domestic energy demands, but few solutions are at hand to buttress water supply in the region, which is around 1,200 cubic meters per person per year compared with the average of about 7,000 worldwide, according to The World Bank,” Wharton said. Just days before Mubarak steeped down, Joseph Stiglitz, the 2001 Nobel Economics laureate, speaking to reporters in New Delhi where he was attending a conference, cautioned that uncertainty in the Middle East would “impose risks on oil and higher prices of oil could lead to inflation.” His warning put a damper on UNCTAD’s 2011 trends forecast released a week before the Egypt uprising. It estimated global FDI flows to be between $1.3 trillion and $1.5 trillion in 2011, up from an estimated

FDI inflows and cross-border M&As, by region and major economy, 2009-2010 (Billions of dollars) FDI inflows Net cross-border M&Asb Region / economy World Developed economies Europe European Union Austria Belgium Czech Republic Denmark Finland France Germany Greece Ireland Italy Luxembourg Netherlands Poland Portugal Spain Sweden United Kingdom United States Japan Developing economies Africa Egypt Nigeria South Africa Latin America-Caribbean Argentina Brazil Chile Colombia Mexico Peru Asia and Oceania West Asia Turkey South, East & South-East Asia China Hong Kong, China India Indonesia Malaysia Singapore Thailand South-East Europe and the CIS Russian Federation

2009

2010a

Growth rate (%)

2009

2010

Growth rate (%)

1 114.1 565.9 378.4 361.9 7.1 33.8 2.7 7.8 2.6 59.6 35.6 3.4 25.0 30.5 27.3 26.9 11.4 2.9 15.0 10.9 45.7 129.9 11.9 478.3 58.6 6.7 5.9 5.7 116.6 4.9 25.9 12.7 7.2 12.5 4.8 303.2 68.3 7.6 233.0 95.0 48.4 34.6 4.9 1.4 16.8 5.9 69.9 38.7

1122.0 526.6 295.4 289.8 12.6 50.5 8.2 6.3 2.6 57.4 34.4 2.1 8.4 19.7 12.1 -24.7 10.4 3.4 15.7 12.1 46.2 186.1 2.0 524.8 50. 6.8 2.3 1.3 141.1 5.1 30.2 18.2 8.7 19.1 6.9 333.6 57.2 7.0 274.6 101.0 c 62.6 23.7 12.8 7.0 37.4 6.8 70.5 39.7

0.7 -6.9 -21.9 -19.9 78.8 49.5 199.6 -19.2 3.1 -3.7 -3.5 -38.3 -66.3 -35.5 -55.7 .. -8.9 17.8 4.3 11.6 1.2 43.3 -83.4 9.7 -14.4 1.7 -60.4 -77.9 21.1 4.0 16.3 43.4 20.8 52.9 44.7 10.0 -16.2 -8.0 17.8 6.3 29.2 -31.5 162.7 409.7 122.7 14.2 0.8 2.5

249.7 203.5 133.9 116.2 1.8 12.1 2.7 1.7 0.5 0.7 12.8 0.5 1.7 1.1 0.4 18.0 0.8 0.5 32.2 1.1 25.2 40.1 - 5.8 39.1 5.1 1.0 - 0.2 4.2 - 4.4 0.1 - 1.4 0.8 - 1.6 0.1 0.0 38.3 3.5 2.8 34.7 10.9 3.0 6.0 1.3 0.4 9.7 0.3 7.1 5.1

341.4 252.1 125.0 115.3 4.9 9.4 - 0.5 1.4 0.3 4.3 10.8 - 1.2 2.3 7.7 2.1 3.5 1.0 2.2 8.5 0.8 56.3 79.6 7.1 85.1 7.7 0.2 0.4 3.9 32.0 3.5 9.4 1.8 0.6 8.0 0.7 45.3 4.8 2.1 31.5 6.0 12.2 5.2 0.9 3.7 4.7 0.5 4.3 2.9

36.7 23.9 -6.6 -0.8 174.2 -22.3 ... -12.6 -36.3 500.3 -15.2 ... 31.8 590.2 368.9 -80.8 32.5 338.1 -73.4 -23.0 123.5 98.6 ... 117.6 49.3 -80.4 ... -6.5 ... 3001.5 . .. 121.0 ... 7616.1 1689.7 18.4 34.5 -28.0 -9.2 -44.6 301.5 -14.3 -33.1 939.0 -51.1 32.0 -39.8 -43.6

Preliminary estimates by UNCTAD. b Net cross-border M&As are sales of companies in the host economy to foreign transnational corporations (TNCs) excluding sales of foreign affiliates in the host economy. c Not including the financial sector. Note: World FDI inflows are projected on the basis of 153 economies for which data are available for part of 2009 or full year estimate, as of Jan. 7. 2011. Data are estimated by annualizing their available data, in most cases the first two or three quarters of 2010. The proportion of inflows to these economies in total inflows to their respective region or subregion in 2009 is used to extrapolate the 2010 regional data. Source: UNCTAD a

CRISTAL GLOBE - January 2011 Issue 4

39 1122222 5:55:55 PM

2011 FORECAST: BRIGHT BUT NOT SO BRIGHT

T

he prospects for the world economy are less bright than before, according to Britain’s National Institute for Economic and Social Research (NIESR), lowering its global GDP expansion forecast to 4.2% in 2011 from 4.5% forecast last October. The increase in oil prices is the main reason, NIESR said in its February 1 report. Between September and December 2010, oil prices rose by around $20 a barrel to $95 and the futures market suggests that this upward lurch will persist. “Simulations on our model suggest that output in the US will be 0.6% lower this year as a consequence, while output in the big European economies will be between 0.1 and 0.4% lower,” the report said. The rise in oil prices forms part of a general surge in the cost of commodities. Average food and other agricultural prices in 2011 will be over 25% higher than in 2010; metals prices over 30% higher. This is pushing up inflation, which will rise in the OECD to 2.2% in 2011, from 1.7% in 2010 (and a negligible 0.3% in 2009). Inflation will run at 3.5% in China this year, NIESR said. Euro Area GDP will rise by 1.7% in 2011, the same as last year, despite continuing angst about the simmering sovereign debt crisis. As before, Germany will drive the recovery, with GDP rising by 2.6% though its contribution will be less than in 2010 when national output rose by 3.6%. Greece and Ireland, the two countries bailed out last year, have diverging prospects. The Greek economy will shrink by 1.9% in 2011, whereas Irish GDP will expand by 1.7% this year. Output in Portugal, widely suspected to be the next in line for a rescue, is expected to decline by 0.8% this year. A swift resolution of the debt crisis would bring great relief to these three beleaguered economies by lowering interest payments. “If bond spreads were immediately to revert to historical norms, rather than in 2015 and beyond as we assume in our forecast, the Greek budget deficit would improve by 10% of GDP by 2014 relative to our current forecast. We estimate the cost to the Greek taxpayer of the loss of confidence in Greek government debt to be about 10 cents on the euro,” NIESR

said. The American economy regained its pre-crisis level of output in the final quarter of 2010. The negative effects of higher oil prices will be largely offset by the additional fiscal and monetary stimulus introduced towards the end of last year. “We estimate that the recent round of quantitative easing is roughly equivalent to a 100 basis point cut in shortterm interest rates this year.” Although the economy will expand by 2.6% his year, the unemployment rate will remain at 9.7%. Japan was hit especially hard in the recession, but recovered especially fast in 2010 with GDP rising by 4.5%. However, prospects dimmed as the yen appreciated and in response the government introduced late last year a fiscal stimulus worth 1% of GDP. The fiscal multiplier is large in Japan, helped by the fact that it is a relatively closed economy, which limits import leakages. As a result the budgetary boost should contribute about half of this year’s GDP growth of 2.1%. ✦

$1.122 trillion last year and $1.114 trillion in 2009. “Improved macroeconomic conditions in 2010 strengthened profits of transnational corporations (TNCs) and boosted stock market valuations. These favorable conditions coupled with rising business confidence in 2011 will help translate TNCs’ record levels of cash holdings (in the order of $4-5 trillion among developed country firms alone) into new investments. TNCs will also face increasing pressure to make strategic investments to cement their business plans for the postcrisis period.”

UNCTAD also expected worldwide M&A activity (domestic and cross-border M&As combined) to rise further in 2011 and said the current overall policy climate for foreign investors was favorable. Nonetheless, risks persist. “Worldwide GDP growth, after the ‘recovery-boost’ in 2010, will slow down,” UNCTAD said. “In addition, risks related to currency volatility, sovereign debt and investment protectionism could still derail the expected FDI upturn. A strong global FDI recovery depends much on the steady economic and FDI recovery of the developed economies.” ✦

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• Rising oil prices are dulling the outlook for global growth, which is forecast at 4.2% a year in both 2011 and 2012 • World trade will rise by 7.8% this year and 5.7% in 2012 • Average food and other agricultural prices in 2011 will be over 25% higher than in 2010 • Chinese GDP will grow by 9% in 2011 and 8.1% next year • Despite the sovereign-debt crisis, Euro Area GDP is expected to grow by 1.7% this year and 2% in 2012 • The American economy will grow by 2.6% in 2011 and 2.7% in 2012 – NIESR

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