AkzoNobel has started construction of a 32,000 tonne/year monochloroacetic acid (MCA) plant in Gujarat, India, and will look at further expanding its capacity in China, a senior company executive said late on Monday.

“We always look for growth in other regions and after having expanded in China several times we wanted to enter the Indian market,” Knut Schwalenberg, managing director for industrial chemicals business at AkzoNobel, told ICIS.

MCA demand in the south Asian country will likely grow at around 8%, or 1.0-1.5 percentage points above GDP growth, he said.

India is the second biggest emerging economy in Asia, next to China. In the fiscal year ending March 2017, the Indian economic growth was projected at 7.1%.

In China, AkzoNobel will likely expand the capacity of its 100,000 tonne/year MCA plant in Shanghai, as well as build a second plant in the country once the India plant starts commercial operations in 2019, Schwalenberg said, citing that the northeast Asian country is the fastest growing MCA market in the world.

There is no firm timeline for the completion of the expansion project in China.

In India, AkzoNobel broke ground in Atul in the western state of Gujarat for its new MCA plant, which will involve “double-digit million euro investment”, Schwalenberg said.

The project is a 50:50 joint venture between the Dutch paints and coatings major and Indian chemical firm Atul Ltd.

The new plant in India will boost the company’s overall MCA capacity globally to 250,000 tonnes/year, Schwalenberg said.

“We want to be mechanically completed in the third quarter of next year and the start-up and ramp-up of to full capacity will be in the first quarter of 2019,” he said.

MCA can be used to produce thickening agents for the food, oil, mining, personal care and detergent industries. It also has applications in agrochemicals, adhesives, pharmaceuticals, thermo-stabilizers, surfactants and cosmetics.

Demand for MCA will grow proportionally to increases in population and wealth – both of which are in play in India, he said.

Atul Ltd will provide the feedstock chlorine for the joint venture MCA plant, while AkzoNobel will provide the technology, engineering for the project.

“We looked for a partner [in India] because … chlorine is not [a] substance you would like to transport,” Schwalenberg said, citing that MCA plants are best built in close proximity to chlorine feedstock units, he said.

AkzoNobel picked Atul Ltd as partner as the Indian company can also absorb part of the planned MCA output for herbicide production.

Based on the deal, Atul will absorb 30% of the MCA produced by the plant, while 70% will be sold to the domestic market, according to Schwalenberg.

As for the acetic acid feedstock needed for MCA production, the company will get the material from the open market, according to Schwalenberg.

India is a net importer of acetic acid.

The Indian MCA plant will be structurally ready to be expanded to 60,000 tonnes/year, but “its expansion will be done in relation to the development of the market,” Schwalenberg said.

The Indian market is not yet able to consume 60,000 tonnnes/year and at 30,000 tonnes we already have a major market share, Schwalenberg said, adding that expansion will likely be executed “in a few years”.

Global MCA demand this year remains strong while competition is at healthy levels he said.

“The main raw material is methanol going into acetic acid so if methanol prices [are] going up or down, you will see fluctuations in the prices of MCA,” Schwalenberg said.

“Demand for MCA is strong and we are fully sold out so there we don’t see any reason for weaker pricing. If MCA prices fluctuate it is more related to deviation in methanol prices... So for the margin for MCA, it is neutral right now,” he said.

AkzoNobel’s global MCA business is showing earnings improvement compared with previous year’s levels, he said.

“At this moment the MCA business is quite competitive and results are improving in 2017 compared to 2016. The demand side is good. The raw material is also sustainable so it is a nice specialty business,” the executive said.