Saltigo: Focus on custom synthesis and manufacturing services for advanced chemical intermediates and active ingredients
Sep. 21, 2020
"Growth perspectives of the global agchem CMO industry over the coming years will likely be further shaped by regulatory developments in the end markets for agrochemicals. Furthermore, the slowing rate of new AI discoveries having to fulfill ever higher regulatory requirements will increase demand for CMOs who are capable of supplying the new chemistries being outsourced by innovator companies. We feel that those who have a strong expertise in multi-step syntheses and scale-up, as well as a versatile production network to match, are perfectly prepared,” said Andreas Klein, Head of Marketing & Sales at Saltigo GmbH in a recent interview with AgroPages.
He also talked about the market scenario of global agchem CMO industry and growth potential, Saltigo’s agchem custom manufacturing business and competitive strength, the company’s target client groups and business model, as well as future development planning etc.
Andreas Klein, Head of Marketing & Sales at Saltigo GmbH
What’s your view on the market scenario of global agchem CMO industry? What are the major driving forces and challenges, as well as its growth prospects over the coming years?
The global agchem CMO industry has undergone a period of change since mid-2018, with environmental protection enforcement in China leading to both temporary and permanent shutdowns and relocations of many chemical companies. Then the COVID-19 pandemic led to lockdowns of literally entire countries. Supply chains were frequently disrupted, exposing the sensitivity of our highly interdependent globalized economy to such shocks, and shedding light on the relative fragility and volatility of specialty raw material markets. As a result, we have seen a strong trend towards supply chain diversification, aiming at independent and geographically diverse supply chains. This has increased demand for Indian and Western CMOs, with European sources often able to provide local backwards integration and full independence from Chinese raw material sources.
Growth perspectives over the coming years will likely be further shaped by regulatory developments in the end markets for agrochemicals. One example is the strict regulation of endocrine-disrupting chemicals in the European Union, which is shifting volumes from older active ingredients to newer ones, and sometimes leaving treatment gaps for farmers yet to be filled by innovative new substances. Furthermore, the slowing rate of new AI discoveries having to fulfill ever higher regulatory requirements will increase demand for CMOs who are capable of supplying the new chemistries being outsourced by innovator companies. We feel that those who have a strong expertise in multi-step syntheses and scale-up, as well as a versatile production network to match, are perfectly prepared.
What is the size of agchem CMO industry and the pace of growth? What is Saltigo’s position in it?
In the broadest sense, the agrochemical CMO segment value could reasonably be defined by the outsourced part of the estimated 60 bn USD global agrochemicals annual sales volume, not considering fertilizers and seeds. After subtracting the agrochemicals companies' margin as well as distribution, marketing, R&D and overhead costs, the remaining costs are for the formulation and production of the active ingredients, both of which are partially outsourced. Formulation and packaging requires different assets with a different cost structure than chemical production, so there is very little, if any, overlap between these two areas.
Saltigo's core field of activity is advanced chemical intermediates and non-commodity active ingredients, i.e. products that require a complex, multi-step chemical synthesis. We estimate the value of this segment at low to mid single digit bn USD sales per year.
We consider Saltigo to be one of the major companies in this field. Working together with the majority of the large innovator agchem companies, we are constantly investing in assets, process innovation and HSEQ excellence. The increasing tendency of agchem companies to outsource has led to an above average growth rate for R&D driven CMOs like Saltigo, which are capable of offering a comprehensive package of services for sophisticated projects.
Could you introduce Saltigo’s agchem custom manufacturing business, relevant competitive strength and global presence?
Saltigo is one of the world's largest specialty and fine chemicals custom manufacturers and our company history dates back to the 19th century. We provide a broad portfolio of technologies, world-class assets and decades of chemical expertise. Deep experience in protecting our and our customers’ confidential technology, a sound safety track record and dedicated project management make us a premium choice for complex multi-step chemical syntheses. Our experienced and well-equipped process development department adapts and innovates our customers' processes for maximum efficiency. This allows for a swift and smooth transition of processes from lab to pilotation and commercial scale equipment. With the exception of our phosgenation assets at the nearby Chempark Dormagen, all our plants are located at the Leverkusen Chempark site. They form a highly integrated network there, making it easy to devise multi-step processes across several plants, using both multi-purpose assets and technology-focused plants, e.g. for hydrogenation, chlorination, distillation, melt crystallization.
An additional advantage of our location are integrated infrastructural services from electricity co-generation, logistics support, tank farms and specialty analytics to wastewater treatment, waste incineration and even a dedicated landfill site. Being a member of the LANXESS Group, Saltigo is backwards integrated into basic chemicals and reagents and enjoys financial stability and backing of a large corporation as well as an international network of specialists from various chemical and technical backgrounds.
Who are the major target client groups of Saltigo? What’s the business model? What are the requirements in choosing clients?
We do not restrict our customer base in any way, but most of our clients are innovator companies taking new AI developments to the market. IP protection and secrecy are very important for our customers – and likewise for us. Every new inquiry is therefore carefully checked against our existing commitments, and we will not pursue business opportunities which do not fulfill these criteria. We work extensively on continuous process improvement after implementation of a new production to help our customers stay competitive along the full product life cycle. As one of the leading R&D-driven CMOs, we are continuously striving to develop our technology base further, always aiming at having the appropriate and most modern solutions for today’s challenges.
What is the impact of Covid-19 on Saltigo’s custom manufacturing business? What is the new development strategy for the post-pandemic period?
Saltigo’s agrochemical custom manufacturing operations were comparably little impacted by Covid-19 so far, with uncertainties resulting mostly from logistics problems, e.g. availability of suitable containers or freight space, since – especially in the beginning of the pandemic – shipping lines had cancelled many routes or countries restricted travel. For most raw materials we already had implemented a dual-source strategy or were capable of providing a backup solution internally, so Saltigo suffered very few shortages. Therefore, Covid-19 has so far been a challenge which we could successfully address with experience, expertise and flexibility, quite similar to how we deal with usual customer requirements.
The resilience of the agrochemical sector was in part due to the dedication of the large crop-producing countries to keep the agricultural sector afloat amidst shortages of medical supplies, labor or means of transport. It remains to be seen if this has led to anticipatory effects like overstocking. Therefore, it cannot be precluded that the sector will experience some fallout in the aftermath of the pandemic, with impact potentially reaching well into the coming years.
What’s the future development planning over the custom manufacturing business of Saltigo?
We strive to develop in line with the requirements of our customers to continuously grow Saltigo and its business further. Saltigo constantly strengthens its capabilities to ensure efficiency by improving and developing processes. The same is true for our project execution technology team. It provides engineering competence and currently supports various capacity expansion projects as well as the implementation of a range of new customer projects. Besides, Saltigo has initiated an investment program to further increase the capacity of our dedicated pilotation equipment. With this we will be even better positioned to fulfill the increased customer demand for small scale production volumes of 0.5-2 t per project in a fast and flexible manner. This not only expands our service portfolio, but is also an excellent example of how Saltigo finds ways to leverage its key competencies continuously.
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