Dow has big ambitions in Chinese market

Dow Chemical has big ambitions for the growing Chinese market, CEO Andrew Liveris told The Nikkei, with agriculture one priority for expansion beyond the company's upcoming merger with DuPont.
 

"I am very optimistic that [Dow's] China business can be a continual engine of growth for the next decade or two decades," Liveris said recently. He sees annual sales in the country quintupling to $20 billion in 20-25 years, even before tacking on the post-merger contribution from DuPont.
 

The CEO anticipates plenty of opportunities in China for chemical makers as the expanding middle class accelerates a shift that puts services and quality of life at the heart of the economy. He indicated that Dow will focus on food safety, energy efficiency and other areas.
 

Yet Liveris expects competition from Chinese rivals, as the country is trying to become "not an exporter of commodities, but a value-adder of technology," he said.
 

Liveris is particularly aware of state-owned enterprises such as China Petroleum & Chemical, known as Sinopec, and China National Chemical, or ChemChina. He pointed to ChemChina's February deal to acquire Swiss agrochemical manufacturer Syngenta, saying it shows the Chinese enterprise's shift from a producer of commodity chemicals to a technology company.
 

State-owned enterprises are publicly held only in part, if at all, and receive government aid, Liveris said. "They're not driven by the financial markets of Wall Street, or even London or Frankfurt -- they don't have the same short-term profit orientation that we have to live by," he argued.
 

Dow agreed in December to merge with American peer DuPont, aiming to complete the transaction by the end of this year. The integrated entity will be split into three independent companies focusing on agriculture, materials science and specialty products, creating a clearer structure to encourage outside investment. In agriculture, priorities will consist mainly of cutting-edge fields such as genetically modified seeds.
 

DuPont and Dow rank fourth and sixth in global agrochemical sales, respectively, and the combined company will vault to the top of the list. Though the pair had considered joining forces in this area for years, it was Monsanto's failed bid for Syngenta last year, which would have united two leading agrochemical players, that spurred them to take the plunge, Liveris said.
 

The CEO also noted that the "market was ripe for consolidation."
 

"Commodity prices have come down in agriculture, crop science -- crops like corn and soy," he said. The merger will create $3 billion in cost savings, he said.
 

"To survive and grow in [this market], you have to change yourself," Liveris said. Dow took a decade to transition from a commodity-chemical maker to a technology company, investing in research and development to add high-margin, high-value products to its portfolio, he said.