Serving China from the doorstep

Since the demand for locally produced leather chemicals in China is far higher than supply, BASF decided to open a manufacturing facility within the country to assist the domestic tanners. BASF now serve more than 350 tanneries in the greater China region and have established a network of national and regional support and distribution centres throughout the country. Almost a third of BASF's global leather chemical range is now produced directly for China-based tanners following the expansion of the German chemical conglomerate's activities in greater China. The BASF Colorants and Chemicals plant (BACC) in Shanghai is the lynchpin of the company's leather chemical production activities and is also home to the Asia Technical Centre - Leather (ATCL) providing technical support and innovation for the whole Asia-Pacific region. In terms of volume, the greater China region is now the largest leather producing area in the world and accounts for more than 1,000 sizeable tanneries. The greater China area includes mainland China, Taiwan, Hong Kong and Macao. Compared with the predicted global growth of the world leather industry (1-2% by 2010), the Chinese industry is anticipated to grow by 4-5% over the same period. The opening of the Chinese domestic market, low labour costs and the relocation of a number of foreign companies to China, have resulted in a rapid expansion of the Chinese tanning industry over the past fifteen years and the growth is expected to continue into the future. 'Asia is doing very well at the moment', says Hubert Rudolph Kollmar, division manager, performance chemicals for leather, BASF China. 'Footwear and furniture leather production is still increasing, especially here in China, while the local leather garment production seems quite saturated. China's leather exports to the US have slowed recently, but they are still very significant, and now that China has entered the WTO, the European market should now be more open for the Chinese', he added. The entry of China to the WTO last December is also viewed as a positive development, since the quota system of the EU will be overcome, thus making it easier for Chinese footwear manufacturers to sell into the EU. China is already the leading footwear supplier to the US market and is the leading manufacturer of American lifestyle leathers. Leading international leather makers such as Prime Tanning, Sadesa, Irving-Schweizer and Shanghai Richina have all established tanneries in the country supplying local leather product manufacturers. 'Shoe upper production accounts for 55-60% of the leather made in China and, if you include splits, the figure is closer to 80%', says Kim Doo Soo, director, performance chemicals for leather - BASF Asia. 'Furniture and car seat leather are growing fast and some tanners are not far off achieving the standards of OEMs. Most automotive sales are for the after market but I think that Chinese tanners will be supplying OEMs within five years.' Approximately one third of all the leather produced in China is now sold on the domestic market and the market is expected to get bigger in the future. The domestic hide and skin supply chain is still developing and is a little slow and the tanners rely on supplies of salted and wet-blue hides from the US. BASF in China An outline of BASF's global activities in China can be seen on the map. The performance chemicals leather business unit is centred at the BACC in Shanghai. As well as the BASF sites, they also use a total of seven additional distributors located throughout greater China. The distributors have their own testing facilities and are able to carry out small trials and basic analysis for BASF customers. The company supply the top 350 tanneries located throughout the country, including six key accounts or trend setters and a further 14 significant accounts. 'By using the 80:20 rule, we believe that we service all of the major leather producers in greater China', says Kollmar. As well as the production centre and regional distribution centres, BASF also have a network of offices in Guangzhou, Hong Kong, Beijing, Teipei and Shanghai. The offices include technical and commercial sales staff to provide local assistance for tanners. ATCL The Asia Technical Centre - Leather (ATCL) was transferred to the BACC site in August 2000 from the previous location in Malaysia. The 1,320m2 facility includes a wet-end and finishing pilot plant, a training centre and several laboratories for quality control, physical and chemical testing and R&D. The ATCL provides technical assistance to BASF customers throughout the Asia-Pacific region, especially greater China. Most of the hides are bought in as wet-blue and are stored in a chilled room. The facility is able to cater for virtually all the tannery machinery operations with the exception of fleshing and splitting. These functions can be carried out at a nearby tannery. The machinery can accommodate full side trials if required. The pilot plant also includes a chemical storage room and a safe area for dangerous and volatile materials. All of the pilot plant equipment has been manufactured by Italian and German companies and most was transferred over from the former site in Malaysia. On the first floor of the building are the physical and chemical testing laboratories. Physical testing is carried out at 55-60% relative humidity, 21°C. BASF have the whole range of testing equipment from Bally, lastometer, Taber flex, fogging, water permeability and many others. Fogging tests are also carried out in the chemical lab as well as free formaldehyde, chrome and cold flex testing etc. Many other tests are carried out for BASF's own purposes or for customers. They also carry out physical and chemical analysis on behalf of their customers. Testing becomes particularly important when BASF custom-make a particular product for a specific tanner or finisher. 'We are able to use our Verbund philosophy to help our customers not only with high performance leather chemicals but also with technical solutions', says Kim Soo Doo. The ATCL has four full-time technicians, two wet-end and two finishing specialists. All the technical staff are trained to the same level as technicians in Germany. As well as the trained technical staff at the ATCL, there are also four university students from two Chinese academic centres in Xian and Chengdu. The four students are either involved in two short courses at the centre which last from 4-6 weeks or are taken on by BASF for one year where they become involved in every aspect of BASF's leather activities and also contribute to their research and product development. Externally, BASF also provide sponsorship for students and in the future will financially support Chinese PhD undergraduates. 'By supporting the universities, BASF are able to benefit in many ways', says Kim Doo Soo. 'The students could be potential employees or customers of BASF in the future and it helps to maintain or improve our image in the local marketplace. We believe that by having a closer cooperation with the universities for research and development, our product ranges will be even further enhanced in the future.' BACC Since October 1996, leather dyes and chemicals have been directly manufactured at BASF's Colorants and Chemicals plant located in Shanghai. BASF Colorants and Chemicals plant (BACC) is BASF's first wholly foreign owned production site in China. Chemical manufacture on the site is almost exclusively for the domestic market with approximately 10-20% exported to other Asian markets such as South Korea and Japan. The site produces pigments, metal complex dyes, acrylic dispersions and leather chemical auxiliaries for the tanning industry. BACC is located 1.5 km from the HuangPu river, which passes through the centre of Shanghai and is a contributory to the Yangtse river. The plant was initially opened as a joint venture between BASF Shanghai Colorants and Auxiliaries and the Chinese owned Shanghai Dyestuff Corporation (SDC). In 2000, BASF acquired 100% ownership of BACC when they bought out the SDC share. BACC has approximately 1,000 employees and covers six-business units of BASF including performance chemicals of which leather chemicals are a part. Leather chemicals are produced in two factory units: the chemical auxiliary plant and the one which produces metal complex dyes for leather. Virtually all of the leather chemicals are produced in the auxiliary plant. Approximately 60 leather chemicals are produced on the site from BASF's global range of 230. Well-known BASF leather chemical brand ranges are made such as Relugan, Corial, Basyntan, Basozym, Mollescal, Coripol, Tamol and many others. BACC produce leather chemicals that cover the whole leathermaking process from beamhouse to finishing. Approximately half of the production at the auxiliary plant is for leather chemicals with the remaining capacity for the textile industry. The total capacity of the auxiliary plant is 45,000 metric tons per annum and since the plant was inaugurated in 1996, BASF have already extended the building twice and plan to increase capacity further in the future. The plant also produces black shoe finishing pigments. The auxiliary plant features a large spray drying unit and approximately ten reactor vessels of varying sizes depending on the raw material and batch size. The plant also includes two special glass reactor vessels for producing fatliquor ranges such as Lipodermlicker and Lipoil. The glass reactors enable the reaction to be visually monitored and enable the use of corrosive compounds that would otherwise damage metal reactors. Outlook Looking forward, BASF want to become more than a leather chemical provider to the Chinese tanning sector. By anticipating further growth of the local Chinese market and the projected increase in sales of Chinese leather to the rest of Asia and Europe, BASF have already laid down the infrastructure. Their future aims include the setting-up of a competence centre for the production of American lifestyle leather and significant advances in order handling and processing to make the mechanism simpler and more efficient for customers. Order processing in China is notoriously difficult and BASF are developing a faster, simpler system. Although BASF will find it difficult to compete on price, they are able to provide tailor-made products as well as their main product lines and offer many value added benefits to the tanner in China. The author would like to thank Regina Pfriem, business communications - Leather, Ludwigshafen for her help and assistance in compiling this article.