German speciality chemicals group Lanxess remains confident about its growth prospects, especially in Asia, despite the tough market conditions plaguing the rubber industry.
Lanxess chairman Matthias Zachert yesterday said the company expects to face challenges in the near-term, weighed down by a supply glut and softening demand across the region.
He said: "We expect difficulties in the operations, performance and cash generation aspects."
"But we also see that supply and demand, especially in Asia, over the mid-term, will improve because rubber is supporting a growing industry, namely, the tyre and car industry," he added. Mr Zachert was speaking to the media at the opening ceremony of the group's new plant in Jurong Island yesterday.
Lanxess has forged ahead with its expansion strategy in the region. The group yesterday opened its new €200 million (S$320 million) plant on Jurong Island - one of its largest single investments.
The neodymium butadiene rubber facility, which produces synthetic rubber that can increase fuel efficiency and performance in tyres, is Lanxess' first such plant in Asia. In 2013, the company opened a €400 million butyl rubber plant in Singapore.
The new plant, which has a production capacity of 140,000 tonnes a year, will serve global markets, with an emphasis on meeting the growing demand in Asia. The plant has generated about 100 highly skilled jobs here, largely filled by locals.
Mr Zachert said the facility will not operate at maximum capacity yet as that would only "put more pressure" on the current price situation. It will, instead, ramp up production gradually over the next two to three years.
Lanxess has been undergoing an aggressive restructuring exercise amid the industry downturn. The company will cut 1,000 jobs in Germany, and close down a rubber plant there by the end of this year.
"It was a very difficult decision we took but it underlines, again, our commitment to Asia," said Mr Zachert.
"We are clearly focusing on improving our competitiveness in a tough rubber market," he said, adding that the company will consider further moves to improve its operations.
Trade and Industry Minister Lim Hng Kiang, who was the guest of honour at yesterday's event, said in a speech that the growth of emerging economies in the region is a "silver lining" amid today's global uncertainty.
Chemical sales in Asia, for example, are expected to grow at a compound annual growth rate of 4 per cent to 5 per cent over the next 10 years, he said.
"Riding on this growth, Singapore can play a significant role for companies looking to tap opportunities in this region by becoming a strategic base from which companies manage their Asian operations."
Mr Zachert said Singapore's solid infrastructure, highly educated workforce and pro-business policies continue to be a draw for Lanxess, which has set up its regional headquarters here. The Asia-Pacific region accounts for about a quarter of Lanxess' overall sales.
Said Mr Zachert: "Given the significant challenges involved in serving so many different industries across such a large and diverse part of the world, it was only natural that we elected to make Singapore the hub for all of our businesses and technical operations in the region."