|
Colorants industry: Why the ways of the past
won’t do for the future
|
|
The
colorants industry – comprising dyes, pigments and their intermediates – is a
highly competitive one, impacted by commoditisation, environmental &
sustainability challenges, and price pressure from downstream users. It is a
significant industry in India – with several hundred producers, mostly small
and medium enterprises (SMEs). Their challenges are unique and future
uncertain, unless they embrace innovation, new ideas and new ways of engaging
customers.
First to shift from west to east
The
colorants industry was amongst the earliest in the chemical industry to
migrate from west to east. This migration followed that of the textiles
industry – still the largest market for dyes. When it was more or less
completed by the turn of the last century, there was not much of the industry
left in its ancestral homes in North America and Western Europe. Instead,
producing centres emerged in developing Asia – in particular in China, India,
South Korea, Taiwan and Indonesia – and served markets across the globe.
Globally,
the colorants industry suffers from over-capacity, and at least in India and
China suffers the baggage of years of poor environmental compliance. It is
now finding that the business environment of the past is no longer relevant;
customer requirements have evolved – at least in developed economies – and
there is now great emphasis on environment-friendly performance products.
Compliance is now needed not just to local regulations, but international
ones – posed both by customers and regulators.
A success of sorts in India
The
Indian colorants industry is a success story – of sorts. More than a thousand
units, ranging from the tiny to the small & medium make colorants,
alongside about a dozen larger ones that have some economies of scale and
integration to key raw materials. The industry is concentrated in the
Gujarat-Maharashtra belt to leverage local raw materials and benefit from
proximity to markets in textiles and plastics, in particular.
The
industry meets nearly all of the national requirements and some more. Exports
of dyes and intermediates are estimated at about $2-bn – with more than 90%
accounted for by dyes. As per the Ministry of Chemicals and Fertilisers,
installed capacity for dyes and pigments in India is about 500-ktpa, with
production of about 300-kt in 2015-16. Reactive dyes are the single largest
category of dyes produced in the country, with an output of about 100-kt.
Indeed, in this class, India is the leading global supplier – edging out
China to a distant second place. Other important classes of dyes produced
include acid, azo and disperse, in addition to optical whitening agents and
organic pigments.
Structural & operational problems
Many
of the problems facing the Indian colorants industry have to do with the way
it is structured and operates.
Products
from one unit are more often than not indistinguishable from another and the
sole differentiator is price. This is a slippery slope to operate, and it is
no surprise margins have been steadily eroded, leaving little room for
innovation, application development and for ensuring compliance with
environmental norms.
There
is also a fundamental weakness in the industry – its acute dependence on imports
for several basic intermediates and raw materials. This is not unique to this
industry; this column has repeatedly lamented a similar scenario in the
agrochemical and pharmaceutical industries. The gap, most of the time, is
plugged by imports from China.
Such
a situation is both unsustainable and undesirable. Prices of dye
intermediates have at several times in the past shown unforeseen spurts and
problems with availability. Most of this has to do with developments in
China, where a severe crackdown on polluting industries is forcing closures
and production curbs at non-compliant units. The inspection regime is
becoming more stringent and frequent, especially in major production centres,
and the situation is not expected to change. Even multinational companies who
usually operate to a higher internal standard of environmental compliance are
not immune from this scrutiny. Indeed, some allege, they are unfairly
targeted for inspections.
To
plug the gap between demand and domestic supply of intermediates, India’s
colorants industry must look to backward integrate or producers of basic
chemicals must forward integrate to make these inputs available locally.
Given the typically smaller size of the former, the latter approach makes
more sense. Any which way, efforts to develop integrated value chains for
colorants must be at a scale that affords competitiveness, especially against
imports from China, and should leverage technologies that are
state-of-the-art and compliant to strict environmental norms. The latter is a
challenge the industry – barring a few exceptions – has shied from tackling
so far.
Reducing the ecological footprint
Many
classical schemes for production of dyes & dye intermediates have a high
environmental impact, generating significant amounts of wastes (solid and
liquid). Little attempt has been made to innovate cleaner, ‘green’ routes,
either by the companies themselves or in partnership with technical centres
such as academia and research institutes. This must change if the industry
needs to transition to a more sustainable way of operation.
There
also needs to be greater emphasis on improving the water- and
carbon-footprints of the industry. Water consumption in the manufacture of
pigments – of which India is now a leading production centre – is high and
entirely unsustainable considering much of the industry is located in
water-stressed parts of the country. Only now, with water costs rising, has
this come on the radar of companies. Reducing energy consumption through
appropriate conservation measures and by process innovation can have quick
paybacks and count as easy pickings in any transition to more sustainable
production.
Bringing value to customers
While
the colorants industry must look within to improve its performance and its
image, it must also look to its customers and improve upon the value
proposition it can offer. Take the textiles value chain as an example. By
several measures this is amongst the most polluting and has been in the
crosshairs of environmentalists. The concerns span the several processes from
production of fibre – synthetic or natural – to spinning, weaving, dyeing,
printing and finishing. At each of these a plethora of chemicals are used
some of which are harmful to human health or the environment. Vast quantities
of water are also used and end up in water bodies, at times with little or no
treatment. Such problems have plagued several production centres in India,
including Tirupur in Tamilnadu where it led to closure of several processors,
save those that invested in ‘zero liquid discharge’ technologies.
Challenges as opportunities
Progressive
colorants manufacturers are now eyeing the challenges as opportunities to
differentiate and stay ahead of the pack. They are going to their customers
not with a product, but with a solution that offers a value-proposition that
is comprehensive and compelling. The aim is to simplify processes at the
customer end, reduce costs for them, and improve performance. Often these are
achieved by working closely with equipment suppliers.
Such
approaches allow colorant suppliers to escape the rampant commoditisation in
the industry and enable them to capture at least some of the value they offer
customers. Their engagement thus evolves from a transactional one that
typically exists in the industry to a strategic and ‘stickier’ relationship –
one in which either party is reluctant to disengage for the benefits it
affords both.
This
is obviously an approach that calls for an intimate understanding of customer
practices and the ability to innovate to deliver appropriate solutions. These
can vary from one customer to another, and will call for revamping not just
the manufacturing but also the innovation, sales and marketing organisations
as well.
In
the pigments industry, to cite an example, the emphasis is now on improving
the application properties of existing classical pigments, rather than
researching for new ones. The development work is largely centred around
changing particle morphology (shape, size and particle size distribution),
new crystalline modification, and modifications of pigment surfaces with a
range of surface finishing approaches. Though in the last 70 years, very few
new product classes have been commercialised, for each hue several colouring
options are available that span the price and performance spectrum and
companies focus on the turf they wish to play. Each sub-segment requires its
own level of business competencies, and has its own share of challenges.
Diversifying for a future
Internal
and external competition has squeezed profit margins in the global colorants
industry and India’s industry is no exception.
Sustainable
growth in the industry cannot come from doing business as in the past. There
needs to be full accountability of all costs, including impacts on the
environment, and these need to be addressed at the start of the project –
during product selection, plant design & construction – and in meticulous
operation.
There
has to be a greater focus on diversifying the product slate to more high
technology products. No longer are applications of colorants limited to
traditional areas in the textiles, leather, plastics and paper industries.
New opportunities in advanced electronics, lasers, solar photovoltaic cells
etc. are opening up and these are still not crowded by competition. But
entering these will call for an intense technology emphasis – something
missing so far. R&D spends of a piffling 1-2% of sales will simply not
do!
|
- Ravi Raghavan
CHWKLY 18jul17
No comments:
Post a Comment