Surveying The Scene

Excerpt: Recently, America and Britain have charged China with industrial espionage. Many countries have shut their doors to Huawei, with the curious exception of India.
  • The year ahead: What it portends

  • Covestro supports sustainable research

  • Sika acquires market leader in roofing and waterproofing systems in Romania

  • Nippon Paint's Nshakti program wins JFW special award 2018 for CSR initiative

  • India's first green warehouse for chemicals to be put up by Maersk in Pune

The year ahead: What it portends

V. Anantha Nageswaran, dean of IFMR Graduate School of Business (KREA University) writes in the Mint

It is that time of the year when we peer ahead into the New Year in a vain (pun intended) attempt to see what it holds for us. A meeting of the Federal Open Market Committee concluded last week. The Federal Open Market Committee raised the federal funds rate to 2.25% and 2.5%. Apparently, in the wake of the rate action by the Federal Open Market Committee, US President Donald Trump had contemplated dismissing Jerome Powell, chairman of the Federal Reserve Board. If he did that—very few think that he has the powers to do so—he would unleash the very crash in asset prices that he thinks that the rate hikes are precipitating.

Rate hikes are, at best, only peripheral to the decline in asset prices. Cycles are inevitable and contrary to what Powell's predecessors told us, business cycles have neither been moderated nor eliminated.

The economy is in its 10th year of expansion. It will slow down because, inevitably, excesses build up over a long expansion. They have to be eliminated. A recession in 2019 in the US will neither be surprising nor undesirable. One can, therefore, say that the 10-year bond yield bear market is yet to begin and that the yield will stay to the south of 3% for the most of the year. That will not necessarily mean that the dollar will collapse. On the contrary, the dollar is a countercyclical currency. As the US economy slows, its imports decline and the trade deficit declines slightly. Global dollar liquidity declines at the margin. Therefore, it will be premature to write off the dollar strength in 2019. That should be the base case, unless political developments raise fundamental questions on the global role of the dollar.

Somehow, many are comfortable predicting a smoother year for emerging economies and assets next year after a rough ride in 2018. I am not one of them. If the US economy enters a recession and if stock prices in America decline while the dollar rules firm, it is difficult for emerging market assets to perform well, in absolute terms. They may or may not perform better in relative terms. That is small consolation for investors.

In addition, emerging economies have to contend with economic and political turbulence in China. Xi Jinping's speech on the 40th year of the China economic reforms did not rekindle the spirit of economic openness and liberalisation. Not that China ever embraced it openly even as its fans in the West swallowed the propaganda and spread the myth around. The rest of us are better off reading Michael Pillsbury's The Hundred-Year Marathon: China's Secret Strategy To Replace America As The Global Superpower. China wrongly believes that the decline of the West has begun and that the time has come for it to declare its arrival on the world stage as the true Middle Kingdom. However, such celebrations are premature. China's economy is hurting from the trade actions that the US has taken. For the first time in nearly four decades, a bipartisan consensus has emerged that China poses a threat to American hegemony and technological dominance.

Recently, America and Britain have charged China with industrial espionage. Many countries have shut their doors to Huawei, with the curious exception of India. Retail sales, industrial production and foreign direct investment into China have declined. A lot of economic data has been withheld from publication and there is a gag order on reporting bad news. Recently, Moody's Investors Service came up with several reports that tell the story of China's painful dilemmas— between deleveraging and economic stimulus to preventing the recent slowdown from becoming deeper and prolonged—and reluctance to face up to its debt problem, especially in local governments.

It is not even clear that opening the credit taps would help as much as it did in the past as incremental debt, on top of the debt pile already accumulated, would be less effective in stimulating economic growth. China will also cast a long shadow on the commodities markets—industrial metals especially—and on Asian economies and stock markets.

Europe never really came out of the 2008 recession. Notwithstanding the bombast by the president of the European Central Bank (ECB) Mario Draghi that he would do what it takes to keep the eurozone together, the political cost of ECB's monetary policies and eurozone's structural weaknesses has been substantial. European “liberal” elites refuse to acknowledge the anger and alienation that their policies cause while economic policies favour asset markets and corporate malfeasance more than they stimulate the real economy. Disaffection is widespread across Europe. That is what recent local elections in Spain and the strife in France indicate.

Therefore, the strength of the euro is to be sold and not bought.--These are his personal views.

Covestro supports sustainable research

THE Technical University (TU) Berlin, Germany and Covestro are intensifying their cooperation, focusing in particular on sustainable solutions for chemistry. Applied research and courses at the Faculties of Chemistry and Industrial Engineering are being supported in particular. This makes TU Berlin a new strategic partner of the materials manufacturer alongside other renowned international universities such as Carnegie Mellon University (Pittsburgh, USA), Tongji University (Shanghai, China) and RWTH Aachen University (Aachen, Germany).

"As one of the leading technical universities in Germany, TU Berlin is now one of our most important partners for research into the chemical fundamentals of polymers and their possible applications, especially in the field of sustainability. To explore economically efficient routes to alternative, resource-saving raw materials in the chemical industry in particular, we need excellent science as provided by the TU Berlin," says Dr. Markus Steilemann, CEO of Covestro.

Years of intensive cooperation in several research projects funded by the German Government and the European Commission have led to the intensification of the partnership in Berlin, which is primarily aimed at publicly funded projects.

"Our expertise in extensive economic feasibility studies for various research projects has already yielded valuable insights. The strategic partnership with Covestro underpins the path we have chosen to pursue with sustainable solutions for chemistry," explains Prof. Dr. Christian Thomsen, President of the TU Berlin.

The university can already boast extensive expertise in the development of a sustainable future for chemistry and the promotion of knowledge and technology transfer to industry. With the start-up laboratory "Inkulab" and the emerging "Chemical Invention Factory", the new start-up center for "Green Chemistry", TU Berlin supports those interested in setting up their own business in the development of sustainable chemical products and processes.

The university has an especially high level of expertise in the field of polymer development and technical-economic analysis (TEA) at the interface of chemistry and industrial engineering in a research group led by Prof. Dr. Reinhard Schomäcker.

For the second time already, TU Berlin, Covestro and Dechema organized the "Raw Materials Summit" in June this year under the auspices of the German Federal Ministry of Education and Research with the aim of demonstrating ways to alternative, non-fossil raw materials for chemistry.

Sika acquires market leader in roofing and waterproofing systems in Romania

SIKA has agreed to acquire Arcon Membrane Srl, a leading manufacturer of roofing and waterproofing systems in Romania. By acquiring Arcon, Sika will significantly strengthen its position in the Romanian market and extend its product portfolio to meet the increasing demand for complete solutions in the roofing and waterproofing markets. The acquired business generates annual sales of CHF 23 million. The transaction is subject to approval by the Romanian anti-trust authority.

With the acquisition of Arcon Sika will become the clear market leader in the Romanian roofing and waterproofing markets. It is also a further step in Sika's expansion in bituminous membranes, following several acquisitions in recent years such as Index in Italy, KVK in the Czech Republic, and Bitbau Dörr in Austria.

Arcon is based in Sfântu-Gheorghe, 200 km north of Bucharest. In its fully automated manufacturing facility it produces technologically advanced bituminous membranes, with the potential to also serve other South East European markets. Furthermore, Arcon's product portfolio also includes thermal insulation systems for facades and roofs, combining EPS (expanded polystyrene) sheets and bituminous membranes. The acquired technologies will perfectly complement Sika's roofing, waterproofing, and building envelope systems.

Ivo Schädler, Regional Manager EMEA: “Arcon's market leading position, comprehensive product portfolio, and established distribution network will support our growth strategy by opening up new cross-selling opportunities, as well as increasing our market access and the penetration of key projects. We would like to welcome the Arcon employees to our Sika team and look forward to growing our business together.”

Nippon Paint's Nshakti program wins JFW special award 2018 for CSR initiative

NIPPON Paint (India) Private Limited (Decorative Division) Asia's leading paint manufacturer, recently received the JFW Special Award 2018 for its CSR initiative, the Nshakti program. The event which was held at Sir Mutha Venkata Subbarao Hall, Chennai saw the participation of leading brands and Nippon Paint received accolades for its novel CSR initiative.

Ms. N. Rajeshwari, DGM (HR) Nippon Paint (India), received the award from celebrated director Radha Mohan and producer Dhananjayan Govind, in appreciation of Nippon Paints efforts in transforming the lives of rural women.

On receiving the iconic award, Mr. S Mahesh Anand, President – Decorative Paint, Nippon Paint India commented, “Nippon Paint is glad to receive the JFW Special Award for its CSR initiative. When we embarked on the Nshakti initiative we were not sure how well it would be received. But having successfully trained over a hundred rural women now, we can say with utmost pride that the program has made remarkable difference in transforming the lives of unskilled labourers. The award if further testimony to our social contribution that far surpasses our brand awareness, uplifting people's lives”. India's first green warehouse for chemicals to be put up by Maersk in Pune

APM Terminals Inland Services, a unit of Danish transport giant AP Moller Maersk Group, is to open India's first environment approved inland container depot (ICD) for handling chemicals in Pune, its Managing Director for South Asia, Ajit Venkataraman, has said.

The Ministry of Environment, Forest and Climate Change has given APM Terminals Inland Services blanket approval to store 35,000 tonnes of chemicals of all types, except explosives and radioactive chemicals, at its facility located 150 km from Mumbai.

The ICD can handle 60,000 containers a year. It has 100,000 sq ft of warehouse space, half bonded and half non-bonded, besides 50,000 sq ft of yard space to store containers.

The move is aimed at supporting India's chemical industry, currently estimated at $200 billion, and accounting for about 3 per cent of the global market. By 2025, the local chemical industry is expected to double to $400 billion, nudging multinational chemical companies to set up base in India, though the lack of compliant facilities was hampering growth.

India is a net importer of chemicals, with imports growing at 17 per cent CAGR in the last 10 years and exports at about 8 per cent, while domestic growth was about 4 per cent.

“Given that there is a huge amount of export-import happening in chemicals, one of the biggest challenges that chemical companies face today is the infrastructure to support the regulatory issues and compliance, because there are not too many compliant facilities in India, and this was hindering growth,” said Venkataraman

“We see this as an opportunity not just for us, but also for the chemical industry to take it to the next level,” he said. Global port operators such as DP World and PSA International are chasing cargo in India's hinterland by acquiring firms running container freight stations (CFS), ICDs and container trains, to offer end-to-end solutions and propel growth in the world's fastest growing major economy.

AP Moller-Maersk Group runs Maersk Line, the world's biggest container shipping company, and APM Terminals, one of the big four global port terminal operators. It also runs Damco, a freight forwarder. This helps the Moller-Maersk Group offer end-to-end services to customers.

“As a group, we transformed into a logistics and transport business a year ago. This stems from the fact that customers are looking for end-to-end solutions, they don't want to deal with multiple entities, they just want to deal with one entity who will take end-to-end responsibility. With Maersk Line, APMT and Damco, there is no other group that can give a complete end-to-end solution,” says Venkataraman.

Many of the large chemical players want a single player to deal with in key consumption and production areas.

“Since safety, security and compliance is such an important thing for these chemical giants and it fits well with the way we run our operations in a safe and compliant manner, it's a good match in terms of what the customer is looking for and what we can provide,” he noted.

“Our industry is going through a transformation. People are moving away from a box-in, box-out concept, a traditional model for a CFS/ICD, to more value-added services. The game is in the hinterland, because that is where most of the action is going to be, and with improved connectivity, we expect growth will happen more and more in the interiors of the country,” Venkataraman added.

Venkataraman said the firm would look at setting up more such environment compliant warehouses to store chemicals at its other facilities.

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