Last year, ENEOS Materials – a subsidiary of Japan’s leading oil company, ENEOS Corporation – was established following the break up of JSR Corporation's elastomer business, and is today engaged in research and development, manufacturing, and sales of synthetic rubber, thermoplastic elastomers, latex, and other raw materials.
The Japanese chemical industry faced challenges in base chemical production due to regional competitors reducing their costs. Nonetheless, Japanese manufacturers continue to lead in producing highly functional and specialized chemicals and materials, as demonstrated by Mitsubishi Chemicals. Moreover, Japan benefits from numerous SMEs capable of developing niche chemicals and material technologies. What are the strengths and weaknesses of the present-day Japanese chemical industry?
Our survival hinges on our ability to tailor our products to suit specific applications or the unique production lines of our customers. One of our core strengths lies in our expertise in customization technology, which is bolstered by our extensive experience and knowledge in polymerization. Presently, a significant portion of our revenue is derived from baseline products categorized as elastomers. However, our goal is to increase the share of specialized products, such as binders for lithium-ion batteries (LiB) and Solution Polymerized SBR (SSBR) for high-performance tires used in auto including electric vehicles (EVs).
Over the last two decades, several steam crackers have ceased operations, disrupting the balance between master cracking and downstream chemicals. To ensure the sustainability of our business, we must increase our share in specialized polymers and transition towards a more global operation. More than half of our total revenue is generated from outside Japan, and we operate two overseas production sites in Thailand and Hungary. Our strategy is to transform our operation into a "glocal" one, effectively combining global and local elements. In this rapidly evolving landscape, there are two viable paths to survival: customization and globalization.
There is a persistent shortage of materials for lithium-ion batteries, which poses a challenge for mainstream electric vehicle manufacturers. Industry giants like Tesla seek to secure as many battery units as possible. Given the shortage, how do you believe the lithium-ion supply chain can best adapt to address this issue? Furthermore, how do you envision the evolution of the supply chain over the next 12 months? What opportunities do you anticipate for your firm due to these developments?
In the supply chain context, although EVs currently constitute approximately 10% of the global market, envisioning a future where this figure reaches 50% raises critical questions about the lithium-ion and the power supply for these vehicles. This shift also prompts reflection on the transformation of the original equipment (OE) car manufacturing landscape. The gradual transition of most OE car manufacturers towards EVs or non-fossil fuel engines appears inevitable as the automotive industry undergoes substantial change.
Your products find application in various sectors, including footwear and electric wires. Are there any additional applications your company is currently exploring or working on? Are there any new and unexplored applications you would like to introduce your products to in the future?
Approximately 75% of our revenue is closely tied to the auto industry, making our financial stability heavily reliant on it. Recognizing this strong dependence, we actively pursue a strategic initiative to diversify our business portfolio by venturing into non-automotive sectors. While we remain committed to our contributions within the auto industry, exploring new applications for our products has become imperative.
To expedite diversification, I have tasked our team with exploring and creating innovative polymers designed for non-automotive purposes.
Your primary research and development focus is creating products that align with Sustainable Development Goals (SDGs) and environmentally friendly materials. Could you elaborate on whether this remains the central emphasis of your current R&D endeavors or if there are other domains and technologies you are actively engaged in and would like to present to our international readers?
This company operates with two main missions in mind—the first centers around directly contributing to carbon neutrality, while the second involves adopting indirect measures.
Regarding direct contribution, we currently rely on gas-based or oil-based fossil materials for our fuel stock. However, transitioning all of our fuel stock is a monumental task. A critical component in producing elastomers is a material known as styrene-butadiene – a product derived from steam cracking. Although the process is complex and time-consuming, our research and development teams and our price engineers are diligently exploring the possibility of transitioning from fossil materials to biomaterials for our fuel stocks. These efforts are integral to our contribution to Sustainable Development Goals (SDGs).
Regarding indirect measures, we focus on supplying robust polymers for electric vehicles (EVs). As vehicles move, tires shed certain particles into the environment. By providing durable polymers, we can help reduce the emission of these particles. This is why we allocate significant resources to developing high-performance polymers, particularly tough and wear-resistant. Additionally, our binders also play a role in contributing to SDGs.
We are presently focusing on two primary areas. The first involves exploring the most straightforward method of obtaining bio-based naphtha. However, the available volume of this resource is quite limited. The second avenue is production of bio-butadiene that is a key raw material for elastomer. The cost of bio-monomer is notably high, and the conversion from raw materials to butadiene incurs substantial expenses.
Eneos Materials Corporation was founded in 2022. Could you provide more insight into the factors behind establishing your company? Additionally, considering your relatively recent entry into the market, what are some of the challenges that you have encountered thus far?
During the transition to ENEOS Materials, no issues surfaced concerning our customers, suppliers, or employees. The business has continued as it did before.
Given our exclusive focus on elastomers, ENEOS Materials is now tasked with a significant effort to succeed and endure. Pioneering new materials are critical. We can only sustain our existing revenue and profitability if we explore beyond our conventional businesses and technologies.
Could you elaborate on the role that partnerships play in your business model, and are you currently exploring any potential partnerships in international markets to facilitate your expansion efforts?
We are definitely open to partnership opportunities, including alliances and mergers and acquisitions. However, my main focus is on improving our current business. We need to enhance our expertise in elastomers and how they are used in the automotive field. In addition, we aim to expand our revenue sources by finding new applications for our products and developing new technologies.
Currently, we have two production sites outside Japan —one in Thailand and another in Hungary. These sites came about through joint ventures with local suppliers of butadiene. In Thailand, we are partnered with Bangkok Synthetics, and the major shareholder there is the Siam Cement Group. In Hungary, we are working alongside MOL Oil & Gas Company.
Thailand and Hungary have different engineering skills and material quality standards than Japan, resulting in varying outcomes for final products. To maintain consistent quality in your overseas operations as in Japan, could you share your company's strategies or measures to ensure that the same high standards are upheld across all locations?
In Hungary, our current operations are improving, however, not yet reaching satisfactory level. As a result, the company has taken the step of dispatching a number of key engineers to that location. In contrast, in Thailand, a significant portion of the operational tasks are undertaken by the local workforce. Over the past decades, our engineers have been assigned to Thailand with the purpose of training local management and operators. Our key approach is the principle of "glocal" - thinking globally while acting locally.
The company has encountered various challenges stemming from differences in local cultures. In Hungary, efforts towards this adaptation are still ongoing. Meanwhile, in Thailand, the majority of our executive team is already composed of Thai individuals, highlighting the importance of aligning with the local culture.
Over the past decade, our company has made significant strides, largely attributed to our overseas production sites, a global sales network, and a robust technical support infrastructure across Germany, Belgium, China, Thailand, India, Korea, and the US. It is worth noting that key sales representatives are individuals from these local regions. Our R&D team is dispatched from Japan within the realm of technical support. However, our emphasis lies in creating a localized sales communication and network to better cater to the needs of our international clientele.
Your company is in North America, Europe, and Asia. Looking ahead, which countries or regions have you pinpointed as crucial for your corporate growth, and what specific strategies are you considering to achieve this growth?
We currently have no intentions of establishing new facilities outside Japan, primarily due to the ongoing need to secure consistent fuel stock supplies from upstream sources.
With over 50% of your revenue generated from overseas, are there regions you believe hold the greatest potential for sustaining and increasing your business operations in the future?
Europe is getting stricter about fuel-saving and needs special materials. So, we see some good business opportunities in the future.
We are also keeping an eye on Europe. They need special materials for things like tires and binders in electric cars. This could be a big opportunity for us.
Looking ahead to your fifth anniversary, are there any specific goals, missions, or milestones you hope to achieve by then?
I aspire for our company to hold the top position in the elastomer industry, not just in Japan but across Asia and globally. Additionally, I am keen on increasing the proportion of our revenue from innovative applications and new technologies.
Interview conducted by Karune Walker & Sasha Lauture
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