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Contemplation

By Walter Greene,2014-07-23 20:35
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ContemplationContem

    Contemplation

?

    ;DepthReport

    ;smplationofthe

    ;~isitionbytheBluestarGroup

    ;:ditorsnote:AttheendofIastyear,BlackstoneGroup,aleadingglobalalternativeassetman

    agerand

    ;lrovideroffinanciaIadversaryserviceslistedonNewYorkStockExchange(NYSECode:

    BX)becamea

    ;hareholderofChinaNationalBluestar(Group)Corporationwith600millionUSD.Attheb

    eginningof

    ;,

    ;‘008.everythinghasbeensettleddownforChinaBluestarCorporationandAdisseotosetup

    anewfac’

    ;DrybyinvestmentinChina.WhatprofoundeffectwilIitbringtoChinafeedadditiveindustr

    yinthefu.

    ;ure?Comprehensiveanalysisandinterpretationhavebeenmadebythismagazfne.

    ;etinformation

    ;rhandinhandwithAdisseomakesinvestmentinChina, ;Itoincreasedemandforthemethioninemarket ;~tionalBluestar(Group)Cor

    ;hinaBluestar”,istobuilda

    ;theproductionofmethionine

    ;artnershipwithitssubsidiary

    ;;seo.Thisprojectisamajor

    ;;seo’sdevelopmentinAsian

    ;newfactoryisscheduledto

    ;tctionin2011.wheno111-ex

    ;oncapacityofEuropeanme

    ;nolongerbeabletosatisfy

    ;globaldemandalone,especiallydemand

    ;firomAsiancountries.Thegrowthofme

    ;thioninedemandfromAsia-Pacificregion ;willaccountformorethanhalfoftheglob- ;algrowthofthemethioninemarketover

    ;thenextdecade,”pointsoutG6rardDe—

    ;man.CE0ofAdisseo.

    ;Theglobalmethioninemarketshould

    ;begrowingatanaveragerateofabout4%

    ;annuallyby2015.Thisgrowthwillcome

;wimtheincreaseintheworld’spopulation

    ;whichwillneed,accordingtoFoodandA

    ;gricultureOrganizationoftheUnitedNa

    ;tions(FAOUN),aglobalproductionofal

    ;most300milliontonsofmeatby2015. ;Poultryshouldaccountforhalfofthe ;growthoftomlmeatproduction,while40% ;ofpoultrymeatproductionshouldtake ;placeinAsia.

    ;Initially,thenewfactorywillhavean ;annualcapacityof70,000tons.Thede. ;~lroundInformation

    ;signedtotalcapacitycanbedoubledover ;theinitialpoint.Thisnewsiteofmethion

    ;inefactorieswillbeintegratedintoapetro

    ;chemicalindustrialzoneownedbyChina ;Bluestarandalltheprimaryrawmaterials ;(propylene,methanol,sulphur,etc.)canbe ;providedlocally.

    ;Thenewfactoryislocatedintheout

    ;skirtsofTianjin,amajorportinno.hem ;Chinawithgeographicalconveniencefor ;logisticsandtransportationinAsia.The ;newfactorypossessesnotonlyAdisseo’s

    ;uptodatetechnologyinthefieldofme

    ;thionineproduction,butalsoChinaBlues

    ;tar’sadvancedindustrialexperience.

    ;Thisprojectfurtherconfirmsthesig? ;nificanceofChinaBluestar’sinvolvement

    ;inanimalfeedproduction,thatistosatisfy ;demandforfeedinChinaandAsianregion ;withcompetitivepriceandsuperiorgeo- ;graphicalposition.

    ;IBluestaracquireAdisseo?

    ;~ificanceoftheaquizationbyBluestarGroup ;tionalBluestar(Group)Cor-prise,whichisunderthemanagementofteredinBeijing,Blues

    tarfocusesonthe

    ;]rgescalestate-ownedenterChemChinaGroupCorporation.Headquarproductionofspecialchemicalp;cluding”BluestarCleaningCo.”.”Bluestar

    ;NewMaterialsCo.”.and”ShenyangChem—

    ;icalCo.”andhas25plantsand4scientific

    ;researchinstitutesnationwide,and15 ;plants,7R&Dandtechnicalserviceinstitu

    ;tionsoverseas.Amarketingnetworkhas

;extendedovermorethan140countriesworld

    ;wide.

    ;OnJan.17,2006,ChinaBluestarac

    ;quiredFrenchAdisseoGroupasawholly ;ownedsubsidiaryatthepriceof400mil

    ;lionEuros(about4billionyuan).Thisac

    ;quisitionfilledblankinmethionineproduc

    ;tionandtechnologyandreversedthepas

    ;sivesituationofrelyingonmethionineim

    ;port,whichwillhavefarreachingimpact

    ;onChinamethioninemarket.Subsequently, ;Bluestarwil1makefal1useofmethionine ;technologyofAdisseoandimprovethedo

    ;mesticmethionineprojectandintroduce ;liquidmethioninetechnologytosetupnew ;productionfacilitiesinChina.Bluestarwill ;graduallyestablishliquidmethioninepro

    ;ductioncapacityof200,000tonsperyear ;inChinaandpromoteallroundlocalization

    ;intermsoftechnology,production,anddis

    ;tribution.Domesticproductionoffeedme

    ;thioninewillachieveabreakthroughat ;hand.Inaddition,Bluestarisinthetop3 ;1istedintheglobalmarketshareofVita

    ;rainAandEandtop5ofbio?-enzymeout-- ;put.StrongsupportwasprovidedbyNa

    ;tionalDevelopmentBanktogetherwitha ;majorityoffundsforacquisition. ;FrenchAdisseoGroupisthelargest ;supplierspecializinginanimalnutritional ;additivesintheworld,inpossessionof ;manypatenttechnologies.Themarketing ;networkisextendedto140countiesandre

    ;gions.In2004,Adisseobecamethesecond ;share.FiveplantsunderAdisseohaveareal ;valueof12billionyuan.Salesincomeex

    ;ceeded5billionyuanin2005.Withthe ;mostadvancedtechnologyofmethionine ;production,Adisseoistheonlymajorme

    ;thionineproducerofbothliquidandsolid ;formsglobally.Globalmethionineoutput ;was260,000tonsin1993andincreasedto ;300,000tonsin1996,450,000tonsin1999, ;550,000tonsin2002and600,000tonsin

    ;2006,twiceasmuchasthatof10yearsago. ;Atpresentannualdemandforfeedmethion

    ;ineisestimatedtogrowby5%onaverage ;intheglobalmarketand7%%inthedo

    ;mesticmarket.Drivenbysuchdemand,me

    ;thionineproducersaroundtheworldwillex

    ;erteffortstoincreaseproductioncapacity ;andoutput.wiglobaltotalproductionca

    ;pacityreachingabout1.1milliontonsper ;year.Itisobviousthatsupplyofmethionine ;exceedsdemandintheglobalmarket.Under ;theconditionofimbalanceofoveml1de

    ;mandandsupply,whydidBluestaracquire ;Adisseo?

    ;Inthe1980s,Chinaintroducedme

    ;thionineproductiontechnologyfrom ;Rhdne-poulencS.A.tosetupamethionine ;productionlinewithanannualproduction ;capacityof10.000tonsinTianjin.This ;productionlinehadbeenclosedformany ;yearsduetovariousreasons.Methionine ;productioninChinaisstillablankpage. ;Inthepast,owingtohighcostofproduc

    ;tion,methioninehasbeenbasicallyusedfor ;medicalrawmateria1.Domesticfeedindus

    ;tryhastorelyonimport100,000tonsof ;methionineeveryyeartomeetdemandin ;themarket.Chinaimportedover85,800 ;tonsofmethioninein2004.a17.77%in

    ;creasefrom2003;66,700tonsimportedin ;2005.22I3%lowerthanthatofprevious ;year.TheacquisitionofAdisseobyBlues

    ;tarcanhelptoreversethetideofrelyingon ;longtermmethionineimport.Moreover, ;largestmethionineproducerintheworld.externalresourcescanbeusedtofi11inthe

    ;accountingfor29%oftheglobalmarketgapinthisfieldofChinachemicalindustry.

    ;16ICHINAFEEDINDUSTRYrFeb2008Jwww.Chinafeedindust~.corn

    ;LuXiaobao,ViceGeneralManagerofChi

    ;naBluestarpointedout:”Theacquisitionof

    ;AdisseobyBluestarisdifferentfromprevi- ;OUSacquisitionofFrenchcompaniesby ;Chineseenterprise.Previousactsaimedto ;expandthemarket,whileouracquisitionis ;tomeetdomesticdemandinthemarket.

    ;Thisacquisitionenablesustointensifyour ;technicalstrength.”Inaddition,methionine

    ;iswidelyusedinChinaandhasahuge ;market.Itisexpectedthatthedomesticde

    ;mandformethioninewillbeincreasedby ;10%15%annually.

    ;Moreover,ChinaBluestarisconfident ;thatAdisseowillbemorecompetitivethan ;anyotherforeignenterprisesthroughlocal

    ;izedinnovation.Bluestarhasalwaysfol- ;lowedaprinciplethatcooperationcomes ;earlierthanjointinvestment,acquisition ;comeslate.Thereareextremelystrictre

    ;quirementsonmethionineproductionin ;termsofsafetyspecification,management ;procedureandproductionexperience. ;Bluestarinitiatedaplantointroducepro

    ;ductiontechnologyandcooperationin ;2002andgotintouchwithAdisseoGroup ;in2003.Bluestaraimedtointroducead- ;vancedtechnologyfortheinnovationof ;methioninefacilitieswithannualproduc

    ;tioncapacityof10,000tonswhichhad ;stoppedproductionformanyyears.Asthis ;technologywasmonopolizedbyafew ;companiesintheworld,AdisseoGrouphas ;refusedtotransferthistechnology.Witha ;historyof60yearsintheproductionand ;management,AdisseoCompanyhasestab

    ;lishedacompletemanagementsystemand ;matureoperationmechanisminvariousas’

    ;pectsconcerningproduction,safety,R&D ;andmarketing.Therefore,Intheearlydays ;ofturningoverAdisseo,Bluestarsetto ;workfocusingonkeepingexistingmanage- ;rialstaffandorganizationalstructurework- ;ingsteadilyandsoundlyinordertoguaran

    ;teeproductionandoperationinasteady ;runningcondition.

    ;

    ;Inaccordancewithlocalizationpnncl

    ;pies,itisclarifiedintheacquisitionagree

    ;mentthatallthestaffshallremainun

    ;changedinordertoreleaseAdisseoem

    ;ployeesfromworriesaboutfuture.Priority ;hasbeengiventobudgetmanagement, ;BehindNews

    ;whichfullyarousesenthusiasmofexisting ;managerialstaffandsetstheproperbusi

    ;nesstargettoensureincomefrominvestors. ;Bluestargainedstrengthofthegroupin ;methionineproductionaccordingly.This ;acquisitionofAdisseobyBluestaraimsto ;meetincreasingdemandformethioninein ;thedomesticfeedmarket.Greatercoopera

    ;tionwillbeachievedintheintegrationof ;ChinaBluestarandAdisseo.

    ;AnalysisreportonmethioninemarketinChinain2007and

    ;prospectin2008

    ;2007-alandmarkyearIntheme-

    ;thionlnemarketofChina

    ;Themarketpriceofmcthioninehas ;hitanewrecordhigh,nearlyonetime ;higherthanthatof2006.Thepressureison

    mixfeedenterprisesinChina_ ;forpre

    ;Fast-growingdemandforpoultryfeedre-- ;suitedinarapidincreaseofmethioninede

    ;mandinthemarketofChinaallthroughthe ;year.Totalmethioninedemandwasaround ;49.OO

    ;47.o0

    ;45.cH0

    ;43.o0

    ;41.00

    ;39.0O

    ;37.00

    ;35.0O

    ;33.oo

    ;31.00

    ;29.OO

    ;27.OO

    ;25.00

    ;

    ;18%.Suddenandsharprisesofcrudeoil ;pricesintheglobalmarketcausedajump ;ofmethioninerawmaterialprice. ;Accordingtocustomsstatisticsof(sol

    ;id)methioninein2007,Chinahasimported

    ;about80,610tonsofsolidmethioninein ;thefirst10monthsof2007.

    ;ReviewandAnalysIsofMarket

    ;Trendin2007

    ;Week133:betweenJanuaryandthe

    113263952 ;

    ;Week

    ;WeeklyChartonAveragePriceTrendofMethionineMarket

    ;inChinain2007

    ;100,000tonsinChinain2006(including ;solidandliquidmethionineandcalcium ;salt).In2007,thetotalmethioninedemand ;wasestimatedbetween115,000and ;118,000tonsinChina,allincreaseof15% ;firsthalfofAugustof2007,therewereno ;greatchangesinthesupplyanddemandin ;themethioninemarketinChina.

    ;Week3443:SincemidAugust,

    ;sho~agesinthesupplyofmethioninefrom ;Adisseo.Paralleltothis,therewasanobvi- ;ousincreaseindemandforpoultryfeed ;methionineinthedomesticmarket.Degus

    ;saCompanyhasadjustedtheirsalesstrate

    ;gieswiththeintentionofcontrollingthe ;marketsupply.Allthesefinallyresultedin ;thelackofmethioninesupplyinthemarket ;andasharppriceriseaswel1.

    ;Week44??47:somesuppliershaveal-- ;readyfulfilledthesalestasksoftheyeara

    ;headofscheduleinNovember.Inthewake ;ofsuddenandsharppricerisesofcrudeoil, ;somesuppliers,suchasNovusreduced ;supplyofmethioninetoagreatextent.And ;Adisseoplayeditsoldtrickonceagain.The ;priceofrawmaterialsrosesuddenlyand ;sharplyinNovember.Salesincreased ;tremendouslyinthedomesticfeedmarket ;inNovember,whichoverdrewhalfsaleof ;December.Inthisbackground,domestic ;methioninemarketexperiencedanother ;pricerise.

    ;Week48tillnow:fromtheendof

    ;NovembertothebeginningofDecember, ;severalmainsuppliersweremuchmorere

    ;luctanttoreleasegoodsbecausetheywere ;unwillingtoincreasesalesfornextyear. ;AnditwaspeaktimewhensuppliersinEu- ;ropeplacedquarterlyorders.TheChina ;marketwaslackinginsuppliesonceagain ;andpricewentuprapidly.However,dueto ;theoveralldecreaseoftheanimalandpoul

    ;FrenchworkersonstrikecausedserioustryfeedsalesinDecemberinthemarketof

    ;wwW.Chinafeedindustry.corn1Feb20081CHINAFEEDINDUSTRY117

    ;0J\?

    ;China,inadditiontoexpectationoflarge ;goodsreleaseinJanuary,pricerisesinthis ;roundwaslimitedtosomeextent.Pricerc

    ;coverywasseeninthemidandlateofDe

    ;cember.

    ;InterpretafionofSalesStrategyof ;MethionineSuppliersin2007

    ;Degussa

    ;DegussachangeditsRegionalPresi

    ;dentoftheGreaterChinamarketandmade ;obviousadjustmentstoitssalesstrategy. ;Priorityhasbeengiventoendusersin ;termsofsupplyandprice.Moreattention ;hasbeenpaidtoendusersinsteadofdeal

    ;ers.Duetobigchangesinthemarketinthe ;secondhalfoftheyear,directendusersen

    ;joyedquitealotbenefits.Pricerisehas ;beenrealizedbycontrollingthereleaseof ;goodsandpromotinglackofgoodssupply ;insteadofdirectraisingprice.Though ;dealersgotfewergoodsthanbefore,they ;obtainedabetterprofit.Thestrategiesof ;Degussaisworkableandeffective.andwill ;havefarreachingimpactonthemethionine ;marketOfChinainthefuture.

    ;Adisseo

    ;ChinaBluestaracquiredAdisseoin ;2006.Unsettledissuesledtoalongplaying

    ;nationwidestrikeinFrancein2007.Adis

    ;seousedthisasanexcusetoprolongsup

    ;plytotheChinamarket,whichbecamethe ;causeofmethioninepriceriseinChinain ;2007.

    ;Novus

;Novuslaidmarketingemphasison

    ;calciumsaltinsteadofliquidmethioninein ;2007;Becauseothercompaniescanpro

    ;ducemethioninebythemselves,thesudden ;andsharpriseofcrudeoilpricedidnotre

    ;suitinpricejumpoftheirmethionineprice. ;Novushastooutsourcechemica1interme

    ;diate,soNovushadsetahigherpricethan ;thatofothercompaniesduetoahighercost ;ofliquidmethionineandcalciumsalt. ;ProspectofMethionineMarket

    ;inChinain2008

    ;Thepricetrendofmethionineinthe ;Chinamarketmainlyrestswiththe ;followingaspectsin2008.

    ;Salesstrategiesofmajorsuppliers ;haveagreateffectonthemarket,especially ;Adisseo’s”playingstrikctrickaspotluck”

    ;andDegussa’s”prioritytoendusers”.

    ;Price~endsofglobalcrudeoilin

    ;2008andcrudeoilpricesin2007thatrose ;to$100aba~elbroughtalongpricerisesof ;manydownstreamproductsofcrudeoilin ;theglobalmarket.Chemicalintermediate, ;oneofcrudeoildownstreamproductsisthe ;mainrawmaterialformethionineproduc

    ;tion.

    ;Demandconditionofmethioninein ;Chinain2008.Atpresent.methionineis ;mainlyusedinpoultryfeed.Theamountof ;MagazineViewpoint

    ;poultryonhandanddemandincreased ;greatlyin2007.PoultryfeedsalesofNew ;HopeGroupandLiuheGroupin2007

    ;doubledcomparedwimmatof2006.Me. ;thioninedemandincreasedrapidlyinthe ;marketofChina,whileeggpriceinitiated ;tolingerarounda1owerlevelinthefourth ;quarter.Manyenterpriseswashedout ;egglayingchickenaheadofaschedulein ;December,salesofbabYchicksofthe ;breedchickenfarmwereonthedecline. ;Somepeopleforecastthattheamountof ;egglayingchickenswilltendtodecreasein

    ;thefirstquarterof2008.Anditisnotrather ;optimisticformeatchickensales.Accord

    ;ingtotheviewofchinafeedonline.com,if ;nobigepidemicsituationhappens,salesof ;poultrywillbestillongrowingtrendin2008. ;Progressonsettingupnewfactory

    ;byAdisseoinChina.ItissaidthatAdis- ;seohaschosenseveralsitesinChina.How. ;everprogressissluggish.Itseemslesspos- ;sibleforafactorytobeuprtmingin2008. ;However,theoperationofthenewfactory, ;oncestartedwillhaveafar-reachingimpact ;onmethioninemarketinChina.

    ;Fortheabovereasons,methionine

    ;priceinthemarketofChinawillvarybe- ;tween30and50yuanperkgin2008.Ac

    ;curateestimationcanonlybemadeincon- ;siderationoftheabovefouraspects. ;AcquisitionofAdisseobyChinaBluestarisawin-winact

    ;InChinaBluestar’sownwords,acqui—

     ;sitionofAdisseoisa1andmarktransna

    ;tionalacquisition.InSinoFrencheconomy

    ;andtradeexchange,thebiggestinvestment ;inFrance.exceedingtota1investmentsin ;theyearsbefore.Thissetsarecordofover- ;seasacquisitionintheshortesttimef6 ;months,byChineseenterpriseandfillstbe ;spaceinthemethionineproductiontech

    ;nologyofChina.

    ;ThePrincirIalofChinaBluestarex

    ;pressesthattheacquisitionofAdisseoisa ;necessarysteptakencateringtothenation

    ;a1economicdevelopmentofChina.This ;18lCHINAFEEDINDUSTRYlFeb20081wvvvv.Chinafeedindustry.com

    ;acquisitioncnablesChinaBluestartohave ;productiontechnology,device,R&Dteam, ;andglobalsalesnetworkrelatedtomethio

    ;nine.ChinaBluestarstridesforwardtobe- ;comethesecondbiggestproducerofme?

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