Future challenges and scenarios
We constantly monitor the environment and trends to keep our strategic focus up-to-date. The chemical industry’s market environment is in the transition phase towards Chemistry 4.0.
We constantly monitor the environment and trends to keep our strategic focus up-to-date. The chemical industry’s market environment is in the transition phase towards Chemistry 4.0. Factors that have so far been its main growth drivers, such as globalisation, specialisation and focus on core business, have already seen their peak.
With Chemistry 4.0, it is digitalisation and circular economy that will play a key role in the industry’s transformation. Future opportunities will stem from the uptake of electric mobility, drive towards material-efficient construction, growing expectations for the properties of plastics, as well as development of bioplastics and greener polysaccharide-based polymers to replace traditional plastics and other environmentally harmful materials.
The technological advances and digitalisation are accompanied by the growing importance of cybersecurity and the need to explore new sales and customer interaction channels. The market is becoming more demanding with respect to customer service methods. Growing in prominence are precision agriculture and smart specialty fertilizers. The progress in agro-sector technologies is changing farmers’ preferences, entailing the need to tailor products to specific crops. Demand for resource efficiency and environmental protection is on the rise.
Crop-specific fertilizers could be introduced, e.g. for maize or wheat.
Some farmers fertilize their crops by heart. Soil samples could be tested to apply best suited fertilizers.
The company could survey farmers to determine their fertilizer needs, and then market products satisfying those needs and provide relevant advice.Dialogue session
In each area of our business, we intend to produce more specialty substances, customised for specific groups of users. With our expertise and experience in the agricultural sector, we can consider offering crop-specific fertilizers, and even ones formulated specifically for individual farm fields.
We will be developing our specialisation in plastics as well. We have been ramping up production of high-margin specialty plastics used in the manufacture of food packaging. Polish engineers are at the forefront of Europe’s innovation in such technologies.
At the same time, we do not forget about the traditional production profiles of our chemical plants, seeking to accommodate the country’s continued strong demand for such products as nitrogen and compound fertilizers. It is our responsibility to ensure the uninterrupted availability of commodity chemicals to agriculture and other industries.
Developing cooperation and innovation potential
We aim to forge and develop lasting, regular cooperative links between the chemical industry and scientific or academic institutions specialising in related fields. We believe such links would allow the entire chemical industry in Poland to quickly and effectively respond to the needs of customers. We support areas where such cooperation is already a fact, the plastics segment being a case in point.
What innovation means to us, how to raise funds for innovation and what our priorities are – these were the topics discussed by Lech Schimmelpfennig, Chief Technology and Product Development Specialist, during the presentation entitled ‘Financing programmes for science and business on the example of projects run by the National Centre for Research and Development’, delivered at the ‘Innovation Days’ event organised in the Puławy Science and Technology Park.
Developing business potential
In order to diversify its revenue sources and become less dependent on business cycles in agriculture, the Grupa Azoty Group will step up its efforts to expand non-fertilizer business lines.
The key directions of business expansion will be in petrochemicals and plastics.
In Police, we have launched one of contemporary Poland’s largest chemical projects to produce polypropylene, which is perceived by many experts as the most forward-looking chemical. Apart from the production unit itself, the ‘Polimery Police’ project will involve the development of a port with a base of feedstock tanks, as well as auxiliary and logistic infrastructure. More information on the project can be accessed here.
Rapid, politically induced changes in foreign exchange rates cause increased uncertainty. Fluctuating costs of raw materials (such as crude oil and natural gas) have an impact on derivative products used by the Group as production inputs (propylene, benzene, phenol), as do changes in coal and electricity prices.
A HANDFUL OF NOTEWORTHY FACTS:
We are among the largest consumers of raw materials in Central and Eastern Europe. Natural gas, used to produce nitrogen fertilizers and ammonia, accounts for about 30% of our costs of all raw materials.
We strive to ensure security of supplies of our strategic raw materials. We want to be certain that the continuity of our manufacturing processes is maintained, and that our capacities are fully utilised. We diversify our sources of raw materials, looking for new and alternative suppliers. Forming equity links with some of them is also an option.
By integrating our procurement function, we have minimised the cost of procuring supplies.
In 2018, we signed an agreement for phosphate rock imports from Morocco. The raw material, bought from Office Chérifien des Phosphates (OCP) for approximately PLN 350m, will be supplied to the Police plants over three years, which will cover the company's needs until the end of 2020.
African phosphate rock from OCP is of high quality, ensuring maintenance of proper technological regime during fertilizer production at the Police plants. Grupa Azoty Police will also purchase phosphate rock from Algeria and low-cadmium phosphate rock from Senegal. The latter will be used in the manufacture of fertilizers for customers who require low cadmium content. Thus, the company's requirement for phosphate rock (ca. one million tonnes per year) was secured.
OCP is a global leader in phosphate rock sales, exporting about 8 million tonnes of phosphate rock a year (approximately 30% of global trade) and its revenue in 2017 was close to USD 5bn.
Where our raw materials are sourced:
Changes in the regulatory framework require that we bring our production in line with international regulations, especially those enacted at the EU level, including environmental standards, REACH, standards for the permissible contents of heavy metals in fertilizers (notably the content of cadmium in phosphates), as well as production and usage of glyphosate.
With climate change recognised as a global phenomenon, Grupa Azoty needs to keep in compliance with changing regulations, related mainly to CO2 emission allowances.
In order to reduce the impact of greenhouse gas emissions at Grupa Azoty, the energy intensity of processes has been consistently reduced for a number of years, resulting in lower atmospheric emissions of greenhouse gases. In addition, the company has deployed a system for monitoring and reporting CO2 emissions.
At Grupa Azoty Kędzierzyn, the baskets in oxidisers at nitric acid units were modernised to bring down greenhouse gas emissions. In addition, fresh catalyst was added, which increased contact surface and effectiveness of nitrogen oxide reduction.
In 2018, Grupa Azoty Kędzierzyn’s requirement for emission allowances exceeded the free allocation. However, given the company’s environmental protection projects (construction of a new CHP plant), it additionally received another tranche of free allowances. 4.5% of its actual verified emissions for 2018 were settled with cheaper CER units. The balance of allowances were purchased on the market in spot and forward transactions in accordance with the Group’s common CO2 Emission Allowance Trading Policy followed by its main companies. The main objective of the policy is to spread the price risk over time, with plans to purchase emission allowances made yearly for the next three years.
Grupa Azoty Puławy reduced its GHG emissions thanks to completion of the following projects in 2018:
- Installation of the expansion turbine unit and an electricity generator on the natural gas stream for ammonia unit II,
- Upgrade of the circulation water network in the ammonia department,
- Replacement of transformers, upgrade of emergency lighting and switchgear.
Another practice designed to cut greenhouse gas emissions, carried out on a continuous basis, involves the use of high-efficiency catalysts to reduce NOx emissions (N2O) from the nitric acid unit and to increase energy efficiency. The company is working on reducing its consumption of natural gas (production and energy efficiency improvements) and energy carriers (energy efficiency improvements), especially of high-pressure heating steam and process steam.
Grupa Azoty Police’s situation with regard to greenhouse gas emissions has largely stabilised. In the second trading period (2013–2020), the European Emissions Trading Scheme covers five of the company's installations. Every year, the balance of the required allowances are purchased by the company on the secondary market.
The ongoing transformation of the global plastics market has sparked mounting price pressures. A competitive advantage is increasingly a matter of possessing capacities to manufacture specialty plastic and chemical products. Producers in developing and resource-rich countries are expanding their product ranges to include specialty categories. The world’s fertilizer production capacities are growing, as is a global overhang in the supply of caprolactam and polyamide. The competitive struggle between PA6 manufacturers is intensifying.
In Poland, challenges are posed by the grey market – illegal imports and sales of counterfeit products – coupled with a growing pressure from imported fertilizers.
Against this background, both investors and analysts are paying increasingly more attention to environmental, social and governance (ESG) aspects.