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Cabot forms joint venture for fumed silica in China

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Members from Cabot Corp. and Inner Mongolia Hengyecheng Silicone sign agreements to build a joint venture in China.

WUHAI, China—Cabot Corp. is expanding its capability for fumed silica in Asia.

The firm has signed a joint venture agreement with Inner Mongolia Hengyecheng Silicone Co. Ltd. to form a joint venture and build a manufacturing plant in Wuhai. Once operational, the facility will be Cabot's second in China and third in Asia, also operating a facility in India.

The firms signed the agreement on Sept. 12. Cabot said in a news release that it will hold 80 percent of the venture, and HYC will own the remaining 20 percent. It will be Cabot's seventh global facility, also operating two in North America and two in Europe.

“This is part of our core strategy to basically extend our leadership positions in the businesses of performance materials,” said Nick Cross, executive vice president and president of the firm's Performance Chemicals Segment.

“We've had a strong position in fumed silica globally for a number of years, and in fact we have a leadership position in the market in China. I would say while the market has been a bit slower, consistent with what a lot of people have seen driven by lower GDP in China, it remains one of the most material. If you look at the expectation around growth rates and the overall size of the market, we felt extending our position there with this investment is consistent with the growth and demand we expect in the next several years.”

The joint venture—named Cabot HengYeCheng Performance Materials (Inner-Mongolia) Company Ltd.—will invest about $60 million in the plant, which will have the capacity of 8,000 metric tons of fumed silica per year. Once the venture obtains the necessary governmental and regulatory approvals, Cabot said construction is projected to begin in early 2017 and is scheduled for completion in 2019.

The venture's leadership structure and employment level will be sorted out in the coming months, Cross said. The site will have a roughly 860,000-sq.-ft. facility, co-located at the same site as HYC's silicone plant.

The firm is targeting a wide range of industries with its fumed silica, including adhesives, composites and advanced industries such as batteries.

“There are a huge number of established applications, and by far the biggest is silicone rubbers,” Cross said. “But we're constantly seeing new opportunities for developing new products into new applications.”

Cabot said the project will allow it to meet growing demand for its high-quality, high-performance fumed silica. According to Cabot's website, its fumed silica is used in a variety of applications—including adhesives, coatings, food, greases, pharmaceuticals, silicone rubbers and silicone sealants.

“We are pleased to partner with an industry leader and innovator such as Cabot to build this state-of-the-art fumed silica plant,” Wang Yongquan, chairman of Zhejiang Zhongcheng Holding Group Co. Ltd., parent company of HYC, said in a statement. “Not only will we have access to Cabot's silica for use in our silicone compounding operation, but we also will be able expand production efficiencies through the utilization of a closed loop system.”

Cross said the joint venture is consistent with both company's growth objectives, adding that HYC brings a number of things that are important to the local market. The firm started operating in silicones about 10 years ago and, according to Cross, has become one of the leaders among the Chinese producers.

“We're always looking for strong partners. They've got a strong track record of growth,” Cross said. “Their business is across construction, energy and now silicones. The group has a strong reputation. We found very strong reputation of the management, and they've quickly established themselves as a strong silicones player.”

Cabot's latest joint venture comes on the heels of an investment in a new technical center to be co-located with its regional headquarters in Shanghai. Its application innovation laboratory will serve as the Asia technology center with labs supporting all businesses in the region, including activated carbon, rubber and specialty carbons, fumed metal oxides, masterbatch and compounds, and inkjet colorants.

The firm said the new center will be pivotal to its global operations. It will feature analytical and application testing equipment and initially employ more than 30 researchers and scientists. The lab will be designed with a product showroom.

“We're committed to both support the growth of this business through research and development activities in the U.S., but in order to grow the way we want to grow and support customers, we're building up capability in Asia as well,” Cross said. “This technology center is an important part of our growth agenda.”

Headquartered in Boston, Cabot is a global specialty chemicals and performance materials company that provides rubber and specialty carbons, activated carbon, inkjet colorants, cesium formate drilling fluids, fumed silica and aerogel.