What was behind the decision to move Integra’s headquarters from Europe to Singapore back in 2003?
We began to observe changes in Asia 35 years ago when Japan and Taiwan were already operating steam crackers and Korea was developing its petrochemical industry - a key indicator of economic growth and development. We arranged the first shipment of ethylene from Europe to Korea, a pioneering move at the time, and also delivered the first ethylene and propylene shipments from Europe to India. The trend was for new Asian companies to start with products like pipes or coatings and gradually move toward producing their feedstock, buying intermediates, and eventually more significant investments into steam crackers, to provide a wide range of petrochemical feedstocks. This was a new and developing region that we needed to be immersed in, rather than just continue to have regional offices in Beijing, Seoul and New Delhi
We chose Singapore for our global headquarters because of its highly educated population, English as the primary language, strict rule of law, well regarded arbitration process, anticorruption position, excellent international connections through Changi Airport, and reliable telecommunications infrastructure, even 25 years ago. Singapore also offers a welcoming environment for foreigners and high-quality international schooling, which is important for international staffing Our plans were supported and assisted by the Economic Development Board (EDB) and International Enterprise Singapore (IE Singapore).
With Western banks prioritizing ‘fully green’ projects, how do you make the case for investment in the petrochemicals industry?
We have been able to justify the very obvious environmental case for new ships, however, obtaining support from mainstream banks in Europe for petrochemical and ship building projects is increasingly difficult due to shareholder expectations, and ESG regulations.
Given the average lifespan of a ship, what considerations do you take into account when you're either building or buying new ships?
Obviously, carbon emissions come from ships carrying products from one side of the world to the other. Recently, because of issues with the Panama Canal and the Red Sea disturbances, it’s gotten worse, with products being carried even further in many cases. An awful lot of materials move by ship so we can't cut just that off in 2030 and suddenly move everything by rail or produce everything locally - that's just not practical or realistic. We have to make changes seriously and with intent. To meet the newest regulations one of the possibilities is sailing slower so consuming less fuel, but this extends the length of the voyage, resulting in more ships being needed to carry the products which has an enormous impact, making the situation on emissions potentially worse rather than better.
Adaptations to ship design, following more closely weather patterns and of course finding alternative fuels are at the front of the industry’s mind at the moment. Terminals easing congestion so that ships spend less time stuck in ports burning fuel while waiting, should be an industry priority also since it is not only about the sailing time, but also excessive waiting time in ports
The industry is facing an aging fleet, where many ships are reaching their 25 year limit in the international markets and some ships trading in more localized markets such as the USA with the Jones Act are closer to 40 years old.
New ships need to be built and alternative fuel sources used., but there is still a lot of debate and little consensus on what fuels are most appropriate. LNG, LPG, methanol, and ammonia are contenders but there’s a limit to the amount of ammonia available commercially currently that is not being used for fertilizer production.
Methanol is another solution, but we need to take a cradle-to-the-grave approach to these fuels. Will there be enough green methanol? That's an expensive option at the moment. Coal to methanol is an alternative but hardly a solution to decarbonization of the supply chain.
So far there is no agreed or obvious single solution so new ships are often being equipped to run on various alternative fuels, which of course costs more to build.
You have described 2023 as a year of consolidation and strategic review. What do you expect to see next?
We are beginning to see a settling and realization of market oversupply and energy costs, along with some domiciliation or re-onshoring. There is a wide range across our industry in financial performance with some company results for 2023 being shockingly good and some shockingly bad. As a company Integra is looking to improve our supply chain, trying to minimize the transportation and find more local alternatives on a global basis and see how new EU and IMO rules affect us and our customers. How can we diversify our supply chain to include products both nearby and distant for better flexibility to our customers?
Often the preference is for the cheapest product solution, driven by businesses and their need to satisfy their customers who are unwilling to accept higher prices. This can result in a longer transport chain and higher emissions even with new regulations. Companies run the risk of having short memories; forgetting that relying on long distance supply chains, even if sometimes apparently cheaper, runs the risk of unintended long-term consequences. This striving for short term gains driven by quarterly financial result reporting in a highly competitive global market comes at a possible unanticipated cost. However, we have to hope that with increased awareness, businesses will adopt safer, blended supply chains resulting in more sustainable practices. The key is spreading this message and encouraging a shift in mindset, and being able to provide alternatives.
As we move towards localization and deglobalization, what will happen in the next three to five years?
The trend towards localization and deglobalization is shaping different strategies across regions. China is focusing on self-sufficiency and higher-value projects, while Korea and Southeast Asia are undergoing economic transformations. The Middle East emerges as a strategic location for its potential in petrochemicals and as a middle ground amidst European regulatory pressures. Concerns about Europe's competitiveness and the impact of global trade policies underline the complexities of this shift. The U.S. is leveraging its position in North America to strengthen regional supply chains, highlighting a diverse global landscape that requires nuanced approaches to navigate effectively.
