Flexibility is the name of the game when it comes to operating in the commodity materials marketplace. As feedstock material prices rise, a company needs to be able to adjust and change its manufacturing capacity to markets where margins are more predictable and profitable. Some commodity manufacturing sectors can make this change more easily than others, but when they do, they will be more able to capitalize on the changing dynamics that commodity oriented markets bring.
China Clean Energy Corp., a specialty chemicals manufacturer, works to manufacture and market specialty chemicals from sustainable waste feedstock sources. The company is currently manufacturing high performance hot-melt adhesives while maintaining capabilities to manufacture bio-diesel.
The company operates on a commodity pricing basis. Its primary specialty chemical feedstock is waste palm-oil, imported from Malaysia and the Philippines, which is highly susceptible to swings in commodity prices. In the past, through its wholly owned subsidiaries Fujian Zhongde Co. Ltd. and Fujian Zhongde Energy Co., the company focused on bio-diesel as its main product offering. Imported feedstock pricing and government price controls, however, made this operation cost prohibitive and was suspended in favor of hot-melt adhesives (hot-melt adhesive, in a simple example, is one way to glue two pieces of consumer grade plastic or other materials together). The move to manufacturing hot-melt adhesives, as it turns out, was a fortuitous one as these materials are almost entirely imported into China. As a result, the company is having solid successes with expectation of increased revenues as full capacity is reached in early 2009.
Perhaps the strongest advantage that the company brings to the specialty chemicals business is its versatility and flexibility with regard to product mix. The specialty chemicals business is dominated by very large chemical companies, where specialty chemicals are not necessarily a large portion of their product mix. China Clean Energy, past having access to a relatively captive and large market, is focused on a defined specialty chemicals product mix. This enables it to service its customers in a more China centric way with products that meet needs more closely.
The ability of the company to easily shift between bio-diesel and hot-melt adhesives also makes it more flexible to the whims of the commodities pricing marketplace. In a domestic marketplace that has yet to fully understand the benefits of hot-melt adhesive in the consumer marketplace, China Clean Energy is ready to pounce on opportunities that may have been overlooked.
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