Alzchem: Why the chemical company needs more green electricity

Created: 05/24/2022, 15:39

By: Matthew Schneider

The Alzchem plant near Trostberg used to be powered by the adjacent Alz Canal.

© Michael Namberger/Berg12.de

The chemical company Alzchem is in a good position – only the high electricity costs are a concern for the traditional company.

This allows the competition from the Far East to offer much cheaper products.

Trostberg – The origins of modern agriculture lie in the Bavarian chemical triangle, on the banks of the Alz river: in 1908, the Polish chemist Nikodem Caro founded the Bavarian nitrogen works AG here.

The aim was to use the method developed by Caro for the large-scale production of calcium cyanamide commercially.

It was the first process that made nitrogen from the air available for arable crops - and thus made it possible to increase yields enormously.

The decisive factor for the success of the Bavarian artificial fertilizer was the inexpensive hydroelectric power from the Alz.

To date, the needs of the group, which is now called the Alzchem Group, have hardly changed, as Managing Director Andreas Niedermaier explains: "All we need for our production at the beginning is lime, coal and energy." Alzchem, which was called SKW Trostberg between 1978 and 2006, developed a wide range of specialty chemical products for various future markets.

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“Our original calcium cyanamide fertilizer is still sold under the Perlka name.

Based on this, however, we developed the drug Dormex.” This chemical simulates the beginning of spring for plants.

"This means that plants in warm areas like California do not produce mediocre yields throughout the year, but have a concentrated harvest time, as in Central Europe," explains Niedermaier.

In this way, the yields could be increased considerably.

"There are more and more people in the world who need to be fed, but only limited areas," says the Alzchem boss, explaining the potential.

Alzchem also produces nutrients for mammals from the raw material for plant fertilizers.

The most important is creatine, which is used by muscles as an energy source: "With Creamino, we are one of the few manufacturers of creatine metabolism as a feed supplement for chickens and pigs," says Niedermaier.

The addition would make the meat firmer "and you save about two to three percent of feed," says Niedermaier.

Because it also promotes muscle growth in humans, Alzchem successfully sells creatine to sports nutrition manufacturers under the Creapure name.

Alzchem boss Niedermaier also wants to appeal to less developed target groups: "Both older people and vegetarians need more creatine to maintain their muscle mass or to build it up again," explains Niedermaier.

Both are growing populations.

Customers are therefore now also many developers of meat substitute products: "Because you can't replace a steak with a pure wheat patty in terms of nutritional value," says Niedermayer.

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The Trostbergers are also hoping for stricter climate protection guidelines: "The gas methane is up to 25 times more climate-active than CO2," explains Niedermaier.

The Eminex granulate is designed to prevent emissions almost entirely.

Economically, the product has so far not had any great added value for farmers.

But: "We firmly expect that there will be a price for methane from liquid manure storage at some point, just like for CO2." The target group would then be those farmers for whom a biogas plant for methane skimming is not worthwhile: "If you take a similar price for methane as for CO2, avoiding it with Eminex is cheaper,” says Niedermaier. 

Alzchem: Production is proving to be relatively crisis-proof

In addition to these growth markets, Alzchem also serves large customers such as pharmaceutical manufacturers, steel smelters and the automotive industry.

With this mix, the group has grown around five percent each year in the recent past, and the profit before interest, taxes, depreciation and amortization was even eight percent.

If things are going well in the growth markets, there should be more in the future.

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Thanks to the simple mix of raw materials, production is relatively crisis-proof: "The lime comes from the region, coal is delivered by ship and block train from all over the world," says Niedermaier.

There is even further potential for differentiation here: "We could also use other raw materials, such as high-quality plastic or leftovers from the carbon fiber industry," says the managing director, "the main thing is that it contains carbon".

Alzchem: Traditional companies are worried about electricity costs

The electricity factor is more critical.

Because while Alzchem is relatively safe from price fluctuations when buying raw materials, it now has to procure electricity on the European stock exchanges like all other companies.

And there, "today, the gas-fired power plants determine the overall price of the electricity mix using the merit-order principle," says Niedermaier.

And natural gas prices have literally exploded as a result of the corona pandemic.

"As a result, the electricity that we could otherwise buy for around four cents per kilowatt hour now costs a good 20 cents," explains Niedermaier.

Normally, these costs would be ruinous.

Alzchem: Disrupted supply chains play chemical companies into the cards

But the pandemic has not only driven up prices, it has also undermined globalization: "Because the logistics chains are messed up and we are able to deliver, we can pass the prices on to our customers," says Niedermaier.

As a result, the group is in a solid position and was even able to increase its dividend.

It will be problematic when the supply chains are running again, says Andreas Niedermaier: "Then we have to have a competitive industrial electricity price again in Germany, because otherwise we have no chance against products from abroad, especially China, in terms of costs," explains Niedermaier.

This sword of Damocles hangs over most of German industry.

Nevertheless, the Alzchem boss is optimistic: "The political will to switch the energy supply from oil, gas and coal to green electricity is there.

And we have an advantage: Our production already runs 100 percent on electricity, we no longer have to convert."