Interview with Christian Kohlpaintner: Head of the world’s largest chemical trader Brenntag warns: “Rapid price cuts are an illusion”

He has never experienced a situation like this in 30 years in chemistry, says the CEO of the company that was promoted to the Dax in September. Nevertheless, he does not believe that the supply chains will now move back from Asia to Europe after the Corona experience. Kohlpaintner wants to consolidate Brenntag’s global market leadership with a new strategy.

Read the full interview here:

Mr. Kohlpaintner, Brenntag was promoted to the Dax 40 in September. What has changed for the company since then?
We feel a significantly increased attention and awareness. People talk more about Brenntag, and this also makes us more attractive to talented applicants who didn’t know us well before, for example. The promotion to the Dax is a nice recognition that we are happy about. But the greatest achievement in 2021 is fundamentally different.

Which was that?
As the world’s largest chemicals trader, we are at the center of the global chemical supply chains, which came under massive pressure during the pandemic and were at times very fragile. The fact that we were still able to supply the customers was hard work and sheer stress for our employees. For example, we will reward this with two additional vacation days in 2022 for all of our 17,000 Brenntag employees worldwide.

How do you experience the current bottlenecks?
It is a real shock for many customers. They are used to predictable and reliably predictable product availability. Nowadays, the daily conversation with customers is almost all about when and what quantities of the products will be available again or where you can still get them. I have never experienced a situation like this in my 30 years in the chemical industry.

Everyone is hoping for some relaxation soon. Can you give the all-clear yet?
In spring we assumed normalization by summer, which then did not occur. The loads and faults were significantly lower than expected. We are currently assuming that the bottlenecks will continue well into 2022. Specifically: The situation should gradually improve in the second quarter and then normalize further in the second half of the year.

And until then will the prices of chemicals continue to rise?
One cannot speak of relaxation here yet. At least we see a stabilization of prices at a high level. It would be an illusion to believe in rapid price cuts. That will only happen when there is more supply on the market and the bottlenecks in logistics dissolve.

Weren’t you surprised that a couple of weeks of lockdown can shake the global fabric of chemistry?
It came together a lot more. The blockade in the Suez Canal, for example, but above all the consequences of the ice storms in Texas in the winter of 2021, many are not aware of: More than 75 percent of the American petrochemical capacity there had to be shut down abruptly. It takes months to make up for such failures, and that runs through the entire chemical value chain. As a result, numerous manufacturers were unable to build up any urgently needed stocks.

Now there are the extremely increased energy costs.
This affects parts of chemistry in two ways. For example, natural gas is required both as an energy carrier and as a raw material for ammonia production. The producers are often contractually unable to pass the prices on to the customers as quickly as it would be necessary. Because they are shutting down production for this reason, we are currently experiencing a shortage of secondary products such as fertilizers or urea and, as a result, also a reduced availability of the diesel fuel additive “Adblue”. However, we expect the situation here to gradually ease.

Are you currently able to fall back on sufficient logistics capacities?
It is very different. In China, the situation is gradually returning to normal, even if the ports are still partially overloaded and container capacity is sometimes snatched from under the nose because someone else wants to pay $ 1,000 more. It is different in Europe. The ports in Antwerp and Rotterdam, for example, are congested. In addition, cranes with technical problems often fail there. The entire transport line along the Rhine from the Netherlands via Germany to Italy is still under great pressure. In addition, there is a shortage of truck drivers in many countries around the world, especially in the USA.

So the logistics will also remain expensive for the foreseeable future?
We have not yet experienced any of the problems mentioned in this dimension. It is not at all foreseeable that freight rates will fall.

During the pandemic it became clear how dependent we are on deliveries from Asia. Now regionalization or renationalization of the supply chains is required. Is she coming?
I think that’s an illusion. The manufacture of many intermediate products in chemicals and pharmaceuticals emigrated to China and India more than 25 years ago and will not return to Europe. The point is different: companies have to build supply chains that are stable even under difficult conditions. Instead of “just in time” we need “just in case” – in other words, sufficient alternatives in the event of a problem.

Does that mean globalization will continue?
I am deeply convinced of that. History teaches us that the division of labor leads to great advances in productivity, even on a global scale. It is the source of our prosperity. And one can also say: Despite all the problems in the supply chains, the global system by and large worked quite well even during the pandemic.

How is Brenntag itself coping with the bottlenecks?
It’s a challenging situation because availability and prices change daily. We have to constantly reorient ourselves as to the supply chains from which we can obtain products for our customers. But we can handle that well because we are present in 77 countries and are therefore very global.

You started at Brenntag at the beginning of 2020 to reposition the company and change its culture. Has the pandemic slowed you down?
No, we didn’t let that stop us. It was always clear that we shouldn’t lose sight of the long-term view. With the new design of our business structure, we can respond to the needs of our various customer groups in a much more targeted manner. Our Brenntag employees used to sell industrial chemicals in the morning and specialties with a high level of technical support in the afternoon. We are now doing better with the new line-up, our customers tell us too.

Brenntag is known for its takeover course; between 200 and 250 million euros flowed into acquisitions every year. Do you continue like this?
In fact, we have already spent more than 400 million euros on acquisitions this year. We are continuing to pursue the course because our industry is still very fragmented. But the focus has changed: We are focusing on growth regions such as Asia, product markets with above-average growth rates such as food additives, and the takeover target must make a clearly recognizable profit contribution to the company as a whole.

Do you aim to remain the global number one?
For me, world market leadership doesn’t just mean size. We want to lead our industry in all dimensions and at the same time be the most attractive employer.

Mr. Kohlpaintner, thank you very much for the interview.

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