In an interview with Swedish news agency Direkt, Nexam‘s CEO Per Palmqvist Morin stated that today’s contract with BASF regarding the commercialization of Nylon 66 and Nexam’s crosslinkers could be worth several billion SEK sometime in the future, with gross margins around 50%.
“If we assume that BASF is using our crosslinker in all of their Nylon 66 plastics, which is possible in theory, we can start by stating that they have 10-15% of the market with 1,5m tons a year. If we then assume an additive content of 1% as an example and that we will penetrate 10% of the Nylon 66 market, our share will amount to 1% times 150.000 ton, which mean 1.500 ton or 1.500.000 kg additive. We charge around SEK 2000 per kg at the moment, so this implies revenues of SEK 3bn, but prices will fall over time. ”
Mr Palmqvist Morin also highlights that this a hypothetical calculation and should not bee seen as a guidance. The additive content varies a lot among different types of plastics products, ranging from 0.5 up to several percent. Being asked whether it is realistic to assume a penetration of 10%, Mr Palmqvist Morin says “probably not” by within certain specialties areas and in 10 years time absolutely. He also states that Nexam is working with other players on different kinds of nylons. “Just the nylon component market on its own can become very very big for us, but this does not happen over night.”
Nexam’s gross margin on the initial deal with BASF are, simply looking at the relatively low minimum volumes guaranteed, at around 30-40%. However, this is likely to increase to 50% once volume production kicks in.
The next step in the nylonproject is that BASF will test the new product family with its clients. The plastics that is equipped with the crosslinker is more expensive per kilo, but can be used in applications where normal plastics cannot be used or where a more expensive type of plastics is used today.
Asked whether he believes that BASF will use Nexam’s ingredients in all of its Nylon 66, Mr Palmqvist Morin says: “No, I do not believe that our crosslinker will be included in all of their Nylon 66, but it can become an exciting product family for them.” Nylon 66 is used e.g. in the automotive sector.
Today’s deal highlights the potential of the Nexam case. BASF is the first meaningful commercialization contract for the company and many more are likely to follow. Nexam seems set to become a multi-billion company in revenue terms.