Chemical giant The Dow Chemical Company (DOW), through its fully owned subsidiary Dow Europe Holding BV, has officially formed a joint venture with leading acrylic fiber company Aksa Akrilik Kimya Sanayii A.S. for developing and marketing carbon fiber and derivatives. Earlier, the companies had inked a definitive pact to form the alliance in December 2011. Both Dow and Aksa hold a 50% share in the joint venture.
Istanbul, Turkey-based Aksa is the world’s largest producer of acrylic fiber with roughly 14% share of the global market. The company, whose offerings include acrylic textile fibers, technical fibers and carbon fiber, had sales of around $978 million in 2011.
The joint venture, called DowAksa Advanced Composites Holdings BV (“DowAksa”), will leverage the technical expertise of both companies to develop a wide array of products and technical service support for the fast-growing carbon fiber composites industry. Focus will be on manufacturing and globally marketing innovative solutions that will rein in overall costs, thereby improving economics and boosting adoption in a broader range of industrial markets including energy, transportation and infrastructure.
Carbon fiber composites, which are expected to supersede metal as the material of the future, have key significance globally for industries such as transportation, wind energy technologies and construction. These strong and lightweight materials are used in a range of applications in a number of fundamental industries where weight savings, emissions reduction, durability and energy efficiency are considered the key performance indicators.
Aksa’s carbon fiber has been produced in the Yalova Factory in Turkey since 2009. DowAksa will expand the existing carbon fiber production assets in this facility and achieve growth by creating a large-scale, integrated production capability for the development and commercialization of advanced carbon fiber technologies.
The formation of DowAksa underscores Dow’s continued commitment to tap high-value, innovation-rich industries through strategic alliances. The global carbon fiber composites industry is currently worth roughly $10 billion and is expected to reach $40 billion by 2022, offering a compelling opportunity for the joint venture.
Dow is benefiting from strong fundamentals in agriculture and food markets. The company’s performance in the emerging markets remains strong and we expect this to continue moving ahead. A string of innovative products in its pipeline also adds to its strength.
However, Dow is witnessing weakness in the electronics and construction end-markets, which may weigh on its second-quarter 2012 results. The construction market in Europe remains soft. Moreover, the company will continue facing challenges in Western Europe due to weak demand and the sovereign debt crisis.
We currently have a long-term Neutral recommendation on Dow Chemical. The company, which competes with EI DuPont de Nemours & Co. (DD), currently holds a short-term Zacks #3 Rank (Hold).
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