Italmatch 25th Anniversary – In search of Phosphorus in China (1999)

Italmatch Chemicals moved its first steps in China in the 1999 to secure critical raw materials

Communications Office

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In the early 2000s, securing phosphorus supply, which was the most critical raw material for Italmatch Chemicals, was of vital importance for the company. Since there were no deposits of phosphate rock in Europe and there were fewer and fewer companies dealing with it, the team came up with the idea of going upstream in the supply chain, reaching the main country from which yellow phosphorus was imported. For Italmatch, China became the key interlocutor.

The winning intuition was to consider the country as a partner and to involve it in a new industrial model, and not just to use it as a supplier. If in China there were large phosphate rock mines and low-cost energy to feed the furnaces, Italmatch had the skills, technologies and know-how that the Celestial Empire was thirsty for. There were therefore no obstacles to establish a first joint venture. The first destination was identified in Songming county, in the southern province of Yunnan. If today production in China is considered a natural step for Western companies, at the end of the nineties Italmatch was a precursor.

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Group picture during the Songming joint venture
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Shared by Sergio Iorio, CEO & Founder Italmatch Chemicals Group
"Our adventure in China didn't start in the best way. After returning from the inauguration ceremony of the joint venture in Kunming, there was a terrible car accident that caused the death of one of our Japanese partners and caused me vertebral fractures that forced me to remain immobilized for months in China. But the long stay in a hospital in the county of Kunming was an opportunity to get to know my Chinese colleagues better and to establish long term bonds. A critical experience to create new links. Having overcome the traumatic impact, today I can say that the event was the beginning of a success story and long- term friendships. It can truly be said that it is only starting from 'pain' that leads to success."
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Italmatch manufacturing site in Nantong

After the first joint venture in Songming, a second was signed almost immediately, in the neighboring county of Xundian (Yunnan). With this further agreement, Italmatch officially began to work on Chinese soil. The market was moving quickly and requests were increasing. It wasn’t enough to involve other partners.Instead the time had come for a very important step: to build a greenfield factory to process the raw material and to produce finished products directly in the area. At that point, the scenario moved over 2,300 kilometers further north-east, to Jiangsu province and, more precisely, to the city of Nantong. Heading the ambitious project were Maurizio Turci, now Corporate General Manager, Toh-Yong Koh, the CEO of the Chinese partner company, and Angela Hu, a true professional of the Italian management in China, who would later become Italmatch CEO of the Asia Pacific region. The Nantong project was not simple, especially in terms of logistics.

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Shared by Maurizio Turci, Group General Manager Corporate
"Although today the city appears modern and efficient, at that time it was still in a prerural situation. To reach it from Shanghai, which was not far away, you had to cross the great Yangtze River, and the only means available were barges."

It was on those marshy territories that the 40 MU (Chinese unit of measurement equivalent to 666.7 square meters) of land were granted to build the factories. This required lengthy reclamation work. In Nantong, Italmatch began to produce additives similar to those already being produced in Spoleto, for the growth of the Chinese domestic market: melamine and its derivatives, an innovative flame retardant product with low energy density. It was a new fundamental turning point for the growth of the company. To complete the picture, in those first few years of the Third Millennium, Italmatch also created a trading company, necessary for the general coordination of operations, the optimization of logistics and tax management within the rules of the Chinese market. Added to this was the development of new perspectives, markets and products. Harmonizing visions and workflows was among the most significant challenges of the Chinese mission.

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That particular period was marked by numerous challenges. One, in particular, has a very specific date: May 5, 2008, the day on which the Chinese authorities imposed an export duty of 120% on a number of products, including phosphorus. That year is also famous because the country was focused on the great event of the Beijing Olympic Games, while the world was grappling with an economic crisis never seen in recent times. If we add to all this the closure of the ports and the earthquake in Sichuan – the country’s main phosphorus producing region – a sort of perfect storm was created which significantly complicated the Italmatch scenario, from which Italmatch came out as clear winner, gaining additional trust of its global customers, due to its success in guaranteeing supply security during such an exceptional challenge.

Later on, in 2007, Italmatch Chemicals began to expand into complentary end markets.

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