Financial Times

Better profit margins
Hi-tech activated carbon products from Haycarb
Haycarb, the Hayleys subsidiary making coconut shell charcoal-based activated carbon, has begun making activated carbon products for more hi-tech, specialised applications after clinching a deal with Calgon Corporation of the US, a dominant player in the industry, to acquire closely-guarded value adding know how.

The deal enables Haycarb to make better profit margins and Calgon Corp, the world's second largest activated carbon supplier and a former Haycarb competitor, to lower its production costs.

Haycarb entered into a long-term agreement with Calgon after the US firm outbid Haycarb to buy up Haycarb's exclusive distributor in America, Barnebey Sutcliffe Corporation when its parent Waterlink Inc., an international provider of water purification and wastewater treatment solutions, sought protection under Chapter 11 of the United States Bankruptcy Code.

"The agreement has mutual benefits with cost reductions for both parties," said Ananda Hettiarachchy, Haycarb managing director. "Through this agreement Calgon is ready to pass on to us certain grades of carbon which they had been making in the US, mainly to retain the confidentiality of how the products are made for particular applications."

Haycarb had been supplying certain base carbons, including treated carbon, some of which would undergo more processing by Calgon in the US. Under the agreement, Calgon has passed on the manufacturing processes so that Haycarb can now make the products for the US firm.

"The aim is to pass the know-how on to us and we make the product for them," said Hettiarachchy. "The manufacturing processes are expensive and we can do it much cheaper in Sri Lanka. Also, Haycarb itself has come up with manufacturing processes to give a much higher throughput."

The specialised applications require changes to the chemical as well as physical properties of the activated carbon involving impregnation technology and different particle sizes.

Returns are higher in specialised applications although the markets are small and more difficult to enter. Haycarb chairman Rayan Yatawara said the company intends to maintain its position as the world's largest coconut shell based activated carbon supplier. To achieve these ends, the first step has been for the company to enter into a long-term supply agreement with Calgon Carbon Corporation, USA, for the supply of activated carbon to the USA, Yatawara told shareholders in the company's annual report. As a second step, Haycarb plans to increase its manufacturing capacity by acquiring plants in Indonesia where competition for raw material is less severe.

Activated coconut shell carbon is used in the gold mining industry to recover gold from ore, as well as in air and water purification areas such as gas masks, protective military suits, cigarette filters, odour removal and tap water filters.

Some 600,000 tonnes of activated carbon is manufactured globally of which coconut shell based activated carbon accounts for 120,000 tonnes. Haycarb, the first activated carbon manufacturer in any coconut producing country, has the capacity to make 14,600 tonnes of activated carbon in its plants in Sri Lanka and Thailand.

The company is setting up plants in other coconut producing countries to overcome shortages of raw material in Sri Lanka, where recurrent bouts of drought reduce the coconut crop and the amount of coconut shell available for manufacturers like Haycarb. The company has been forced to import coconut shell charcoal because of such shortages.

Haycarb has leased a plant in Sulawesi, Indonesia and plans to set up another manufacturing facility in Sumatra.

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