Christmas Double Issue
December 2021
The cynics among you may conclude that we’re calling this a Christmas Double Issue because we’re very late publishing the November blog. And the cynics would, on this rare occasion, be right. The last few weeks have been tough for reasons good and bad and so this blog – gives you the news up to mid-December and includes some Christmas musings. We’ll be back in January though, so don't worry. You’ll get your money’s worth!
By the way, don’t forget to save the date. May 9 – 11th for our great 2022 World Surfactants Conference. Live and in-person in Jersey City, NJ. Same great place and bigger and better than ever. More details to all registered blog readers, very soon.
Christmas Musings: I’m standing outside our lab in Connecticut, waiting for a car. It’s late, dark and cold. It’s been a physically, mentally and spiritually demanding week. Not that different from a lot of weeks you have in the course of your daily business – but I’m beat and ready to get home to a nice warm fireplace and dinner and wife and night’s sleep. A minivan pulls up. Chrysler, old-ish model, a bit dirty, sounding a little bit rough. Not my ride, clearly. The inside light goes on and a young lady, puffer jacket, wooly hat, starts pecking away on her phone. Lost. Obviously. I watch. If she asks me anything other than a couple of huge landmarks, I’m useless. I just work here. But Google’ll help her. Or Waze. I keep watching and the shape of a child-seat resolves from the dimly lit back seat. A young child, 3 or 4 is in it. Next to him, his little sister. How do I know? I don’t but blue hat and pink hat so…two kids in the back seat. Mom driving. Is that the protocol? Youngest behind the driver – or what? It’s been over 20 years since I had a child seat.
Phone pecking stops. Mom turns to look at me through the passenger side window. She thinks for a moment and then gets out the car, walks round the back and opens the hatchback – chilly draft enters the van and I’m glad the kids have their hats on – pulls out a cardboard box and continues around the car toward me. She’s young and seems very small in the big black parking lot. “P2 Science”? she says with an accent. “yeah this is P2. Is that for us?” I guess looking at the package of what might be lab supplies or glassware. “Delivery for P2 Science. Are you P2 Science?” “Yes, I am” and then something weird and not heretofore encountered in my 60 years becomes apparent. This young mom with the old minivan and the two kids with the blue hat and the pink hat, is outside my building in the dark, in the cold in the empty parking lot, opposite the dental supply place with its empty parking lot, trying to deliver a package for some company – maybe the lab supply company, maybe Amazon, maybe.. She tries to scan the barcode with her phone. It doesn't work until I hold it at just the right angle. She says "thank you sir” as I imagine she learned just the other day from a company manual or training app. I don't know how I feel about this – what is going on here. I feel a bit.. off.
Joe, the cleaning guy pulls up in his white van – bang on time, 7.00 PM. He sees me with the package. “here Neil, I got that – I’m going in there now. I’ll put it on the front table.” “Cheers Joe, I appreciate it” He takes the package. Mom looks at both of us and then at me “Is he P2 Science” – “yeah he is also. He’ll put it with the other packages” “What is his name?” She’s poised to enter that into the delivery record. “Oh it’s Neil – put in N-E-I-L” I don't want her now to get into trouble from the company or the app. Joe is not exactly P2. He’s our cleaning service. My name should be good. Mom seems OK with that. She walks back around the van, closes the hatchback and gets back in. More pecking on the phone-thingy and then back out the lot, a little more quickly than I would have liked.
Joe and I stand for moment, thinking, just a little. He says to me “She’s out there delivering packages with two little kids. Little kids in the van – tonight” – with rising incredulity. I can only nod. He says “God Bless America”. It doesn't sound good. It’s not like how you say it in a good way or a proud way. I don’t want to agree with the sentiment but I can’t figure out how not to. So I say nothing. He heads in to the building. My car comes and I get in. That young lady. Maybe this is the first rung on the ladder. Maybe she earns enough to scrape together a deposit on an apartment before Christmas. Maybe the kids go to a nice school somewhere next year. Maybe the next Einstein or whoever, is in the back of that van. I doubt it though. Those kids should be in a nice warm home, getting read to by someone with a sweet voice. Maybe they have something stodgy and warm to eat, some veggies even though they don't like them. A toy car, a doll, a laugh. Christmas lights. Out there in the minivan in the dark and the cold with the app and Mom worried, worried about a delivery and the company and the name of the person. That’s not the place for those kids. Whose fault is it? It's her’s right? She took the job. True. I wonder what the alternatives were? Did any of the alternatives include dinner and reading and a warm fireplace and biscuits and a laugh about a silly toy car? So who’s fault then? America, Amazon, you, me? I dunno. I can’t change America or Amazon or you.. but me... I can do that.
News: In mid-November, ICIS’ great editor, Joe Chang did one of his superb interviews with the CEO of Clariant, Conrad Keijer. You can read the whole thing here https://subscriber.icis.com/news/petchem/news-article-00110706321 (subscription may be needed) but here’s an interesting snippet: “An excellent example is the joint venture we recently announced with India Glycols. This is actually making us one of the leading players in the India surfactants market and it also makes us one of the global players in green ethylene oxide (EO) derivatives,” he added. In July, Clariant and India Glycols completed the creation of their 51/49 JV Clariant IGL Specialty Chemicals Pvt Ltd.
The deal combined India Glycols’ renewable bio-EO derivatives business, which includes a multi-purpose production facility including an alkoxylation plant located in Kashipur, Uttarakhand, India, with Clariant’s Industrial and Consumer Specialties business in India, Sri Lanka, Bangladesh and Nepal. “There are definitely opportunities outside southeast Asia for these biosurfactants. What we essentially offer is 100% renewable-based green ethoxylated products,” said Keijzer.
Speaking of India; here’s an ICIS report from our EU and Asia Surfactants Conference that is timely and interesting: Sustainability is at the forefront of concerns among surfactant companies in India, as the pandemic turns a corner in the country to some degree, and consumption is set to rise. India’s economy is growing, and demographic advantage makes the industry players confident of robust growth in demand in the long term. Plastic consumption is projected to spike in the developing world over the next 10 years, at a point where the focus on developing a more circular economy for the materials is becoming more intense. The key end use for surfactants is in cleaners, disinfectants and personal wash products.
According to Galaxy Surfactants' Avinash Nandanwar, the role of surfactant players in India lies "in reducing plastics" and to use "less plastics in the supply chain", as well as to tap into "recycled plastics in the supply chain". In their green efforts, Nandanwar said the company is also persuading customers to shift from taking small barrels or drums. He is the head of sourcing at Galaxy. "Why not take supplies in bulk shipments [instead]?" Nandanwar suggested during a panel discussion at ICIS European & Asian Surfactants Conference in October.
India is targeting net-zero carbon emissions by 2070 under a five-point plan, which includes raising the country’s non-fossil energy capacity to 500 Gigawatts (GW) by 2030 so that half its energy requirements would start coming from renewable sources.
“By 2070, India will achieve the target of net-zero emissions,” Prime Minister Narendra Modi said at the United Nations Climate Change Conference of the Parties on 1 November. The 26th COP (COP26) was held in Glasgow, UK, from 31 October to 12 November. Modi vowed to reduce the carbon intensity of India’s economy to less than 45% and reduce its total projected carbon emissions by 1bn tonnes by 2030.
India is the last of the world’s major carbon polluters to announce a net-zero target, which is set 10 years after China’s 2060 target and 20 years after the 2050 target of both the US and EU. The southern Asian nation relies on coal - a highly polluting fossil fuel - for about 70% of its power generation. Its net zero emissions pledge is two decades beyond what scientists say is needed to avert catastrophic climate impacts.
India ranks third in greenhouse gas emissions after China and the US. COP26 looks to building on agreements reached at previous conferences, including the Kyoto Protocol and Paris Agreement.
Just like elsewhere in the world India’s oleochemicals market is facing major supply-side and cost issues that will continue to affect the industry as it grapples with logistical challenges stemming from the COVID-19 pandemic. Like the rest of the petrochemical chain, the surfactants industry is not immune to turbulent times dogged by record-high raw material prices, as well as plant maintenance of fatty alcohols in the last quarter of the year, Nandanwar said. "The challenge from last year continues," said Nandanwar, referring to expensive freight costs, high Brent crude prices, and longer delivery period.
He added that such factors have "impacted feedstocks used in surfactants... it's a complicated situation". China has also affected the supply value chain, according to Nandanwar. "It's a tightrope to walk. We have to ensure our operations run sufficiently," he said. Several feedstock fatty alcohol and ethylene oxide (EO) plants in China were shut or were running at reduced rates following the implementation of the dual control policy. As such, Chinese spot interest for fatty alcohol imports increased recently to replace the shortfall in its domestic market. The dual control policy places tighter limits on energy consumption and intensity in parts of China to enable the nation to reach a 'carbon peak' in 2030 and carbon neutral by 2060.
All things considered, the outlook on surfactants demand in India remains bright, supported by rapid urbanisation and a youthful populace, coupled with the fact that per capita consumption in the country is far below the developed world’s level, thus holding a lot of promise of growth. “Demographics [are] still on India's side and we will see that this pandemic has not actually hurt India, and India will bounce back and in fact the consumption story is still intact,” remarked Sadanand Palnitkar, associate vice president marketing of Godrej Industries. He added that the advancement of e-commerce has helped fuel "lifestyle and aspiration" changes, with residents from outside the metropolitan cities moving to catch up on the latest fad such as new shampoos.
"The consumption story is strong. I'm bullish on India," Palnitkar said.
We’ve been tracking the PCC / Petronas JV for a while and at the end of November the official news came from ICIS that the JV has begun construction work on a planned project to produce non-ionic surfactants and polyether polyols at Kertih in Malaysia’s Terengganu state. The 70,000 tonne/year plant by the 50:50 JV, PCG PCC Oxyalkylates, is expected to be commissioned for commercial production in Q3 2023.
It will be integrated with other PETRONAS facilities at Kertih. The joint venture project would enable PCC Group to access emerging markets in East and Southeast Asia, CEO Peter Wenzel said in a statement. Financial details were not disclosed.
Duisburg, Germany-based PCC is focused on chemical feedstocks and specialties. It also has a container logistics business. [I love this news for both PCC and Petronas. Much success to the companies involved. ]
More investment from PCC hit the ICIS pages about a week later: Poland’s PCC Rokita and PCC Exol have announced a zloty (Zl) 351m ($86.1m) investment in building a manufacturing complex that will combine the production of ethoxylates and polyols.
The 50,000 to 55,000 tonne/year facility, to be located in the Brzeg Doly Chemipark in southwestern Poland, is to be ready for a launch in 2026, the companies—subsidiaries of Germany’s PCC Group chemicals, logistics and energy corporation—added in a press release published last Friday. PCC BD, a unit held 50:50 by Rokita and Exol, is to implement the project. “The new installation will be the first of its kind in Poland, combining flexible production of ethoxylates and polyols,” said Wieslaw Klimkowski, CEO of PCC Rokita.
The plant is to produce a range of ethoxylates, polyether polyols and other ethoxylated products, including biodegradable products, Rokita and Exol said. For feedstock, the installation will use ethylene oxide supplied by Polish group PKN Orlen. Separately, PCC Rokita, also a producer of chlorine, sodium hydroxide and surfactants, said it plans to invest in renewable energy sources to reduce its corporate carbon footprint.
At the top of December, ICIS’ great Lucas Hall reported on the alcohol market as: US Q1 fatty alcohol contract negotiations are ongoing, with discussions heard at a sharp increase from Q4. Discussions have been heard approximately 40-50% higher from their Q1 settlements, tracking bullish feedstock costs across the oil palm complex, namely palm kernel oil (PKO). Increased scrutiny against Malaysian-origin material over forced labour allegations remains a major concern, as the traceability of Roundtable on Sustainable Palm Oil (RSPO) Mass Balance-certified (MB) material becomes increasingly more difficult, supporting higher premiums for MB PKO for oleochemicals production. Premiums for mass balance-certified (MB) material were heard at 8-14 cents/lb over non-certified material. Supply of MB material continues to tighten following the US ban on palm oil from Malaysian palm oil giants Sime Darby Plantation Berhad and FGV Holdings Berhad in 2020 against the backdrop of ongoing pandemic-related disruptions throughout southeast Asia. In addition to the ban on Sime Darby and FGV, in the August-September period, US Customs and Border Protection (CBP) denied entry to at least two Malaysian-origin vessels carrying oleochemicals from another producer.
These disruptions have primarily impacted palm oil and refined glycerine imports from Malaysia, in addition to some short-chain fatty acids and alcohols. However, they have raised concerns among market participants of expanding scrutiny against Malaysian-origin material as RSPO MB markets continue to tighten.
There are conflicting reports as to whether these issues are easing. One producer is heard to be purchasing large volumes of Indonesian-origin PKO to sustain oleochemical production in Malaysia given the ongoing scrutiny on palm oil production in the country.
In the meantime, market players in Malaysia are working to reorganise their supply chain to avoid further disruptions, given the latest CBP action. Ongoing delays and supply chain disruptions globally are adding to the pressure - particularly in container markets, where shipping costs remain bullish. Heavy chain alcohols are largely shipping in containers, as few importers have bulk processing/storage capabilities in the US. As such, discussions in these markets vary widely, depending on import capabilities. The rise of the Omicron variant of the coronavirus in recent days has spurred bearish market sentiment in southeast Asia, putting downward pressure on feedstock costs across the oil palm complex and pushing some fatty alcohols players to the sidelines as they await a clearer market outlook on the virus.
The bearish sentiment has had a more immediate impact on mid-cut alcohols, where imports are more consistent versus in heavy chain alcohols, where supply of both single cut C18 and C16 alcohols is tight because of the above constraints. Despite lower feedstock costs, US demand is expected to continue to outpace supply into Q1 as pandemic-related delays and shipping logistics constraints dominate the market in a snug-to-tight supply environment. The US is unlikely to reinstate major pandemic-related restrictions like lockdowns in the near-term, sustaining demand for fatty alcohols and other raw materials as many players continue to work hand-to-mouth to catch up to pent-up demand stemming from persistent supply chain disruptions globally throughout most of 2021. US production disruptions are heard to be easing, with producers are running as hard as they can to make up for the inconsistent import market against the backdrop of their own feedstock and other supply chain disruptions locally. Overall production is insufficient to meet total market demand, keeping the wider market snug to tight. Southeast Asian producers will have maintenance in Q1, keeping supply snug to tight next quarter. Demand in most end-markets remains healthy to strong, including cleaning, personal care and industrial end-markets.
ALCOHOL PRICES
Q1 discussions
Q1 bulk contract discussions have been heard at a major increase from Q4, tracking the above cost pressures, namely higher PKO costs. Heavy chain alcohols in containers have been heard even higher given the critically tight container market.
Q4 contract ranges*
| Product | Price (cents/lb) | INCO | Location |
| C12-C15 | 97-112 | DEL | USG |
| C16 | lower 110s-140s | DEL | USG |
| C18 | lower 110s-140s | DEL | USG |
| C16-18 | 114-134 | DEL | USG |
Prices for synthetic alcohols were heard at both ends of the above ranges amid the ongoing force majeure at Shell's Geismar site. At least one buyer settled its Q4 C16-18 contract below the $1/lb DEL USG range. The same buyer settled its Q4 C18 contract below the $1/lb DEL USG range. In the wider market, multiple producers have switched their contract terms from a DEL to an FOB + freight basis or to terms subject to changes in freight and demurrage given the ongoing shipping logistics constraints. Some players have fewer volumes available for their traditional quarterly customers because of upcoming maintenance and ongoing supply chain disruptions globally. as they prioritise stock building full-year commitments given the increasing supply chain constraints.
Spot
Bulk mid-cut, C16, C18 and C16-18 spot prices have been heard approximately 40-50% higher than Q4 contract settlements, tracking the above cost pressures. Heavy chain alcohols in containers have been heard even higher given the critically tight container market.
The Asia Fatty Alcohol market, which had been on a relentless price upward spiral since early September, is now facing slowing demand in China – reported ICIS. Mid-cut C12-14 prices had increased by 56% from 1 September to average at $2,850/tonne FOB (free on board) SE (southeast) Asia on 17 November, ICIS data showed.
[insert Asia Alcohol Price Chart]Prevailing tight supply and firm demand had been lending strong price support, but current high prices are now causing buyers to adopt a cautious stance on the market and hold back purchases. Spot appetite has waned despite elevated prices of upstream crude palm oil (CPO) and feedstock palm kernel oil (PKO). Regional fatty alcohols producers have been focusing on term business and have little spot volumes available for the rest of the year. “Discussions are ongoing for next year’s first-quarter contracts and demand is stable and healthy,” a regional producer said. With Europe in lockdown amid surging COVID-19 infections and Asia demand slowing down, the upward price momentum has withered, market sources said. Suppliers are keeping offers steady or firm in view of margin erosion and prevailing tight supply. “It is still an evolving situation. It depends on how serious the Covid surge is in Europe - whether Europe will be locked down for a longer period and the impact on demand is still unclear,” a supplier said. A buyer said: “With the fuels prices cooling, which have impacted the vegetable oils markets including palm, there is no buying interest.”
“The general market trend is downward,” a trader said.
Meanwhile, in Asia LAB markets, things are, by comparison, pretty quiet. ICIS reports that activity in the Asian linear alkyl benzene (LAB) market slowed with the year-end holiday lull approaching. At the same time, the widening gap between buyers and sellers continue to keep trade muted in the region. While suppliers have largely held on to offers, buying momentum appears to have wane for spot cargoes, with buyers in a wait-and-see mode. The recent weakness in the upstream crude oil and benzene markets weighed on sentiment with buyers expecting a softer LAB market in the near term. Spot prices in southeast Asia remain at $1,760-1,850/tonne CFR (cost & freight), with products quoted in a wide range, depending on the parcel size and origin, ICIS data showed.
“The spot market in Asia remains slow with few deals heard,” said a trader in northeast Asia. Meanwhile, output in China has lengthened with scheduled maintenance shutdown at plants completed in November. However, these suppliers are understood building up inventories and meeting the requirements of local users. Consequently, export availability from Chinese sellers is expected to be limited in December. Over in India, domestic demand weakened over the past two weeks, as users have accumulated some stocks post-Diwali in early November. Domestic offers declined to around Indian rupees (Rs) 143/kg ex-tank, down from Rs148/kg ex-tank for November.
“Spot and contractual offtakes have slowed recently, and hence offers from suppliers have come off,” said a producer in India. Some sellers have also left the Indian market for the time being and refocused sales elsewhere, in view of the tepid demand in the import segment. “We are currently focusing on countries around us; buying momentum in India remains slow,” said a producer in the Middle East.
Continuing our survey of the hydrophobes, ICIS reported that Asia’s fatty alcohol ethoxylates (FAE) market is expected to slow in December on worries that the Omicron variant of the coronavirus will further weigh on demand amid the run-up to the year-end festive holidays. Spot interest waned as buyers held back their purchases and adopted a cautious stance on worries that the highly infectious Omicron variant will impede the global economic recovery.
“Omicron will trigger a knee jerk reaction and it will subside soon. Raw material volatility is an issue, but as the calendar year is at its end many companies are taking stock of their positions and taking a cautious call, and pushing everything to next year,” a trader said. Following the emergence of the Omicron variant, crude oil has dropped significantly, prompting a fall in vegetable oil prices. With upstream crude palm oil (CPO) and palm kernel oil (PKO) prices declining, as well as falling feedstock fatty alcohol C12-14 prices, buying interest in southeast Asia and China has taken a backseat.
Chinese demand has also slowed due to ample inventories following the arrival of imports which were booked earlier in October. The slump in the Chinese domestic feedstock ethylene oxide (EO) market has also curbed spot interest in fresh FAE spot imports. “December is usually a low demand season in China,” a trader said.
Adding to the woes of market players are ongoing logistics issues, including delayed shipments, congested ports, sky-high container freight rates, constrained manpower, and demurrage.
“Supply chain disruptions and container freight rates, which have surged by four or five times since pre-pandemic times, have all added to business costs,” a regional supplier said. Business will likely pick up in January after the year-end festive holidays and before the Lunar New Year, which falls on 1 February 2022. In the meantime, market activities are likely to pause and players will mostly welcome a well-deserved rest from a most challenging year.
Shifting to the hydrophile side of the ledger: US November ethylene oxide (EO) contracts fell for the fourth consecutive month, tracking same-month feedstock contracts. ICIS assessed US November EO lower by 0.2 cents/lb ($4/tonne) from the previous month. Despite the steady decreases, US EO contracts remain 18% higher year on year.
Same-month ethylene contracts settled lower by 0.25 cent/lb. Average spot ethylene prices were mostly steady from the prior month but a decline in average production costs pushed the settlement lower. The majority of EO contracts are formula-based, and price movement comprises 80% of the change in the ethylene price and an additional conversion fee, or adder. Like ethylene, EO contracts are settled at the beginning of the month for the previous month’s price.
By the way in positive news for US EO, here is a plant status report: Shell’s Geismar, Louisiana plant which makes linear alcohol (195 KMT/yr) and ethoxylates, is back up from force majeure. The fm was declared in early September following the impact of Hurricane Ida on raw materials availability and operations at the Geismar and Norco sites.
Like many of you, we here at the blog have been seeing a lot of price increases for products and services. We can’t print all of them here (actually we could but that would be boring) but here’s a representative one that Dow sent around last week: Dow nominated higher pricing for its surfactants products effective 1 January. The company is seeking price increases of 6-8 cents/lb for products including surfactants and specialty alcohol alkoxylates. So there you are. One among very many. What’s the craziest increase you have seen. Here’s one I got last week. A carboxylic acid that I last bought 3 years ago, was quoted to me with a price increase of 130%. Note – that’s not a 30% increase; that’s double the price then add another 30%. Can you top that?
Finally – here’s a company we don’t talk about often. Pu Feng Biotech of Taiwan (http://pf-bio.com/en#2) has introduced a surfactant called Surpetant 13 made from recycled PET bottles. It’s a 99+% active liquid with an HLB of 13. Applications include laundry. Interesting.
End of news. This edition has no music section. Go back up to the top and read the musings and let me know your thoughts. Next month - we'll have some New Year's Music to listen to. In the meantime: Merry Christmas and a Happy New Year to all our readers. All the best and see you soon.