You’ve still got about a week to reserve your spot at the upcoming conference, May 10-11 in Jersey City. Did I mention we have, for the first time ever, an exclusive breakfast briefing by Shell Chemical? They don’t speak that often in public about their surfactant related business, so now is your chance to hear what they have to say – in person. Check out the website for the event and book when you still can. Thanks. End of commercial.
In what’s becoming a bit of a habit, the WSJ misleadingly headlined an April 28 story about Unilever as follows: Unilever’s Activist Truce Should Hold for Now. They’re talking about activist investor, Nelson Peltz and, as the story goes on to confirm, there is no such truce. A lull maybe, yeah, but not a truce. A lull isn’t a truce in my book. Anyhow the story notes that the company has done pretty well recently and they have not heard from Nelson since he built up a stake and rattled some management cages. That’s not a truce though right ? - if they have not heard from him yet. Anyway, the article goes on to note that Marmite Maker Unilever increased sales by 7.3% in the first three months of 2022 compared with the same period a year earlier. Growth was slightly faster than European peer Danone and well ahead of the 4.4% forecast by analysts covering the stock. Unilever was also able to raise prices without losing too many consumers. It charged 8.3% more for its products—one of the most aggressive increases reported by a household-essentials producer so far this results season—and the volume of goods sold slipped just 1%. Good for them right?
The WSJ went on to report that Unilever wouldn’t say whether it had met with Trian Partners during a call with investors Thursday. However, Lazard pointed out in its first-quarter review of shareholder activism that activists at European targets are treading carefully since the war in Ukraine began, to avoid coming across as tone-deaf. I would also added that Nelson Peltz has been otherwise occupied by the April marriage of his most-valuable asset, daughter Nicola to Brooklyn Beckham, scion of the footballing pop culture royal family of David and Victoria. For details of this match, we must go to the authoritative tabloid source of the Daily Mail, which I think I have to add to the Blog’s mandatory reading list. As of today, that reading list includes – this blog, People Magazine, erm...and of course, ICIS Chemical Business. So it’s a pretty exclusive list. Anyway for the Mail’s coverage of the wedding, go here: https://www.dailymail.co.uk/tvshowbiz/article-10703957/Nicola-Peltz-stuns-Valentino-bridal-gown-ties-knot-Brooklyn-Beckham.html
Best pic, IMHO – This one.
It looks like Vogue got first dibs on the official photos. Smart couple.
Oh and here’s one with the groom in it.
Start of the serious surfactant news, which is probably what you came for.
ICIS’s Clive Ong reports on Asian LAB at the end of April as follows: The linear alkylbenzene (LAB) market in India remains buoyant, with near-term supply expected to be snug. Buying interest remains keen on the import front as well, with buyers seeking some spot lots in view of the shortfall in the local market.
- India domestic market to remain snug
- Chinese supply elevated amid lockdowns
- Asia buyers unhurried on considerations of ample availability
The domestic market in India, in particular, is expected to remain tight in the near term as a producer will kick off planned maintenance and expansion in early May, which is expected to last at least three months. “We are making arrangements to meet some of the shortfall in the local market,” said another producer in India. The tight local market also translated into firmer buying interest on the import front. Spot prices rose above $2,000/tonne CFR (cost and freight) India, surging ahead of China and the rest of Asia, ICIS data showed. Suppliers in the Middle East, China, and the rest of Asia continue to target sales towards the subcontinent, as demand in China and the rest of Asia continues to lag.
The Chinese market remains weak, with the ongoing lockdowns weighing on trade and sentiment. Logistical woes inland and at the ports continue to hamper trade, resulting in elevated stocks in the country. Chinese suppliers remain under pressure to deal with high stocks and were understood to be offering cargoes at a discount. Consequently, buyers in SE Asia have become unhurried, with expectations of cheaper offers available for their picking. “There are cheaper offers from China compared to other Asian material,” said a buyer in Asia. Trade in the region slowed as some buyers decided to wait and see, on hopes that prices would lose ground in the near term. However, most suppliers in Asia are not keen to reduce prices significantly, with feedstock costs trending higher. “Our Asian supplier could not match the prices of the Chinese and hence did not offer,” said a trader in Asia. The chart below shows the ratio of India prices versus SE Asia, which clearly depicts the outperformance of the former in the current period. It also shows the prices of LAB in SE Asia against the downstream product of LAB sulphonate (LAS). A lack of impetus in the LAS market will continue to act as a weight to the LAB market in the region, keeping the ratio in a narrow band.
By contrast the India LAB market is looking pretty vibrant, with domestic demand staying decent as reported by Clive Ong of ICIS. Tight availability in the local sector is expected to persist in the near term, as a producer plans to shut for an extended maintenance in May.
- Tight availability to bolster India market
- Chinese demand at a low ebb amid lockdowns
- East Asia trails India as buyers wait and see
Domestic India prices for April parcels surged to rupees (Rs) 170-175/kg ex-tank, up from around Rs152-153/kg ex-tank in March. Tight supply coupled with decent buying interest spurred the market higher. “April sales are fine and prices steady at the new level,” said a producer in India. The firm domestic market has also fuelled buying interest on the import front. Suppliers in the Middle East and Asia mostly indicated prices at above $2,000/tonne CFR (cost and freight) India, although most concede that buying indications are moving up slowly. The volatile crude oil markets have roiled sentiment, especially among buyers, prompting some to become cautious. However, with upstream markets on the rise and hence an increase in raw material costs for LAB, makers continue to push for higher numbers in a bid to maintain workable margins.
“Our costs are rising fast, and hence we have to try for higher LAB values,” said a producer in east Asia.
Meanwhile the Chinese market remains mired in tepid demand, with the COVID-19 lockdowns and the resultant logistics problems weighing on trade and demand.
Suppliers are keen to export out of China, as they are saddled with stocks. However, logistical issues and port restrictions at some locations appear to have dampened this initiative to some degree. Other Asian suppliers also faced weak buying momentum in the region, with the downstream linear alkylbenzene sulphonate (LAS) market stagnant.
“Buying interest is not strong and buyers are slow to commit, especially to higher offers,” said another LAB producer in Asia. The price gap between SE Asia and India has widened in recent weeks, with different performance in these two regions become increasingly evident. Some players expect Asia will need to deal with the excess Chinese material before it is able to recover, while Chinese lots will likely have an impact on the Indian market as well, perhaps capping its current uptrend.
An interesting snippet on Shell by Al Greenwood in ICIS Chemical Business. Shell is considering building another linear alpha olefins (LAO) plant in Geismar, Louisiana, the company confirmed late April. The company could make a final investment decision in the first quarter of 2024, said Curtis Smith, spokesman. Production could start in 2026-2027. The capacity would be world-scale. The value of the project is $1.4bn, according to the Louisiana Board of Commerce and Industry, which received an application from the company for a tax break. Shell had started production at its fourth LAO plant in Geismar late in the last decade. That plant could produce 425,000 tonnes/year. As well as going into polymers and lubricants, LAO’s are used as raw materials for AOS- alpha olefin sulfonates. Very interesting right? As luck and great timing would have it, we are hosting a Shell breakfast briefing at next week’s surfactant conference. You have to be there to see what’s really going on with them. I’ll not be reporting it here or anywhere else. Join us!
Big news from BASF in China: BASF and Sinopec, late April broke ground the expansion project of their site in Nanjing, China’s Jiangsu province, the companies said in a joint statement. The site is operated by their 50:50 joint venture named BASF-YPC Co. The partners will expand the production capacities of propionic acid, propionic aldehyde, ethyleneamines, ethanolamines and purified ethylene oxide. A new tert-butyl acrylate (TBA) plant will also be built. The TBA plant will use acrylic acid and isobutene produced by the JV itself as feedstocks, the first time this production technology is applied outside of Germany. The expanded and new plants are planned to come on stream by the end of 2023. Capacities details are not disclosed.
April saw Stepan’s Q1 results reported by ICIS: Stepan’s first-quarter net income rose year on year despite flat sales volumes and weaker polymers operating income due to stronger business for surfactants and specialty products, the US-based producer said on Tuesday
| ($m) | Q1 2021 | Q1 2020 | Change |
| Sales | 675.3 | 537.7 | 26% |
| Operating income | 63.3 | 53.9 | 17% |
| Net income | 44.8 | 40.6 | 10% |
Key Points
- Surfactants operating income rose around $600,000 year on year to $53.8m during the quarter on the back of an improved product and customer mix, with gains significantly offset by supply chain challenges and a 1% decline in sales volumes.
- First-quarter specialty product operating income rose $1.1m year on year to $3.7m due to shifting order timings in the food and flavour business and medium chain triglycerides margin recovery.
- Polymer division operating income fell to $14.1m during the quarter compared to $18m a year earlier due in large part to a power outage at Stepan’s Milssdale, Illinois, plant in January, resulting in some force majeure declarations and increased costs.
Outlook
“We believe that demand across our business will remain strong but the company will continue to be challenged by external supply chain issues, including raw material availability and transportation constraints that impacted us in 2021 and during the first quarter of 2022,” said Stepan CEO Scott Behrens.
ICIS published some additional analysis on the Stepan results : Stepan saw a 1% decrease in surfactants volumes in Q1 because of lower demand for laundry products within its consumer products business, the company said in its earnings call.
Strong demand in the functional products, institutional cleaning and personal care end markets mostly offset the decrease in consumer laundry demand.
President and CEO Scott Behrens said the softness Stepan is seeing stems in part from significant and persistent raw material and transportation constraints in the North American market against the backdrop of the impact of price inflation on consumer trends in developing regions, including the Mexico market. Behrens added that surfactant inventory levels across the household, industrial and institutional cleaning (HI&I) chain are in a better balance but still not at the levels they need them up to given the robust demand from their customers. Global agricultural volumes increased as high commodity prices for corn and soybeans drive increased planted acreage and demand for crop protection in North America and Brazil. In Asia, continued growth in the post-patent herbicide market also contributed to higher volumes. Oilfield volumes increased as elevated crude oil prices support demand for oilfield products, including biocides. Raw material availability offset some of this growth.
On the same day, CEPSA, also a major player in surfactants, also reported stronger earnings. As reported by ICIS: Cepsa reported a 10% increase in first-quarter chemical earnings on the back of higher selling prices and despite almost flat sales.Privately-owned Cepsa did not provide sales figures for the first quarter. It measures earnings in current cost of supplies (CCS) earnings before interest, taxes, depreciation and amortisation (EBITDA). Cepsa provided sales figures for the production of linear alkylbenzene (LAB) which is widely used in detergents and produced by Cepsa in Spain, Asia, and the Americas.
| Cepsa chemicals | Q1 2022 | Q1 2021 | Change |
| CCS EBITDA (€/m) | 110 | 100 | 10% |
| Sales volumes (in tonnes) | 720,000 | 715,000 | 1% |
| - Of which LAB | 174,000 | 163,000 | 7% |
Cepsa said margins in chemicals had been “solid and sustained” despite high prices for natural gas and electricity in the first quarter. Thanks to healthy increases in earnings at Cepsa’s Energy and Upstream divisions, overall CCS EBITDA stood at €605m in the first quarter, up 87% year on year. Speaking at Cepsa’s headquarters in Madrid, CFO Carmen de Pablo said surfactants had performed particularly well in the first quarter, both in the home and personal care sectors. “For surfactants, we saw a strong increase in sales volumes during the first quarter, both year on year and quarter on quarter. Intermediates and solvents also posted a good performance, in line with previous quarters,” said De Pablo.
According to the great Helen Yan of ICIS, China Covid problems are leading to soft ethoxylate markets in the region. Asia’s fatty alcohol ethoxylates (FAE) market is expected to remain soft in the near term due to lockdowns in China and declining feedstock fatty alcohols market. Demand for FAE had weakened due to the cautious stance adopted by regional players who are closely monitoring the Chinese market, which had slowed down significantly following lockdown measures implemented to contain the spread of the Omicron variant. Shanghai, a major port and key financial and manufacturing hub, had been locked down since late March. Spot appetite has waned and trading activities stalled as market players grapple with logistics issues, transport restrictions, port congestion and manpower constraints. Supply chains have been disrupted and shipments delayed as factories were temporarily shuttered or running at reduced rates. “Demand is low due to the China lockdowns. Customers are waiting also as the feedstock fatty alcohol market is bearish,” a regional FAE supplier sai
Feedstock fatty alcohols C12-14 prices have fallen by more than 15% since early March to $2,550-2,625/tonne FOB (free on board) southeast (SE) Asia in the week ended 20 April, ICIS data showed. Spot prices of FAE mols 7, 9 were flat at $1,900-1,950/tonne CIF (cost, insurance and freight) SE Asia on 21 April, ICIS data showed.
Back in the US, our fatty alcohol guru from ICIS, Lucas Hall (who will be delivering his exclusive insights and analysis at our conference next week) notes the following: US fatty alcohols markets remain underpinned by volatile but overall firm feedstock costs and ongoing supply chain disruptions in the global market, primarily on imports.
- Palm in a downward correction, narrowing premium to CNO
- SBO, BFT remain firm
- Demand for imported material slows on downward correction in Asia
US fatty alcohols markets remain underpinned by volatile but overall firm feedstock costs and ongoing supply chain disruptions in the global market, primarily on imports. However, feedstock costs across the oil palm complex have entered a downward correction in the last several weeks, pushing buyers to the sidelines. Buyers are already committed to their Q2 volumes but the downward correction has slowed demand in the spot market as wider economic concerns mount. Certified mass balance (MB) material, however, remains tight, sustaining the MB premium over standard balance material. Palm oil prices are in a downward correction ahead of expectations of weaker demand for palm oil during the Ramadan holiday as well as during the oil palm harvest during the summer months ahead.
Meanwhile, feedstock soybean oil (SBO) and bleachable fancy tallow (BFT) costs remain firm. SBO remains at a premium to palm on historically tight supply and sustained concerns over global cooking oil supplies against the backdrop of the Russia-Ukraine war. SBO and BFT demand into renewable fuels markets also remains strong, further supporting the market. Palm kernel oil (PKO) costs have largely been at a major premium to CNO costs the last several months, encouraging CNO consumption over PKO in the feedslate. While PKO and CNO produce similar levels of mid-cut and C16 alcohols, CNO produces significantly less C18 material, pushing C18 alcohols tight throughout the last quarter. The downward correction in PKO may encourage increased consumption of PKO in the feedslate in the coming months, improving C18 availability in the same time. Lead times from southeast Asia remain long - up to four to five months - because of ongoing shipping logistics constraints globally. Slower demand in China, because of ongoing coronavirus-related lockdowns across parts of the country, may alleviate some of these disruptions in the near term.
PRICES
Q2 contract ranges*
| Product | Price (cents/lb) | INCO | Location |
| C12-C15 | 160-170 | DEL | USG |
| C16 | largely above 200 | DEL | USG |
| C18 | largely above 200 | DEL | USG |
| C16-18 | 195-215 | DEL | USG |
*The prices in the table represent a range of settlements for standard balance material heard throughout the quarter for the majority of market participants. Prices above and below those listed in the table were heard throughout the quarter but excluded as they were not viewed as representative of the wider market.
US Q2 fatty alcohols contracts were assessed at a sharp increase from Q1, tracking bullish feedstock costs across the oil palm complex in Q1. Palm oil markets were bullish in Q1 as Indonesia introduced temporary curbs on exports of palm oil and palm products ahead of disruptions to global sunflower oil supply because of the Russia-Ukraine conflict. Freely-negotiated contracts for mid-cut alcohols did not rise as sharply as long-chain alcohols as supply and demand were more balanced. Some players had carryover volumes from Q1 as they hedged against the uptrend in feedstock costs. Freely-negotiated contracts for long-chain alcohols saw larger increases, as single-chain C18 alcohols became particularly tight during the quarter with the increase in CNO consumption in the feedslate over PKO. Tight C18 markets increased demand for C16 alcohol for blending, in turn keeping C16 markets snug to tight during the quarter. C16-18 alcohols are commonly sold in a ratio of 30:70, 50:50 and 70:30. Settlements from one natural supplier of single-cut C16 and C18 alcohols were heard closer to $1.80/lb, given that supplier's competitive access to bulk storage capacity. Most other natural suppliers import in containers, where freight costs continue to soar.
Mass balance (MB)
MB premiums were largely heard in the $300-330/tonne range. MB material is tight as certified sustainable material becomes more challenging to source against the backdrop of ongoing supply-chain disruptions and the ongoing withhold release order (WRO) from the US Customs and Border Patrol (CBP) against Sime Darby Plantation Berhad and its subsidiaries and joint ventures, as well as FGV Holdings Berhad and its subsidiaries and joint ventures, from late 2020. In early 2022, the CBP said it found sufficient evidence of forced labour at Sime Darby, subjecting its imports to seizure and destruction. Some players have had oleochemical products detained at ports.
Malaysian players continue to work to avoid further disruptions to their supply chain, but overall availability is expected to continue to tighten in the medium-to-long term.
Some EO pricing news from Europe and then the US: First from Melissa Hurley of ICIS, who is fast establishing an authoritative reputation for analysis in this market: European ethylene oxide (EO) pricing for April remains unclear still in the face of soaring energy costs and record high ethylene prices.
- Sharp production costs throw curve ball to formula pricing
- Supply more snug due to unplanned outages, demand healthy
- Purified EO demand higher, suppliers less focused on MEG production
Separate supplier and consumer discussions are ongoing. Talks were expected to finish last week but the situation is unprecedented, making for challenging contract talks.
Separate energy charges of varied amounts have either been implemented, are still under discussion. or have not been accepted by consumers. The European ethylene contract reference price for April was up by a record month-on-month adjustment of €230/tonne from March. This supersedes the previous record high set in March.
Upward ethylene pressure was a key issue in the market, with energy costs also causing mounting production costs. Previously, 2022 adder fees were assessed stable to firm due to sharp production pressure. Supply was balanced to tight in the first quarter, following a few force majeure declarations at Dow's production unit in Terneuzen and Shell's Moerdijk EO unit, both in the Netherlands, as well as Nouryon's facility in Sweden. Shell's cracker remains offline but is expected to restart this week, according to sources upstream. The FM for EO supply remains in place, according to sources at the end of last week.
MEG MARGINS
Downstream monoethylene glycol (MEG) margins have experienced significant pressure due to rising costs and demand challenges in the spot market.
European MEG contract prices struggled to keep up with the increasing ethylene prices in 2021. Contractual consumers are minimising volumes in the face of higher prices or postponing monthly allowances for April, according to sources. Demand has increased for purified EO in cases, and local glycol sellers are opting to optimise production away from MEG towards better performing derivatives. Certain EO derivatives are performing better such as surfactants and polyethylene glycol (PEG), leading suppliers to adjust EO production accordingly. General end-user demand could weaken in the face of higher inflation rates across Europe as the cost of living soars. March EO contract prices were between €1,567-1,705/tonne FD (free delivered) NWE (northwest Europe).
And for EO in the US, ICIS notes that US March ethylene oxide (EO) contracts fell by 2 cents/lb ($44/tonne), based on a decrease in US March ethylene contracts. March EO contracts were assessed at 63.0-72.5 cents/lb FOB (free on board). Following the historic changes to the global ammonia market in March, the first week of April was calmer. EO and ammonia can be combined to produce ethanolamines, which are facing April price increases. More EO will be pulled into monoethylene glycol (MEG) later in Q2 as turnaround activity wraps up and the peak bottled beverage season begins.
Finally, Al Greenwood writes a very nice analysis of the synergies between Oxiteno and new parent, Indorama. Check it out here. https://subscriber.icis.com/news/petchem/news-article-00110750362 You may need a subscription though. Side note – I received some encouragement from not-disinterested parties to continue to use the Giselle memes when writing about Indorama’s surfactants business which continues to have a strong base of operations in Brazil. What do you think, dear reader?
I gotta make the music section brief this time as I’m on the road again right now – first to Paris. OK so who remembers this one from Adam and the Ants?
Then I go to Zurich. So this one is not claiming to be Swiss music but come on.. who hasn't yodeled this in the shower? (I know Focus are Dutch! But this song sounds Swiss – to me)
That’s it. See you next week in Jersey City!