Surfactants Monthly – February 2021

Surfactants Monthly

February 2021

For a short month, February had a lot of news. Of course, the biggest was related to the extreme low temperatures in Texas and surrounding areas and the impact on the chemical industry. Rather than detail it all here – if it affected you directly, you were tracking real-time – I’ll just note 2 things.

First -  S&P’s Platts reported last week something that caught our attention. The extreme weather knocked 75% of all 40 million mt/year of US ethylene capacity offline, including 100% of ethylene capacity in Texas.  The vulnerability of the US Gulf Coast to weather events is not news. Neither is the concentration of a strategically important industry in this area. Reminders come around every so many years, usually in the form of Hurricanes, including recently Katrina / Rita in 2005, Ike in 2008 and Harvey in 2017. There’s an admonition about having too many really important things in one place – erm.. something about eggs. Well, those strategically important chemical eggs are all crammed into a very fragile, weather-beaten basket and, among other things, it’s a national security risk.

Second – for the real nitty gritty useful detail, you gotta go to ICIS (of course). Check this out – a very cool data-fuelled graphic. I hope it works with your browser.

 

Hey one more thing before the news: The surfactants conferences are back for 2021. Register Here. World Surfactants starts on 25^th May. Demand is likely to be very high.

Now the (non-weather related) news:

First up, I’m usually very skeptical about distribution announcements, as they rarely signify a major development, but this one may be meaningful in light of new capacity added recently by Sasol and the financial ructions the company has been through. Apparently, according to ICIS,  Univar Solutions will be the primary distributor of Sasol’s alcohol and surfactant products in US and Canada  The agreement includes Sasol’s Alfol alcohols and Alfonic. Novel and Safol surfactants for the homecare and industrial cleaning, personal care, coatings, agriculture, and energy markets.

"This partnership utilises our shared organisational strengths,” said Brian Jurcak, vice president of product marketing management at Univar Solutions. “Sasol's expansive alcohol and surfactant portfolio fits well with our vertical market focused approach.”

"Univar Solutions' warehousing, distribution, logistics network, and digital marketplace leadership will enable Sasol to enhance our customer service and help meet our sustainability goals," said Victoria Stolarski, Sasol's director of marketing and sales, global alcohols and US surfactants. "Through Univar Solutions we will gain packaging and shipping efficiencies that will help us reduce both plastic use and fuel consumption."

 

Not exactly surfactant related but I found this interesting. Right at the end of January, ICIS reported that  Stepan has acquired INVISTA's aromatic polyester polyol business and associated assets.  The acquired business, with manufacturing sites in Wilmington, North Carolina, and Vlissingen, Netherlands, has global sales of about $100m/year. The acquisition price was not disclosed.  The acquisition expands Stepan’s manufacturing capability in the US and Europe, supporting growth of its global rigid polyol business, CEO Quinn Stepan said in a statement on Friday (29 January). Nice add-on and very much in character for Stepan’s M&A strategy

 

Stepan  continues buying stuff in the following news, from ICIS: Stepan has acquired a fermentation plant in Lake Providence, Louisiana, to support its bio-surfactants business, for an undisclosed sum.  With additional investment, the company expects to be able to produce 20,000 tonnes/year of bio-surfactants at the site.  The deal comes after Stepan in March 2020 acquired NATSURFACT, a rhamnolipid-based line of bio-surfactants derived from renewable sources.  "The acquisition of an industrial scale fermentation plant represents the latest step in our bio-surfactant commercialisation efforts,” Quinn Stepan, CEO of the US-based producer of specialty and intermediate chemicals, said in a statement late on Tuesday.  Fermentation is a new platform technology for the company as it looks to commercialize the next generation surfactants.  “Bio-surfactants, produced via fermentation, are attractive due to their favourable biodegradability, low toxicity, and in some cases, unique antimicrobial properties," Quinn Stepan said. So – this, in my view is great to see. A solid, not betting the company move, to provide capacity for the Logos technology as the business grows. Excellent. Now, it doesn't say anywhere, but I’m wondering if this is the old Myriant plant – same town in LA. That was built to make succinic acid but the process is fermentation. If so – wow! That thing was pretty nice and cost about $80Million to build, most of which was covered by the DOE and DOA – ie, you.. and me. But look, if this is that plant then I am happy that a sensible company now has it and will no doubt put it to good use. And I’m sure that Stepan paid nothing close to a fraction of the original sum. Good for them.  I’m pretty excited to see the output. Yeah that’s right, sounds like cheerleading for biosurfactants. So..?

Meanwhile, on the alcohol beat aroud the beginng of the month, the great Lucas Hall reports that  US fatty alcohols spot prices remain elevated despite downtrend in Asia: Buyers that did not contract their typical quarterly volumes amid the bullishiness in feedstock costs in Q4 continue to pay a premium for spot volumes, despite the recent downward correction in palm kernel costs (PKO) in recent weeks.  Although PKO costs have stabilised and the southeast Asian markets have entered a lull before the upcoming Lunar New Year holiday, spot prices remain above contract levels as sellers work through higher priced feedstock inventory against the backdrop of record high freight costs, tight shipping equipment availability and rebounding-to-strong demand across most end sectors. Mass balance premiums continue to face pressure from tight shipping availability made worse by the recent US ban on palm oil imports from the world's largest palm oil producer by land size - Sime Darby.

Feedstock markets remain volatile, however, with crude palm oil (CPO) costs increasing and palm kernel oil (PKO) costs decreasing week on week.

Palm Product	Delivery	9 February	2 February
CPO	DEL, south Malaysia	M$3,980.00	M$3,900.00
PKO	DEL, south Malaysia	$1,201.48	$1,210.54
Palm Olein	FOB, Malaysia	$1,025.00	$1,010.00
Palm Stearin	FOB, Malaysia	$990.00	$967.50
PFAD	FOB, Malaysia	$905.00	$867.50

All prices are on a per tonne basis.

Sasol will remain on force majeure for linear alcohols and ethoxylates at its Lake Charles Chemical Complex (LCCC) in Louisiana through February, confirmed the company, following a hurricane-related outage in 2020. The plant restarted in late October.  US spot prices remain above $1/lb ex-tank for mid-cut and C16-18 alcohols despite lower prices in southeast Asia amid continued high freight costs and stable-to-strong demand in most core end markets.  Mass balance premiums have been heard in a range of 6 cents/lb or higher over non-certified material. Tight vessel availability has I ncreased demand for domestic volumes among synthetic producers, maintaining pressure on the market.

In Europe’s alcohols market, Samantha Wright reports that Second-quarter discussions for European fatty acids and fatty alcohols have been halted by unclear expectations for availability in the next quarter.  In the fatty acids market, most producers are not confirming supply levels for either palm or tallow for the second quarter. Expectations are that availability will become clear by mid-February.

Negotiations are likely to re-start after that point.  Oleic acid is facing the most tightness, with palm and tallow supply limited.  Palm-derived shortages are caused by vessel delays from Asia, which have been further compounded by sharply rising freight costs in January.  Tallow tightness is due to an increase in tallow biodiesel demand coupled with a lack of tallow production amid restaurant closures across Europe.  Tallow stearic supply is also limited, while the palm stearic market is more balanced.

Fatty alcohols buyers are stalling discussions with the hope that supply levels will increase and take some pressure off the market.  There is tightness in the first quarter amid the container vessel delays from Asia, but the market is likely to balance out once delayed vessels arrive in the region.  Currently if players want material in the first quarter it is limited but the market is looking balanced for the second quarter.

Demand remains healthy, especially given production issues with ethylene oxide (EO). EO and fatty alcohols are used together in the production of alcohol ethoxylates.

The problems have caused tightness in the downstream ethoxylates market, which has in turn boosted buying interest for fatty alcohols.

 In Asia’s Alcohols Market – the market is seeing increasing spot interest from China, following the return of market players from the week-long Lunar New Year holidays.

Chinese market players sought to restock and replenish their dwindling fatty alcohols inventories, after holding back from purchases prior to the Lunar New Year holidays, market sources said.  The Chinese market was closed 11-17 February for the Lunar New Year holidays.  “There are more enquiries for C12-14 alcohol blends from China buyers as they are now back from their holidays,” a regional producer said.

Spot prices of C12-14 blend fatty alcohol were stable to firm week on week at $1,950-2,150/tonne FOB (free on board) southeast (SE) Asia on 17 February, ICIS data showed.

Soaring freight costs had bolstered the selling indications of many fatty alcohols, as suppliers and customers face dwindling vessel space.  “Freight costs have doubled or even tripled in some cases due to the tight vessel space, and this is exerting upward pressure on fatty alcohol prices,” a separate supplier said.  Single-cut C10 alcohol saw prices rising by $50/tonne week on week to $2,500-2,650/tonne FOB SE Asia on 17 February, ICIS data showed.  “C10 alcohol supply is tight and we are seeing strong demand from the US for the construction segment, with April shipment sold at $2,630/tonne FOB SE Asia,” another regional producer said.

At the other end of the surfactant molecule: US January ethylene oxide (EO) contracts settled at a six-year high, in line with same-month feedstock ethylene contracts.  ICIS assesses EO at an increase from the previous month of 5.2 cents/lb ($115/tonne) FOB (free on board), at 59.2-68.7 cents/lb.  US January feedstock ethylene contracts settled 6.5 cents/lb higher from December, amid limited supply and strong derivative demand.

 

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.  As you know, like ethylene, EO contracts are settled at the beginning of the month for the previous month’s price.

And in ethoxylates news from Asia: ICS notes that Asia’s fatty alcohol ethoxylates (FAE) market is seeing upward pressure due to rising feedstock costs and bullish market sentiment following the return of Chinese players from the Lunar New Year holidays.  Selling indications for March shipments are likely to rise further due to the continued erosion in margins from cost pressures, demand, and supply concerns, market sources said.  “The feedstock fatty alcohol prices and ethylene oxide prices have gone up significantly. We have no choice but to increase our offers as our margins have been severely eroded,” a regional FAE producer said.  Restocking activities by Chinese players post-Lunar New Year holiday have added upward pressure on prices, market sources said.  The Chinese market was closed from 11-17 February for the festive holiday.  On 25 February, FAE spot prices rose by $75/tonne week-on-week to $1,570/tonne CIF (cost, freight and insurance) China for drummed material, ICIS data showed.

 

Supply concerns due to the ripple effect from an unexpected polar storm, which has crippled production in Texas, a major petrochemical production hub in the US, are also expected to add upward pressure.  Crackers, refineries, plants and factories shut down in Texas due to the unprecedented cold snap, disrupting supply and impacting the global trade flow.  Clariant, Indorama, Oxiteno and Sasol were some of the plants in the surfactants business that shut in the US due to the cold snap.  “The winter storm was unprecedented in the US, and the supply disruption may prompt some producers in Asia to divert their supplies to the US,” a regional producer said.  “All the commodity prices in China are rising due to the bullish sentiment as well as supply disruptions from the winter storm in Texas,” a trader said.  Upstream Chinese domestic ethylene oxide prices hit Chinese yuan (CNY) 7,600/tonne ex-tank east China on 25 February, up from CNY6,800/tonne ex-tank on 19 February, ICIS data showed.  Meanwhile, feedstock fatty alcohol C12-14 blends rose to $2,075/tonne FOB (free on board) southeast Asia on 25 February, up from $2,025/tonne FOB SE Asia on 3 February, ICIS data showed.

We don't talk much about silicone surfactants here, but mid-month, Evonik provided a statement on their line of these products and so we give it you here. : Evonik has improved the sustainability of its entire European silicone surfactants portfolio. The materials, used as stabiliser additives for polyurethane (PU) applications, now include only low cyclics or low volatile organic compounds (VOC).  All products in this portfolio are either compliant with or have surpassed the standard safety requirements.  Of Evonik’s globally available surfactants, most contain levels below the required 0.1% for each cyclic siloxane species found in finished PU foam products.

Cyclic siloxanes are necessary building block-materials for siloxane polymers which are used as silicone surfactants in the PU foam industry.  Finished PU foam products are used across the construction, automotive and appliance industries and promote energy efficiency in insulation applications.  Evonik started to minimise cyclic siloxane content in its silicone surfactants in 2003.  VOCs are gases emitted from solids or liquids, and are heavily regulated due to the potentially hazardous impact on the environment or human health. // OK so there you have it. You may be familiar the rush to find silicone alternatives in cosmetics but the matter does impact surfactants, in a small way, also.

In news from Brazil.:  Surfactants producer Oxiteno reported  a Q4 operating profit versus a loss during the same time in 2019 because sales rose faster than costs.

The following shows the financial performance of the company.

Figures are in millions of reais (R).

Rm	Q4 20	Q4 19	%
Sales	1,477	1,012	46.0
Cost of sales	1,186	827	43.4
Gross profit	290	184	57.5
Operating income	143	-20	-
Adjusted EBITDA	262	57	-

Source: Ultrapar

Sales rose because of higher volumes and a weaker real, said Ultrapar, the parent company of Oxiteno.

The following tables break down Oxiteno's sales volumes. The first is organised by type of product. The second is by the destination of the volumes. Figures in both tables are in thousands of tonnes.

thousands tonnes	Q4 20	Q4 19	%
Commodities	33	33	0
Specialities	171	142	20.4
TOTAL	204	175	16.6

Source: Ultrapar

Specialty volumes rose because of increased demand in segments for agriculture, coatings and the home and personal care. Sales also rose in the US, where the company has a plant.

thousands of tonnes	Q4 20	Q4 19	%
Brazil	154	125	23.2
International	50	50	0.0
TOTAL	204	175	16.6

Source: Ultrapar

Meanwhile, cost of sales rose because of the devaluation of the Brazil's domestic currency and higher sales.  Looking ahead, Oxiteno expects to report R800m-1,100m ($148m-203m) in 2021 adjusted earnings before interest, tax, depreciation and amortisation (EBITDA). That compares with R784.9m in 2020.  Ultrapar also owns fuel distributors Ipiranga and Ultragaz, liquid bulk storage firm Ultracargo and drugstore chain Extrafarma. As we have reported here, Ulltrapar has announced its intention to divest Oxiteno.

Interesting news from Lonza The company has entered into a definitive agreement with Bain Capital and Cinven to acquire Lonza’s Specialty Ingredients business and operations for an enterprise value of CHF 4.2 billion. Lonza’s Specialty Ingredients business operates across 17 manufacturing sites globally and has approximately 2,800 permanent employees. The business is a leading provider of microbial control solutions for Professional Hygiene and Personal Care products. It also offers the custom development and manufacturing of specialty chemicals and composites to support the electronics, aerospace, food and agrochemical industries. The transaction is expected to close in H2 2021, subject to customary closing conditions.  BofA Securities and UBS are acting as joint financial advisors to Lonza. Surfactants folks will know that Lonza has a surfactants business based out of Willamport, PA, supplying eithoxylates to the food industry, among others. It never seemed core to Lonza overall and this split confirms that impression. But will the Williamsport business be core to the new PE owned specialties business? Well, it’s more core now than it was but let’s see.

And finally (in the news section) from the recent edition of Mining Weekly (yes that’s right) an old friend of the blog was quoted as saying that Sasol would no longer need to raise cash through a rights issue. Here’s the article. :

Chemicals and energy group Sasol confirmed that it would no longer pursue a rights issue in light of progress made, through assets sales and cost savings, to shore up its debt-laden balance sheet. In a recorded results presentation, president and CEO Fleetwood Grobler said that the decision not to implement a rights issues, which had been capped at a possible $2-billion, was made after securing $3.3-billion from asset disposals since March last year.
He indicated that further asset disposals were being pursued, including the sale of its stake in the Rompco gas pipeline from Mozambique to South Africa, which should lift the value of disposals to $3.8-billion by December 2021.

Thereafter, proceeds from asset sales should fall sharply.

Grobler said the group was also on track to delivered a further $1-billion in permanent cost savings during its 2021 financial year, having already reported savings of $1-billion in 2020.

“This significant progress, together with a more encouraging macroeconomic outlook has mitigated the need for us to do a rights issue,” Grobler announced.

At December 31, Sasol’s total debt had fallen to R126.3-billion compared with R189.7-billion as at June 30, with proceeds from asset sales used to repay the US dollar syndicated loan, as well as a portion of a revolving credit facility. These action reduced Sasol’s US dollar denominated debt by $2-billion to $8.2-billion.

Gearing decreased from 114.5% at June 30, 2020 to 76% at the end of December 2020. Speaking against the backdrop of a strong recovery in the group’s financial results, with earnings increasing by more than 100% to R15.3-billion from R4.5-billion in the prior period, Grobler asserted that Sasol “had turned that corner” and that its current focus was, thus, on delivering on its ‘Sasol 2.0’ strategy. The JSE-listed group was deploying the strategy to streamline operations and make its chemicals and energy units less reliant on a recovery in chemicals and oil prices. Good for them.

So – that’s it for (the news in) the short month.

Just a short coda to the month – not related to anything really. I’ve been mining the back-catalogue of Deep Purple recently. Check this out – the opening track to Live in Japan – recorded in 1972. One of the many things I like about it as an opening song to a live show is that it’s keyboard led – that is the intro is led by Jon Lord's Hammond organ and the first solo is actually a keyboard solo at 2:14. We don't get to hear the inevitable Ritchie Blackmore indulgence (in a good way) until 4:18. It’s worth waiting for though. Wow. Thing is that Richie on a good night was incredible – and on a bad night, well…. . But this was a good night.

Were any of our Japanese readers there that night? If so, get in touch and tell us what it was like.

One good night, at which I was present: He’d left Deep Purple by then. But listen to this monstrous riff that opens Greensleeves, live in 1976. Just ignore the rather cheesy intro by RJ Dio and take in that opening riff at 2:34. Look, yeah, it’s not Bach or Mozart, but I have a sense that gargantuan riff and those solos woven through the piece will last for a while.

Here’s one more thought: Go back to about 2:18 in the song above, the quiet guitar part just before the titanic riff. Does it remind of you of anything ? Maybe it’s just me, but it immediately takes me back to the first 2 minutes of this great classic….

From 1977, so .. maybe..

OK, OK  - so now we’re on Rush. This is what the perfect expression of guitar/bass/drums sounds like. You should know this  - live in Cleveland in 2012..

That’s it. Beautiful.

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