Surfactants Monthly – May (and early June) 2020

Surfactants Monthly – May (and early June)

This May was to have been the month of the 10^th ICIS World Surfactants Conference in Jersey City, co-produced by your correspondent. Surfactants X as I called it in those super-bowl daydream moments. I’d alternately assume the personas of Bill Bellichick, Vince Lombardi, Joe Montana, George Best and Tom Brady (“hey Gisele, get in on this selfie with Tiger, Cardi and Oprah!”). Then I’d come to in my study where I’ve been for the last 3 months, with the dog’s head resting on my knee. Fine. I have a big-screen TV now for video calls and have that badge of honor of the modern day ‘net warrior, zoom neck (it’s a thing. Google it). I have a super-hi-def streaming cam that faithfully details every facial imperfection across 14 timezones. A studio mic that detects every prevarication, obfuscation and deflection in my voice. And on top of all this, United has extended my exalted elite status through to the end of ’21. Is this not truly the best of all possible worlds!?

The conference did not happen, of course. But stay tuned to this blog. We have some very special things planned for this year and next year. I think you’ll like them a lot.

On the P2 front, we’ve taken advantage of the becalming of the economy to engage in marketing LAMF (as the kids say.. do they still say that? It was Johnny Thunders and the Heartbreakers who popularized the term in 1977 – so not kids any more I guess..). Check out the website and this page in particular https://p2science.com/resources/ and Linkedin.

The news: As usual, most if not all of the news comes to us courtesy of ICIS and so again, I encourage to check out their many data and information services.

European ethylene oxide (EO) contracts dropped for the third month in a row, on the back of upstream ethylene losses for May. The European ethylene contract reference price for May has been set at €620/tonne, down by €100/tonne from April. Ethylene contract reference prices have fallen by €350/tonne in the last three months, on the back of the coronavirus pandemic impacts on upstream costs and downstream demand.

European EO prices dropped by €82/tonne at both ends of the range bringing prices to €898-1,066/tonne free delivered (FD) northwest Europe (NWE). A couple of turnarounds which took place in March and April have finished, and other maintenance  due to take place at the end of the quarter has been postponed. Due to the postponed turnarounds, supply is expected to remain healthy in northern Europe.

European producer BASF previously conducted a planned maintenance on EO in Ludwigshafen, Germany according to sources. The turnaround was said to have ended last week but this was not officially confirmed. Shell's EO and ethylene glycol (EG) planned turnaround at its plant in Moerdijk in the Netherlands, which was originally due to take place in the second quarter, has been postponed to autumn 2020. This is expected to exert more pressure on the ample MEG supply situation in Europe during May. Another planned turnaround which took place in Belgium also ended around Easter, according to sources, exacerbating the long downstream MEG supply situation.

First-quarter formula EO contracts were stable to soft, and a drastic drop was seen in April and May due to crashing ethylene feedstock costs. Demand is varied in the downstream markets. MEG demand and prices are heavily reduced in the spot market, with anti-freeze demand drying up on automotive industry struggles during the coronavirus pandemic. Other derivative markets more connected to the personal care and surfactants market are experiencing healthier demand.

Meanwhile US Ethylene Oxide contracts settled at a decrease, in line with April feedstock ethylene. ICIS assesses April EO at 45.4-54.9 cents/lb ($1,001-$1,210/tonne) FOB (free on board) US Gulf, lower by 1 cent/lb from the previous month.

This is the lowest level for EO contracts since June 2002, according to ICIS data. US April ethylene contracts settled at 20.5 cents/lb, down by 1.25 cents/lb from March.

Chinese EO, however, is heading in the other direction, according to ICIS’s Yuanlin Koh. In less than two weeks, China’s domestic ethylene oxide (EO) prices rose by another yuan (CNY) 200/tonne, according to market sources. This rise succeeded a previous rise of CNY300/tonne on 30 April. One of the largest EO producers in China - China Petroleum & Chemical Corp, or Sinopec, announced revision of its list price to CNY6,500/tonne ex-tank. The rise was generally attributed to recent strong upstream ethylene values and tightened EO supply on domestic plant turnarounds, especially in the east.

In other EO news: The IQOXE plant EO/EG production restarts after the 13 – 14^th January explosion in Tarragona, Spain. The Industrias Quimicas de Oxido de Etileno (IQOXE) has roughly, capacity for 140,000 MT/yr (EO); 106,000 MT/yr (EG) . In January, an explosion at IQOXE’s Tarragona chemicals plant in Spain occurred in a reactor, which then ignited a nearby storage tank. Since 13^th May, EO and EG production is running again, according to a company source.

Earnings Season: Oxiteno reported a Q1 net income of reais (R) 108.5m ($18.3m), compared with a net loss of R13.7m from the same quarter of last year because of higher sales, lower costs and a one-time R71m tax credit. [God bless tax credits really. I’ve been saved by them occasionally myself over the years]. /Oxiteno also benefited from the depreciation of the real against the dollar.

The following table summarises the company's financial performance. Figures are in millions of reais.

	Q1 20	Q1 19	Change (%)
Sales	1,107.9	1,055.7	4.9
Cost of sales	876.9	898.6	-2.4
Gross profit	231.0	157.0	47.1
Operating income	108.5	-13.7

Domestic sales rose because of demand in the crop solutions and home and personal care segments, as well as greater US sales volume with the ramp-up of the Pasadena surfactants plant in Texas. Cost of sales fell because of a reduction in raw material costs, particularly for ethylene and palm kernel oil (PKO).

In an earnings webcast, Frederico Curado,Ultrapar (Oxiteno’s parent) CEO provided further color. Sales volume of Oxiteno’s specialty chemicals were stable compared to Q1 2019. Curado attributed this to the increase in sales in the crop solutions and home and personal care segments, offset by a reduction of 6% in exports. Curado said these were more resilient segments, unlike the coatings, oil and gas segments which had been negatively impacted by the pandemic.

“We had a slight increase of 2% in sales volume of commodities driven by exports,” he said. “Oxiteno’s results in the quarter benefited from improved contribution margins in US dollars per tonne, reduction in the cost of key raw materials and the devaluation of the real.” Oxiteno’s surfactants plant in Pasadena reported a 31% increase in sales volumes in the quarter. “Results were also boosted by a non-recurring tax credit of R71m booked in the first quarter of 2020,” Curado said. “As a result Oxitano’s EBITDA was a R193m in the quarter.”

Ultrapar said it adopted emergency measures to combat the economic fallout of the coronavirus pandemic, such as a 30% reduction in its investment plan for 2020, an increase in cash position through further credit facilities worth a total of R1.5bn and the withdrawal of its 2020 guidance.

“We are not going to have to buy US dollars to settle all the bonds,” Curado said. “We are not taking money from our cash to settle the bonds, the settlement will be coming from exports that are being performed by Oxiteno over the years.”

Curado was reluctant to make predictions during the “current crisis” when questioned. “There’s a lot of volatility," he said. “It will be a few months before we have any idea where this whole thing will end… We are tuning down the capex for this year based on what we see for the next several weeks. All our businesses are quite resilient.”

Lucas Hall, the new ICIS Fatty Alcohols maven reports that the supply of both mid-cut and C16-18 alcohols remains tight amid delayed shipments of Q2 alcohols stemming from transport logistic and other coronavirus-related constraints in southeast Asia and Europe during the quarter.

Although production in those regions is improving as more countries exit lockdowns related to the virus, many Q2 volumes are not expected to arrive until summer or early fall, increasing demand for incremental volumes in the spot market to cover strong demand in the personal care sector during and after the coronavirus.

Mid-cut alcohols are particularly tight, with summer turnarounds expected to keep the market snug into the third quarter. An increase in feedstock costs across the oil palm complex in recent days has, however, prompted some buyers to pull back their bids amid expectations feedstock costs will drop over the summer during the peak palm harvest season, helping counterbalance the market. In addition to natural alcohols, petrochemical alcohol supply is also tight, as the market awaits the startup of Sasol's Ziegler and Guerbet alcohols units - now expected at the end of the quarter - adding to the upward pressure.

Despite tight supply, most large volume buyers are largely satisfied with their Q2 volumes, limiting significant upward pressure on the market. However, spot prices have been heard within and above Q2, depending on the buyer's Q2 contract settlement, at a 3-5 cent/lb increase from the previous quarter.

A while back in prior blogs (November ‘19 and January ‘20) we wrote about EO emissions in the US. Here's the update as reported by ICIS: The US Environmental Protection Agency (EPA) has finalised a rule to regulate ethylene oxide (EO) emissions.

"The EPA evaluated the risks remaining and determined cancer risks from the miscellaneous organic chemical manufacturing source category to be unacceptable," according to a statement on the EPA website. To reduce risks to an acceptable level, the agency said, the EPA is finalising additional requirements for process vents, storage tanks and equipment used with EO. These requirements will bring risk to an acceptable level, the EPA said.
In May the Texas Commission on Environmental Quality (TCEQ) increased its EO safe exposure limit. TCEQ set a long-term effects screening level of 2.4 parts per billion (ppb), which is the health-protective air concentration used to determine limits for proposed air permits in Texas. TCEQ’s previous, preliminary EO limit was 1 ppb.

According to TCEQ, its EO cancer dose-response assessment shows that this chemical, used to sterilise half of the approximately 40bn medical devices used in the US each year, poses less risk than was previously thought.

In November 2019, a bipartisan congressional task force assembled to address the safety of EO emissions. And in January 2020, the American Chemistry Council created a new project to study air quality information for EO emissions in the US state of Georgia.

So – some positives and negatives right? The increasing recognition of EO’s role in medical device sterilization has to be putting some wind in its sails though.

On a related note, as reported by HAPPI, BASF has launched a new 1,4-Dioxane Online Calculator which enables personal care formulators to determine the 1,4-Dioxane content in their formulas. The tool is accessible from both desktop and mobile devices and recommends alternative BASF ingredients to bring the total 1,4-Dioxane value of the formulation to less than 1ppm.

S4389B, a New York state law signed in December 2019, prohibits the sale of personal care products and household cleaning products containing more than 2ppm 1,4-Dioxane, as well as cosmetics products containing more than 10ppm 1,4-Dioxane by the end of 2022. For personal care and household cleaning products the limit will be further reduced to 1ppm at the end of 2023. The state of California is also assessing 1,4-Dioxane in home and personal care products through the Safer Consumer Products program and research is estimated to be completed in three years.

To allow for full formulation flexibility, in addition to the BASF product offering and recommendations, the 1,4-Dioxane Online Calculator allows inclusion of non-BASF ingredients if the 1,4-Dioxane level in them is identified. Formulators are also able to place sample requests for BASF ingredients directly from the calculator. [Pretty Clever]

Finally some cool news, that I found in Global Cosmetics Industry Magazine: For the first time, ‘Safer Choice’ has approved a Safer Chemical Ingredients List (SCIL) submission by a non-manufacturer: The American Cleaning Institute (ACI), which submitted eight cleansing ingredients.

The SCIL is a list of chemical ingredients, arranged by functional use class that the Safer Choice Program has evaluated and determined to be safer than traditional chemical ingredients. This list is designed to help manufacturers find safer chemical alternatives that meet the criteria of the Safer Choice Program.

The ACI has worked with environmental and risk sciences consulting firm Gradient in compiling the necessary data for review by the Environmental Protection Agency (EPA).

“Adding chemicals to the SCIL encourages innovation and growth in safer products, increases markets for manufacturers and helps protect people and the environment,” said Kathleen Stanton, ACI associate vice president of Technical and International Affairs, who led ACI’s work on the submissions. “The SCIL has a rigorous review process undertaken by both EPA and third parties to ensure the chemicals meet the Safer Choice Surfactant Criteria.”

The list is not intended to be exclusive. Chemicals may be submitted as part of a formulation that the program has yet to review or a chemical manufacturer may develop a chemical to meet the Safer Choice criteria. If the chemicals meet the criteria, they may be approved for use in Safer Choice-labeled products and added to the SCIL. Chemicals may be removed from the list or have its status changed based on new data or innovations.

The following surfactants were added to the SCIL on May 13, 2020:

• Octadecanoic acid, 2-ethylhexyl ester (CASRN 22047-49-0)
• Alcohols, C12-15 (CASRN 63393-82-8)
• Octadecanoic acid, 12-hydroxy- (CASRN 106-14-9)
• Fatty acids, C8-18 and C18-unsatd., sodium salts (CASRN 67701-10-4)
• Fatty acids, C14-18 and C16-18-unsatd., sodium salts (CASRN 67701-11-5)
• Potassium oleate (CASRN 143-18-0)
• Fatty acids, palm-oil (CASRN 68440-15-3)
• Sulfuric acid, mono-C14-18-alkyl esters, sodium salts (CASRN 68081-98-1)

Good on you, ACI!

Wrapping up this month:  I have a story. I came to the US in 1984 the day after labor day. Shortly after, I met the girl who is now my wife. I got a cold or flu or something and we went to the drugstore to get something for it. Bethe picked up a box of Alka-Seltzer Plus and thrust it toward me triumphantly saying “here this’ll cure it”. In my best sort of Hugh Grant voice, I replied that “you know, that doesn't actually cure anything, it merely treats the symptoms”. Facing me among the cold medicine, halloween candy and 17 brands of scented candle, 70’s muzak wafting through the chilled and dehumidified CVS air , she grabbed hold of my upper arms, looked earnestly and deeply into my eyes and slowly, with great patience explained.. “Neil. This is America. We treat the symptom”. I’ve thought about that many times since then.

See you soon..