Surfactants Monthly Summary – September 2105
As I prepare to head back over to Southeast Asia for our plenary speaking engagement on day 1 of PIPOC in KL, the following news from earlier in September caught my eye. Apparently Wilmar is not doing enough deals! This according to…. Wilmar. This news may come as a surprise to those of us who have followed the prolific company’s activities in surfactants and oleochemicals alone. However, the Kuok family has decided they need to kick it up a notch and therefore have brought in the former head of Goldman Sachs Southeast Asia Investment Banking unit, Hsin Yue Yong in a dealmaking role. It probably doesn’t hurt that Ms. Yong is the wife of the nephew of Wilmar’s CEO, Kuok Khoon Hong. However, with an almost 20 career with Goldman behind her, she is clearly no lightweight. Look for more deals going forward like Wilmar’s acquisition with First Pacific Co., of Australia's largest baker, Goodman Fielder Ltd. Who knows, we may soon see the much anticipated big move into the North American surfactant value chain by Kuok family. This is my speculation only, I must add. However, if you’ve read this blog or attended any of my surfactant conferences recently, you’ll know what I’m talking about.
Sticking with Southeast Asia, fatty acid prices were starting to nudge up mid-month, according to ICIS. Prices for C12 lauric acid were assessed at around $780-820/tonne FOB SEA in the week ended 16 September, up by $30/tonne from the previous week. Palm oil prices continued a steady rebound, with crude palm oil (CPO) and palm kernel oil (PKO) prices increasing by ringgit (M$) 100/tonne and $27/tonne week-on-week, respectively. The rise in palm oil prices was supported by the continued weakening ringgit and reports that El Nino may cause crude palm oil output in Indonesia, the world’s largest producer and exporter, to decline by 20% to 27.5 million tonnes in 2016.
Volatility in the PKO market, however, made it difficult to fix pricing in fatty alcohols in September. The PKO price has swung from more than $800/tonne free delivered (FD) south Malaysia in late July, down to $592/tonne FD in late August and back up to $778/tonne by Sept 15th.
Speaking of deals, we finally got confirmation that Air Products plans to spin off its materials technologies business by September 2016, according to the company. Guillermo Novo would be the CEO of the new company. He is currently executive vice president of the materials technologies business. Air Products CEO Seifi Ghasemi would be the non-executive chairman. The Materials Technologies business produces polyurethane catalysts and other additives for polyurethane foams; epoxy amine curing agents and other products for epoxy systems; specialty surfactants for formulated systems; and functional additives for industrial cleaning and mining. These (bolded items) of course the old Tomah business with plants in Janesville, WI and Louisiana.
Shell started up its new high-purity ethylene oxide (HPEO) purification and ethoxylates units at Jurong Island in Singapore, around mid-month The new units, each with a 140,000 tonne/year capacity, more than doubled Shell’s output of HPEO and ethoxylates at the production site. Previously, Shell’s HPEO capacity was 65,000 tonnes/year and its alcohol ethoxylates capacity stood at 40,000 tonnes/year, with the units operated by its fully-owned subsidiary Ethylene Glycols (Singapore). Feedstock for the new HPEO plant comes from Shell’s ethylene oxide/monoethylene glycol (EO/MEG) plant, which is integrated with the company’s ethylene cracker and refinery in neighbouring Bukom Island, Shell said.
In more EO news, Indorama’s Clear Lake, Texas, plant was restarted on 5 September following an unexpected outage
Continuing economic problems in Malaysia and the weakening of the currency, now hang over the surfactant value chain – according to some analysis by ICIS. Petrochemical production in Malaysia is being curtailed by the unabated heavy depreciation of the ringgit (M$) that is pushing up costs of imported raw material. The ringgit is dubbed the worst performer among southeast Asian currencies, having shed about quarter of its value against the US dollar from the start of the year, partly on concerns over political instability in the region’s third-biggest economy. Malaysia’s petrochemical producers that rely on imported raw materials for production are being forced to hike prices to the domestic market to cover their increased cost, industry sources said.
A Malaysia-based fatty alcohol ethoxylates (FAE) producer told ICIS: “Exports of finished products [such as shampoos and shower gels] are falling, because it is now more expensive to import the raw materials and then export the finished products based on the exchange rate. “It’s even worse that we have to compete with the cheaper China goods,” the producer said. “For now, we can only hope for the domestic demand can sustain our operations. We are 50% behind the target sales for our ethylene derivatives for this years,” the FAE producer said.
More news re the Central Ohio cracker project: Japanese petrochemicals engineer JGC Corporation said it had been selected for work on a proposed world-scale petrochemicals complex at Dilles Bottom, Ohio. The project developer, PTT Global Chemical America, sent JGC and partners Bechtel and Samsung a letter of intent to deliver front-end engineering and design (FEED) services for the project. The project scope includes an ethane cracker with a capacity of 1.0m tonnes/year, a high-density polyethylene (HDPE) unit, an ethylene oxide ethylene glycol (EOEG) unit, as well as the associated off-sites and utilities. JGC’s Houston office would be the lead execution centre for the FEED, it said. JGC added that it would “vigorously promote sales activities” in North America where many petrochemical projects utilising shale gas are planned. Does anyone now doubt that North America is promised land for surfactant manufacturers (ok that is an exaggeration, but there are clearly tougher places to be making surfactants today, such as Europe, Latin America and Asia, to name 3).
By the way, earlier in the month, Supattanapong Punmeechaow President and CEO of PTTGC spoke to ICIS and noted that Innovation and technological research are the key to the company’s growth. As a first step, the company established a Science & Innovation Center in Rayong province. It will also develop other products in accordance with PTTGC’s business goals, such as polymer, ethylene oxide and oleochemical products.
In more US cracker news, Indorama agreed to buy a shale gas-based cracker in the US from Occidental Chemical Corp (OxyChem), with investment costs at “a fraction of what we had originally planned” to build one, a company spokesperson told ICIS. The cracker is located in Lake Charles, Louisiana, and can process both ethane and propane feedstock to produce about 370,000 tonnes/year of ethylene and 30,000 tonnes/year of propylene. The cracker is expected to start commercial production before the end of 2017 on completion of required refurbishment and maintenance. The cracker was idled in the first quarter of 2001 by Equistar, which was a joint venture between Lyondell Chemical, Millennium Chemical and OxyChem. OxyChem leased the land and facilities to Equistar, according to Jones. The cracker capacity puts another piece into the vertically integrated jigsaw puzzle for Indorama with purified terephthalic acid (PTA) operations in Canada and monoethylene glycol (MEG) and EO in Texas, as well as downstream polyethylene terephthalate (PET) and fibres and yarns.
And in a final snippet of US Cracker news, Shell Chemicals noted that it will undertake an extensive re-vegetation plan to rehabilitate the area surrounding the old Horsehead Corp. site along the Ohio River.
The Southeast Asian march into Europe continues with IOI agreeing to acquire a Cremer Oleo oleochemicals business in Germany for €89.4m The deal includes two production sites with a combined processing capacity of about 39,200 tonnes/year, located at Witten, near Dortmund, and at Wittenberge, northwest of Berlin. The company gave a clue to this sometimes puzzling trend of companies rushing into an already overbuilt market. According to IOI as told to ICIS, the acquisition of Cremer Oleo would allow IOI’s oleochemicals division to expand into a new product range to serve higher-margin but difficult to penetrate pharmaceutical, cosmetic, food and performance chemicals markets worldwide, it said. Furthermore, it would help mitigate increased import tariffs on Malaysian oleochemicals into the EU following the withdrawal in 2014 of a “Generalised Scheme of Preferences”.
Late in the month Sasol announced some decent results and reiterated their commitment to the US market. The company broke ground in late 2014 on an $8.9bn cracker and derivatives complex in Lake Charles, Louisiana, that stands to produce 1.5m tonnes/year of ethylene. Although the cost advantage of US shale-derived oil and gas has narrowed on the back of falling global oil prices that are expected to last for a couple of years, shale gas remains attractive to the company. Geography. However, the lower oil price has led the company to move to tighten its belt and target cash savings, leading to a final investment decision (FID) on a large-scale gas-to-liquids (GTL) plant in Louisiana being deferred in January this year. An FID remains on hold, according to a Sasol spokesman.
Falling oil prices have led to the postponement of numerous planned projects in the US, with several mooted cracker complexes remaining in limbo if work had not started on them by the time prices started to fall. Sasol locked down a $4bn credit facility from a syndicate of 18 lenders in December 2014 for the Lake Charles cracker, which is expected to come online in 2018. The complex is also expected to have a polyethylene (PE) production capacity of 900,000 tonnes/year split between low- and linear low-density PE (LDPE and LLDPE), along with 300,000 tonnes/year of ethylene oxide and glycol (EO/EG) and 300,000 tones year of specialty alcohols.
Sad news from my alma mater, Pilot Chemical. Former Chairman and CEO Pete Morrisroe passed away recently. Pete spent most of his career with Pilot, which his father started. In 1980 he became General Manager of the Western Division of Pilot – giving him responsibility for Pilot's California and Texas operations. In 1988 he became Chairman and CEO of Pilot – positions he held until he retired in 1999. Our condolences to the family.
An interesting article in Mumbai’s Business Standard, talked about a sustainable farming partnership which L’Oreal had already discussed in depth at our European Surfactant Conference in Berlin. Solvay and L'Oreal teamed up in a scalable three-year project to teach and promote sustainable agricultural practices among 1,500 guar bean farmers across ten villages in the desert region of Bikaner, Rajasthan. Solvay is one of the leading global players in guar derivatives and supplies its customers who formulate these ingredients in a variety of applications such as in food, cosmetics, oil & gas extraction and textile industries. Grown mainly in India's semi-arid regions, guar is the main resource for many farming communities but its production is volatile as it relies on monsoon rains. Solvay's ‘Sustainable Guar Initiative’ aims to empower countless farmers with the tools and knowledge to cultivate the crop through good agricultural practices, resulting in more continuous, high-yield production. Solvay's Novecare global business unit (GBU) in 2013 launched the initiative.
That’s it for this month. If you are going to be in KL next week, please do get in touch for a catch-up. I’ll be speaking on Tuesday afternoon at the plenary session of PIPOC at the KLCC, and yes, it’s all new, original, material. No music videos, no Dr. Who, just an interesting (at least to me) look at the big bang, how that led to palm fruit, the Petronas towers and… little packets of salt; and what this means if you are an oleochemicals producer. PIPOC is a great event to which I was last invited in 2011. I strongly encourage you to come along if you are in the neighbourhood.