September 2021 - Surfactants Monthly
For Blog Readers Only
We’re starting with a commercial for the upcoming European and Asian Surfactants Conference – Online - October 26th and 27th. I have a $100 promo-code only for readers of this blog only. Just use WSC21NB500 at checkout and you get $100 off the registration. I’m told that this is now the only way to get registered at less than the full price. So – don't say I never give you nowt! Check out the conference here or just go straight to registration here. We have some great new speakers and panelists from companies including:
- Sasol
- Reckitt Benckiser
- Clariant
- Ecover / Method
- IP Specialites
- Vespucci
- Locus
- Jiahua
- Godrej
- Arzeda
- ICOS Capital (invested in Holiferm)
- Mintel
- Flini
- Colt & Willow
So register here and use the promo-code WSC21NB500 to get $100 off. Great right? Blog readers only. I’ve always wanted to say that. As always, of course, I am producing and chairing the event and we will learn a lot and have a bit of fun along the way. See you there.
End of commercial. Start of some pre-news musings. I’ve spent a bit of time listening to 2 heavy metal bands this past month, Diamond Head and Metallica. Who? you might ask..Ah sorry, Metallica is an American heavy metal band that achieved prominence in the 80’s and 90’s and sold a few tens of millions of records over the past few decades. Anyhow, there’s something interesting that we might learn from Metallica’s history that's applicable to our work. And it’s not what you think.
Let’s do this: Listen to the next two songs as I present them here (courtesy of YouTube) and then we’ll pick up the discussion after the news section. If metal is not your thing – just listen to the first couple of minutes of each song (up to where the singing starts).
End of pre-news musings. Start of the News:
First – there continues to be a lot of Hurricane Ida outage and restart developments that I will not detail here. Your best resource is the great ICIS topic page at this link. It’s updated pretty much in real-time. Check it out (subscription may be required) .
In last month’s blog we wrote about the sale by the owners of Emery of Emery’s Asia business. Some helpful readers have provided me with some more information. First the filing by Mega First Corporation – which I link here [insert link] – notes the following:
“The Board of Directors of Mega First Corporation Berhad (“MFCB”) wishes to announce that Edenor Technology Sdn Bhd (the “Purchaser” or “Edenor Technology”), a 50:50 joint venture company between MFCB and 9M Technologies Sdn Bhd (“9M Technologies”), has on 19 August 2021 entered into a conditional Sale and Purchase Agreement (“SPA”) with Sime Darby Plantation Berhad and PTTGC International Private Limited (collectively, the “Vendors”) to purchase the entire issued and paid-up capital of Emery Oleochemicals (M) Sdn Bhd (“EOM”) and Emery Specialty Chemicals Sdn Bhd (“ESC”) for a Target Equity value of RM38 million (the “Proposed Acquisition”). “
Now – the name Edenor may well ring a bell for some readers. It’s a tradename used by Emery for some fatty acids and glycerine. It is also used by KLK for glycerine. Interestingly, reading the Mega-First filing further, we learn about 9M Technologies (and I am quoting here). “9M Technologies is a private limited company incorporated under the laws of Malaysia with an issued and paid-up share capital of RM14,950,000, comprising 14,950,000 ordinary shares. Its business is in investment, mergers and acquisitions and technical advisory services. The founder of 9M Technologies is Mr. Yeow Ah Kow who has more than 35 years international experience, mostly in the leadership role in oleochemicals, edible oils and specialty chemical business and manufacturing.” So – there we have it. AK Yeow, who many of our readers know, spent a large part of his career, running the oleochemicals business at KLK, is behind the buyout. Kudos to AK. We wish him much success.
In US Ethylene Oxide, ICIS reported at the beginning of September that August ethylene oxide (EO) contracts edged lower, tracking same-month feedstock ethylene contracts. ICIS assessed EO lower by 0.80 cents/lb ($18/tonne) from the previous month. US August ethylene contracts decreased by 1 cent/lb from the previous month, on resolved production issues and lower cash costs.
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 probably know, like ethylene, EO contracts are settled at the beginning of the month for the previous month’s price.
In addition, ICIS noted that, following Hurricane Ida, no significant damage to ethylene oxide (EO) units in Louisiana was reported. Still, producers awaited the return of third-party utilities and feedstocks, and largely have no estimate for restarting plants. The storm affected nearly 60% of US EO capacity, according to the ICIS Supply and Demand Database. In addition to significant EO capacity being affected, 18% of US downstream polyether polyol capacity and 14% of US capacity for co-feedstock propylene oxide (PO) is located in the area impacted by Hurricane Ida. This shortage could temporarily dampen demand for EO in this segment. A complementary feedstock for polyurethanes (PUR), methylene diphenyl diisocyanate (MDI), also could tighten further because of Ida, and thus could decrease demand for EO-derived polyols into PUR.
Around mid-month, Stepan, in the US, declared force majeure on surfactants-related products including ethoxylates and ethylene oxide/propylene oxide (EO/PO) polymers effective 15 September, according to a customer letter. The company cited shortages in the availability of multiple raw materials, and disrupted logistics. "Several of Stepan Company's suppliers have declared force majeure and confirmed limited allocation of their products impacting our ability to obtain key raw materials. We are working closely with our suppliers to understand their capabilities and continue to assess the overall impact on product availability," the letter said. Stepan did not immediately respond to a request for comment. The product lines included in the force majeure are: ethoxylates, EO/PO polymers, olefin sulfonates, synthetic sulfonates, synthetic ether sulfates, hard and soft sulfonates, amides, dry flowable dispersants, Chem-Specialties, phosphate esters, softeners, Sulfites-Specialties and blends containing these products.
Around the other side of the world, ICIS’s Helen Yan reported that Asia’s fatty alcohols market may see upward price pressure from increased Chinese spot interest amid limited local supplies, prevailing logistics issues and higher packaging costs. Chinese buyers are back in the spot market and seeking to replenish their dwindling stocks due to limited domestic supplies, market sources said. “We are seeing a pick-up in spot interest from China and they are looking for December cargoes due to reduced local production output,” a regional producer said. The ongoing environmental inspections of plants in China have curbed production output, market sources said. Upward costs pressures from logistics issues, including soaring container freight rates for regional and deep-sea trades, delayed shipments and congested ports, as well as rising packaging drum costs, are also bolstering the Asian fatty alcohols market.
Meanwhile, China’s month-long environmental inspections of five provinces housing industrial hubs have prompted independent refineries and some plants to either reduce operating rates or shut production. [Only in China right? .. Right? ..??] On 25 August-2 September, the country's Ministry of Environment and Ecology (MEE) dispatched working groups [ carry sticks and leaving the carrots back in the office] to Jilin (northeast), Shandong (east), Hubei (central), Guangdong (south) and Sichuan (southwest), to check on the provinces' compliance with environmental regulations. China's second round of crackdown on non-compliant industries across more than 30 provinces started in July 2019. [great thing, compliance isn’t it? I mean without that, where would we be..?]
ICIS’s great Lucas Hall provided the monthly North American Fatty Alchol update as follows: US Q4 fatty alcohols contract negotiations are largely finished, against the backdrop of ongoing supply-chain disruptions in the US and southeast Asia, healthy-to-strong demand and volatile feedstock and freight markets globally. Freely negotiated contracts for mid-cut alcohols have largely been heard at a decrease from Q3. Contracts have largely been heard lower now that demand has stabilised from the panic-buying seen at the start of the pandemic, with many players having carryover volumes from Q3. Demand is typically slowest in Q4. That said, Shell's ongoing force majeure has prompted an increase in synthetic alcohols demand in the near term. Demand into Mexico has also picked up on increased ethylene oxide (EO) availability from the local producer. Shell remains on force majeure into October because of feedstock constraints, but has increased its allocation levels from September.
Freely negotiated contracts for long chain alcohols have largely been heard at an increase from Q3. Demand in these markets is largely outpacing supply amid ongoing supply-chain disruptions in southeast Asia because of the pandemic, ongoing supply-chain disruptions globally - particularly in shipping container markets - and overall strong demand in industrial end-markets.
Heavy chain alcohols are more susceptible to import disruptions because they are often shipped by container. A limited number of suppliers have tank storage capacity in the US to process and store heavy chain alcohols in bulk. Mid-cut alcohols are less susceptible to these disruptions, as they are largely shipped in bulk.
Prices
Q4 discussions
In mid-cut markets, freely negotiated contracts have largely been heard at a decrease from Q3. In heavy chain markets, freely negotiated contracts have largely been heard at an increase from Q3. vIn the wider market, multiple producers have switched their contract terms from a DEL (delivered) to an FOB (free on board) + freight basis because of volatile and bullish freight markets.
Q3 contract ranges
| Product | Price (cents/lb) | INCO | Location |
| C12-C15 | 107-120 | DEL | USG |
| C16 | 124-131 | DEL | USG |
| C18 | upper 90s-129 | DEL | USG |
| C16-18 | 106-122 | DEL | USG |
Mass balance (MB)
Premiums were held steady at a 7-13 cent/lb premium over standard balance material.
Q4 prices have been heard slightly above the posted range. Supply continues to tighten because of pandemic- and customs-related disruptions across the wider market.
US sanctions against Malaysian palm oil giants Sime Darby Plantation Berhad and FGV Holdings Berhad in 2020 have significantly tightened Roundtable on Sustainable Palm Oil (RSPO) MB markets since then. US Customs and Border Patrol (CBP) has denied entry to at least two Malaysian-origin vessels carrying oleochemicals over the August-September period. While the latest disruptions did not largely impact fatty alcohols availability, there is growing concern among market participants of expanding scrutiny against Malaysian-origin material as RSPO MB markets continue to tighten.
Rising premiums are making MB material competitive with coconut-based material, in turn increasing demand for coconut-based fatty alcohols. In the meantime, market players in Malaysia are working to reorganise their supply chain to avoid further disruptions, given the latest CBP action.
Meanwhile in Asia, Helen Yan of ICIS reports that Asia’s fatty alcohol ethoxylates (FAE) market is likely to face upward pressure in the near term due to tightened supply in China following its dual control policy on environmental protection. Chinese spot interest is also expected to gather momentum ahead of the Chinese National Day holidays from 1-7 October, as buyers need to replenish their dwindling inventories.
“We are getting enquiries, and discussions are ongoing with the Chinese buyers for October shipments,” a regional producer said. Selling indications for October shipments have increased to $1,600-1,700/tonne CIF (cost, insurance and freight) China for drummed product, tracking the Chinese domestic prices and higher feedstock ethylene oxide (EO) and fatty alcohols C12-14 costs, market sources said.
“Local FAE prices have increased to more than Chinese yuan (CNY) 12,000/tonne ex-warehouse this week, up by about CNY500/tonne from the previous week,” a trader said. In the week ended 23 September, FAE spot prices were up $50/tonne week on week to $1,500-1,550/tonne CIF China, ICIS data showed. Feedstock fatty alcohols C12-14 spot prices rose to $1,875/tonne FOB (free on board) southeast (SE) Asia in the week ended 22 September, up by $25/tonne from the previous week, ICIS data showed. Several feedstock fatty alcohol and ethylene oxide (EO) plants in China were shut or running at reduced rates following the implementation of the dual control policy. [oooh that sounds nice doesn't it? Dual control – just like a nice safe aeroplane or one of those drivers instruction vehicles. Very safe and responsible and eviscerating your property rights – if you had any in the first place, which you probably didn't so.. ]
The dual control policy places tighter limits on energy consumption and intensity in parts of China and has prompted plant shutdowns or cuts in operating rates, raising concerns of curbed production and supply. FAE is used mainly in sodium lauryl ether sulfate (SLES), a surfactant found in many home and personal care products such as soaps, shampoos and detergents.
And in Europe, ICIS’s Sam Wright reports that European fatty acids and fatty alcohols fourth quarter negotiations are ongoing, with shortages still plaguing both markets. Most settlements are expected to take place for both products during early October. In the palm fatty acids market, some final fourth quarter contracts are being settled, although most players are fully committed for the fourth quarter and are now looking at first quarter material. In the tallow fatty acids market, negotiations got off to a slower start, as players were waiting to hear of available volumes from producers. Discussions are now underway for the fourth quarter.
Fatty alcohols fourth quarter contracts have started, and some settlements have taken place, but most are yet to conclude. Logistical issues surrounding shipments from Asia continue to be the biggest problem for both the palm-based fatty acids and fatty alcohols markets. These shipping constraints are unlikely to ease before the end of the year, with most players also bracing for tightness during the first quarter of 2022.
Tallow fatty acids shortages are still caused by lower slaughter numbers and strong tallow biodiesel demand. There is very firm demand for fatty acids and fatty alcohols heading into October, caused largely by the lack of volumes. In the fatty alcohols market, some downstream ethoxylates customers are said to be requesting six-month contracts currently, to ensure security of supply.
End of the news. Beginning of the “music section”. We’ve had the bulk of this month’s music already up front but here is part 2 of the discussion about Diamond Head and Metallica that we started above. If you haven’t done so already, go back and listen to the two songs (and if you’re not that partial to heavy metal, at least listen to the first 2 minutes of each). OK? So – Diamond Head formed in 1976 near Birmingham England and in 1980 released their first album on which was the song Am I Evil. As you have heard, it is a decent, solid, heavy rock song. Your blogger saw them live at Sunderland Poly in ’79. Pretty good. In 1984, Metallica covered the song, putting it on a B side. Over the years it became a staple of the Metallica live shows and often would the last song played. A real crowd-pleaser. Diamond Head is still plugging away today and they have had zero commercial success, nothing – which is why you’ve never heard of them. Metallica – one of the top selling artists of any genre. Interestingly Diamond Head have said that they are grateful for the royalties that have come from Metallica’s performance of the song. The money has enabled the group to keep going. Those royalties have been Diamond Heads biggest revenue source.
What’s fascinating to me is that the songs are the same. It’s not like Metallica did a metal version of an English folk song. It’s the same song in the same style played on more or less the same instruments. Except that Metallica… well it’s hard to put your finger on it. I’ll let you judge for yourself.
So – who would you rather be? No not the actual band necessarily. Think metaphorically. Who would you rather be? This is not a trick question. If you’re trying to calculate what the royalties might be, then I already have your answer. And that’s OK. Playing at the highest level every night is not for everyone. Thing is though, if you think you want to be Metallica, then having a great song, played well, is not enough. It’s all the other little things executed consistently with excellence year after year that count. Think about it.
By the way, this is not some rant about how the plucky Brits invent things and then the Americans always steal it, dress it up with a bit of marketing and make a fortune. And what can we learn? No… that old trope doesn't apply here. What about (English heavy rock band) Iron Maiden whose first album also came out in 1980? Still a multi-platinum, stadium filling, global act. Actually it’s hard to imagine anyone covering a Maiden song. I can’t think of such an instance. Of course now I’ll hear of several such covers from our avid readers. But there are definitely no well-known covers. I wonder why? Probably because there is such a high degree of originality baked into those songs. But I’m digressing. The question is who would you rather be?
If you answer Metallica only after estimating what the royalties from Am I Evil could be, then no, not really. You don't want to be Metallica. You’re not up for it. If you answer Diamond Head, while briefly thinking how cool it might be, though, just once, to fly (private) down to Rio to play in a stadium, then no. You’re wrong.
So what am I getting at? It’s a metaphor of course. If you are motivated by inventing, say, new chemical technologies and profiting modestly from others making a commercial success of them, that is great and that’s a way to make a great living. However, if you don’t particularly care where the technology comes from (it might be yours or not) but you want to make it the world standard by which all others are judged – by executing everything at a high level over and over and over again, then don't ignore that instinct. You want to be Metallica. So.. go ahead.
Metaphors are never perfect. Here’s another pair of songs. First up Breadfan by Budgie. They were a Welsh heavy rock band formed in 1967. This song came out in 1973. Wow – ahead of their time or what? Next Metallica’s cover of this song.
Same deal as before. Faithful rendition by Metallica. For some reason I don't feel the same about this pairing. Maybe because Budgie was after something else entirely with their art. If you listen to their body of work, they were never entirely about heavy metal or whatever you want to call it. They were off playing in their own world. There may be a relevant metaphor there also.
But for now, the question is: Metallica or Diamond Head. Who would you rather be?
That’s it for September. Register for the Conference! Use the code WSC21NB500