Surfactants Quarterly Review Q4 - 2013
For the last quarter of 2013, I have summarized key news from the surfactants market, aided as usual by the capable global news team at ICIS. A few of the links in the review point to ICIS articles (most of these need a subscription). As always, your inputs and critiques are welcome. For more exclusive surfactant information and networking, I will see you at our 4th ICIS World Surfactants Conference in NYC, May 15 – 16th, 2014.
Just as the quarter got underway, a little snippet caught our attention. Apparently, Bolivia’s state-owned EBIH is considering to build an ethylene oxide and glycol plant as part of a larger complex costing over $2.7 Billion to be built over the next 4 years. Interesting to hear how this develops and how it may shake up the cozy EO oligopoly in Latin America.
After teasing us with the prospect of, finally, another Latin American EO supplier, Bolivia revealed details for the GTL, polyolefin and methanol complex later in the month (download the report here). Bolivia’s ministry of hydrocarbons and energy released a report detailing an ambitious petrochemical construction programme that seeks to kick-start a new era through the industrialisation of the nation’s huge natural gas reserves. Industrialisation of natural gas became a reality in May this year following the inauguration of the Rio Grande liquids separation plant in the eastern Bolivian department of Santa Cruz. The plant will process around 5.m cubic metres (mcm)/day of natural gas and produce 361 tonnes/day of liquefied petroleum gas (LPG) and 195 bbl/day of isopentane. The LPG and isopentane will be used as feedstocks to supply the petrochemical chain. A second liquids separation plant in the Gran Chaco province of Tarija department in southern Bolivia is due to come on line in the second half of 2014. The plant will process natural gas to produce ethane, propane, butane among other products. The ethane and propane will serve as feedstock for the nearby Gran Chaco petrochemical complex. The projects in the report are divided into “current” and “future”, and will be developed by state-run energy company Yacimientos Petroliferos Fiscales Bolivianos (YPFB) and Empresa Boliviana de Industrialisation de Hidrocarburos (EBIH), a subsidiary of YPFB created by the Bolivian government in 2008 to develop domestic gas-fuelled heavy industry. As noted aboce, the possibility of building an ethylene oxide (EO) and ethylene glycol (EG) plant close to the Gran Chaco liquids separation plant, with capacities of 260,000 MT/yr of monoethylene glycol (MEG), 26,000 MT/yr of diethylene glycol (DEG) and 3,000 MT/yr of triethylene glycol (TEG), is currently being studied. The plant would use ethane and LPG feedstock, and require an investment of $580m.
The big, but perhaps not surprising, news of the quarter was that Huntsman plans to restructure its surfactant business in Europe. As anyone in the market knows (or if you’ve been to one of our training courses), it is tough to make money in surfactants in Europe, especially in detergents and personal care. Huntsman, accordingly plans to get out of assets that are focused on commodities in the region and focus on specialties. The process could take until the end of this year, said Stu Monteith, president of Huntsman's performance products division which the surfactants business falls under. Around 250 employees in its European performance products division could be affected by the changes. If the restructuring takes the form of a sale (a logical objective) then there is no shortage of candidates to buy this business, including companies with a more vertically integrated position in the supply chain than Huntsman.
Shortly after the announcement of what sounds like a “retreat” in Europe, Huntsman announced a big advance with the addition of ethylene and EO capacity in North America. Huntsman is debottlenecking its Port Neches, Texas, ethane cracker and adding about 10% more ethylene capacity to take advantage of the shale gas boom. The company also is continuing in its plans to add 25% more capacity to its ethylene oxide (EO) plant in Port Neches. According to ICIS Plants & Projects database, Huntsman’s ethane cracker has a nameplate capacity of 193,000 tonnes/year, while its EO plant has a capacity of 460,000 tonnes/year. Huntsman is a major buyer of ethylene for its EO and ethylene glycol (EG) production, and the company is still weighing whether it makes economic sense to build a new cracker for its own ethylene consumption or wait and see if the ethylene market grows long as a result of the other planned projects and thus keeps it cheap. If Huntsman decided it wanted to get in on the new cracker rush, it likely would be as a partner in a project, according to the company.
In an interesting twist to the Huntsman EO expansion plan for North America, 5 years after Hurricane Ike tore a path of destruction through southeast Texas, a structure that fell victim to the storm was officially tasked in October with helping its current owner, Huntsman, grow its EO capacity. The unit in question was originally an ethylene glycol (EG) facility in Beaumont owned by DuPont-Lyondell joint venture PD Glycol. But the plant ceased operations after Ike made landfall in September 2008, soon followed by the severe economic recession of 2009. PD Glycol decided to put the facility up for sale, and Huntsman saw an opportunity, so they purchased the EG unit, took it apart and moved it by barge a few miles down the Neches River to the company’s Port Neches facility, where the company is retooling it for EO production and integrating it into the site, which currently has two EO reactors. When the former PD Glycol unit is fully up and running by the second quarter of 2015, the facility will become the largest single-site producer of EO in North America, Huntsman said, with capacity increased by 265m lbs/year, or about 25%. Currently, about 1bn lbs/year (453,600 tonnes/year) is produced at the facility, according to the company. All of that EO will be consumed by the US-based producer to make a variety of ethylene-based derivatives such as glycols, surfactants and amines, with more than 90% of the EO used at the Port Neches facility. Huntsman is investing up to $150m (€110m) in the expansion.
At a groundbreaking ceremony for the expansion, Peter Huntsman took the opportunity to lay out his company’s vision for the EO value chain in North America in this way: According to Huntsman, transportation safety issues will lead to further expansion of Huntsman’s ethylene oxide (EO) facilities in Texas. “I would imagine 5 or 10 years from now you’re going to see a totally different EO derivatives facility being built and expanded here, I think just for transportation safety issues and so forth,” said Peter Huntsman at the site. As more EO is produced as a result of the influx of ethylene production soon to come as part of the shale gas/ethane cracker boom, more integrated facilities will be necessary to handle and move EO safely. “Ten years from now we’re going to be hard pressed to move EO out of a plant, and so you have got to have singular locations that have ethylene oxide,” Huntsman added.
In keeping with Huntsman’s integrated ethoxylation theme, in November, Solvay announced a new alkoxylation facility project for North America. Solvay will build and operate a large-scale alkoxylation unit in Pasadena, Texas, at an integrated industrial facility of LyondellBasell's Equistar Chemicals affiliate.
Solvay will invest nearly €40m ($54m) into the unit, which is expected to be operational in 2015. Equistar will supply the ethylene oxide via pipeline. The investment follows Solvay's announcement in April this year that it will build an on-pipe alkoxylation facility in Singapore.
In the fatty alcohol market, prices settled up by a few cents per lb at the beginning of the quarter due to expectations of tight supply. Little did the market realize what was to come as a result of the Philippines typhoon which had a later outsized effect on the lauric value chain, including detergent range alcohols.
Thus at the end of November, Asia mid-cut fatty alcohols hit one-year high due to firm PKO prices. On 27 November, C12-14 fatty alcohols were assessed at $1,650-1,880/MT (€1,221-1,391/tonne) FOB SE Asia for December loading, up by $100-180/tonne from the previous week, according to ICIS data. On 27 November, PKO prices stood at $1,057.80/MT, up by $37.56/MT from the previous week.
Another big move for Solvay was announced early in the Quarter – the acquisition of Chemlogics (an oilfield chemicals company) at a prices of $1.35bn (€999m). Chemlogics, whose US assets include three production sites with annual capacity exceeding 300,000 MT/yr, offers products and technologies which enable oilfield service players worldwide to extract oil and gas. Chemlogics previously reported last-twelve-month sales of around $500m and has 277 employees. Pricing of the deal, therefore looks quite nice for selling shareholders, including Bill Frost who came to prominence by starting Chemron and selling it to Lubrizol. Solvay said that Chemlogics's expertise in friction reducers, non-emulsifiers and extraction technologies perfectly fit with Solvay Novecare's know-how in surfactants, natural polymers and eco-friendly solvents
Solvay’s Novecare continued on a roll with an announcement of an acquisition of the Brazil specialty chemical assets of ERCA Quimica. The acquisition will allow Solvaty to more than double its (admittedly small) production capacity in surfactants in Brazil. The deal includes ERCA's Brazilian specialty chemical assets and its portfolio of agrochemicals and home and personal care products.
Sasol announced some personnel changes involving names familiar to the surfactant industry. However these are unlikely to result in any significant strategy changes in surfactants due to the very strong bench in this area at the company. Andre de Ruyter, senior group executive for global chemicals and North American operations, resigned to join South Africa-based Nampak, according to a filing by the packaging and plastics producer on the JSE. He is to serve as executive director and CEO-designate from 1 January 2014, and will take over as CEO on 1 April 2014, following the resignation of current CEO Andrew Marshall, Nampak said. De Ruyter will stepped down from Sasol as of 30 November this year. He will be succeeded by Fleetwood Grobler, current manager of Sasol’s olefins and surfactants business.
In more big news from Sasol, the company appears to be making good progress on its significant investment plans in the US, and in proving that its gas to liquids (GTL) technology works effectively. An investment decision on the Westlake, Louisiana ethane cracker is expected in the middle of next year, the company said in a late November release. The go-ahead for the first planned GTL plant at the same location is likely to be given 18 to 24 months later.
Sasol’s ORYX GTL joint venture in Qatar produced 1.5m bbls of product in the three months to the end of September. That is an average 101% of design capacity. The plant is expected to operate at 90% on average in the current Sasol 2014 financial year. Sasol wants to invest more than $21bn in Louisiana in the US on chemicals and GTL plants, taking advantage of the increased availability of natural gas and ethane from shale. This is a huge bet on shale and the US market for the world’s largest synthetic fuels producer. The investments represent around 73% of Sasol’s current market capitalisation. Sasol is fracking in Canada but production is constrained because of low natural gas prices. It is making fastest progress on the 1.5m tonne/year, $5bn-7bn ethane cracker and downstream projects. Downstream from the cracker, Sasol will make LLDPE, low density polyethylene (LDPE), ethylene oxide (EO), mono-ethylene glycol (MEG) and Ziegler and Guerbet detergent alcohols. Contracts for basic engineering packages and services and for various technologies on the cracker and the planned downstream production units have been agreed. Front-end engineering (FEED) is underway for both the cracker and the GTL plant in the US. Fluor is the main FEED contractor for the cracker. Worley Parsons will manage the project alongside Sasol’s own people. Separately, a 100,000 MT/yr ethylene tetramerisation unit at its production site in Lake Charles, Louisiana is being commissioned. The project in on budget and schedule, Sasol said. This is the world’s first commercial unit using proprietary Sasol technology to convert ethylene to 1-octene and 1-hexene, both important co-monomers for linear low density polyethylene (LLDPE). The plant will be part of the company’s olefins & surfactants (O&S) reporting group. The US investments have the potential to underpin profitability in olefins & surfactants and in polymers for the group. Sasol’s US operations currently are the company's cost leaders in chemicals benefitting from low US ethane prices. This is certainly true in Olefins & Surfactants (O&S) where the European businesses are under pressure from reduced volumes and lower margins.
Stepan continued its steady march forward with Q3 net income announced up slightly on higher polymers profits. Stepan said that its net profit for the third quarter of 2013 had increased by 1% year on year, to $20.4m (€14.9m). Net sales for the period increased by 8% year on year to $475.5m as a result of improved sales volumes, particularly in North America, where volumes increased by 2% compared to the same period a year earlier. Demand for agricultural products continued to increase globally, while sales of functional surfactants used in oilfields declined, the company added. "Despite the challenging operating environment, we delivered improved earnings," said CEO Quinn Stepan. “Our businesses delivered volume growth and we continue to invest strategically for future global growth," he added. Gross profit grew by $3m year on year to $74.3m, as lower surfactants profits were offset by a 30% increase in performance of the polymers division, driven by sales growth in Europe and a $3.7m business interruption insurance recovery related to a 2011 fire at a plant in Germany. Total third-quarter gross profit for the polymers division was $26.6m, while surfactant division gross profit fell by 2% year on year to $45m, and specialty products gross profit dropped 33% to $3.8m due to lower margins, the company added. Quinn Stepan said that the slow start to the year made achieving its planned full-year earnings growth “difficult”, adding that the realisation of acquisitions and capacity expansions are expected to buoy 2014 performance. He said: "We delivered slightly improved results in the third quarter, and we remain optimistic about our long-term growth. “The slow start to the year has made achieving full year earnings growth difficult, but we continue to pursue investments that will accelerate our growth. In 2014 we will realise the benefits of our recent acquisition and other capacity expansions,” he added.
With respect to investments: “We will look to make additional investments in Latin America to support the projected growth that we see in that market,” said Quinn Stepan during the same earnings call. Stepan did not elaborate on what those investments could be.
Earlier this year, Stepan said his company was looking to further expand its surfactants production capacity in Brazil, adding that the producer might build a second plant there or expand its existing facility at Vespasiano, near Belo Horizonte. The CEO also said it is not just the surfactant market that continues to grow but also the agricultural and oil field markets for which Stepan produces chemicals.
As follow-up to a prior announcement Evonik started up their 80,000 MT/yr surfactants facility in China at the end of October. The facility is located in the Shanghai Chemical Industry Park (SCIP) and its investment volume was in the “upper two-digit million Euro range”, the company said in a statement but did not specify the exact amount.
Over to China where the EO tidal wave just keeps coming as Oxiranchem announced that it looks to its Yangzhou EO plant start-up in July 2014. The plant has 200,000 MT/yr ethylene oxide (EO) capacity. The company is also looking at building another line with a similar capacity at the same site but this has yet to be confirmed, the source said. Oxiranchem is expected to import the bulk of its ethylene requirements next year although the company is looking to source the raw material domestically as well, the source said, without providing details.
In more China EO tidal wave news: China’s Fujian Refining & Petrochemical (FREP) has started construction of an ethylene oxide (EO)/ethylene glycol (EG) plant at Quanzhou in Fujian province in late October. The unit will have an EO capacity of 180,000 MT/yrand an EG capacity of 400,000 MT/yr, Sinopec said in an online newsletter.The plant, located at Quangang Petrochemical Industrial Park, will be operational in November 2014. FREP is a joint venture between Sinopec, Saudi Aramco and Exxon Mobil.
More from China, this time in oil-soluble surfactants, Chemtura started commercial operation at the Nantong facility for the production of lubricant additives including sulfonate grease. The building of a high-performing lubricant production plant, the second phase of the facility, will be completed in the middle of 2014, and the third phase which can produce urethanes is expected to be completed in 2015. Chemtura began construction of the Nantong facility in March 2012. Total investments for the three phases were $100m (€73m).
In Latin America, Brazil’s Ultrapar Q3 net income was announced up 13% year on year. Ultrapar posted a Q3 net income of Brazilian reais (R) 328m ($144m, €107m), up about 13% compared with R291m in the prior-year quarter. Sales and services revenue for the quarter reached R15.9bn, up by about 13% from R14.1bn, while earnings before interest, tax, depreciation and amortisation (EBITDA) totalled R765m, up almost 18% from R651m, the company said. Ultrapar attributed the growth to higher sales volumes in the company’s fuel distribution subsidiaries Ipiranga and Ultragaz and an increase in operating scale due to recent investments. The company’s surfactants and solvents subsidiary, Oxiteno, saw a 6% drop in sales volumes due to lower sales of glycols in the domestic and overseas markets
In more North American investment news with relevance to surfactants, US-based Chevron Phillips Chemical (CP Chem) has completed a study to expand its capacity for normal alpha olefin (NAO) at Baytown, Texas, US by at least 20% and it plans to seek final project approval in the first quarter of 2014. Construction could begin in the first quarter, and the project could be completed in the second quarter of 2015.
In a rare display of market initiative from Pemex, the Mexican government owned petrochemical company announced late November that it is seeking a joint venture for ethylene glycol, EO and aromatics. The putative project also involves expanding cracker capacity in Mexico to align ethylene supply for EO. Pemex has two ethane crackers in Cangrejera and Morelos, Mexico, each with a capacity of 600,000 MT/yr. The company would like to expand these existing crackers to get another 200,000-300,000 MT/yr of ethylene. The project, including the construction of EO/EG and aromatics facilities, could take two to three years to complete. In September 2013, Pemex completed its first ever joint venture – a partnership with the dynamic private company, Mexichem to double vinyl chloride monomer (VCM) production to 400,000 MT/yr by 2015. Apparently this JV opened Pemex’s eyes to the benefits of operating more like a real company than as a ward of the state. There is talk of an amendment to the Mexican constitution to allow Pemex to move more into the North American commercial mainstream with the sort of operational independence enjoyed by its peers in the industry.
Clariant continue to maintain a solid profile in ethoxylation with an early December announcement that it will further expand US ethoxylation capacity at Clear Lake, TX. This second-phase expansion will include new reactors and additional storage facilities, bringing the overall ethoxylation capacity to more than 125,000 MT/yr from the current 95,000 MT/yr. The new project is scheduled to go on line in mid-2015. The second expansion brings Clariant’s total investment over the last five years to Swiss francs (Swfr) 65m ($72m), according to the firm. Products manufactured at the US site includes high molecular weight polyethylene glycols (PEGs), alcohol ethoxylates, sodium isethionates and ethoxylated specialties.
In a rare piece of growth-oriented news from Europe, Germany's PCC announced a 42,000 MT/yr Mono-Chloro Acetic Acid plant in Poland The unit, PCC P4, will build the plant at a cost of zloty (Zl) 272m ($89.2m, €64.9m) on the grounds of another group subsidiary, surfactants producer PCC Exol, creating around 100 jobs in the Walbrzyska special economic zone near the border with Germany. Poland's economy ministry is subsiding the construction of the MCAA plant with a grant of Zl 67m. In October PCC Exol said it would invest in constructing a new production line for high-margin amphoteric surfactants in the Walbrzyska special economic zone at an investment cost of Zl 10.75m
Just before Christmas, we heard that Thailand’s PTT Global Chemical (PTTGC) is proceeding with capacity expansion at its home production base in Map Ta Phut. This includes a plan to boost its ethylene oxide (EO) output by 2015.
Thanks again for reading and I look forward to seeing you at the 4th ICIS World Surfactants Conference in NYC, May 15 – 16th, 2014. Quinn Stepan, CEO of Stepan Co. Ltd. is keynote speaker!