Surfactants Quarterly Review Q3 - 2013
As we do on a quarterly basis, I have summarized key news from the surfactants market, aided substantially by the news team at ICIS. A number of links in the article point to ICIS articles (most need a subscription). As always, your inputs and critiques are welcome. For more up to the minute surfactant information and networking, I will see you at the 3rd ICIS Asian Surfactants Conference in Singapore, November 14th and 15th.
Early in the Quarter, in July; Kao Indonesia Chemicals announced completed construction of its new yen (Y) 4bn ($40m) plus surfactants plant in Karawang, Indonesia. The new plant with an undisclosed capacity is expected to start operation in August 2013. The plant will produce surfactants and industrial chemicals and help lift Kao Indonesia Chemicals’ surfactants capacity, which includes facilities located in Tambun, Indonesia, 1.5 times, Kao said. All of the Tambun facilities will eventually be transferred to the Karawang site by the end of December 2014. With this relatively small but still significant investment, Kao underlines its commitment to a vertically integrated strategy in consumer goods and their key ingredients.
Also in July, Stepan named Scott Beamer as chief financial officer. Beamer succeeds James Hurlbutt, who is retiring after 31 years with Stepan. Beamer is joining Stepan after spending 16 years at PPG Industries, where he was assistant corporate controller. Welcome to the industry, Scott, and to one of its leading players.
As the 3rd Quarter got underway, fatty alcohol prices edged upward . Mid-cut alcohols were assessed at 83.50-96.00 cents/lb ($1,841-2,116/MT, €1,436-1,650/MT) for the Q3 contracts, rising 0.50-1.00 cents/lb over the previous range. In other alcohol news, the US fatty alcohol market was mulling potential effects of issues involving the Roundtable on Sustainable Palm Oil (RSPO). RSPO was formally established in 2004 in response to growing global demand for vegetable oils and concerns about increasing expansions of palm oil plantations and the potential impact of these upon forests, wildlife and communities. Its RSPO Certification System was adopted and launched in 2007, with the first certification issued in 2008. “RSPO is an ongoing consideration for US buyers trying to understand if initiatives will affect price structures,” a large detergent-range alcohol buyer said. “Sustainability issues derived from RSPO may need to be taken into account,” a seller commented. US fatty alcohol buyers engaged in industrial applications are discussing potential premiums on vegetable, or natural, based alcohols that could develop because of additional costs involved in participating in the RSPO initiatives. Fatty alcohol buyers with end-uses in cosmetics and personal care sectors are weighing the possible benefits being certified by the RSPO versus the potential costs, as consumers of these products can differ widely from those in the industrial surfactant models. Darrel Weber, the head of the RSPO was a featured speaker at the 3rd ICIS World Surfactant Conference in NY in May.
In other alcohol news: Pilipinas Kao Inc (PKI) noted in mid September that it is running its fatty alcohol plant at Jasaan at around 70% of capacity, following the completion of an expansion project at the unit. The plant has been shut since June this year for the expansion project which increased its capacity by 40,000 MTs/year to 150,000 MTs/year, according to sources. The company in a statement on 13 September said that it has completed the construction of the expansion project, which was aimed at meeting the “growing demand for fatty alcohols centering on the Asian region”. The plant operations will be fine-tuned before its production rate is ramped up to full capacity, said a source close to the company.
Looking ahead in alcohols to Q4, uncertainty over fatty alcohol pricing continues to hinder fourth-quarter negotiations in Europe. A shortage of mid-cut fatty alcohols in Europe has led to increased prices of late, with some suppliers now quoting in excess of €1,400/MT ($1,867/MT) free delivered (FD) northwest Europe (NWE). Suppliers maintain that the shortage of mid-cut material will continue to dictate their pricing ideas in the coming weeks. However, buyers remain confident that the restart of fatty alcohol plants in southeast Asia could help to alleviate some of the shortage being felt in Europe, and therefore bring down prices. It is thought that participants had been awaiting the ICIS European Surfactants conference in Brussels, Belgium, mid September, where discussions over pricing were to take place, before commencing their fourth-quarter negotiations
A firm favorite of ours, Elevance, started their JV biorefinery with Wilmar in Gresik Indonesia in July making one group of chemicals available for the first time in commercial quantities. The 180,000 MT/yr biorefinery will consume palm oil to produce C10-C15 unsaturated esters, C16-C18 oleochemicals and long-chained olefins. The unsaturated esters stand out because they are difunctional, in that each molecule has both an olefin and an ester group. According to Elevance, Until now, this group of difunctional products has been available only in lab-sized quantities priced at thousands of dollars per Kg. Already, Elevance is producing these chemicals in commercial quantities and profitably selling them at dollars per kilogram. Elevance has been working with Arkema and Stepan, among others, to develop new products using the Elevance building blocks. Companies are thus developing surfactants with better solvency and cold-temperature cleaning, as well as synthetic lubricants that deliver improved stability and fuel economy, according to Elevance. Other uses for the difunctional molecules include monomers for engineered polymers, coatings, long-chained polyamides, polyurethanes and polyesters. The biorefinery's other products, however, should also meet existing market needs. The long-chained olefins range from C10 to C20. Decene, for example, is a feedstock for polyalphaolefins. Polyalphaolefins, in turn, are a key ingredient in synthetic lubricants. Demand for synthetic lubricants is rising because of stricter emission and mileage standards for automobiles. These stricter rules require smaller and better-performing engines, and these rely on synthetic lubricants.
Likewise, C18 olefins are used to make drilling fluid.
The long-chained olefins are also feedstock for surfactants. C12 olefins can be used to make linear alkyl benzene, providing a bio-based alternative to petroleum-based C12 olefins.
Elevance chose the 2nd ICIS European Surfactant Conference in Brussels in September to highlight their start-up and the new range of products. Look elsewhere on the Neil A Burns LLC blog for an exclusive podcast interview with Andy Corr of Elevance.
Indian Linear Alkylbenzene continued to make news as Indian Oil announced the restart of its LAB plant at Vadodara in the state of Gujarat by 29 July after a month-long turnaround. The shutdown at the 120,000 MT/yr plant severely tightened supply in the Indian market, resulting in virtually no spot export availability in July. Furthermore, the plant near Chennai and Reliance Industries’ 60,000 MT/year plant at Vadodara caused inventory levels of LAB in India to decline to around 5,000 MT in July, down from 8,000 MT in June. The TPL plant restarted on 13th July after a two-month long shutdown but the Reliance unit had yet to restart as of the end of July. India has an installed LAB capacity of 530,000 MT/yr. Indian consumption of LAB totalled 500,000 MT/yr in 2012.
In other LAB news, Iran restricted exports of LAB to ensure supply to the domestic market, in late July. With its imports falling following the sharp depreciation of the rial against the US dollar, Iran needs to ensure domestic production will meet growing domestic consumption. No official ban was implemented, but permission to export these materials is granted by the government on a case-by-case basis, Iranian industry sources said.
The country has an installed LAB capacity of 130,000 MT/yr, with current operating rates at 80-85%, while domestic consumption is around 100,000 MT/yr.
As usual, Stepan (NYSE: SCL) reported solid progress in sales and earnings for the second quarter of 2013. Net income rose by 6% year on year to $22.7m (€17.3m) as sales volumes increased by 4% while selling prices fell by 3%. Stepan’s sales for the three months ended 30 June were $474m, compared with $470m in the 2012 second quarter. Overall gross profit was $73.7m, up slightly from $73.4m in the 2012 second quarter. Second-quarter gross profit in Stepan’s surfactants business fell by 7% to $48.3m. Stepan cited lower North American sales of functional surfactants to the oil field market, reduced profits from biodiesel sales, and lower North American consumer products earnings because of the consumption of higher-cost raw material inventories, in explaining the decline in surfactants gross profit. Furthermore, higher raw material cost inventory built to support Stepan’s Singapore surfactants plant start-up, and the subsequent decline in commodity prices, hurt surfactants margins, it said.
Another solid performer in surfactants and specialty ingredients, Croda reported-quarter operating profit from continuing operations rose by 4.4% year on year to £71.1m ($109.4m, €82.7m) on the back of "improving trends in key markets". The UK-based specialty chemicals company said gains were reported across each of the company's three reporting segments - consumer care, performance technologies and industrial chemicals - and sales rose by 2.3% during the period compared to the second quarter of 2012, to £279.6m.
With demand also growing for surfactants in the CIS at than 6%/year, a letter of intent was signed in July between SIBUR and Solvay to establish a surfactants joint venture called RusPav, located in Dzerzhinsk. SIBUR will contribute its raw materials, production and logistics capabilities to the joint venture. RusPav will be located near SIBUR's petrochemicals operations, 400km east of Moscow, and is tentatively expected to be operational in 2016.
In August, the ACI (American Cleaning Institute) released an important environmental report. “The major disposal route of alcohol ethoxylates [or ethoxylated alcohols] is down-the-drain through sewage systems and municipal wastewater treatment plants into receiving surface waters,” said Kathleen Stanton, director of technical and regulatory affairs for the ACI.
“Because these are down-the-drain disposal routes for the detergents, the fate and effects of the residuals in treated sewage effluent is of interest to industry and regulators alike,” Stanton added. The study concentrated on ethoxylated surfactants with the goal to determine the environmental impact of the fatty alcohol backbone of the detergent. Natural (vegetable-oil based) and synthetic (natural gas/ethylene-based) fatty alcohols were both tested during in the scope of the study.
Another of our firm favorites, Solazyme continued to make news in the second quarter. Solazyme and Sasol finalised commercial terms for the multi-year supply of algal oil in the production of downstream derivatives such as behenyl alcohol, the companies announced. Solazyme is developing the erucic acid-rich algal oil at its Orindiuva facility in Sao Paolo, Brazil, as well as its Clinton site in Iowa, US. Sasol Olefins and Surfactants will use the algal oil for the production of C22 derivatives that are used in industries such as paper, water treatment, personal care, lubricants, oil and gas, as well as paints, inks, coatings and adhesives. Additionally, the companies signed a letter of intent to expand to broad collaboration, including joint manufacturing and marketing of multiple tailored oils. “This agreement with Solazyme is testament to their tailored oil technology platform and the fit for high-performance sustainable oils in our value chain,” said Fleetwood Grobler, managing director at Sasol O&S. “We see a good potential to link Solazyme’s tailored oil platform with our synthetic and natural alcohols portfolio, which will allow us to meet the growing demand that we see in a number of our key markets.”
The LAB and LAS markets in Asia continued to be active. On 14 August, LAB prices increased by an average of $10-30/MT (€8-23/MT) from two weeks prior to $1,850-1,870/MT CFR SE Asia; $1,820-1,850/MT CFR India; and $1,800-1,830/MT FOB Middle East, according to ICIS data. LAS prices, on the other hand, have been holding steady at $1,560-1,580/MT CFR SE Asia and $1,550-1,570/MT FOB India over the past two weeks, according to ICIS.
Market players expect LAS prices to eventually track rising LAB prices. Supply is expected to remain tight in the coming weeks as shortage of feedstock normal-paraffin (n-paraffin) is expected to restrict LAB supply, which in turn will curtail LAS production, market sources said. LAS demand is being revived with the emergence of “one-dose” detergent, which is a combination of washing liquid and softener. The popularity of liquid detergents over powders in the laundry sector had slightly dented demand for LAS in recent months. The proportion of LAS used in liquid detergents is lower compared with washing powders. However, in other applications such as floor cleaners and dish washing liquids, LAS continues to be widely used.
An emerging key player in the surfactant industry, China’s Sanjiang Chemical reported H1 net profit up 78% for 2013 to yuan (CNY) 402m ($66m), because of higher production and sales of ethylene oxide (EO). Its revenue in the first six months of 2013 gained 82.7% year on year to CNY2bn, approximately 86% of which were generated from EO sales, the company said in a statement to the Hong Kong Stock Exchange. The utilisation rate of its ethylene oxide (EO) facilities were at 112% in the first half of this year, compared with 108% in the same period of 2012, it added. In the January-June period, the company produced and sold 176,375 MT of EO, an increase of around 80% year on year. This increase is mainly because its new 100,000 MT/year EO unit started commercial operations on 14 February. The company said it expects total EO production for 2013 to increase to around 370,000 MT from last year’s 216,728 MT. The Zhejiang-based company mainly produces EO and surfactants at 330,000 MT/year and 218,000 MT/year capacity, respectively.
Elsewhere in Asian, Germany's Evonik completed its expansion project at the Indonesia plant in August. “With this investment, Evonik is increasing its capacity for surfactants and esters used in hair care, skincare, and industrial applications,” the company said in a statement. The investment is aimed at “serving personal and household care industries in southeast Asia, Australia and New Zealand”, it said. Further details of the expansion project and capacity details of the plant were not disclosed in the statement.
In a move with some relevance to surfactants, Innospec acquired US Chemsil Silicones, and distributor Chemtec in August. Chemsil, which develops and markets silicone-based formulations to the personal care industry, will become part of Innospec’s performance chemicals business, which develops and markets surfactants and emollients. Chemtec, which distributes personal care ingredients primarily to the US west coast, will continue to operate as a key distributor in that market. The acquisition was funded through the negotiation of an increase to the Innospec’s existing revolving credit facility agreement of $150m (€114m). The amendment allows the company to request a further amount of up to $50m to be committed by various lenders.
Sasol's FY 2013 Olefins & surfactants operating profits rose by 12% year on year to R3.58bn with the US operations benefitting from the low ethane price but operations in Europe squeezed by soft demand and high petrochemical feedstock prices. The segment’s operating profit was 23% higher if the prior year’s gain from the sale of operations in Witten, Germany, is excluded, Sasol said. The company is adding 48,000 MTs/year of ethylene capacity in an ethylene purification unit in Sasolburg, South Africa. The unit is to be officially opened later this month, the CEO said. Orders for long lead-time equipment have been placed for the ethane cracker planned for Louisiana and environmental permit applications have been made.
In news reported directly from the 2nd ICIS European Surfactants Conference, John Hodgkinson, business manager, EG, EO and derivatives at Technon OrbiChem, predicted that ethoxylate demand would grow by 1.7% over the next five years. “The [ethoxylate] forecast is 1.7% growth to 2018, which is fairly good for a mature market. For ethanolamines it is about 1.6%, with e-series glycols ethers around 0.7%,” he said. “This is good news for major EO producers, since they are also ethoxylate producers. But the problem in Europe is available capacity and consumption. A good year for ethoxylates and ethanolamines will bring tightness to the [EO] market,” Hodgkinson added.
In other news from ICIS European Surfactants, Martin Harrington of IP Specialties, pointed to the boom in cheap oil and gas in North America while.
With US natural gas production now equivalent to almost half of Saudi Arabia’s, Harrington said that “palm kernel oil is not the only game in town.” “This is cheaper energy for countries that frack, and will reduce the dependence on the Middle East,” he said. Bio-based feedstocks such as sugar, as well as US natural gas are attracting the attention of the industry as alternative feedstocks, owing to the cheaper costs. Harrington, the president of IP Specialties North America operations, also looked at new alternatives to oleochemicals, such as fermentation with E.coli, metathesis and micro algae cell disruption. “The oleochemical landscape is now very different to what it was in the 1980’s,” Harrington said. “Success in sourcing surfactant feedstocks will hinge on an organisation’s ability to be flexible to the alternative feedstocks, as well as an understanding of the feedstock and its by-product implications.”
| Current prices (August 2013, courtesy of IP Specialties) | |
| Crude oil | $750/ton |
| Palm kernel oil (CIF R’dam) | $865/ton |
| Sugar | $376/ton |
| US Nat Gas as LNG | $175/ton |
Yet more insights from the same conference: An expanding population and strong economic growth in Turkey means that demand for surfactants for the fabric cleaning sector will continue to grow, said Gulhan Eglimez, global category marketing manager at Turkey-based company Hayat Chemicals, said, “Turkish domestic demand is strong and exports are growing. Particularly to countries like Iraq.” “We have 75 million people living in Turkey and quite a young population, with an average age of 28. We have 19 million average households and 15 million housewives,” she added. According to Egilmez, Turkish GDP growth in the first quarter of 2013 was 9.5 %. In relation to the end user markets and their buying habits, Eglimez said that the number one priority in Turkey was price. She added that while the trend in northwest Europe was more towards liquid detergents, the Turkish market still favoured powder.
To round out the quarter and with news of great significance for the North American surfactants market, Switzerland-based Clariant said late September, it has opened the new global headquarters for its Oil and Mining Services business unit in the Woodlands, TX. The campus, housed in Black Forest Technology Park, broke ground a year ago, and at the time the company said plans included two 32,000-square-foot office buildings at 2730 and 2750 Technology Forest Blvd. The new campus will allow Clariant Oil and Mining Services to double its workforce in the area by 2015, the company said at the time. It will house 100 offices and serve the Oil Services, Refinery Services and Mining Solutions business units, Clariant said Thursday. It will also include two technical centers, one for Oil and Refinery Services and the other for Mining. Clariant's U.S. headquarters is in Charlotte, N.C
Thanks again for reading and I look forward to seeing you at the 3rd ICIS Asian Surfactants Conference in Singapore, November 14th and 15th.