Surfactants Monthly - February 2024

Various things :

First – to subscribe to our monthly emails with a link to the blog – just put your name company and email in here Here’s the link. I promise to only send one marketing email per year to this list and that relates to our surfactant conferences.

Second – I’ve had a bunch of questions about training. We have our next public Surfactants Business Essentials Course coming up in person on May 8th in New Jersey. Capacity is limited to ensure a quality experience. More information and links to register here. Training Link . We also do custom training and management seminars, your site or ours – or online if you like. If you’d like to discuss, please drop me an email

Third – I’m told registrations are w a y ahead vs prior years for the May 9 – 10th Conference and that we will sell out the top floor. The speaker roster is amazing and bursting at the seams. So I recommend you book now. Here’s a link straight to that site.

The News

Stepan is the bellwether of the surfactants industry (says who? Me. I don’t believe they have ever referred to themselves that way). Bellwether – according to the OED means “the leading sheep of a flock, with a bell on its neck. Something that leads or indicates a trend. "Basildon is now the bellwether of Britain's voting behaviour". For non-UK readers, think something like Michigan or Wisconsin or some other so-called swing state. Anyway – what I’m saying is that - how Stepan does in surfactants is a good indicator of how the many private companies or subsidiaries of larger companies – in our industry are doing. Make sense? And look, you Stepanophiles, I’m not likening the company to sheep or saying they are all Basildon men (a key constituent of the great Maggie Thatcher in the 70’s). With me? Good. So Stepan released its 2023 results recently. Let’s dig in and see what’s happening.

Maggie in Basildon. I just lost half my UK readers. I don’t care!

Stepan had a rough year in 2023. Reported net income for the full year 2023 was $40.2 million, or $1.75 per diluted share, down 73% versus $147.2 million, or $6.38 per diluted share, in 2022. Adjusted net income was $50.7 million, or $2.21 per diluted share, down 67% vs $153.5 million, or $6.65 per diluted share, in 2022. Total Company sales in US Dollars declined 16% versus the prior year. Sales volume in MT declined 11% overall, primarily due to significant customer and channel inventory destocking across most of the Company's markets. As I said, a rough year, and probably no surprise to others in the industry that have experienced similar.

Let’s get serious and look into the segment results in a little more detail:

First thing to notice is that surfactants sales, which represent 69% of company sales, are off 15% in US Dollars vs 2022. And the surfactants operating margin $ amount for 2023 is off by 56% vs ‘22. Oof – OK – let’s put that in a separate table and think about it (All numbers in Thousands ).

This is what the company had to say about it (Quoted verbatim from the 10-K):

“Surfactant net sales in 2023 decreased $280.0 million, or 15 percent, versus the prior year. Sales volume declined nine percent and negatively impacted the change in net sales by $169.8 million. The lower sales volume primarily reflects a slow down in demand across most end use markets and significant customer and channel inventory destocking. Lower average selling prices negatively impacted the change in net sales by $130.4 million. The lower average selling prices were primarily due to the pass-through of lower raw material costs, less favorable product mix and increased competitive pressure within certain end-use markets. Foreign currency translation had a $20.2 million favorable impact on the year-over-year change in net sales.”

The 10K then goes on to provide information on surfactants sales and gross profit by global region, which I think are worth combining into one table and analysing a bit here:

Generally, the story is one of decreased volumes in MT and decreased unit margins, with a slight volume bright spot in Latin America. A couple of notable takeaways:

· Stepan’s business, like most chemical companies, is scale driven. When volumes drop, the flipside of economies of scale kick in and margins suffer even more.

· The North American business in surfactants for Stepan is generally more profitable than the that in the rest of the world. This is consistent with what I hear anecdotally about other businesses who do not publish their results.

The company mentioned in the earnings release, the cost cutting measures that had been taken in 2023 to address the negative business trends – i.e. “The Company recorded $6.0 million of after-tax restructuring and impairment expenses in the quarter, inclusive of $2.3 million associated with workforce reductions and $3.7 million of non-cash asset and goodwill/intangible impairments. As previously announced, the Company expects to realize $50.0 million of pre-tax cost savings in 2024 to help offset inflationary pressures, increased expenses related to the Company's new Pasadena alkoxylation investment and higher incentive-based compensation expenses.” CEO Scott Behrens said, in part, in terms of looking forward “..While we believe the negative impacts of destocking are mostly behind us, we continue to experience significant destocking within our agricultural business and expect this to continue through the first half of 2024,..”

Other snippets from the annual report:

· The Company is executing the last phase of its Pasadena, Texas alkoxylation investment, with the facility expected to start up in the third quarter of 2024.

· Dioxane: “….in response to recent regulations limiting the amount of 1,4 dioxane in certain consumer products, the Company has made capital expenditures to modify its manufacturing process to reduce 1,4 dioxane content in ethoxylated surfactants. These 1,4 dioxane-related capital investments position the Company to continue serving existing customers and pursue new market opportunities. Compliance with regulations is not expected to have a material adverse effect on the Company’s earnings and competitive position in the foreseeable future.”

· More on Dioxane: “….For example, increased concerns regarding the safety of 1,4 dioxane in consumer products and its potential impact on human health and the environment may lessen the demand for certain of the Company’s products. 1,4 dioxane is generated as a by-product during the manufacture of certain of the Company’s surfactant products, including alkoxylates and ether sulfates, used by its customers as cleaning agents in household cleaning, personal care and cosmetics products. In their finished form, consumer products that contain ethoxylated surfactants may contain trace amounts of 1,4 dioxane. 1,4 dioxane has been categorized by regulators as a toxic and carcinogenic substance at certain levels. In December 2019, New York adopted a law that, beginning in 2022 and 2023, permitted no more than 2 ppm and 1 ppm, respectively, of 1,4 dioxane in cleaning and personal care products and 10 ppm in cosmetics products. California and New Jersey are also considering regulating 1,4 dioxane. The U.S. Environmental Protection Agency (USEPA) also continues to examine 1,4 dioxane as part of its environmental and occupational regulatory authority. Under TSCA, USEPA has identified 1,4 dioxane as a high priority chemical and has issued its draft risk evaluation and risk determination, with risk management measures expected to mitigate any identified risks. The European Union is also expected to propose a regulatory limit for 1,4 dioxane content in surfactants. We expect our customers to continue reformulating their personal care, cosmetics and cleaning products to comply with New York’s regulations. These trends and corresponding changes in consumer preferences could reduce demand for our ethoxylated surfactant products, as our customers look to reduce the levels of ethoxylated surfactants in their finished products to stay below the maximum allowed levels or transition to alternative surfactants with lower levels of 1,4 dioxane. We have modified our manufacturing process to reduce 1,4 dioxane content to allow customers to continue to use ethoxylated surfactants at current use levels, while also offering consumer product formulations that contain low/no dioxane surfactants currently offered by the Company.

· Risks around Ethoxylation: “In addition, increasingly stringent regulation of human exposure to ethylene oxide by regulatory authorities in the United States could require material expenditures or changes in our manufacturing operations. The Company uses ethylene oxide at its Winder, Georgia and Elwood, Illinois (Millsdale) facilities and expects to use ethylene oxide at its Pasadena, Texas facility. The Company uses ethylene oxide in a closed loop process to manufacture surfactants that are used in products such as laundry detergents. The Company does not manufacture ethylene oxide, nor does it use ethylene oxide as a fumigant. Ethylene oxide is listed as a hazardous air pollutant under the Clean Air Act, as amended, emissions of which are regulated by the USEPA and other regulatory authorities. In 2020, Georgia adopted a law requiring any spill or release of ethylene oxide that occurs outside of normal operations to be reported to the state within 24 hours. Georgia and Illinois legislators have proposed legislation that would impose additional restrictions on the use of ethylene oxide. The USEPA is considering new standards for ethylene oxide emissions. While our production facilities have not yet been materially affected by changes in ethylene oxide regulation, any additional regulatory restrictions on the use or emission of ethylene oxide by facilities could impair our ability to manufacturer certain products in affected locations, including at our Winder, Georgia, Elwood, Illinois (Millsdale) and Pasadena, Texas facilities.”

Not sure how meaningful this is but the word “regulation or regulations” appeared 78 times in the Stepan 2023 10K. “Regulatory” added another 17. 10 years ago, in the 2013 annual report, the numbers were 28 and 2. Hmmm… surprised? Not me.

What about Croda? I always think of Croda as a more luxury / specialty oriented surfactants company in contrast to Stepans broad based approach. Hence Croda’s tough time during 2020 COVID (notwithstanding the later vaccine lipid boost) vs Stepan. Croda’s full annual report is not published yet, but they have put out a “Full year results 2023 final statement”. So let’s see – the highlights make clear, the picture is basically the same as with Stepan – everything is down:

Croda further commented:

· Sales down 11% on a pro forma basis as customers reduced inventory levels across multiple markets

o Consumer Care sales down 1% with underlying sales down 11% in Beauty Care, 1% lower in Beauty Actives and Home Care, and up 18% in lower-margin F&F business

o Life Sciences sales 5% lower, excluding Covid-19 lipid sales, with sales up 3% in Pharma on that basis, up 9% in Seed Enhancement and down 19% in Crop Protection due to continued destocking

o Pro forma sales down 35% in Industrial Specialities reflecting destocking and reduced demand

· Adjusted profit before tax down 33% to £308.8m (2022 pf: £463m) in line with updated expectations

o 18.9% adjusted operating margin (2022 pf: 25%) due to the negative operating gearing impact from lower sales volumes, lower Covid-19 lipid sales and the negative mix impact of strong F&F sale

Croda’s outlook reads quite breezy and positive with megatrends and all the rest of it, moreso than Stepan’s. They’re probably right – on the basics. Let’s see..

Speaking of Regulations. Laundry Pods are next in line. I was surprised to read in the latest edition of that great publication Packaging Dive – that ..

· A bill introduced in New York City on Feb 8th would ban the sale of laundry and dishwasher pods and sheets containing polyvinyl alcohol, a water-soluble polymer also called PVA or PVOH, come Jan. 1, 2026. At the local retailer level, violators could face fines.

· Council Member and Environmental Protection, Resiliency & Waterfronts Committee Chair James Gennaro introduced the bill with an aim of limiting micro and nanoplastic pollution.

· New York City-based company Blueland — a main campaigner for the bill and maker of dissolvable cleaning products for use in refillable containers, including laundry tablets — hopes it could also shift the market toward reusables.

Interesting so, Blueland is pretty transparent about pushing this bill – just visit their website. No hidden agenda, either as their own products are tablets and refillables – no pods. What do you think about that? It seems a bit much to me, honestly. I’m familiar with companies crowing about their green-ness and pointing out how existing regulations hobble their competitors, but actively and openly sponsoring, almost, legislation to hobble competitors seems like a new step. Maybe I’m naïve. What do you think? BTW – about 22% of laundry detergent sales are pods today (ACI figures). So, there we are then. Something else for the industry to think about. ACI is engaged and working to mitigate this latest assault, but the bill has been introduced.

What’s Hot? Is the question. Petrochemicals is an answer that I gave recently – as it relates to surfactants. Yes you heard that right. Petrochemicals are hot. That’s not a value judgement. It’s merely a fact. Of course that is not the only thing that’s hot. Biosurfactants are also hot for example. But petrochemicals are hot because such a large portion of the surfactant supply chain depends on them and they are super-cost-effective, especially in North America. Recent and continuing investments by Sasol, INEOS, Dow, Exxon and others in our space attest to this. I have to say that Exxon has been very proactive in getting data out there relating to its Exxal range of detergent range alcohols sold as surfactant intermediates. If you are as experienced as I am in this industry (or if you read last months blog), you’ll know that the Exxon surfactant heritage extends back as far as the backbone of the original Johnsons baby shampoo primary surfactant, sodium trideceth sulfate (sulphate for readers in the rest of the world).

Exxon recently collaborated on a paper with GreenBlue and the NSF. The link is here. It deals with the CleanGredients list of ingredients that qualify for inclusion in products meeting the EPA’s SaferChoice designation. It seems like Exxon wants to help companies making surfactants from their alcohols (and the companies using those surfactants) figure out of the ingredients were good for Safer Choice certification. The paper is very detailed and has a couple of interesting graphics. You should read the whole thing if you can. Here is a brief excerpt, detailing the Exxon rationale: “Because the Exxal™ products constitute such a large percentage and have a heavy influence on the properties of the resulting surfactant, they have a significant influence on whether surfactants made from them will meet Safer Choice criteria. In addition, the variability of ingredients in this product category means that surfactant manufacturers can’t simply rely on SCIL to ensure their ingredients qualify for Safer Choice – they need to obtain much more nuanced information from their suppliers or generate additional data themselves. Because of these factors, a better understanding of how the Exxal™-based ethoxylates align with Safer Choice criteria had the potential to be very helpful for both ExxonMobil and its customers.”

This graphic from the paper is quite informative:

The outlook for oleochemicals was profiled quite nicely recently by Natalie Caldwell of P&G in a Linkedin post here: Issues creating volatility include war (the Red Sea), drought (Panama Canal) and lower crop yields (el Nino ). Other big issues include renewable diesel vs traditional biodiesel and the big petrochemical companies snatching up gobs of renewable feedstock. Wow. You know I just started re-reading Homers Iliad. War, mayhem and interventions of the Gods. Sounds like not much has changed at least in Oleo.

Elsewhere in the oleo world, ChemAnalyst reports that Indonesian palm oil producers are sounding the alarm as the escalating demand for biofuels domestically raises concerns about potential threats to the country's food security and the impact on exports, all amid a plateau in palm oil production. Apparently the consumption of Indonesian palm oil in biodiesel outstripped that in food last year. Of the total 23.2 million metric tonnes consumed, 46% went into biodiesel, 44% into food, and 10% into oleochemicals. Indonesisa is considering a $3,800 per hectare subsidy for replanting aging plantations and there is talk repeat of the 2022 export ban. In addition, the Indonesian trade association, GAPKI is urging the EU to postpone its application of the EUDR to Indonesia origin products for a year. Interesting times.

The great HPC Today digital edition came out recently. Full disclosure, I’m on the editorial board, with some real luminaries who have written books and such. Anyway, I have already shilled on Linkedin for the articles I have written therein, so I’ll just mention here a really good overview of the role of surfactants in household cleaning written by Carrie Brown of the Household and Commercial Products Association. Here’s a great quote “Earlier this year, the Utah Department of Transportation (UDOT) needed to slide a 1.1 million-pound bridge into the southbound lane of I-15(1). The crews needed to keep everything “slippery and moving” to ensure that the bridge would inch toward its final location with the proper spacing on each side. Their secret ingredient? Dish soap.” Fantastic. Bridge Sliding! Add that to the list of things you can’t do without surfactants. And here’s a video of that very project made by the Utah Dept of Transportation. How cool is that ?!

Recently, we’ve been bringing you original research and not just in AI. So here – published in Frontiers in Bioengineering and Biotechnology on Feb 14th is an article, Tuning the antimicrobial activity of microbial glycolipid biosurfactants through chemical modification.( Link Here). It’s worth a full read, if you have the time. If not – here are the key points:

· Twenty-four new sophoroside derivatives were synthesized, including sophoroside amines with varying alkyl chain lengths (ethyl to octadecyl) on the nitrogen atom and their corresponding quaternary ammonium salts.

· Additionally, six different microbially produced glycolipid biosurfactants were hydrogenated to achieve fully saturated lipid tails.

· These derivatives, along with microbially produced glycolipids and three benchmark biosurfactants (di-rhamnolipids, alkyl polyglucosides, cocamidopropyl betaine), were assessed for antimicrobial activity against bacteria and yeast.

· Results indicated that microbially produced glycolipids, such as bola sophorosides, acidic sophorolipids and acidic glucolipids exhibit selective antimicrobial activity against the test organisms. Lactonic sophorolipids, sophoroside amines and quaternary ammonium salts display a broad antimicrobial activity.

Now to the market news:

With appreciation to ChemAnalyst for some of the news and information used herein.

LAB and LAS:

In the United States, freezing weather caused problems in the petrochemical industry, leading to a constrained supply of Benzene and shutdowns or lower operating rates at plants. This resulted upward pressure on LAS prices

In China, upward pressure on LAB and Benzene pushed LAS up, exacerbated by freight problems in the Red Sea area.

In Europe, the picture was similar except demand is more sluggish due to the overall economic picture there.

Spot prices for LAB in Asia tightened in the range of USD 1,375 to USD 1,425 per MT.

Spot prices for LAS in Asia – USD 1,230 – 1,320 per MT

Ethylene, EO and Ethoxylates:

Ethylene Oxide (EO) USA capacity is back more or less to normal after various January freeze outages. Indorama announced a re-start of its Clearlake plant at the beginning of the month and Dow Plaquemine is expected to be online in Q2 of this year. Pricing remains steady in the range 56 – 58 c/lb.

EO in Europe traded higher than the US and up from last month in the range USD 1,400 – 1,575 per MT on the back of higher ethylene prices

Meanwhile in Asia, Ethoxylates are trading just a touch up at USD 1,150 – 1,400 per MT. As with Trading is quiet in light of the Lunar New Year.

Detergent Range Alcohols:

Reminder. We’re talking here about alcohol’s in the carbon chain length range 12 – 18, regardless of provenance – means they can be petrochemical, oleochemical or other (that would be coal mainly)

In Asia – increased demand and lower stocks along with upward pressure in PKO have started to push up pricing. There is also some capacity off the market due to shutdowns. Mid-cuts up around USD 1,450 per MT.

A portion of the US fatty alcohol market is served by import and freight disruptions through the Middle East are being felt. Freight rates and lead times are going up. Prices have started to move up. Mid-cuts are around USD 1,650 – 1,950 per MT.

In Europe, a similar story, but weaker demand. Midcuts still around USD 1,550 per MT.

End of News.

AI Corner

There’s a lot to choose from this month, and I don’t want to overload you. But first, if you’re interested in what goes on under the hood with LLM’s and such, you have to check out the videos by Andrej Karpathy of Open AI (and formerly of Tesla) as he walks you through step-by-step, how to build an LLM from scratch. It is really super-cool to see him work and explain it all – with the pauses to think and consider. Brings back some high-school math as well. The guy’s a genius communicator on a very complex and topical subject. I spend way too much time watching him. Anyway, check this one out. He literally starts with a blank Jupyter notebook and builds and trains a neural network. You know I’ll just add first that the guy is clearly at the frontier of his field and has a complete mastery and has taken the time to make a 2 and a half hour video to explain it (and there’s a lot more videos). But also – read some of the over 1,400 comments from people who are working in this area. I mean he has delivered such value – for free. Makes me feel really good about the human race.

OK – fine but this is a surfactants blog so… let’s see what else is going on out there that maybe is more directly relevant. The opensource pre-print journal ChemRxiv has published another paper involving our friend Professor Alan Aspuru Guzik of the University of Toronto. I learned that the cite the paper you are supposed to write this: 1. Seifrid M, Strieth-Kalthoff F, Haddadnia M, Wu T, Alca E, Bodo L, et al. Chemspyd: An Open-Source Python Interface for Chemspeed Robotic Chemistry and Materials Platforms. ChemRxiv. 2024; doi:10.26434/chemrxiv-2024-33sfl-v2 This content is a preprint and has not been peer-reviewed. Anyway – here’s the link 10.26434/chemrxiv-2024-33sfl-v2 . In summary, it introduces Chemspyd, a lightweight, open-source Python package for operating the popular laboratory robotic platforms from Chemspeed Technologies. As an add-on to the existing proprietary software suite, Chemspyd enables dynamic communication with the automated platform, laying the foundation for its modular integration into customizable, higher-level laboratory workflows. The paper shows the applicability of Chemspyd in a set of case studies from chemistry and materials science.It demonstrates how the package can be used with large language models to provide a natural language interface. Very cool.

Another paper this month including Alan involves quantum computing aided discover of cancer therapies. Here https://arxiv.org/html/2402.08210v1

Something very relevant to surfactants. The Na Research group in Korea is collaborating with Syensqo to develop new surfactants using AI. Article here./ https://nagroup.ewha.ac.kr/development-of-artificial-intelligence-ai-to-design-sustainable-surfactants/

And finally, in this area, I guess I should link to my own article in HPC Today about AI and surfactants. Here’s the link. It’s a short read – so head on over there. https://tks-hpc.h5mag.com/hpc_today_1_2024/artificial_intelligence_-_ai_and_surfactants By the way, it’s the second result on google when you searh for “Artificial Intelligence and Surfactants” and – be warned – the first result is garbage. That link contains clearly hallucinated references. I got caught on that myself a few blogs ago. Just so you know.

Music Section

As mentioned somewhere above I’m re-reading the Iliad, to see if I can be a bit more intellectual. Not sure if it’s working yet but the story is pretty wild. In the notes upfront the editor of this translation basically concludes that Homer was not a single person, but more likely a group or collaboration over time. Reason is basically that no one person could produce such a masterwork. That got me thinking about Van Halen. Good grief – how? Well, just bear with me here. Eddy is clearly top 0.000000001% of all guitarists and the group is kinda named after him. But honestly, without Dave Lee Roth as a counterpoint, hmm I dunno if some of these songs would have had the impact. And even Sammy Hagar – incredibly. Now – in a recent blog we did a detailed exposition on VH’s first album, so I’m going to select examples from subsequent albums to illustrate my point. Despite the groundbreaking nature of Van Halen 1 there are many other great songs to consider. Here we go.

From VH2, Somebody get me a doctor, the song of many great teenage hangovers (I’ve heard). Has there ever been a more protein-packed red-meaty riff – but look how the vocals match the exuberance of the guitar. 2+2 = 5.

From the same album – similar concept, Outta Love. Maybe the first thing you notice is the vocals, but the song without the guitar – riff and solo would merely be extremely good.

This is one of my favorite all-time VH songs. Everyone excels. Lighting up the skies . Love that end with a bit of blues segueing into a guitar break and then simple drum solo and then that vocal outro .. nice

Here in Fools, the band tries on a bit of Led Zep type blues..

The album, Fair Warning didn't get a lot of critical acclaim but there’s a couple of great tracks I love. This one, Mean Street, starts, again like a showpiece for Eddy but then the whole things just comes together https://youtu.be/m4akn6e59TQ?feature=shared

And finally, Unchained from the same album. That monstrous, slobbering great dane of a riff is one for the history books but it’s more than matched by the manic extremes of Dave’s vocals. Classic.

That’s it folks! So – if you like what you read (and listen to) here, join a couple hundred of your friends and colleagues at the biggest and best surfactant event of the year, May 9 – 10th in Jersey City. See our event page here. https://www.neilaburns.com/events/event-one-4s3tz-n2gda

Surfactants Monthly - February 2024

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