January 2018 – Surfactants Monthly Review
January was distinguished as the month in which the ACI (the real ACI) held their annual meeting in Orlando. If you’re here expecting some reporting, gossip, news, updates and anything else from that important industry meeting, sorry but we don’t do that here. 2 reasons: first it’s not cool- to be listening and talking to people and then running off and blurting it all out in a blog; second – my philosophy is, as regular readers know, “you gotta be there”. So if you want to know what happens at any event or industry gathering, just , you know, join and show up like around a thousand people did the week before last. What we have in this blog is all publicly available information, mainly from ICIS News and also from whatever I come across just googling around. The opinions of course are original but again based only on what I know is out there in the public domain. If it’s gossip you’re after, stick to Page Six where you will learn, among other things, that Victoria Beckham has, again, dashed any lingering hopes of an imminent Spice Girls reunion. Sad.
2018 is going to be great for many reasons. Our 2018 series of surfactants conferences kicks off in NYC, May 9 – 11th for our biggest and best World Surfactants Conference yet. We’re again partnered with a high octane and creative ICIS team with some great ideas and the most interesting speakers and engaged attendees you will find anywhere. One thing I am particularly excited about is the return of the surfactants awards to the New York conference, the evening of Thursday May 10th. By the way, if you want to get a flavor of what it’s like to be there, check out our photograph gallery.
Some sad news; right at the end of the month (Actually February 2nd). Jon Huntsman, the founder of Huntsman Corporation died age 80. Huntsman founded the Huntsman Container Corp in 1972 and Huntsman Chemical in 1982. A brief history of the man and company is published on the company’s website. Jon Huntsman is probably remembered as much for his generous philanthropy as for being a successful industrialist. One great personal memory I have of Jon is from the opening of Huntsman Hall at the University of Pennsylvania in 2002. Jon’s donation funded the bulk of the project and he came to speak briefly at the opening, where his remarks emphasized the importance of charitable giving and service. At the end of his talk, I waited in a long line of students and alums all wanting to talk to him. Upon shaking his hand and thanking him for his generosity, he asked me where I was from. I told him, England, but now living and working in the US, at a small company called Pilot Chemical. At this, his eyes lit up “I didn't expect to meet any customers here. Thank you for purchases over the years and supporting our LAB business.“ Pretty impressive.
Just a week before, Huntsman Corp reported some solid results, raising its fourth quarter 2017 expectations due to its global methyl di-p-phenylene isocyanate (MDI) urethanes business showing stronger than expected demand and margins in the quarter, the company said on Thursday. The results from the MDI Urethanes business were somewhat offset by a weaker than expected quarter in its performance products division. This was due in part to unplanned outages and weather related issues in the US Gulf Coast region. The issues have since fully resolved, Huntsman added. Earnings before interest, tax, depreciation and amortisation (EBITDA) in the company’s performance products division is now expected to be down compared with the previous year’s pro-forma EBITDA of $61m, Huntsman said, adjusted for the sale of its European surfactants business. Huntsman expects to report total adjusted EBITDA for the forth quarter modestly above the third quarter 2017 adjusted EBITDA of $340m.
Alcohols expert, Judith Taylor published an interesting outlook piece on detergent range alcohols in ICIS news at the beginning of the month. According to Judith, the US fatty alcohol market in 2018 could see supply pose as much a driver as feedstocks, a shift from the upstream feedstock volatility that dominated 2017. PKO prices were exceptionally volatile in 2017, pushing mid-cut fatty alcohol contract prices up and then sharply down on changes in the feedstock market. However, entering Q1 of ‘18 it is alcohol supply that is driving the price levels. Both oleo (PKO derived) and petrochemical (or synthetic) detergent range alcohols are displaying a potential supply pinch going into 2018. Synthetic alcohols are in a sold-out position almost every quarter, an issue pushing the market to expect both Shell and Sasol to consider expansions according to Judith’s analysis. Synthetic mid-cuts made a sharp market incursion based mainly on price between 2016 and 2017, putting the natural side on the alert. Synthetic producers operate on a different production model utilising ethylene and natural gas – both attractively priced in the US Gulf coast region. In addition to ethylene and natural gas as feedstocks, synthetic producers’ operating costs can be lower because of the attractive price of natural gas to run facilities. These factors have margin impact. This caused several natural alcohol suppliers to pull out of the US market, shortening the import supply to this region. That situation has not broadly rectified going into 2018. Additionally, suppliers still actively importing to the US said Asian alcohol inventories are short going into Q1 2018. Asian alcohol inventories are short because of some smaller plants ceasing production, but also because alcohol plants are often adjacent to fatty acid production. These producers have the choice to make alcohols or not. With strong demand for fatty acid downstream mid-chain triglycerides (MCTs) to go into diet bar food applications and narrow margins for natural alcohols, some producers either cut back on alcohol production or decided not to make alcohols in favour of more MCT production. US fatty alcohol demand appears to be strong going into 2018, bolstered by good demand in the huge surfactant end-use sector for the mid-cut alcohols.
For the other piece of the surfactants puzzle, ICIS reported that US ethylene oxide (EO) contract prices for December went down by 1.0% on the back of a 2.3% decrease in the December contract settlement for feedstock ethylene. December EO contract prices were assessed at 55.0-64.5 cents/lb ($1,213-1,422/tonne) FOB (free on board), a decrease of 0.6 cent/lb from November. US December ethylene contracts were assessed at a 0.75 cent/lb decrease.
Continuing in the US EO market; Q4 production of US ethylene oxide (EO) rose by 8.5% quarter on quarter, according to the latest data made available by the American Fuel & Petrochemical Manufacturers (AFPM). Q4 production recovered after being impacted by Hurricane Harvey the previous quarter. EO production was however down year on year, with a 1.5% decrease in Q4 2017.
Over in Europe, some interesting news from a site that is critical in the surfactants supply chain and that is Shell’s Moerdijk, Netherlands, chemicals site. A solar panel installation is being built help to power production at the site, with an expected generating capacity of 20 megawatts at peak rates, enough to power 7,000 Dutch households ( or I’m guessing a couple hundred less frugal ones like your correspondent’s) . An unused parcel of land has been earmarked for the construction of the unit, which will be developed by Shell’s New Energies Business. “The market for solar power has developed over the years,” said Marc van Gerven, vice president of solar for Shell New Energies Business. “Shell recognises that solar will play an increasing role in tomorrow’s energy systems.” Shell has 17 refining and chemical production units at Moerdijk, including ethylene, propylene, benzene, butadiene, ethylene oxide, ethylene glycols and surfactants.
At the end of the month the soap opera that is Petroleos Mexicanos (Pemex) continued to make news at ICIS. According to Pemex figures the company produced 7.43m tonnes of petrochemicals last year, down by 17.2% from 8.97m tonnes in 2016. Pemex gave no reason for the decrease in output, although the state giant is struggling to supply feedstock to its downstream units following its contractual pledge to deliver ethane to Ethylene XXI, a $5.2bn JV between Braskem and Mexico’s Grupo Idesa. That contractual arrangement, signed off in 2010, is valid for 20 years. It is supposedly this 3-way standoff over ethane that has stressed an already creaky supply chain.
Stick with the video to 3:34 for one of the best lines in movie history, with some clear parallels to our case under discussion. Today, Braksem and Idesa have the loaded gun and Pemex just has to dig.
According to the figures, ethylene production last year totalled 579,000 tonnes, down from 758,000 tonnes in 2016, while output of ethylene oxide (EO), reached 218,000 tonnes, down from 294,000 tonnes.. In aromatics, Pemex produced 19,000 tonnes of benzene and 53,000 tonnes of toluene, compared with 47,000 and 87,000 in 2016. In other business areas, Pemex produced an average 1.95m bbl/day of crude oil last year, down from 2.15m in 2016, while combined output at the company’s six refineries reached 915,100 bbl/day, compared with 1.12m bbl/day in the prior-year. Meanwhile, sagging petrochemical output has corresponded with a widening trade deficit, which last year stood at $84.7m compared with $65.0m in 2016. Exports of petrochemicals in 2017 totalled $37.8m compared with $20.5m in the prior year, while imports rose to $122.5m from $85.5m.
What a successful soap opera looks like
In the Fatty alcohol ethoxylates (FAE) market, spot discussions for imports declined on the back of softer buying appetite in Asia, ICIS reported at the end of of the month. Offers for February drummed cargoes were heard at around $1,750/tonne CIF (cost, insurance and freight) China. In the week ended 24 January, FAE spot prices were assessed stable at $1,700-1,800/tonne CIF China and $1,700-1,800/tonne CIF SE (southeast) Asia, according to ICIS data. In Asia, import buyers were monitoring the spot markets and were somewhat resistant to strong spot offers. Buying interest for imports was also minimal in China, on the back of weaker demand for local FAE. Customers were not motivated to procure too much FAE prior to the Lunar New Year break. Some downstream factories would shut in that period, sources said. Spot availability was generally stable, with some volumes being offered on the market. Some FAE makers were heard operating at healthy rates, especially for those building inventories. From a feedstock perspective, prices for ethylene oxide (EO) and C12-14 fatty alcohols showed some steadiness in the week. On one hand, EO prices in China were maintained for the fourth consecutive week. On the other, C12-14 alcohol prices held steady for the second week, after starting on a downtrend in November.
Finally, congratulations to Shekhar, Geera and friends at Galaxy Surfactants whose IPO opened on January 29th and went very successfully. Full details are available here. The flotation provides some liquidity for minority shareholders and also of course access to the public markets for the company’s longer term growth initiatives. Keep an eye on this great Indian company who we are proud to include among our regular speakers and participants at our surfactants events.
That’s it for the news. As I know you’ve been humming this tune since reading our first paragraph, we’ll have the inimitable Posh, Baby, Sporty, Ginger and Scary play us out for this month. ..
Not appearing at the ACI – or anywhere else...