Surfactants Monthly - June 2017
1776, NEPIC and the common good..
On this Independence Day here in the US, I think back to my homeland in the UK as I did one year ago in the blog. Mid June, I had the privilege, again, to attend the annual meeting of NEPIC, the Northeast Process Industries Cluster in Teeside in the Northeast of England. This meeting marked the retirement of the first CEO and founder of this outstanding trade organization, Stan Higgins. NEPIC was formed as a voluntary association of companies promoting industry in the Northeast and over 13 years has been incredibly successful. As Stan mentioned to me a couple of weeks ago, in the beginning it was just him, an overhead projector and a whole lot of doubt about the future of the UK chemical industry and the Northeast in particular. Since 2004, 83 process sector investment projects have been delivered in the region valued at £4.3 billion. There are more than 1,400 companies directly involved or in the supply chain of the chemical process industries, generating £26 billion of annual sales. Together they employ 190,000 people and the sector exports £12 billion each year – making this region the only net exporting region in the UK (Hear that London!?).
So what does this have to do with our secession from British rule in 1776? At our May surfactant awards I waxed lyrical about the power of voluntary associations of free people to do great things. In this case the subject was the partnership award which ultimately went to P&G for their work with family farms in Southeast Asia. A close runner up was the CPDA (Council of Producers and Distributors of Agrotechnology. ). My point was that associations of free people working together for mutual benefit and governing themselves can achieve so much more than enforcement and coercion by government. Sure, the pharaohs used slave labor to build the pyramids and those stone wonders-of-the-world are still here today, but where did that really get them or their kingdoms? The lasting good from that episode came in a whole different area. And lasting good in areas of science, technology, art and commerce has been wrought mainly by free people.
But here I must remind my American countrymen that the concept of self-government was not invented during that hot summer in Philadelphia. Voluntary associations ranged from ancient Greece through the many guilds and livery companies of Europe and England in the middle ages. Anglo Saxon government up until 1066 was as devolved as anything seen in the US today.
It was the declaration, however, that most poetically and forcefully pointed out that governments are formed for the purpose of securing (not granting!) simple God-given rights including those to life, liberty and the pursuit of happiness. If government fails in that regard, it is “the Right of the people to alter or abolish it..” and so the declaration continues to reverberate around the world today.
So, while respecting and supporting legitimate government, we don’t rely on it to get all things done for ourselves. We don’t follow 5 year national plans, preferring the invisible hand comprising the ambitions and free actions of our fellow citizens. There's a reason those old Soviet supermarket shelves were empty. It was a lack of freedom, not a lack of food.
Folks like NEPIC and those that read this blog create business and opportunities for themselves and each other because they want to and are free to do so. 241 years ago, the 56 brave and visionary signers of the declaration reinforced that ability and right to think and act for our own and the common good.
Happy Independence Day!
Now the news from June..
Some M&A news as reported in ICIS: Our friend, Barry Siadat and SK Capital invest further into chemicals with a majority control position in Tri-Tex, a Canadian specialty chemicals manufacturer and distributor focused on the adhesives, coatings and sealants, surfactants, and textile chemical markets. Tri-Tex’s founders and management, Naim and Natalie Laham will retain a significant ownership stake,Tri-Tex, which is based near Montreal, supplies precursors used to develop consumer and industrial applications in a number of end-markets, including paints, printing, personal care, hygiene, construction, textile and marine.
In other M&A news: Stepan has agreed with BASF Mexicana to acquire its surfactants plant near Mexico City and a portion of its associated surfactants business. Financial terms of the transaction were not disclosed. The facility includes 50,000 tonnes of capacity, 124,000 square feet (12,000 square metres) of warehouse space, a laboratory and office space. Stepan expects the agreement to close in the fourth quarter. And thus Stepan continues its careful strategy of market consolidation in North America; a strategy which those of you who attend my courses and conferences, know I admire greatly.
And in even more M&A news, the rumors swirling around MFG Chemicals came to a head at the end of the month with the announcement that private-equity firm Platte River Equity acquired a majority interest in the company. MFG’s owner, founder and chairman, Charles Gavin, will maintain a minority equity interest. The deal was financed with the help of a $45m credit facility, finance firm Monroe Capital said on Thursday. Much luck and success to the new owners.
In yet more, M&A, Nikkei’s Asian Review reported right at the end of the month that WiImar and Lion (both veteran’s of our surfactants conferneces ) have merged their MES businesses into a 50/50 JV. What does this mean? No idea really except that Lion has to be pleased to line up with a palm giant and Wilmar has to like Lion’s access to consumers via its branded detergent products.
M&A related news from Innospec: Nice to see the company investing in dry product capacity at its St. Mihiel site acquired from Huntsman earlier in the year.
Early in the month ICIS reported on a meeting of the great CM&E (Chemical Marketing and Economics) Group of the ACS, a successful association of free individuals with a love of chemistry. I continue to be honored to serve on there CM&E board. Nexant spoke on bio-renewable produts, “The economics will improve over time, with some renewables able to compete head-to-head with petroleum-based products. Companies will learn how to use these building blocks better,” said Jim Virosco, vice president at Nexant. He went on. “However, the principal driver in utilising renewable feedstocks is consumer pull. This is being picked up by packaged goods manufacturers as well as retailers,”. The impending production of bio-based ethylene oxide (EO) is one example of consumer pull, said Virosco. (We of course heard from Croda at our 7th World Surfactants Conference in NYC in May.) Croda is building a $170m bio-based EO plant in Atlas Point, Delaware, set to start up this year, which will feed into its surfactant production, he noted. This will allow the company to produce 100% renewable non-ionic surfactants, enabling its customers to deliver completely renewable, high performance products to consumers, according to Croda. Croda will also have a steady local supply of EO, rather than having to bring EO from Texas by rail to its Delaware plant. The article goes on to detail a number of other bio-derived products in serious commercial production. See the whole thing over on the ICIS News site. Scroll down also to the last item in this month’s blog.
In a profile of LAB, published by ICIS on June 2nd, some interesting statistics: Global LAB demand in 2016 was estimated at 3.68m tonnes, with Asia and the Pacific region accounting for close to 49% of that, at 1.79m tonnes, according to ICIS Supply-Demand Database. LAB demand is expected to continue growing in 2017, at an estimated annual rate of around 1.5% from 2016. In terms of production, global LAB output was estimated at 3.7m tonnes in 2016 and is forecast at 3.76m for 2017, with production in Asia and the Pacific expected to account for about 47% of that, according to ICIS Supply-Demand Database. Total nameplate capacities of LAB producers across the region exceeds 2.6m tonnes/year, based on ICIS data. In Asia alone, there are currently 13 LAB manufacturers, accounting for just over 2.0m tonnes per year. India is still considered an undersupplied market with production from the four main domestic producers believed to still be insufficient to fully meet the growing demand for LAB and LAS there (by the way, get a full and clear picture of everying India – surfactant related at our first Mumbai Conference in September).
According to ICIS, despite the threat of oversupply, LAB prices have made relatively decent gains over the last year, driven largely by higher feedstock costs. In early-March 2017, LAB import prices in India rose to $1,375/tonne CFR India, their highest since June 2015. This was linked to India’s plan to impose anti-dumping duties on LAB imports from Qatar, Iran and China and also due to higher prices of benzene. Prices have eased since then but remained around the $1,300/tonne CFR India levels. That was still about 22% higher than in January 2016, when LAB prices hit their lowest levels since ICIS began tracking the data, of around $1,065/tonne CFR India. In that period, LAB import prices in SE Asia also hit their lowest on record, of around $1,025/tonne CFR SE Asia. Since the start of 2017, LAB prices in SE Asia are higher by 17-27%, in a $1,200-$1,305/tonne CFR SE Asia range.
India is seen as a generally undersupplied market for LAB (and attendees at our Singapore conference last year, will know exactly why as reported by IOCL) and imports are needed to supplement production by the four main Indian domestic producers. About 200,000 tonne/year of imports are needed to meet India demand. However, the introduction of anti-dumping duties on LAB imports from Qatar, Iran and China in April 2017 has upset some of the market fundamentals there although market participants believe other suppliers would be ready to fill up any supply gaps which could appear. Saudi Arabia’s Farabi Petrochemical is planning to expand its production of linear alkylbenzene (LAB) and feedstock normal paraffin with the development of a new complex in the Yanbu industrial city. Farabi signed a contract with developers on 22 May and construction is expected to start soon while commercial operations are due in Q1 of 2020. India is not expected to have any available LAB for exports anytime in the near future but it does continue to export LAS, to Pakistan, Africa and SE Asia. China is also a key growth region but is believed to be sufficiently supplied. The SE Asia region meanwhile is largely considered to be adequately supplied with Thai Oil and Japan’s Mitsui & Co’s 100,000 tonne/year Labix having started production in 2016 and is a key supplier for the region.
On the pricing front, US ethylene oxide (EO) contract prices for May rose by 1.7% on the back of a 3.9% increase in feedstock ethylene contracts for May, as assessed by ICIS on June2nd. May EO contract prices were assessed at 55.60-65.10 cents/lb ($1,226-1,435/tonne) FOB from 54.60-64.10 cents/lb FOB in April. The increase in EO contracts is based on the settlement in May ethylene contracts. US May ethylene contracts settled at 33.25 cents/lb DEL (delivered), a 1.25 cents/lb increase from 32.00 cents/lb in April.
Last month’s blog took a look at the Akzo / PPG merger proposal and now ICIS’s inestimable Joseph Chang in an interview has teased out that Akzo is considering a carve-out / split up. Thierry Vanlacker, head of AkzoNobel’s specialty chemicals business outlined how AkzoNobel is engaging in a dual track for the separation of its specialty chemicals business from its core paints and coatings franchise – a sale process along with an initial public offering (IPO) or spinoff. In 2016, AkzoNobel’s specialty chemicals business had sales of €4.8bn, eanings before interest, tax, depreciation and amortisation (EBITDA) of €953m (about 20% EBITDA margin). Of its sales, 43% were in “mature Europe”, 17% in North America and 10% in Latin America. Its five business segments include surface chemistry (yep surfactants), pulp and performance chemicals, polymer chemistry, industrial chemicals, and ethylene and sulphur derivatives. Major product areas include surfactants, ethylene oxide (EO), polymer and rubber additives, chlorine and bleaching chemicals. “Each of the five business units are about €1bn in size with more or less the same margins ranging from 18-22%. They are performing equally well and 80% of the businesses are either No 1 or No 2 [in global market share],” said Vanlacker.
Within the sale option, AkzoNobel would clearly prefer a sale of the entire business versus piecemeal. “In April we said we wanted the process to take about a year, and carving out individual pieces would likely complicate and prolong the process,” said Vanlacker. The executive sees “no bad scenarios” in the dual process. “Specialty chemicals is a strong performing business that we could take to a different level – there is a lot of upward momentum and our people are excited and energised,” said Vanlacker. Recently, Akzo in May 2017, announced a joint venture in Gujurat, India with Atul for the production of monochloroacetic acid (MCA) by 2019. The MCA will be used in Atul’s herbicides. MCA is also used as a raw material for betaines. My personal view is that this is a great thing for Akzo as there never was any great synergy between the two sides of the company. The specialty chemicals business is a nice asset and will be interesting to the usual suspects (such as Evonik, BASF as well as some of the larger PE funds).
Our good friends Sasol continue to make news and invest a boatload of money in surfactants. Sasol has told ICIS News that it has started construction of a 150,000 tonne/year alcohol ethoxylates (AE) plant in Nanjing, China, expected to be operational in early 2019. The plant will be located in the Nanjing Chemical Industrial Park (NCIP) west of Shanghai.
One of our favorite voluntary associations of conscientious businesses, the American Cleaning Institute, welcomed three new executives to its board of directors at the mid-year meeting. The new directors include: Jeff Jirak, vice president and general manager, surface chemistry for the Americas at AkzoNobel Chemicals; -Linda Rendle, senior vice president and general manager at the Clorox Company; and -Eric Peeters, global business director, home and personal care at the Dow Chemical Company. Congrats to all and best wishes for this important role in our industry and society. If, for some strange reason, you are reading this blog and your company is not a member of ACI, please check it out and rectify that oversight!
In my well-thumbed copy of Golf Course Industry Magazine, I spotted the attached gem penned by our friends at Milliken. The next time your boss complains about your excessive time on the golf course, you can confidently explain that you are engaged in applications research.
We don’t often write about Turkey here although I suspect we may learn a lot about Turkey at our surfactant conference in Amsterdam coming up in September. ICIS has reported that Turkish company Biokim Rafineri İşletmeleri Sanayi ve Ticaret (or Biokim, if your prefer) has revealed plans to build a unique commercial-scale biorefinery in the Adana Free Zone in Turkey. The investment was announced by the company, part of Turkey’s Tukek Holding, which also includes artificial suede and leather and polyurethanes manufacturer Flokser, during the biobased chemical track at World Bio Markets in Amsterdam earlier this year. The complex will be an integrated biorefinery in which 200,000 tonnes/year of biobased ethylene oxide (EO) will be produced from bio-ethanol via bio-ethylene (sounds like a lot right?). The bio-EO will be used for ethoxylation purposes as well as for the basis of further downstream production of various end products, such as bio-monoethylene glycol (MEG) and bio-polypropiolactone (PPL).
The refinery will use four to five steps to downstream products used in the manufacture of everyday applications such as automotives, furniture, filling materials, diapers and packaging materials. Anticipated first products include bio-PPL, bio-EO and bio-MEG. The project will be implemented at the Adana Free Zone Area, located at Yumurtalık. This has the necessary infrastructure available and, as the area is a duty-free zone. The land has been obtained by Biokim and engineering is in progress. Site works are expected to start in Q2 2017. The production facilities including all related utility facilities and infrastructure are expected to be operational in 2020. According to the company, licensing agreements have been signed and basic engineering started. Partners include Petron Scientech, Novomer and Global Industrial Dynamics. By the end of this year, offtake and financing deals will have been signed, and the engineering, procurement and construction phase should have started, with mechanical completion expected by the end of 2019. The biorefinery should be fully operational by Q1 2020. New Jersey-based Petron Scientech will provide the basic technology for conversion of bio-ethanol to bio-ethylene and bio-EO. Netherlands-based Global Industrial Dynamics brings its biorefinery engineering expertise to the partnership, while US-based Novomer will contribute technology to produce bio-PPL from bio-EO and carbon monoxide using its proprietary catalyst. Wow! This is clearly one to watch and expect more from the blog on this project.
That’s it for June. See you all soon I hope at one of our events during the rest of the year.