Surfactants Monthly Short-Review – May 2017
Of Winston Churchill, Oprah Winfrey and Mel Gibson..
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As reported by ICIS, our good friends and conference sponsor Sasol’s base and performance chemicals sales volumes rose year on year for the nine months ended 31 March, by 6% and 2%, respectively.. Higher performance chemicals volumes were unable to offset lower selling prices over the period, causing a fall in revenue at that division. Within Sasol’s base chemical divisions, polymers sales volumes rose by 11% during the nine-month period, which corresponded to a total of 1.05m tonnes sold, while volumes of solvents stood at 728,000 tonnes, up 7%. Sasol disclosed revenue figures for its other chemical arm, Performance Chemicals, with the July 2016-March 2017 figures down by 3.9% to rand (R) 50.5bn ($3.77bn). The fall in revenue was related to selling prices, lower than in the previous corresponding period, which could not offset a rise in volumes for the period – total sales volumes stood at 2.63m tonnes, up 2% year on year. “Performance Chemicals delivered a strong sales performance, with sales volumes increasing by 3%. However, in rand terms, sales revenue was negatively impacted by the stronger rand exchange rate,” said Sasol. “In euro terms, total sales revenue increased by 2%, with Organics contributing a 6% growth from the comparative period. Sales volumes increased by 3% mainly due to higher sales of comonomers and European-based alcohols and surfactants.” Sasol added it is confident it will be able to start up its large-scale Lake Charles Chemical Project (LCCP) in the US, which will include a cracker and a petrochemical complex, in the second half of 2018. The company said capital expenditure (capex) to date stands at $6.72bn, adding that the engineering, procurement and construction (EPC) works stood at 68% as of 31 March. The start up date has not changed since the project was announced in 2014. At the time, the company said total capex would stand at $8.1bn. “During the course of the 2017 financial year, Sasol entered into a number of hedges to mitigate specific financial risks,” said Sasol about its move to protect itself against sharp changes in the currency. “In particular, we have entered into hedges against the downside risk in the crude oil price and rand strengthening against major currencies to increase the stability and predictability of our cash flows.”
We occasionally dip into the oil and gas rig count as published by Baker Hughes. The average rig count in the US oil and gas industry was 853 in April - up 64 from March, and up 416 or 95% year on year from 437 rigs counted in April 2016, Baker Hughes said in a data release. The worldwide rig count for April was 1,917 - down 68 from March, but up 493 or almost 35% from 1,424 rigs counted in April 2016. The rig count data are seen as an important indicator of activity and investment in the oil and gas sector. The rig count also reflects demand for oilfield chemicals, including hydrochloric acid (HCI), epoxy resins, triethylene glycol (TEG) and certain types of surfactants.
Few thing attract as much consistent interest as the US ethylene oxide (EO) market. As reported by ICIS, contract prices for April rose by 2.8% on the back of a 6.7% increase in feedstock ethylene contracts for April, as assessed by ICIS on Friday. April EO contract prices were assessed at 54.60-64.10 cents/lb ($1,204-1,413/tonne) FOB (free on board) from 53.00-62.50 cents/lb FOB in March. The increase in EO contracts is based on the settlement in April ethylene contracts. US April ethylene contracts settled at 32 cents/lb DEL (delivered), a 2 cent/lb increase from 30 cents/lb in March.
Al Greenwood in ICIS Chemical Business reported that Brazil-based surfactant producer Oxiteno reported a Q1 operating profit of reais (R) 75.4m ($23.8m), down 53% from R160.2m from the same time last year because sales fell while costs rose. First-quarter sales were R912.4m, down 8.8% from R1.00bn from the same time last year. Revenue fell because of the strengthening of the Brazilian real, which offset a rise in sales volumes. During the quarter, sales of specialty chemicals reached 157,000 tonnes, up from 147,000 tonnes from the same time last year. Sales of glycols were 38,000 tonnes, up from 35,000 tonnes from Q1 2016. By region, Brazilian sales were 140,000 tonnes, up from 128,000 tonnes in Q1 2016. Oxiteno said sales rose in the oil-and-gas, coatings and automotive-fluids segments. Sales outside of Brazil reached 56,000, up from 54,000 from the same time last year. International sales rose in part because of pre-marketing that Oxiteno is conducting as part of the start-up of its new plant in the US. The plant should start operations this year and produce about 170,000 tonnes/year. It will make surfactants used in agrochemicals, personal care, home care, industrial and institutional chemicals, paints and coatings and oil and gas. Cost of sales was R730.1m, up 4.9% from R696.3m from the same time last year. Costs rose because of higher volumes, raw-material prices and the new US plant. Because costs rose while revenue fell, Q1 gross profit was R182.4m, down 41% from R307.8m from the same time last year. A benefit of R49.4m from other income helped offset the decline in gross profit. The benefit was connected to taxes. Oxiteno is the sole producer of ethylene oxide (EO) in Brazil and the largest producer of specialty chemicals in Latin America, according to its parent company, Ultrapar. During the quarter, Ultrapar noted that the early months of 2017 saw continued year-on-year weakening of the economy, although this was to a lesser extent than in 2016. Inflation slowed down, and the Brazilian Central bank lowered interest rates. Meanwhile, the real had appreciated by 20% when compared with the average in Q1 2016, Ultrapar said. Ultrapar also owns fuel distributors Ipiranga and Ultragaz, liquid bulk storage firm Ultracargo and the drugstore chain Extrafarma.
Despite unwelcome attention from PPG, Akzo is focusing on its business and has started construction of a 32,000 tonne/year monochloroacetic acid (MCA) plant in Gujarat, India, and will look at further expanding its capacity in China. “We always look for growth in other regions and after having expanded in China several times we wanted to enter the Indian market,” Knut Schwalenberg, managing director for industrial chemicals business at AkzoNobel, told ICIS. MCA demand in the south Asian country will likely grow at around 8%, or 1.0-1.5 percentage points above GDP growth, he said. In China, AkzoNobel will likely expand the capacity of its 100,000 tonne/year MCA plant in Shanghai, as well as build a second plant in the country once the India plant starts commercial operations in 2019, Schwalenberg said, citing that the northeast Asian country is the fastest growing MCA market in the world. There is no firm timeline for the completion of the expansion project in China. In India, AkzoNobel broke ground in Atul in the western state of Gujarat for its new MCA plant, which will involve “double-digit million euro investment”, Schwalenberg said. The project is a 50:50 joint venture between the Dutch paints and coatings major and Indian chemical firm Atul Ltd. The new plant in India will boost the company’s overall MCA capacity globally to 250,000 tonnes/year, Schwalenberg said. “We want to be mechanically completed in the third quarter of next year and the start-up and ramp-up of to full capacity will be in the first quarter of 2019,” he said. MCA can be used to produce thickening agents for the food, oil, mining, personal care and detergent industries. It also has applications in agrochemicals, adhesives, pharmaceuticals, thermo-stabilizers, surfactants and cosmetics. Demand for MCA will grow proportionally to increases in population and wealth – both of which are in play in India, he said. Atul Ltd will provide the feedstock chlorine for the joint venture MCA plant, while AkzoNobel will provide the technology, engineering for the project. “We looked for a partner [in India] because … chlorine is not [a] substance you would like to transport,” Schwalenberg said, citing that MCA plants are best built in close proximity to chlorine feedstock units, he said. AkzoNobel picked Atul Ltd as partner as the Indian company can also absorb part of the planned MCA output for herbicide production. Based on the deal, Atul will absorb 30% of the MCA produced by the plant, while 70% will be sold to the domestic market, according to Schwalenberg. As for the acetic acid feedstock needed for MCA production, the company will get the material from the open market, according to Schwalenberg. India is a net importer of acetic acid. The Indian MCA plant will be structurally ready to be expanded to 60,000 tonnes/year, but “its expansion will be done in relation to the development of the market,” Schwalenberg said. The Indian market is not yet able to consume 60,000 tonnnes/year and at 30,000 tonnes we already have a major market share, Schwalenberg said, adding that expansion will likely be executed “in a few years”. Global MCA demand this year remains strong while competition is at healthy levels he said. “The main raw material is methanol going into acetic acid so if methanol prices [are] going up or down, you will see fluctuations in the prices of MCA,” Schwalenberg said. “Demand for MCA is strong and we are fully sold out so there we don’t see any reason for weaker pricing. If MCA prices fluctuate it is more related to deviation in methanol prices... So for the margin for MCA, it is neutral right now,” he said. AkzoNobel’s global MCA business is showing earnings improvement compared with previous year’s levels, he said. “At this moment the MCA business is quite competitive and results are improving in 2017 compared to 2016. The demand side is good. The raw material is also sustainable so it is a nice specialty business,” the executive said.
The big news of the month of course is that Huntsman and Clariant have agreed to combine their businesses via an all-stock “merger of equals. The merged company will be named HuntsmanClariant, in which the Swiss firm will have a 52% stake, while the US firm will hold the remaining 48%, they said. Under the deal, Huntsman shareholders will receive 1.2196 shares in the merged HuntsmanClariant for each Huntsman share held. Each existing Clariant share, on the other hand, will remain outstanding as a share in the merged entity. The merged firm has about $20bn in enterprise value at the time of the announcement. HunstmanClariant will have a dual direct listing on the SIX Swiss Exchange and the New York Stock Exchange. The merger, which was approved by the board of directors of the two companies, is expected to create more than $3.5bn in value through annual cost synergies of more than $400m, they said. The transaction is targeted to close by the end of the year, subject to approval from the respective shareholders of the companies. “Clariant and Huntsman are joining forces to gain much broader global reach, create more sustained innovation power and achieve new growth opportunities,” Clariant’s CEO Hariolf Kottmann said. “Together, we will create a global leader in specialty chemicals with a combined balance sheet providing substantial financial strength and flexibility,” Huntsman’s president and CEO Peter Huntsman said. HuntsmanClariant’s global headquarters will be in Pratteln, Switzerland, while its operational headquarters will be in The Woodlands, Texas, US. Meanwhile, the planned initial public offering (IPO) of Huntsman’s pigments and additives business, Venator, will continue as planned in the summer of 2017, the companies said. Huntsman and Clariant have little overlap in businesses, and this could help the deal receive approval from anti-trust regulators. Huntsman derives a good portion of its income from its polyurethanes business. Its performance-products segment makes amines, surfactants and maleic anhydride (MA). The textile-effects segment makes textile chemicals dyes and digital inks. Advanced materials makes epoxy resins. Huntsman has been using its expertise in epoxy resins and polyurethanes to develop composites. Clariant, on the other hand, makes polymer additives, flame retardants, masterbatches and catalysts used in chemical processes. Other business units include functional minerals, pigments and oil-and-mining services. Its industrial and consumer-specialties business unit serves end markets such as automotive fluids, aviation, construction chemicals, crop solution, gas treatment and heat-transfer fluids, as well as industrial and home care. Clariant also has a new businesses unit, which concentrates on electronic materials, food ingredients, renewable chemicals and VitiSpheres. These are used to integrate active ingredients into cosmetics.
Judith Taylor did some excellent reporting from my surfactants conference in New Jersey in May. She reported that Martin Vollmer, chief technology officer for Clariant International, said global drivers for innovation include an increasing middle class, world population growth, increasing food consumption, urbanisation and increasing energy demand. With bio-based products and specialty chemicals forming a large segment of the push to meet these demands, sustainability is now a key factor in the drive for innovation. According to Vollmer, by 2030, more than 20% of chemical sales is expected to be bio-based and world demand for chemicals is expected to be double that of today. Within Clariant’s four business areas – personal, home, industrial and agro-care; catalysts; oil services and mining solutions; and additive and pigments – all use surfactants. Pointing to consumer needs, Vollmer said novel, bio-based surfactants such as glucamides offer a platform for new dimensions in sustainability. Glucamides are a glucose – sugar – based surfactant that offers 100% renewability as well as an excellent environmental profile. Seeking sustainability alongside renewability is the push in bringing this type surfactant into commercial applications for consumers.
Judith then went on to report on the First annual awards at the conference as follows: The ICIS World Surfactant conference named the winners of its first Surfactant Awards late on Thursday Clariant won the product-innovation award for the development of glucamide surfactants for consumer and industrial applications. In the sustainability category, Evonik won for its work with sophorolipids, developing unique bio-surfactants that offer an outstanding eco-toxicological profile. The partnership category saw Procter & Gamble take the award for its work in delivering on its no-deforestation commitments and goals in the palm supply-chain. The technology-innovation category was awarded to Dow Chemical/Dow Oil, Gas and Mining/EOR Team for its use of foam to improve efficiency by controlling carbon dioxide/brine viscosity differences in enhanced oil recovery. A rising-star award was given to Ruijia (Ray) Wang of Harcos Chemicals, recognising his expertise in the surfactant industry at an early point in his career. A lifetime-achievement award was given to Icilio Adami of Desmet Ballestra for over 30 years of dedicated work in the industry.
For those who weren’t able to make it to the confefence, you know my philosophy is that “you gotta be there”, so I will not share reportage of the papers. However, I can give some visual snippets below.
And of course the opening address to the conference from Winston Churchill and Iron Maiden :
And some background from Oprah on just how hard it can be to make decisions.
And finally, a light-hearted look at the binary decision process from Mel Gibson and Danny Glover