Surfactants Monthly Review – June 2106
We hold these truths to be self-evident..
Yesterday in our small New Jersey town, I participated in the annual reading of the Declaration of Independence in front of the town hall. Each volunteer gets to read a line from the document and the whole crowd joins in to read the last paragraph together. Since, I am a US citizen by immigration, I have been able to take a fresh look at this amazing statement from an outsiders and insiders perspective. The greatest among the many phrases which strike an emotional chord for me is this one:
“We hold these truths to be self evident” After the introductory paragraph, telling the reader what the document is, we get straight to the meat and I love this phrase for everything it doesn’t say. It doesn’t say that the best and brightest have discovered these truths. It doesn’t say that they convened an expert panel or surveyed a sample of adults in key demographics. It doesn’t say that “we have decided” or deduced that these are the truths: They are just self evident; surely the most revolutionary statement on the human condition in thousands of years.
On this occasion however, it was the following which actually startled me a bit and got me thinking:
“He has called together legislative bodies at places unusual, uncomfortable, and distant…..”. This is buried in the middle section where the signers detail the “long train of abuses and usurpations” that the colonies have suffered at the hands of the English monarch. After spending a week in the UK during the Brexit vote, the parallels were obvious. The “distant”, and inaccessible, EU legislature was one of the chief motivators of the wish for the UK to leave the EU and a motivation with which I found myself sympathizing yesterday morning in Freehold just a few hundred yards from the site of the revolutionary battle of Monmouth between the Continental army and the Crown forces.
During my week’s business trip throughout England from London to Newcastle, I found myself primarily in the company of “remainers”. In fact on the day before the vote, I participated in the annual meeting of the Northeast Process Industries Cluster (NEPIC) in Teeside, Northeast UK. The audience was essentially chemicals business people from the North of England, i.e. the people I grew up with and continue to do business with. The sentiment (and the results of the mock vote they held among the 200 attendees) was overwhelmingly to remain. We heard from Lord Mandelson, former Labour party cabinet minister, who proved to be an articulate “remain” apologist. Nonetheless, I found myself disagreeing with a position which elevated forced political union to the same level as free trade. I asked the former minister, how things had gotten to this point, where half the country (no-one suspected at that point it was more than half) was passionately opposed to a project that the best and brightest from all political parties, industries, trades unions and universities championed unreservedly? Mandelson’s answer was a variation on the theme of “the people are riled up and easily led by an ill intentioned group of manipulative demagogues”. I did not hold this truth to be self evident.
But you didn’t come to this blog to hear what I think on the politics of the day. You want to know what this has to do with surfactants. Well, if you want to have a reasoned and analytical assessment of the effects of Brexit on the surfactants industry, you really need to attend my next European Surfactant Conference with ICIS, which will be held in Berlin on September 15th and 16th. There you will hear an exclusive Brexit analysis from Dr. Evripidis (Evri) Lampadarios, business manager at White Sea & Baltic Co., and a lecturer at Leeds University. Evri is not just an academic. He is an accomplished business practicioner, who knows what he talks about as he is living the business on a daily basis. This is one among many exclusive papers prepared for our conference series that you simply cannot get anywhere else.
Now to the news:
Last month, we talked about the “solid right” landed by P&G on the head of Henkel when P&G launched “Purclean” renewable laundry detergent. Little did I know that, at the same time, Henkel was preparing to unleash a vicious uppercut to the chin of P&G. That uppercut was unwound on June 24th when it was announced that Henkel was to buy the North American laundry detergent company, Sun Products for $3.6 Bn (over 2.5 X SALES!). This move put Henkel in control of brands, All, Snuggle and Sun among others and propelled the company to the number 2 spot in North American laundry behind P&G and ahead of the scrappy Church & Dwight. Longtime readers will know that Sun Products is legacy Unilever and Huish businesses in laundry and that recently, they sold their Pasadena site (and accompanying sulfonation capacity) to Stepan, along with, one assumes, an attractive long term supply contract. So today, we have ranged against the still heavyweight champion, P&G, a much bigger and more muscular Henkel, in P&G’s own backyard. A counterpunch heard around the industry! But this is no mindless slugfest. The elements of strategy here include manufacturing, marketing, technology and more. The continuing consolidation of the industry, especially in North America, I believe favors certain large manufacturers and users of surfactants. If you are big and low-cost, you can profit from getting, and staying, in the ring. This fight is by no means over though so watch out for other fronts being opened such as Africa – “Rumble in the Jungle” – perhaps?
The month started with a progress report from Sasol on its big Louisiana investment. The 1.5m tonnes/year ethane is expected to achieve “beneficial operation” in the second half of 2018, with the overall project now more than 40% complete. This will “enable around 80% of the total output from [the] Lake Charles Chemicals Project (LCCP) to reach beneficial operation later in 2018 and early 2019. The LCCP project includes units that can produce 450,000 tonnes/year of low density polyethylene (LDPE); 450,000 tonnes/year of linear low density PE (LLDPE); 300,000 tonnes/year of EO/EG (ethylene oxide/ethylene glycol); and 300,000 tonnes/year of ethoxylates and detergent alcohols. The company is also undertaking a detailed review of the Lake Charles project, which is expected to be completed in the third quarter of this year. Sasol said that preliminary finding from the review showed that the expected total capital expenditure for the project could be up to $11bn from an earlier estimate of about $8bn. “While the detailed review is still in progress, current indications are that the estimated capital expenditure increase is mostly due to construction delays caused by higher-than-expected rainfall, higher labor costs, certain of the lump-sum bid contract prices being higher than originally estimated, as well as quantities of bulk materials being in excess of those included in the original estimate,” the company said. A slowdown in the company’s capital spending also caused delays in the project, it said. “As of 30 April this year, the capital expenditure to date on LCCP is $4.5 billion, and the overall project completion has progressed beyond 40%,” the company said. Sasol said that expected returns from the project have declined, taking into account the higher capital estimate and changes in the long-term price assumptions since the final investment decision on LCCP was made in October 2014. The project will continue to be funded from existing credit facilities and group cash flow, the company said.
In an outstanding series of articles, ICIS continued to document and analyze the continuing saga of forces majeure in European EO this month, with causes ranging from strikes to maintenance. I will not reproduce the articles here, but will pass on a handy map they provided to keep the facts and figures in front of you.
In news that could pretty much only come out of China, Most petrochemical plants at Ningbo City in China’s Zhejiang province are being required to shut operations ahead of the G20 summit in September. According to ICIS, the measure is being taken to improve the air quality over Hangzhou City, the capital of Zhejiang, where leaders of the G20 (Group of 20) member countries will convene on 4-5 September, to discuss a host of issues facing the global economy, including (natch) climate change. Ningbo has an established petrochemical industry cluster, with manufacturing facilities from upstream aromatics and olefins right down the value chain to downstream coatings, dyes and agricultural chemicals. Included in the impromptu holiday is Zhenhai Refining’s 665 KMT/yr EO plant. Is it time to update the old “Potemkin Village” metaphor to something more modern like “Ningbo Chemical Cluster” – just smell how clean the air is, even with all that industry!
On the fatty alcohol, beat, ICIS saw prices stabilizing mid month at $1,800-1,850/tonne FOB SE Asia. This, notwithstanding the bullish outlook on palm and PKO due to lower productions yields this year (predicted among other places at our last ICIS Asian Surfactant Conference in Singapore in November). According to recently released palm oil production data from Malaysia, crude palm kernel oil (CPKO) production dropped around 30% year-on-year in May at 153,826 tonnes compared to 218,716 tonnes recorded for the same period last year. Crude palm oil production dropped from 837,953 tonnes in May 2015 to 667,246 tonnes this year, representing a drop of around 20% year-on-year. In addition, more raw materials are expected to be consumed by the biodiesel sector in Malaysia as a result of the country’s recent announcement that it will be moving to B10 (10% biodiesel blending) next month. Some market participants expect PKO prices to maintain a steady uptrend, especially if the B7 biodiesel mandate in Malaysia can be implemented successfully. PKO prices were at $1,330.83/tonne at noon on 15 June, compared to $1327.33/tonne at closing on 8 June and $1,220.06/tonne at closing on 1 June, according to ICIS.
In a fairly low-key announcement, reported by ICIS, Shell noted that the chemical sector, including polyethylene (PE), will be a growth priority. Shell also announced a final investment decision to build a 1.5m tonne/year ethane cracker, along with three PE units totaling 1.6m tonnes/year of capacity in Monaca, Pennsylvania. Construction is slated to start in 18 months, with start-up targeted in the early 2020s. Along with a second cracker of 1m tonnes/year in China being built with joint venture partner CNOOC at Huizhou, Guangdong province, Shell will boost its ethylene capacity by 33% to around 8m tonnes/year in the next five years. Although Shell will continue to be a merchant seller of ethylene, they will see more derivatisation in the future and derivatives such as ethylene oxide/monoethylene glycol (EO/MEG) and alpha olefins are cost advantaged in the US, according to Shell. Clear implications for surfactants in North America, which we will continue to monitor.
Finally, as reported and discussed earlier at our Surfactant conference in NYC, Evonik reported started up production of biosurfactants using yeasts coming from honey bumblebees. The surfactants will have as end markets personal care products like shampoos and shower gels as well as household cleansers, it added. Although it did not disclose production capacities, the company said the production of biosurfactants in an industrial-scale production had started up at its Slovenska L’upca site in Slovakia. “The first household cleansers containing Evonik biosurfactants are already available to consumers in supermarkets. These products contain what are known as sophorolipids, which are produced in nature by a yeast and which can be found in the honey produced by bumblebees, among other sources,” said the company. Evonik added it plans to develop another class of biosurfactants, rhamnolipids, for which it has already started up a pilot plant at Slovenska L’upca using bacteria as feedstock, instead of yeasts.
Followers of the bio-surfactant phenomenon, will need to make sure they do not miss my 5th ICIS European Surfactant Conference in Berlin, where the subject will be addressed in depth. See you there, I hope!
That’s it for June. We’ll have one more blog early August, then I take the month off, European style, and return after the US Labor Day with some notes ahead of our get-together in Berlin. Au Revoir!