Surfactants Review – January & February 2014
Our first review of the surfactants markets in 2014 will cover January and February. Thereafter, we will try to get these out on a Monthly basis for easier and more timely reading. As usual, many of the news items come courtesy of my friends at ICIS. Many of the links are to ICIS articles and some need a subscription. As regular readers know, the best way to stay current in the surfactants markets is to attend one of our conferences produced in partnership with ICIS. We will have three in 2014. The next one comes up on New York, The 4th ICIS World Surfactant Conference on May 15 – 16th in NYC, features Quinn Stepan Jr. as our keynote speaker. I look forward to seeing many readers there.
The year kicked off with more ethoylation capacity expansion news. Clariant announced on 10 January it has started the expansion of its ethoxylation plant in Daya Bay, Huizhou, China in early 2014. As the first ethoxylation production site under Clariant Business Unit Industrial and Consumer Specialty (BUICS) in Asia, the Daya Bay plant was put into operation in 2011 with the initial capacity of 50,000 MT/year. After completion of the expansion, the total capacity of the plant will reach 100,000 MT/year.
The year in fatty alcohols started off with a bit of stalemate between buyers and sellers. In Europe, prices hovered around €1,450-1,500/tonne FD (free delivered) NWE (northwest Europe).
Elsewhere upstream from surfactants, the oleochemicals industry is optimistic in the medium to longer term, despite several new capacities and expansion, said industry participants during the 2nd Asian Oleochemicals conference in Kuala Lumpur, Malaysia. In the next three years, oleochemicals production capacities are expected to grow by 30%, according to Tan Kean Hua, executive director of IOI Oleochemicals. The expansion in Indonesia, mostly driven by the government’s lower export tax in refined palm oil products as compared with Malaysia in 2011, resulted in a flurry of downstream investments, industry participants added. Market players were optimistic that higher demand from China, India and Indonesia is expected to absorb the increments in supply, driven by higher population, GDP and disposable income growth. Key trends for oleochemicals market drivers would be in homecare, industrial, institutional and oilfield and biodiesel applications, Dr Pek added.
The year in LAB started with indications of a slowdown in demand. Qatar’s Seef Limited is running its 100,000 MT/year linear alkyl benzene (LAB) plant at 90% of capacity because of lower demand for LAB, a company source said on 21 January. Buyers in southeast Asia are said to hold sufficient inventory or can choose from a variety of sources locally and from other Middle Eastern and south/southeast Asian suppliers. According to ICIS data, by 2013, demand for LAB in Asia was at 1.4m tonnes/year versus a capacity of 1.68m tonnes/year.
SEEF is JV between Qatar Petroleum [80%] and local company UDC [20%].
The American Cleaning Institute (ACI) held its annual meeting as usual the last week in January in Orlando. Overall the mood was upbeat and lot of information can be gleaned about the industry via meetings, conversations, sessions and just old-fashioned. networking. I personally learned a whole lot over the course of about 6 days. But you’ll read none of it here. This is definitely one of those events where you “gotta be there”. The ACI puts together an outstanding meeting every year. Membership is open to anyone involved directly or indirectly in the cleaning industry. There is little excuse for not joining and getting involved.
At the end of January, Dow reported some solid Q4 2013 results, aided by a good surfactant business persformance. Dow’s net income for the fourth quarter of 2013 jumped to $963m compared to a $716m net loss during the same period the previous year, buoyed by gains from almost every operating segment. Adjusted earnings before interest, taxes, debt and amortisation (EBITDA) for the quarter increased 31% year on year to $2.1bn, while sales were up 3% year on year at $14.4bn, with sales increasing in all divisions aside from feedstocks and energy. Adjusted EBITDA for Dow’s performance materials division was $421m compared to $267m during the fourth quarter of 2012, with the polyols, surfactants and fluids business marking double-digit sales growth. Propylene oxide and propylene glycol sales also improved on healthy demand in home and personal care products, and additional production capacity in the Asia Pacific region. Despite, or perhaps because of this performance, so-called “activist investor, Daniel Loeb is lobbying Dow to spin off the whole of its petrochemicals business. Loeb, whose hedge fund Third Point acquired a $1.3bn stake in the company last week, has argued a standalone petrochemicals operation could generate significantly higher EBITDA, and would also be beneficial for the specialty-focused parent.
Our good friends and regular surfactant conference participants, Elevance announced the selection of URS to provide engineering, procurement and construction services for its planned biorefinery in Natchez, Mississippi, which is scheduled to be online in 2016. The scope of work under the URS contract will be converting Elevance’s existing biodiesel plant into a new biorefinery. This will be the second biorefinery for Elevance, and will also be based on the company’s metathesis technology. The 280,000 MT/year commercial-scale manufacturing facility in Natchez will produce new specialty chemicals, including multifunctional esters such as 9-decenoic methyl ester; bio-based alpha and internal olefins, including decene; and a mixture of oleochemicals. Accoding to Elevance, the specialty chemicals, olefins and oleochemicals produced at the company’s biorefineries will be used in personal care products, detergents and cleaners, lubricants and additives, engineered polymers, and other specialty chemicals markets.
Echoing comments that I made at the ICIS 3rd Asian Surfactant Conference in Singapore in November, Korea’s Miwon Commercial noted that it has been producing 20% less LAS at its 70,000 MT/year plant since the second half of 2013. Slim margins and lower demand were blamed. Recent increases in costs of feedstock LAB and precursor jet kerosene have been weighing down on margins of LAS producers, with some of them wary of incurring losses.
In news that did not exactly make headlines, but was no doubt picked up by anyone running an ethoxylation plant, the European Chemicals Agency (ECHA) proposed five substances of very high concern (SVHCs) for authorization.
ECHA added that the substances - which include those used in the rubber and plastics and paints and coatings industries – have been prioritised because “they are used in high volumes and have widespread applications which may pose a threat to human health or the environment.” The materials under discussion include N,N-dimethylformamide (DMF), used for production of coated textiles and synthetic fibres, diazene-1,2-dicarboxamide (C,C’-azodi (formamide)) (ADCA), an agent in the plastics and rubber industry, and Aluminosilicate Refractory Ceramic Fibres (Al-RCF), a ceramic-metal composite reinforcement used as insulation for high-temperature industries. Another insulator, Zirconia Aluminosilicate Refractory Ceramic Fibres (Zr-RCF), and 4-(1,1,3,3-tetramethylbutyl) phenol, ethoxylated (4-tert-Octylphenol ethoxylates) (4-tert-OPnEO), used in paints and coating products, emulsion and polymerisation, are also under discussion.
ECHA added that it took into consideration comments from its public consultation on the materials, launched last year, and the view of the member states committee from December 2013. The final decision on the inclusion of the materials in Annex XIV – the authorisation list – will be taken by the European Commission in cooperation with member state representatives.
Huntsman’s net income for the fourth quarter of 2013 swung to a $41m gain, compared to a $40m loss during the same quarter the previous year. With revenues up across most divisions year on year and for the group as a whole, at $2.71bn compared to $2.62bn in the fourth quarter of 2012, the company attributed a strong quarter to restructuring efforts concentrating focus on key markets. EBITDA more than doubled year on year to $225m, while adjusted EBITDA of $313m represented a record for fourth-quarter earnings. Brights spots were many, but surfactants wasn’t one of them. Performance products division revenues were also up year on year due to higher sales volumes for all products except European home care surfactants. This of course, is a business slated for restructuring by Huntsman in Europe; the nature of which will likely be seen sometime later this first half of the year.
Stepan announced a rare decrease in net income or Q4, 2013 which fell 31% year over year to $10.7m, mainly because of higher raw material, maintenance and transportation costs in the company’s core North American surfactants business. Results included $700,000 in restructuring charges for shutting down sulfonation capacity in Canada. Stepan’s gross profit for the three months ended 31 December was $61m, down from $70m in the same period a year ago. However, fourth-quarter sales rose 11% year over year to $474m on higher volumes in each of the company’s three businesses, and because of a polyester resin acquisition. For the full 12 months of 2013, Stepan’s net income was $72.8m, down from $79.4m in 2012. Full-year sales were up 4% to $1.9bn. ”Despite the challenges faced in 2013, we recorded the second best year in our 82-year history and we remain optimistic about our future and our ability to deliver growth,” said CEO Quinn Stepan in an earnings call. ”Recent large investments in both surfactants and polymers contributed to our profitability in 2013 and should deliver income gains in 2014,” he said. ”Our balance sheet remains strong and we intend to make further investments that will improve our efficiency, accelerate our earnings growth, and deliver value to our shareholders,” Stepan added.
Oxiteno’s EBITDA in Q4 2103, just announced, was Brazilian reais (R) 107m ($45m), up by about 47% from R73m in the prior-year quarter, mainly due to the depreciation of the real and a more favourable sales mix. Despite a 4% year-on-year drop in consolidated quarterly sales volumes, mainly due to lower sales of glycols, parent Ultrapar said that sales of specialty chemicals increased by 6% – or 10,000 MT – as a result of recent investments in capacity expansion. Ultrapar said that in 2013 it invested R139m in Oxiteno, mainly directed to the expansion of ethoxylation production capacity at the company’s plants in Pasadena, Texas in the US and in Coatzacoalcos, Mexico. The conglomerate plans to invest some R244m in its chemical division in 2014, with R161m earmarked for the conclusion of capacity expansion in Coatzacoalcos and potential capacity expansion in Pasadena. The expansion in Mexico is expected to be operational this year, Ultrapar said, and will add 30,000 MT/year of production capacity.
Thanks again for reading and I look forward to seeing you at the 4th ICIS World Surfactants Conference in NYC, May 15 – 16th, 2014. Remember, Quinn Stepan, CEO of Stepan Co. Ltd. is keynote speaker!
Surfactants Outlook – 2014
For the first time, we have been persuaded to put forward an “Outlook” for surfactants in the coming year. All projections and predictions are, by definition, wrong as soon as they are made. What I provide here are some ideas about what could happen that I recommend you bear in mind as you plan and execute your business in the next 12 months. In some cases, I have been vague about the identity of companies that are mentioned. If you read closely enough and you are in the business already, you will likely guess who I am talking about. This post contains absolutely no confidential or inside information; just reading the tea-leaves, joining the dots and admittedly adding 2 and 2 to get 5. If you’d like to call me out in person for something I say here, I will see you at our 4th ICIS World Surfactants Conference in NYC, May 15 – 16th, 2014. You will also have an opportunity there to spend time face-to- face with practitioners far more expert than I am in their surfactants fields.
First the easy one: Huntsman will sell its European surfactant business, comprising sulfonation and ethoxylation plants. This has been announced and that is why it is an easy prediction. They will take the money and invest it in something that makes them a better return than what a non-integrated converter makes in an over-supplied commodity market when they are not a low cost producer. Who will buy the business? Clearly the opposite of Huntsman; that is a vertically integrated manufacturer that has a credible claim on being a low cost producer. There are a handful of them around and most are HQ’d in Southeast Asia. I won’t name the company I favor, but you know them already. Furthermore, the next steps for this company are further downstream and further West. Companies like Huntsman will therefore play to their strengths, which are to be found, in the case of Huntsman, on the US Gulf Coast, plugged firmly into an advantaged ethylene supply.
Here’s another easy one: The last of the major non-pipeline supplied ethoxylators in North America will set up a pipeline integrated EO supply. Not Solvay; that has already been announced. The completion of this move will set the clock ticking on the other stragglers, although there remains money to be made on high value specialty ethoxylation even when you are slap in the middle of the country and served by a railroad that would much rather be hauling cabbage or livestock or anything other than a highly explosive gas.
One more easy one: Oil and gas Chemicals will continue to be hot. Following Ecolab’s announcement of the acquisition of Nalco in July 2011 (followed by the acquisition of Champion), their stock shot up to outperform the Dow by 3X since then. Expect additional M&A in this field (pun intended) by companies like Sealed Air (new owners of Diversey) and surfactant companies looking to de-emphasize detergents and personal; Huntsman, Stepan, Sasol and BASF spring to mind.
Other non-detergent surfactant businesses will attract surfactant companies. These markets include, food, agriculture, emulsion polymerization and industrial lubricants. Small to mid-sized companies with a strong position in these markets may find it an opportune time to sell to their larger competitors. M&A will be a key factor here as getting into these markets, is easier said than done and, regardless, takes time.
We expect at least one merger between two of the Southeast Asian plantation based companies; one of whom has a significant and growing downstream presence in surfactants. The resulting giant will be active in investment in North America, particularly in ethoxylation and maybe also sulfonation. New projects are favored, although an acquisition in the US is not out of the question.
Europe continues to attract surfactant investment and something has to give. So we will see some significant surfactant and feedstock capacity being take off-stream by at least one of the old-line surfactant manufacturers in the field. This action will at least support a somewhat improved asset utilization rate in the industry as a whole. However, gross margins will at best hold level for the year.
Big chemical companies will continue to be flush with cash and therefore keen to do deals. Much of this money will be spent in areas relating to surfactants. We expect at least 2 or 3 private companies to be acquired in each of North America and Europe. Most by companies from Asia and a large Middle-Eastern acquirer who continues to move downstream into specialties where possible.
Thanks again for indulging these speculations. One final “prediction” I can make and that is we will have an outstanding time meeting, talking and networking at the 4th ICIS World Surfactants Conference in NYC, May 15 – 16th, 2014. I’ll see you there.
Surfactants Quarterly Review Q4 – 2013
For the last quarter of 2013, I have summarized key news from the surfactants market, aided as usual by the capable global news team at ICIS. A few of the links in the review point to ICIS articles (most of these need a subscription). As always, your inputs and critiques are welcome. For more exclusive surfactant information and networking, I will see you at our 4th ICIS World Surfactants Conference in NYC, May 15 – 16th, 2014.
Just as the quarter got underway, a little snippet caught our attention. Apparently, Bolivia’s state-owned EBIH is considering to build an ethylene oxide and glycol plant as part of a larger complex costing over $2.7 Billion to be built over the next 4 years. Interesting to hear how this develops and how it may shake up the cozy EO oligopoly in Latin America.
After teasing us with the prospect of, finally, another Latin American EO supplier, Bolivia revealed details for the GTL, polyolefin and methanol complex later in the month (download the report here). Bolivia’s ministry of hydrocarbons and energy released a report detailing an ambitious petrochemical construction programme that seeks to kick-start a new era through the industrialisation of the nation’s huge natural gas reserves. Industrialisation of natural gas became a reality in May this year following the inauguration of the Rio Grande liquids separation plant in the eastern Bolivian department of Santa Cruz. The plant will process around 5.m cubic metres (mcm)/day of natural gas and produce 361 tonnes/day of liquefied petroleum gas (LPG) and 195 bbl/day of isopentane. The LPG and isopentane will be used as feedstocks to supply the petrochemical chain. A second liquids separation plant in the Gran Chaco province of Tarija department in southern Bolivia is due to come on line in the second half of 2014. The plant will process natural gas to produce ethane, propane, butane among other products. The ethane and propane will serve as feedstock for the nearby Gran Chaco petrochemical complex. The projects in the report are divided into “current” and “future”, and will be developed by state-run energy company Yacimientos Petroliferos Fiscales Bolivianos (YPFB) and Empresa Boliviana de Industrialisation de Hidrocarburos (EBIH), a subsidiary of YPFB created by the Bolivian government in 2008 to develop domestic gas-fuelled heavy industry. As noted aboce, the possibility of building an ethylene oxide (EO) and ethylene glycol (EG) plant close to the Gran Chaco liquids separation plant, with capacities of 260,000 MT/yr of monoethylene glycol (MEG), 26,000 MT/yr of diethylene glycol (DEG) and 3,000 MT/yr of triethylene glycol (TEG), is currently being studied. The plant would use ethane and LPG feedstock, and require an investment of $580m.
The big, but perhaps not surprising, news of the quarter was that Huntsman plans to restructure its surfactant business in Europe. As anyone in the market knows (or if you’ve been to one of our training courses), it is tough to make money in surfactants in Europe, especially in detergents and personal care. Huntsman, accordingly plans to get out of assets that are focused on commodities in the region and focus on specialties. The process could take until the end of this year, said Stu Monteith, president of Huntsman’s performance products division which the surfactants business falls under. Around 250 employees in its European performance products division could be affected by the changes. If the restructuring takes the form of a sale (a logical objective) then there is no shortage of candidates to buy this business, including companies with a more vertically integrated position in the supply chain than Huntsman.
Shortly after the announcement of what sounds like a “retreat” in Europe, Huntsman announced a big advance with the addition of ethylene and EO capacity in North America. Huntsman is debottlenecking its Port Neches, Texas, ethane cracker and adding about 10% more ethylene capacity to take advantage of the shale gas boom. The company also is continuing in its plans to add 25% more capacity to its ethylene oxide (EO) plant in Port Neches. According to ICIS Plants & Projects database, Huntsman’s ethane cracker has a nameplate capacity of 193,000 tonnes/year, while its EO plant has a capacity of 460,000 tonnes/year. Huntsman is a major buyer of ethylene for its EO and ethylene glycol (EG) production, and the company is still weighing whether it makes economic sense to build a new cracker for its own ethylene consumption or wait and see if the ethylene market grows long as a result of the other planned projects and thus keeps it cheap. If Huntsman decided it wanted to get in on the new cracker rush, it likely would be as a partner in a project, according to the company.
In an interesting twist to the Huntsman EO expansion plan for North America, 5 years after Hurricane Ike tore a path of destruction through southeast Texas, a structure that fell victim to the storm was officially tasked in October with helping its current owner, Huntsman, grow its EO capacity. The unit in question was originally an ethylene glycol (EG) facility in Beaumont owned by DuPont-Lyondell joint venture PD Glycol. But the plant ceased operations after Ike made landfall in September 2008, soon followed by the severe economic recession of 2009. PD Glycol decided to put the facility up for sale, and Huntsman saw an opportunity, so they purchased the EG unit, took it apart and moved it by barge a few miles down the Neches River to the company’s Port Neches facility, where the company is retooling it for EO production and integrating it into the site, which currently has two EO reactors. When the former PD Glycol unit is fully up and running by the second quarter of 2015, the facility will become the largest single-site producer of EO in North America, Huntsman said, with capacity increased by 265m lbs/year, or about 25%. Currently, about 1bn lbs/year (453,600 tonnes/year) is produced at the facility, according to the company. All of that EO will be consumed by the US-based producer to make a variety of ethylene-based derivatives such as glycols, surfactants and amines, with more than 90% of the EO used at the Port Neches facility. Huntsman is investing up to $150m (€110m) in the expansion.
At a groundbreaking ceremony for the expansion, Peter Huntsman took the opportunity to lay out his company’s vision for the EO value chain in North America in this way: According to Huntsman, transportation safety issues will lead to further expansion of Huntsman’s ethylene oxide (EO) facilities in Texas. “I would imagine 5 or 10 years from now you’re going to see a totally different EO derivatives facility being built and expanded here, I think just for transportation safety issues and so forth,” said Peter Huntsman at the site. As more EO is produced as a result of the influx of ethylene production soon to come as part of the shale gas/ethane cracker boom, more integrated facilities will be necessary to handle and move EO safely. “Ten years from now we’re going to be hard pressed to move EO out of a plant, and so you have got to have singular locations that have ethylene oxide,” Huntsman added.
In keeping with Huntsman’s integrated ethoxylation theme, in November, Solvay announced a new alkoxylation facility project for North America. Solvay will build and operate a large-scale alkoxylation unit in Pasadena, Texas, at an integrated industrial facility of LyondellBasell’s Equistar Chemicals affiliate.
Solvay will invest nearly €40m ($54m) into the unit, which is expected to be operational in 2015. Equistar will supply the ethylene oxide via pipeline. The investment follows Solvay’s announcement in April this year that it will build an on-pipe alkoxylation facility in Singapore.
In the fatty alcohol market, prices settled up by a few cents per lb at the beginning of the quarter due to expectations of tight supply. Little did the market realize what was to come as a result of the Philippines typhoon which had a later outsized effect on the lauric value chain, including detergent range alcohols.
Thus at the end of November, Asia mid-cut fatty alcohols hit one-year high due to firm PKO prices. On 27 November, C12-14 fatty alcohols were assessed at $1,650-1,880/MT (€1,221-1,391/tonne) FOB SE Asia for December loading, up by $100-180/tonne from the previous week, according to ICIS data. On 27 November, PKO prices stood at $1,057.80/MT, up by $37.56/MT from the previous week.
Another big move for Solvay was announced early in the Quarter – the acquisition of Chemlogics (an oilfield chemicals company) at a prices of $1.35bn (€999m). Chemlogics, whose US assets include three production sites with annual capacity exceeding 300,000 MT/yr, offers products and technologies which enable oilfield service players worldwide to extract oil and gas. Chemlogics previously reported last-twelve-month sales of around $500m and has 277 employees. Pricing of the deal, therefore looks quite nice for selling shareholders, including Bill Frost who came to prominence by starting Chemron and selling it to Lubrizol. Solvay said that Chemlogics’s expertise in friction reducers, non-emulsifiers and extraction technologies perfectly fit with Solvay Novecare’s know-how in surfactants, natural polymers and eco-friendly solvents
Solvay’s Novecare continued on a roll with an announcement of an acquisition of the Brazil specialty chemical assets of ERCA Quimica. The acquisition will allow Solvaty to more than double its (admittedly small) production capacity in surfactants in Brazil. The deal includes ERCA‘s Brazilian specialty chemical assets and its portfolio of agrochemicals and home and personal care products.
Sasol announced some personnel changes involving names familiar to the surfactant industry. However these are unlikely to result in any significant strategy changes in surfactants due to the very strong bench in this area at the company. Andre de Ruyter, senior group executive for global chemicals and North American operations, resigned to join South Africa-based Nampak, according to a filing by the packaging and plastics producer on the JSE. He is to serve as executive director and CEO-designate from 1 January 2014, and will take over as CEO on 1 April 2014, following the resignation of current CEO Andrew Marshall, Nampak said. De Ruyter will stepped down from Sasol as of 30 November this year. He will be succeeded by Fleetwood Grobler, current manager of Sasol’s olefins and surfactants business.
In more big news from Sasol, the company appears to be making good progress on its significant investment plans in the US, and in proving that its gas to liquids (GTL) technology works effectively. An investment decision on the Westlake, Louisiana ethane cracker is expected in the middle of next year, the company said in a late November release. The go-ahead for the first planned GTL plant at the same location is likely to be given 18 to 24 months later.
Sasol’s ORYX GTL joint venture in Qatar produced 1.5m bbls of product in the three months to the end of September. That is an average 101% of design capacity. The plant is expected to operate at 90% on average in the current Sasol 2014 financial year. Sasol wants to invest more than $21bn in Louisiana in the US on chemicals and GTL plants, taking advantage of the increased availability of natural gas and ethane from shale. This is a huge bet on shale and the US market for the world’s largest synthetic fuels producer. The investments represent around 73% of Sasol’s current market capitalisation. Sasol is fracking in Canada but production is constrained because of low natural gas prices. It is making fastest progress on the 1.5m tonne/year, $5bn-7bn ethane cracker and downstream projects. Downstream from the cracker, Sasol will make LLDPE, low density polyethylene (LDPE), ethylene oxide (EO), mono-ethylene glycol (MEG) and Ziegler and Guerbet detergent alcohols. Contracts for basic engineering packages and services and for various technologies on the cracker and the planned downstream production units have been agreed. Front-end engineering (FEED) is underway for both the cracker and the GTL plant in the US. Fluor is the main FEED contractor for the cracker. Worley Parsons will manage the project alongside Sasol’s own people. Separately, a 100,000 MT/yr ethylene tetramerisation unit at its production site in Lake Charles, Louisiana is being commissioned. The project in on budget and schedule, Sasol said. This is the world’s first commercial unit using proprietary Sasol technology to convert ethylene to 1-octene and 1-hexene, both important co-monomers for linear low density polyethylene (LLDPE). The plant will be part of the company’s olefins & surfactants (O&S) reporting group. The US investments have the potential to underpin profitability in olefins & surfactants and in polymers for the group. Sasol’s US operations currently are the company’s cost leaders in chemicals benefitting from low US ethane prices. This is certainly true in Olefins & Surfactants (O&S) where the European businesses are under pressure from reduced volumes and lower margins.
Stepan continued its steady march forward with Q3 net income announced up slightly on higher polymers profits. Stepan said that its net profit for the third quarter of 2013 had increased by 1% year on year, to $20.4m (€14.9m). Net sales for the period increased by 8% year on year to $475.5m as a result of improved sales volumes, particularly in North America, where volumes increased by 2% compared to the same period a year earlier. Demand for agricultural products continued to increase globally, while sales of functional surfactants used in oilfields declined, the company added. “Despite the challenging operating environment, we delivered improved earnings,” said CEO Quinn Stepan. “Our businesses delivered volume growth and we continue to invest strategically for future global growth,” he added. Gross profit grew by $3m year on year to $74.3m, as lower surfactants profits were offset by a 30% increase in performance of the polymers division, driven by sales growth in Europe and a $3.7m business interruption insurance recovery related to a 2011 fire at a plant in Germany. Total third-quarter gross profit for the polymers division was $26.6m, while surfactant division gross profit fell by 2% year on year to $45m, and specialty products gross profit dropped 33% to $3.8m due to lower margins, the company added. Quinn Stepan said that the slow start to the year made achieving its planned full-year earnings growth “difficult”, adding that the realisation of acquisitions and capacity expansions are expected to buoy 2014 performance. He said: “We delivered slightly improved results in the third quarter, and we remain optimistic about our long-term growth. “The slow start to the year has made achieving full year earnings growth difficult, but we continue to pursue investments that will accelerate our growth. In 2014 we will realise the benefits of our recent acquisition and other capacity expansions,” he added.
With respect to investments: “We will look to make additional investments in Latin America to support the projected growth that we see in that market,” said Quinn Stepan during the same earnings call. Stepan did not elaborate on what those investments could be.
Earlier this year, Stepan said his company was looking to further expand its surfactants production capacity in Brazil, adding that the producer might build a second plant there or expand its existing facility at Vespasiano, near Belo Horizonte. The CEO also said it is not just the surfactant market that continues to grow but also the agricultural and oil field markets for which Stepan produces chemicals.
As follow-up to a prior announcement Evonik started up their 80,000 MT/yr surfactants facility in China at the end of October. The facility is located in the Shanghai Chemical Industry Park (SCIP) and its investment volume was in the “upper two-digit million Euro range”, the company said in a statement but did not specify the exact amount.
Over to China where the EO tidal wave just keeps coming as Oxiranchem announced that it looks to its Yangzhou EO plant start-up in July 2014. The plant has 200,000 MT/yr ethylene oxide (EO) capacity. The company is also looking at building another line with a similar capacity at the same site but this has yet to be confirmed, the source said. Oxiranchem is expected to import the bulk of its ethylene requirements next year although the company is looking to source the raw material domestically as well, the source said, without providing details.
In more China EO tidal wave news: China’s Fujian Refining & Petrochemical (FREP) has started construction of an ethylene oxide (EO)/ethylene glycol (EG) plant at Quanzhou in Fujian province in late October. The unit will have an EO capacity of 180,000 MT/yrand an EG capacity of 400,000 MT/yr, Sinopec said in an online newsletter.The plant, located at Quangang Petrochemical Industrial Park, will be operational in November 2014. FREP is a joint venture between Sinopec, Saudi Aramco and Exxon Mobil.
More from China, this time in oil-soluble surfactants, Chemtura started commercial operation at the Nantong facility for the production of lubricant additives including sulfonate grease. The building of a high-performing lubricant production plant, the second phase of the facility, will be completed in the middle of 2014, and the third phase which can produce urethanes is expected to be completed in 2015. Chemtura began construction of the Nantong facility in March 2012. Total investments for the three phases were $100m (€73m).
In Latin America, Brazil’s Ultrapar Q3 net income was announced up 13% year on year. Ultrapar posted a Q3 net income of Brazilian reais (R) 328m ($144m, €107m), up about 13% compared with R291m in the prior-year quarter. Sales and services revenue for the quarter reached R15.9bn, up by about 13% from R14.1bn, while earnings before interest, tax, depreciation and amortisation (EBITDA) totalled R765m, up almost 18% from R651m, the company said. Ultrapar attributed the growth to higher sales volumes in the company’s fuel distribution subsidiaries Ipiranga and Ultragaz and an increase in operating scale due to recent investments. The company’s surfactants and solvents subsidiary, Oxiteno, saw a 6% drop in sales volumes due to lower sales of glycols in the domestic and overseas markets
In more North American investment news with relevance to surfactants, US-based Chevron Phillips Chemical (CP Chem) has completed a study to expand its capacity for normal alpha olefin (NAO) at Baytown, Texas, US by at least 20% and it plans to seek final project approval in the first quarter of 2014. Construction could begin in the first quarter, and the project could be completed in the second quarter of 2015.
In a rare display of market initiative from Pemex, the Mexican government owned petrochemical company announced late November that it is seeking a joint venture for ethylene glycol, EO and aromatics. The putative project also involves expanding cracker capacity in Mexico to align ethylene supply for EO. Pemex has two ethane crackers in Cangrejera and Morelos, Mexico, each with a capacity of 600,000 MT/yr. The company would like to expand these existing crackers to get another 200,000-300,000 MT/yr of ethylene. The project, including the construction of EO/EG and aromatics facilities, could take two to three years to complete. In September 2013, Pemex completed its first ever joint venture – a partnership with the dynamic private company, Mexichem to double vinyl chloride monomer (VCM) production to 400,000 MT/yr by 2015. Apparently this JV opened Pemex’s eyes to the benefits of operating more like a real company than as a ward of the state. There is talk of an amendment to the Mexican constitution to allow Pemex to move more into the North American commercial mainstream with the sort of operational independence enjoyed by its peers in the industry.
Clariant continue to maintain a solid profile in ethoxylation with an early December announcement that it will further expand US ethoxylation capacity at Clear Lake, TX. This second-phase expansion will include new reactors and additional storage facilities, bringing the overall ethoxylation capacity to more than 125,000 MT/yr from the current 95,000 MT/yr. The new project is scheduled to go on line in mid-2015. The second expansion brings Clariant’s total investment over the last five years to Swiss francs (Swfr) 65m ($72m), according to the firm. Products manufactured at the US site includes high molecular weight polyethylene glycols (PEGs), alcohol ethoxylates, sodium isethionates and ethoxylated specialties.
In a rare piece of growth-oriented news from Europe, Germany’s PCC announced a 42,000 MT/yr Mono-Chloro Acetic Acid plant in Poland The unit, PCC P4, will build the plant at a cost of zloty (Zl) 272m ($89.2m, €64.9m) on the grounds of another group subsidiary, surfactants producer PCC Exol, creating around 100 jobs in the Walbrzyska special economic zone near the border with Germany. Poland’s economy ministry is subsiding the construction of the MCAA plant with a grant of Zl 67m. In October PCC Exol said it would invest in constructing a new production line for high-margin amphoteric surfactants in the Walbrzyska special economic zone at an investment cost of Zl 10.75m
Just before Christmas, we heard that Thailand’s PTT Global Chemical (PTTGC) is proceeding with capacity expansion at its home production base in Map Ta Phut. This includes a plan to boost its ethylene oxide (EO) output by 2015.
Thanks again for reading and I look forward to seeing you at the 4th ICIS World Surfactants Conference in NYC, May 15 – 16th, 2014. Quinn Stepan, CEO of Stepan Co. Ltd. is keynote speaker!
3rd ICIS Asian Surfactants Conference
As we do periodically, I am happy to bring you a summary of what I think were the key points from the 3rd ICIS Asian Surfactants Conference in Singapore, November 14th and 15th. As you know, for the full benefit of these events, you just have to be there and I encourage you to join us at future surfactant conferences in Asia, Europe and the USA.
In my opening remarks, we discussed the global surfactant supply chain and how different companies pursue strategies which depend on the specific part of the value chain that they occupy. We studied the latest update of the surfactant vertical integration grid and located a number of company groupings focused on very different sections of the business. We also discussed some recent company investments that highlighted their approach to vertical integration.
Next up, Sarah Yarger Kienzle, managing partner of Linden Tree Partners gave a global updated of the surfactant market. One fascinating piece of data (for me) centered on the per capita consumption of surfactants for different regions of the world. The mature market consumption is dropping on a per capita basis, while emerging market are growing. The North American per capita consumption still leads the world, 60% of the number two Western European market.
A highly interesting talk from VVF came next. S. Harihasumbramanian gave an in-dept study the different technologies and markets for soap bars and surfactant based cleaners and ended up delivering a robust defense of the value and environmentally friendliness of soaps. Quite a unique and thought provoking perspective.
First-time speaker and long-time attendees, Exxon Mobil Chemical came up next with an in-depth look at their line of Exxal detergent range, petrochemical surfactants. An often overlooked class of compounds; it was interesting to see the focus being put by Exxon on the surfactant value chain.
The “sleeper” paper of the whole series came up next. After reading in the Wall Street Journal, about the mapping of the oil palm genome, I was determined to talk to one of the researchers to get an idea of what this work meant for the surfactant industry. Dr. Rajindra Singh of the MPOB gave an outstanding explanation of this 10 year program and its likely impact on our industry. If you missed this one, we are considering having a review of this work also at the World surfactant conference.
A perennially popular subject at our conference is EO (ethylene oxide). EO is the basis of most nonionics and a large portion of anionic surfactants. Michelle Yang of Tecnon Orbichem took us deep into the World and Chinese markets for EO and EOD’s (EO derivatives). In one of the most in-depth market surveys we have seen at one of these conferences. More than one reference was made to an oncoming tidal wave of EO – both in China and North America.
After lunch, Galder Cristobal of Solvay Novecare, really opened up the eyes of many of the attendees by providing an in-depth look into the world of enhanced oil recovery. Some interesting data on the high-throughput screening of four thousand formulations at a time really engaged the audience.
A surprising highlight of our entire series of conferences (at least for me) came during Reckitt Benckiser’s presentation, delivered by Samrat Sehgal, head of supply chain in India. As part of the Q&A, we were treated to a live case-study relating to surfactant importation strategy as one of Reckitt’s suppliers posed a real-time problem and Samrat addressed it as he would in a meeting with a supplier. As we like to say these conferences are “bigger on the inside” and you just have to be there in order to get the full benefit.
Once again, Icilio Adami of Desmet Ballestra delivered an outstanding paper with an incredible amount of information relating to the markets and technology relating to sulfonation. One day, Icilio may write a book. Until then, you have to come to our conferences.
Starting up the second day, I was very pleased to partner with our friends from ICIS Pricing to deliver a paper covering pricing of key surfactants and feedstocks in the Asia Pacific Region overlaid with a deep dive into the current economics of sulfonation and fatty alcohol manufacture in the region. I hope the audience enjoyed it as much as I did delivering it.
Novozymes returned to our speaker’s roster and as a sponsor again with the paper, entitled “Surfactants and Enzymes, Friends or Foes”. It was an informative and provactive look at the growing role of enzymes alongside surfactants in many application areas.
Martha Tilaar Group, a first time speaker and new name for our attendees, outlined their strategy for growth in the region. In fact, the presence of a Martha Tilaar shop in the mall next to the hotel provided an interesting back-drop to the proceedings.
Rounding out the entire proceedings was an outstanding paper from Dean Lao of Chemrez Technologies. Dean covered the Philippines as an oleochemicals investment opportunity and offered a robust analysis of the advantages of coconut as a crop. He also analysed the recent effects of the Typhoon on the Philipines coconut industry.
Overall; an enjoyable and informative conference which cements its place on the calendar as a can’t miss surfactant gathering for Asia. Thanks again for reading and I look forward to seeing you at the 4th ICIS World Surfactants Conference in New York, May 15th and 16th, 2014.
Surfactants Quarterly Review Q3 – 2013
As we do on a quarterly basis, I have summarized key news from the surfactants market, aided substantially by the news team at ICIS. A number of links in the article point to ICIS articles (most need a subscription). As always, your inputs and critiques are welcome. For more up to the minute surfactant information and networking, I will see you at the 3rd ICIS Asian Surfactants Conference in Singapore, November 14th and 15th.
Early in the Quarter, in July; Kao Indonesia Chemicals announced completed construction of its new yen (Y) 4bn ($40m) plus surfactants plant in Karawang, Indonesia. The new plant with an undisclosed capacity is expected to start operation in August 2013. The plant will produce surfactants and industrial chemicals and help lift Kao Indonesia Chemicals’ surfactants capacity, which includes facilities located in Tambun, Indonesia, 1.5 times, Kao said. All of the Tambun facilities will eventually be transferred to the Karawang site by the end of December 2014. With this relatively small but still significant investment, Kao underlines its commitment to a vertically integrated strategy in consumer goods and their key ingredients.
Also in July, Stepan named Scott Beamer as chief financial officer. Beamer succeeds James Hurlbutt, who is retiring after 31 years with Stepan. Beamer is joining Stepan after spending 16 years at PPG Industries, where he was assistant corporate controller. Welcome to the industry, Scott, and to one of its leading players.
As the 3rd Quarter got underway, fatty alcohol prices edged upward . Mid-cut alcohols were assessed at 83.50-96.00 cents/lb ($1,841-2,116/MT, €1,436-1,650/MT) for the Q3 contracts, rising 0.50-1.00 cents/lb over the previous range. In other alcohol news, the US fatty alcohol market was mulling potential effects of issues involving the Roundtable on Sustainable Palm Oil (RSPO). RSPO was formally established in 2004 in response to growing global demand for vegetable oils and concerns about increasing expansions of palm oil plantations and the potential impact of these upon forests, wildlife and communities. Its RSPO Certification System was adopted and launched in 2007, with the first certification issued in 2008. “RSPO is an ongoing consideration for US buyers trying to understand if initiatives will affect price structures,” a large detergent-range alcohol buyer said. “Sustainability issues derived from RSPO may need to be taken into account,” a seller commented. US fatty alcohol buyers engaged in industrial applications are discussing potential premiums on vegetable, or natural, based alcohols that could develop because of additional costs involved in participating in the RSPO initiatives. Fatty alcohol buyers with end-uses in cosmetics and personal care sectors are weighing the possible benefits being certified by the RSPO versus the potential costs, as consumers of these products can differ widely from those in the industrial surfactant models. Darrel Weber, the head of the RSPO was a featured speaker at the 3rd ICIS World Surfactant Conference in NY in May.
In other alcohol news: Pilipinas Kao Inc (PKI) noted in mid September that it is running its fatty alcohol plant at Jasaan at around 70% of capacity, following the completion of an expansion project at the unit. The plant has been shut since June this year for the expansion project which increased its capacity by 40,000 MTs/year to 150,000 MTs/year, according to sources. The company in a statement on 13 September said that it has completed the construction of the expansion project, which was aimed at meeting the “growing demand for fatty alcohols centering on the Asian region”. The plant operations will be fine-tuned before its production rate is ramped up to full capacity, said a source close to the company.
Looking ahead in alcohols to Q4, uncertainty over fatty alcohol pricing continues to hinder fourth-quarter negotiations in Europe. A shortage of mid-cut fatty alcohols in Europe has led to increased prices of late, with some suppliers now quoting in excess of €1,400/MT ($1,867/MT) free delivered (FD) northwest Europe (NWE). Suppliers maintain that the shortage of mid-cut material will continue to dictate their pricing ideas in the coming weeks. However, buyers remain confident that the restart of fatty alcohol plants in southeast Asia could help to alleviate some of the shortage being felt in Europe, and therefore bring down prices. It is thought that participants had been awaiting the ICIS European Surfactants conference in Brussels, Belgium, mid September, where discussions over pricing were to take place, before commencing their fourth-quarter negotiations
A firm favorite of ours, Elevance, started their JV biorefinery with Wilmar in Gresik Indonesia in July making one group of chemicals available for the first time in commercial quantities. The 180,000 MT/yr biorefinery will consume palm oil to produce C10-C15 unsaturated esters, C16-C18 oleochemicals and long-chained olefins. The unsaturated esters stand out because they are difunctional, in that each molecule has both an olefin and an ester group. According to Elevance, Until now, this group of difunctional products has been available only in lab-sized quantities priced at thousands of dollars per Kg. Already, Elevance is producing these chemicals in commercial quantities and profitably selling them at dollars per kilogram. Elevance has been working with Arkema and Stepan, among others, to develop new products using the Elevance building blocks. Companies are thus developing surfactants with better solvency and cold-temperature cleaning, as well as synthetic lubricants that deliver improved stability and fuel economy, according to Elevance. Other uses for the difunctional molecules include monomers for engineered polymers, coatings, long-chained polyamides, polyurethanes and polyesters. The biorefinery’s other products, however, should also meet existing market needs. The long-chained olefins range from C10 to C20. Decene, for example, is a feedstock for polyalphaolefins. Polyalphaolefins, in turn, are a key ingredient in synthetic lubricants. Demand for synthetic lubricants is rising because of stricter emission and mileage standards for automobiles. These stricter rules require smaller and better-performing engines, and these rely on synthetic lubricants.
Likewise, C18 olefins are used to make drilling fluid.
The long-chained olefins are also feedstock for surfactants. C12 olefins can be used to make linear alkyl benzene, providing a bio-based alternative to petroleum-based C12 olefins.
Elevance chose the 2nd ICIS European Surfactant Conference in Brussels in September to highlight their start-up and the new range of products. Look elsewhere on the Neil A Burns LLC blog for an exclusive podcast interview with Andy Corr of Elevance.
Indian Linear Alkylbenzene continued to make news as Indian Oil announced the restart of its LAB plant at Vadodara in the state of Gujarat by 29 July after a month-long turnaround. The shutdown at the 120,000 MT/yr plant severely tightened supply in the Indian market, resulting in virtually no spot export availability in July. Furthermore, the plant near Chennai and Reliance Industries’ 60,000 MT/year plant at Vadodara caused inventory levels of LAB in India to decline to around 5,000 MT in July, down from 8,000 MT in June. The TPL plant restarted on 13th July after a two-month long shutdown but the Reliance unit had yet to restart as of the end of July. India has an installed LAB capacity of 530,000 MT/yr. Indian consumption of LAB totalled 500,000 MT/yr in 2012.
In other LAB news, Iran restricted exports of LAB to ensure supply to the domestic market, in late July. With its imports falling following the sharp depreciation of the rial against the US dollar, Iran needs to ensure domestic production will meet growing domestic consumption. No official ban was implemented, but permission to export these materials is granted by the government on a case-by-case basis, Iranian industry sources said.
The country has an installed LAB capacity of 130,000 MT/yr, with current operating rates at 80-85%, while domestic consumption is around 100,000 MT/yr.
As usual, Stepan (NYSE: SCL) reported solid progress in sales and earnings for the second quarter of 2013. Net income rose by 6% year on year to $22.7m (€17.3m) as sales volumes increased by 4% while selling prices fell by 3%. Stepan’s sales for the three months ended 30 June were $474m, compared with $470m in the 2012 second quarter. Overall gross profit was $73.7m, up slightly from $73.4m in the 2012 second quarter. Second-quarter gross profit in Stepan’s surfactants business fell by 7% to $48.3m. Stepan cited lower North American sales of functional surfactants to the oil field market, reduced profits from biodiesel sales, and lower North American consumer products earnings because of the consumption of higher-cost raw material inventories, in explaining the decline in surfactants gross profit. Furthermore, higher raw material cost inventory built to support Stepan’s Singapore surfactants plant start-up, and the subsequent decline in commodity prices, hurt surfactants margins, it said.
Another solid performer in surfactants and specialty ingredients, Croda reported-quarter operating profit from continuing operations rose by 4.4% year on year to £71.1m ($109.4m, €82.7m) on the back of “improving trends in key markets”. The UK-based specialty chemicals company said gains were reported across each of the company’s three reporting segments – consumer care, performance technologies and industrial chemicals – and sales rose by 2.3% during the period compared to the second quarter of 2012, to £279.6m.
With demand also growing for surfactants in the CIS at than 6%/year, a letter of intent was signed in July between SIBUR and Solvay to establish a surfactants joint venture called RusPav, located in Dzerzhinsk. SIBUR will contribute its raw materials, production and logistics capabilities to the joint venture. RusPav will be located near SIBUR’s petrochemicals operations, 400km east of Moscow, and is tentatively expected to be operational in 2016.
In August, the ACI (American Cleaning Institute) released an important environmental report. “The major disposal route of alcohol ethoxylates [or ethoxylated alcohols] is down-the-drain through sewage systems and municipal wastewater treatment plants into receiving surface waters,” said Kathleen Stanton, director of technical and regulatory affairs for the ACI.
“Because these are down-the-drain disposal routes for the detergents, the fate and effects of the residuals in treated sewage effluent is of interest to industry and regulators alike,” Stanton added. The study concentrated on ethoxylated surfactants with the goal to determine the environmental impact of the fatty alcohol backbone of the detergent. Natural (vegetable-oil based) and synthetic (natural gas/ethylene-based) fatty alcohols were both tested during in the scope of the study.
Another of our firm favorites, Solazyme continued to make news in the second quarter. Solazyme and Sasol finalised commercial terms for the multi-year supply of algal oil in the production of downstream derivatives such as behenyl alcohol, the companies announced. Solazyme is developing the erucic acid-rich algal oil at its Orindiuva facility in Sao Paolo, Brazil, as well as its Clinton site in Iowa, US. Sasol Olefins and Surfactants will use the algal oil for the production of C22 derivatives that are used in industries such as paper, water treatment, personal care, lubricants, oil and gas, as well as paints, inks, coatings and adhesives. Additionally, the companies signed a letter of intent to expand to broad collaboration, including joint manufacturing and marketing of multiple tailored oils. “This agreement with Solazyme is testament to their tailored oil technology platform and the fit for high-performance sustainable oils in our value chain,” said Fleetwood Grobler, managing director at Sasol O&S. “We see a good potential to link Solazyme’s tailored oil platform with our synthetic and natural alcohols portfolio, which will allow us to meet the growing demand that we see in a number of our key markets.”
The LAB and LAS markets in Asia continued to be active. On 14 August, LAB prices increased by an average of $10-30/MT (€8-23/MT) from two weeks prior to $1,850-1,870/MT CFR SE Asia; $1,820-1,850/MT CFR India; and $1,800-1,830/MT FOB Middle East, according to ICIS data. LAS prices, on the other hand, have been holding steady at $1,560-1,580/MT CFR SE Asia and $1,550-1,570/MT FOB India over the past two weeks, according to ICIS.
Market players expect LAS prices to eventually track rising LAB prices. Supply is expected to remain tight in the coming weeks as shortage of feedstock normal-paraffin (n-paraffin) is expected to restrict LAB supply, which in turn will curtail LAS production, market sources said. LAS demand is being revived with the emergence of “one-dose” detergent, which is a combination of washing liquid and softener. The popularity of liquid detergents over powders in the laundry sector had slightly dented demand for LAS in recent months. The proportion of LAS used in liquid detergents is lower compared with washing powders. However, in other applications such as floor cleaners and dish washing liquids, LAS continues to be widely used.
An emerging key player in the surfactant industry, China’s Sanjiang Chemical reported H1 net profit up 78% for 2013 to yuan (CNY) 402m ($66m), because of higher production and sales of ethylene oxide (EO). Its revenue in the first six months of 2013 gained 82.7% year on year to CNY2bn, approximately 86% of which were generated from EO sales, the company said in a statement to the Hong Kong Stock Exchange. The utilisation rate of its ethylene oxide (EO) facilities were at 112% in the first half of this year, compared with 108% in the same period of 2012, it added. In the January-June period, the company produced and sold 176,375 MT of EO, an increase of around 80% year on year. This increase is mainly because its new 100,000 MT/year EO unit started commercial operations on 14 February. The company said it expects total EO production for 2013 to increase to around 370,000 MT from last year’s 216,728 MT. The Zhejiang-based company mainly produces EO and surfactants at 330,000 MT/year and 218,000 MT/year capacity, respectively.
Elsewhere in Asian, Germany’s Evonik completed its expansion project at the Indonesia plant in August. “With this investment, Evonik is increasing its capacity for surfactants and esters used in hair care, skincare, and industrial applications,” the company said in a statement. The investment is aimed at “serving personal and household care industries in southeast Asia, Australia and New Zealand”, it said. Further details of the expansion project and capacity details of the plant were not disclosed in the statement.
In a move with some relevance to surfactants, Innospec acquired US Chemsil Silicones, and distributor Chemtec in August. Chemsil, which develops and markets silicone-based formulations to the personal care industry, will become part of Innospec’s performance chemicals business, which develops and markets surfactants and emollients. Chemtec, which distributes personal care ingredients primarily to the US west coast, will continue to operate as a key distributor in that market. The acquisition was funded through the negotiation of an increase to the Innospec’s existing revolving credit facility agreement of $150m (€114m). The amendment allows the company to request a further amount of up to $50m to be committed by various lenders.
Sasol’s FY 2013 Olefins & surfactants operating profits rose by 12% year on year to R3.58bn with the US operations benefitting from the low ethane price but operations in Europe squeezed by soft demand and high petrochemical feedstock prices. The segment’s operating profit was 23% higher if the prior year’s gain from the sale of operations in Witten, Germany, is excluded, Sasol said. The company is adding 48,000 MTs/year of ethylene capacity in an ethylene purification unit in Sasolburg, South Africa. The unit is to be officially opened later this month, the CEO said. Orders for long lead-time equipment have been placed for the ethane cracker planned for Louisiana and environmental permit applications have been made.
In news reported directly from the 2nd ICIS European Surfactants Conference, John Hodgkinson, business manager, EG, EO and derivatives at Technon OrbiChem, predicted that ethoxylate demand would grow by 1.7% over the next five years. “The [ethoxylate] forecast is 1.7% growth to 2018, which is fairly good for a mature market. For ethanolamines it is about 1.6%, with e-series glycols ethers around 0.7%,” he said. “This is good news for major EO producers, since they are also ethoxylate producers. But the problem in Europe is available capacity and consumption. A good year for ethoxylates and ethanolamines will bring tightness to the [EO] market,” Hodgkinson added.
In other news from ICIS European Surfactants, Martin Harrington of IP Specialties, pointed to the boom in cheap oil and gas in North America while.
With US natural gas production now equivalent to almost half of Saudi Arabia’s, Harrington said that “palm kernel oil is not the only game in town.” “This is cheaper energy for countries that frack, and will reduce the dependence on the Middle East,” he said. Bio-based feedstocks such as sugar, as well as US natural gas are attracting the attention of the industry as alternative feedstocks, owing to the cheaper costs. Harrington, the president of IP Specialties North America operations, also looked at new alternatives to oleochemicals, such as fermentation with E.coli, metathesis and micro algae cell disruption. “The oleochemical landscape is now very different to what it was in the 1980’s,” Harrington said. “Success in sourcing surfactant feedstocks will hinge on an organisation’s ability to be flexible to the alternative feedstocks, as well as an understanding of the feedstock and its by-product implications.”
|Current prices (August 2013, courtesy of IP Specialties)|
|Palm kernel oil (CIF R’dam)||$865/ton|
|US Nat Gas as LNG||$175/ton|
Yet more insights from the same conference: An expanding population and strong economic growth in Turkey means that demand for surfactants for the fabric cleaning sector will continue to grow, said Gulhan Eglimez, global category marketing manager at Turkey-based company Hayat Chemicals, said, “Turkish domestic demand is strong and exports are growing. Particularly to countries like Iraq.” “We have 75 million people living in Turkey and quite a young population, with an average age of 28. We have 19 million average households and 15 million housewives,” she added. According to Egilmez, Turkish GDP growth in the first quarter of 2013 was 9.5 %. In relation to the end user markets and their buying habits, Eglimez said that the number one priority in Turkey was price. She added that while the trend in northwest Europe was more towards liquid detergents, the Turkish market still favoured powder.
To round out the quarter and with news of great significance for the North American surfactants market, Switzerland-based Clariant said late September, it has opened the new global headquarters for its Oil and Mining Services business unit in the Woodlands, TX. The campus, housed in Black Forest Technology Park, broke ground a year ago, and at the time the company said plans included two 32,000-square-foot office buildings at 2730 and 2750 Technology Forest Blvd. The new campus will allow Clariant Oil and Mining Services to double its workforce in the area by 2015, the company said at the time. It will house 100 offices and serve the Oil Services, Refinery Services and Mining Solutions business units, Clariant said Thursday. It will also include two technical centers, one for Oil and Refinery Services and the other for Mining. Clariant’s U.S. headquarters is in Charlotte, N.C
Thanks again for reading and I look forward to seeing you at the 3rd ICIS Asian Surfactants Conference in Singapore, November 14th and 15th.
Surfactants Quarterly Review Q2 – 2013
As we usually do on a quarterly basis, I have summarized key news from the surfactants market, aided substantially by the news team at ICIS. A number of links in the article point to ICIS articles (most need a subscription). As always, your inputs and critiques are welcome. For more up to the minute surfactant information and networking, I will see you at the 2nd ICIS European Surfactants Conference in Brussels, September 12th and 13th.
The first quarter ended with some concerns about EO supply, notably in Europe where a heavy slate of planned EO plant turnarounds was scheduled for the second and third quarters of 2013. In Europe, there has been a general trend in recent years towards market consolidation in EO, involving capacity losses, acquisitions and a focus on captive demand rather than merchant demand, for economic reasons. However, in October 2012 a source at Shell Chemicals said that the company was considering whether to expand EO production capacity at its Moerdijk site in the Netherlands. The proposed expansion would include an increase in high-purity EO production capacity, the source said. Shell’s Moerdijk facility currently has a nameplate EO equivalent (EOE) capacity of 305 KMT/yr. Aside from Shell’s proposed expansion at Moerdijk, no new capacity is planned in Europe. The gap between ethylene prices in Europe and the US means that producers of ethylene derivatives are struggling to maintain competitiveness.
In April, Solvay, underlined its commitment to surfactants with two new capacity addition announcements. First the company announced that it will build a specialty surfactant plant at an industrial park in Genthin, near Berlin in Germany. The unit is scheduled to be operational by the first quarter of 2014.
Second, Solvay noted investment in a large-scale alkoxylation facility in Singapore to serve the fast-growing Asian market in home and personal care, coatings, industrial, agrochemicals and oil & gas. Expected to start operations by 2015, the plant will be connected to Shell’s new high purity ethylene oxide (HPEO) unit in the integrated petrochemical hub of Jurong Island.
The Shell Singapore new production facilities were announced in April also, including a high-purity ethylene oxide (HPEO) purification column and two world-scale ethoxylation units. The company is also proceeding with upgrading works at its polyols production facility as announced in February and expects the projects to be completed next year. The new production units will add to Shell’s existing HPEO capacity, which is currently at 65 KMT/yr and alcohol ethoxylates capacity of 40 KMT/yr. The HPEO purification column being built will have an initial capacity of 140 KMT/yr , while the two ethoxylation units will have a combined capacity of 140 KMT/yr.
According to Shell’s EVP Graham van’t Hoff, “The demand for alcohol ethoxylates in Asia is expected to increase at approximately 6-7% annually over the next five years. The key driver for this is the move by consumers from laundry powder and soap bars to liquid detergent and liquid soaps, especially in major markets like China, India and Southeast Asia,” Feedstock for the new HPEO plant will come from Shell’s EO/monoethylene glycol (MEG) plant on Jurong Island that is integrated with the company’s ethylene cracker through to its refinery in nearby Bukom Island.
In a move with tangential importances for surfactants, Clariant signed a deal in April, with Ecolab to acquire several of the cleaning services firm’s deep-water assets in the Gulf of Mexico for an undisclosed fee. Ecolab had to divest the assets as a prerequisite by the US Department of Justice (DOJ) for the approval of its acquisition of US specialty chemicals producer Champion Technologies. The assets include Champion Technologies’ oil and gas production chemicals.
Also in April, it was announced that BASF’s new chemicals production site at Dahej, India, is on track to begin production in early 2014. The cost of the project – on the west coast of India in Gujarat and being developed by local subsidiary BASF India – is estimated at around Indian rupees (Rs) 10bn, ($183.12m). The project, which broke ground a year ago, represents BASF’s largest single investment in India. The care chemicals facility at the new Dahej site will produce surfactants largely for home and personal care. These surfactants will also add value to formulation technology applications including agrochemicals, textiles and emulsion polymerisation. With BASF’s global growth strategy for its care chemicals business, the Dahej site adds to BASF’s production footprint in one of the fastest growing emerging markets.
Toward the end of April, Stepan announced Q1 net profit down 14.7% at $19.0m on weak construction demand which hit its polymers chemicals businesses. Sales were down 1.9% at $457m with polymer segment sales volumes down 7% and weaker surfactant margins. Surfactant sales were down 2.1% at $340m while volumes were 5% higher with growth coming from consumer products. Higher margin functional surfactants used in agriculture saw volumes rise by 26% year-on-year. Surfactant segment gross profit was down 4% at $51.6m. The company expects better surfactants margins as the year progresses and improved polymer volumes in the second quarter.
May saw an interesting joint announcement from our friends, Solazyme, and AkzoNobel regarding use of algal oils for surfactants and coatings The companies entered into an agreement to begin joint product development of tailored algal oils in the second half of 2013 and to commercially sell near-term product supply in 2014. Commercial supply of algal oil will come from Solazyme’s joint venture with US agribusiness Bunge, a 100 KMT/yr renewable oils plant in Brazil that is expected to start up in the fourth quarter of 2014. Solazyme and Bunge plan to expand capacity to 300 KMT/yr by 2016.
Prospects in the alcohol market continued to dim, or brighten, depending on whether you are a seller or buyer of fatty alcohols, respectively. According to an ICIS article, reporting findings from our friends at Colin Houston Associates (CAHA), supplies of detergent range alcohols are expected grow at twice the rate of demand from through 2015, forcing the existing industry footprint to adjust. Consumption of higher alcohols increased by 4.5% per year from 2005-2012 because of new supplies reaching markets after large additions of oleo-based alcohol capacity from 2005-2010. In addition, according to CAHA, purified ethylene oxide [PEO] capacity expansions are not keeping up with the new oleo-alcohol capacity, hindering the growth of ethoxylated products in the short term. While surplus alcohols are being exported to Western markets currently, trade barriers and new technologies could disrupt the trend, CAHA said. A wave of new detergent alcohols capacity will come on line in the next 18 months, expanding the 2.5m MT detergent alcohols market by another 1m MT – and potentially more. More than 60% of the new capacity will be located in Malaysia and Indonesia.
In further fatty alcohols news and underscoring the CAHA analysis, Wilmar’s fatty alcohols plant in Rotterdam was slated to face only minimal delays and will be up and running by the end of the third quarter. The 120 KMT/yr plant is owned by Wilmar and is in Huntsman’s 85 hectare chemical site in Rozenburg in Rotterdam. The plant will supply natural alcohols to US surfactant producer Huntsman, as well as the European merchant market.
In more fatty alcohol news toward the end of the quarter, A slightly firmer US market perspective in the mid-cut C12-14 to C12-16 alcohols has some buyers talking a Q3 rollover and several sellers aiming for a price increase. Buyer perspectives in late May focused on ease in securing material. However, the slightly firmer market has led several sellers to push for an increase in prices heading into the third quarter. One supplier said it was definitely seeking to raise prices because mid-cut alcohol inventories in Asia are snug after various production units had Q1 and Q2 downtime.
In news from the outer, higher growth, edges of the EU, Polish surfactants producer PCC Exol intends to build sales in Turkey and throughout the Middle East and Africa (MEA) through a newly-established Istanbul-based subsidiary, the company said in May. The subsidiary, PCC Exol Chemical Industry and Commerce, will target Turkish and MEA buyers of surfactants, such as the detergent, textile, paint, adhesive and varnish industries, it added. PCC Exol, headquartered in Brzeg Dolny, southwestern Poland, and owned by Germany’s PCC chemicals, energy and logistics group, has plants which can produce 40 KMT/yr of anionic surfactants and 60 KMT/yr of non-ionic surfactants. The company is looking to move into major production of high-margin amphoteric surfactants production, with an eye to supplying output to makers of quality personal care products.
No review of surfactants in the second quarter would be complete wtithout some report from the 3rd ICIS World Surfactants Conference. Keynote presenter, Solvay Novecare vice president John Foley said that knowing your customer and your customers customer was key to the strategic growth of Solvay Novecare’s business. “Our strategy starts with the customer – it’s about the connection and intimacy with our customer,” he said. “We can’t ask them what business they are in, because it means we don’t know and we’re by then too late.” Talking about “economic transformation”, Foley expects to see Solvay Novecare to grow at multiples of GDP, which he said will come from new opportunities and making sure the company’s technology will be well positioned.
Understanding complex value chains stands as one of the main challenges for chemical producers, a principal at Berger Strategy Consultants, said at the conference. Gillian Morris gave the example of a large commodity producer struggling with a low margin, low volume and low price product.
“The product was a pain and the company tried to exit the business by rising its price by 25% in one quarter and the customer came back. So the next quarter it raised its prices again by another 25% – so that’s a 50% increase in six months. “In the next quarter they moved up again by 20% and then the customer started to ask questions because their customers wanted to know what was going on in the market…. This company had no clue why the product was of such value to the customer.”
In trademark, hard hitting style, Doug Rightler riveted the conference with news such as that China is building 10 ethylene oxide (EO) plants in this year alone. “EO must be used in concrete production in China – we are seeing a massive investment caused by the Chinese government saying you must use this,” said Doug. “Forecasting for the next 30 years, the numbers for this market are momentous,” he said. “The Chinese are putting in 10 [EO] plants just this year. In Europe and the US, it takes five years. But the big uncertainty is EG [ethylene glycol]. China could grow so much, it could end up flooding its own market,” he said. Globally, EO demand is related to GDP growth, he said. “China has still got a long way to go [in terms of growth], also India. Not to mention the African continent – the market hasn’t even kicked off there.”
While Rightler spoke about China being a fast-growing region of purified EO, he was concerned that no investments were being made for pure EO in the US.
“Pure EO producers are running at 90% of capacity and it [the EO market] will get tighter and tighter. EO prices in the US are rising regardless of the price of ethylene,” he said. Prices are rising even though the US has become the most cost-competitive region in terms feedstock since the evolution of shale gas, he said. “The Middle East is running out of cheap ethane, and they won’t be coming here [the US] anymore. China is where everything it’s at – the rest of the world has stopped.”
Rounding out the quarter, Kao Indonesia Chemicals announced that it has completed construction of its new yen (Y) 4bn ($40m) plus surfactants plant in Karawang, Indonesia. The new plant with an undisclosed capacity is expected to start operation in August 2013, the firm said in a statement. The plant will produce surfactants and industrial chemicals and help lift Kao Indonesia Chemicals’ surfactants capacity, which includes facilities located in Tambun, Indonesia, 1.5 times, Kao said, without disclosing current capacity. All of the Tambun facilities will eventually be transferred to the Karawang site by the end of December 2014, Kao said.
Don’t forget, the highlight of the surfactant calendar next quarter is the 2nd ICIS European Surfactants Conference in Brussels, September 12th and 13th!
New York 2013, May 16th & 17th
ICIS and Neil A Burns LLC co-produced the 3rd ICIS World Surfactants Conference in New York, May 16th and 17th. It was the 7th conference in this global series and by far the biggest and most impactful yet.
Once again, I was privileged to chair the conference and to give some opening remarks to set the tone for the following two days. My remarks emphasized the much more challenging nature of business today vs 30 years ago in our industry. I also explored how you can shock-proof your business so that it even benefits from supply chain stress and disruption. To illustrate my points, I used videos from Monty Python, Kelly Clarkson and Dr. Who – as noted below. To really understand how these really do all tie together and make sense, I recommend you come to one of conferences later in the year in either Brussels (Sept 12th and 13th) or Singapore (November 14th and 15th).
Back to the conference: As billed, it comprised three summits in one, based around three themes of critical importance to the surfactants industry:
The Economics Summit:
First up in this section, Gillian Morris of Roland Berger gave a global chemical and economic outlook to 2030 in which she analyzed the near term future for the 2 Trillion Euro global chemical industry. Of particular concern is the downward trend in economic profit since the early 90’s (economic profit being Return on Invested Capital less the Weighted Average Cost of Capital). According to Gillian, some companies just don’t know how much their products are worth to customers and therefore under-price and under-realise the appropriate gross margin.
Returning for a second engagement with the conference, Doug Rightler gave a data packed and stimulating review of the EO and Derivatives Industry. According to Doug, China today determines directly or indirectly, the value of most of the chemicals on the planet. China today has 10 EO projects underway. Going forward, the US will be a prime location for manufacturing EOD’s but someone first has to bite the bullet and increase purified EO capacity, which is the current bottleneck.
A brand name in and of himself, Joel Houston of Colin Houston Assoc. reviewed the markets for LAB and detergent alcohols. Houston echoed the sentiment of Rightler regarding shortage of purified EO. He also predicted substantially increased vertical integration in the detergent alcohol value chain, much like in LAB.
Darrel Webber, leader of the RSPO – Roundtable on Sustainable Palm Oil, highlighted the human face of the palm oil industry by pointing out the millions of small-holders for whom palm oil is the only route out of poverty. Right now, about 15% of palm oil production is RSPO certified.
Nikola Matic of Kline gave highlights of their most recent analysis of the specialty surfactants used in the personal care market. Interestingly anti-aging products is the single largest segment of the personal care market and the largest influencer of ingredient development. Kline makes the case for consolidated and still rapidly consolidating specialty surfactant market. BASF, Rhodia, Clariant, Evonik and Croda are the largest suppliers worldwide. Some regional champions have emerged, like Galaxy Surfactants in Southeast Asia and Guangzhou Tinci in China.
Rounding out our Economics summit, Judith Taylor of ICIS Pricing outlined some analysis of key surfactants and feedstocks which are covered on a weekly basis by ICIS. Delegates got a free trial all the key reports with relevance to surfactants, i.e. fatty acids and alcohols, ethanolamines, EO, glycerine, LAB/LABS (Asia), PO.
The Consumer Summit:
The consumer summit examined the market from the point of view of major users of surfactants as well as the consumers themselves in the supermarket aisles. Implications for surfactant makers and sellers were presented by five companies operating directly at the front lines of the consumer markets.
Mike Fevola of Johnson & Johnson struck a perfect balance between the technical and economic with an exposition of new surfactant technology developed by Mike at J&J. These are hydrophobically modified polymers and polymeric surfactants. Great to see some surfactant innovation at the front end of the supply chain.
For the first time, Natura brought their unique perspective to our conference series from Brazil. In a talk on Surfactant Requirements for Cosmetics Industry, Sergio Gallucci outlined the 12 properties of the ideal surfactants. He also outlined the unique Agro-Forestry system that they use to source their palm oil.
Another company with a radical and unique perspective, Method (now part of Ecover, the Belgian company) talked about bringing green surfactant technologies to market. Kaj Johnson talked about their partnership with Segetis on Levulinic Ketals for solvency and more generally, discussed their development philosophy which includes the question “WWMD – What Would MacGyver Do?”
Mintel brought the full firepower of their consumer database to bear in reporting on consumer trends in HI&I products. In addition to highlighting the existence of a Tardis in the London office of Mintel, Lynn Dornblaser shared some interesting insights. For example, US consumers are much more brand conscious and loyal than Europeans. Also, in Latin America, Colombia distinguishes itself with the highest growth rates across a number of categories.
Rounding out our consumer section, two speakers from the Good Housekeeping Research Instituted, outlined the results of some original research, commissioned for this conference on The Voice of the Consumer. Not surprisingly, consumers are paying more attention to personal care and other ingredients. What came as a big shock to me is that “Sulfate Free” is now a top three item of concern with the consumers surveyed (a statistically meaningful group of 652 respondents who are members of the powerful Good Housekeeping consumer panel.
The Technology Summit:
The most popular summit of prior conferences returned with a selection of papers, presenting and analyzing the new technologies that are positioned, potentially, to turn the surfactant market upside down.
Renowned analyst, Ron Cascone of Nexant gave a thought provoking assessment of New Technology vs Old. Ron argued that it is in fact economically for certain companies to make ethylene from ethanol. He also highlighted an emerging class of syngas conversion companies in particular, OPX, Lanzatech and Kiverdi (see later).
Respected consultant, Andrew Soare of Lux Research gave an analysis of the state of bio-based chemicals in the surfactant supply chain. Surprising statistic (to me). 16% of sugar crops globally are going to bio-fuels and chemicals. This is forecast to double to 32% in the next few years.
A repeat presenter, Solazyme clearly stated that this is the last ICIS conference at which they will be talking about the coming commercialization of algal oil. This is because Q4, 2013 sees the start-up of their 100 KMT/yr JV plant with Bunge with Moema in Brazil. Interesting that a key initial market for SZYM’s high oleic oils will be the d-limonene replacement market.
A new name to our conference series, Kiverdi , outlined their syngas based process for turning waste into specialty chemicals, including surfactants. CEO, Lisa Dyson captivated the audience with a description of their whole cell bio-catalysis process with planned modular deployment at sites chosen for optimal feedstock availability.
Another new name to the series, Kieran Furlong of Virent talked about their novel technology for the production of – Bio-based Aromatics. Finally, a wholly bio-based LAB is within view. A truly amazing prospect for the surfactant old-timers in the crowd.
Fermentation specialists, LS-9 – made a return visit with a new speaker, Gary Juncosa, who presented their fascinating technology for the direct production of a range of surfactant intermediates from simple modified E. Choli. Feedstocks include first and second generation sugars and crude glycerine. Initial targets include fatty alcohols and esters.
Pulling all three summit themes together, was the kick-off keynote address from John Foley of Solvay. Having recently combined with Rhodia, Solvay is now a leading global surfactant company, via its Novecare Business. Solvay’s Novecare supplies the full range of specialty surfactants across the globe and continues to grow both organically and via acquisitions. The keynote address highlighted some of the developmental challenges in building such a business. EOR and Agrochemicals received some airtime. Also the more general point of customer intimacy and service being key, but not on an “all you can eat buffet” basis. Have to be targeted and focused.
Those of you who grew up in the UK, may remember the sci-fi series, Dr. Who. He travelled through time in a time-ship, called the Tardis that looked like a telephone box from the outside but was much larger, like the Starship Enterprise, on the inside. A running theme through the entire series related to the moment when a visitor realized that the Tardis was, in fact, “bigger on the inside!”
Well, our World Surfactant Conference coming up on May 16th and 17th in NYC is just like the Tardis. It is truly much “bigger on the inside”. In fact, what looks like a regular one and a half day ICIS conference, on the outside, is really 3 distinct but complementary conferences around the 3 themes of economics, consumers and technology. Each of these three conferences, is packed with expert speakers and practicioners. The entire 3 conference event is pulled together by a keynote address from one of the most dynamic surfactant manufacturers today, Solvay.
To see the structure of this three conference event and to see the detailed agenda, please download this flyer. :Three Conferences In One – ICIS Surfactants
And for a flavour of how Dr. Who’s guests react to the enormity of the Tardis time-ship on the inside, see the video below.